The European Commission has approved Finnish plans to contribute to the recapitalisation of Finnair through the subscription of new shares by the State in the rights issue launched by Finnair on 10 June 2020 in the context of the coronavirus outbreak.
Executive Vice President Margrethe Vestager, in charge of competition policy, said: “Finnair ensures the essential domestic and international connectivity needs of Finland. Given the geographic location of the country, the national economy, many jobs and the development of foreign trade rely on these services. The €286 million public contribution to Finnair’s recapitalisation will help the company in an industry that has been particularly hard hit by the coronavirus crisis. The substantial participation of market investors in the transaction is a positive signal that the Commission strongly encourages, as it limits the distortion of competition while contributing to the recovery of undertakings affected by the coronavirus outbreak.”
The Finnish recapitalisation measure
Finlandnotified to the Commission the planned participation of the State as a shareholder in the rights issue (launched by Finnair on 10 June 2020). Finnair plays a major role in the Finnish economy, notably because it ensures domestic and international air services for Finland that are essential to the recovery of the national economy after the coronavirus outbreak.
With 55.8% of the shares, Finland is Finnair’s largest shareholder. The total capital increase is expected to be of approximately €500 million. The State is expected to receive rights to subscribe for new shares in an amount of €286 million, corresponding to its current shareholding level. The remaining shares will be offered on the market, subject to pre-emptive subscription rights of other existing shareholders.
The Commission found that the Finnish measure is in line with Article 107(3)(b) TFEU, which enables the Commission to approve State aid measures to remedy a serious disturbance to the economy of a Member State, and the general principles set out in the Temporary Frameworkadopted by the Commission on 19 March 2020, as amended on 3 April 2020and 8 May 2020.In particular, the measure will not exceed the minimum needed to ensure the viability of Finnair and restore the capital position before the coronavirus outbreak.Furthermore, the State will receive an appropriate remuneration for the investment.
When assessing the compatibility of the recapitalisation with the conditions set out in the Temporary Framework and Article 107(3)(b) TFEU, the Commission took into account the fact that the envisaged rights issue will involve the participation of a substantial number of private market investors in the airline on the same terms as the State. Furthermore, it will not lead to an increase of the shareholding level of the State in Finnair; on the contrary, the State contribution is intended to maintain the existing share of the State in the overall capital of the company, relative to private shareholders.
As a result, certain conditions under the Temporary Framework, in particular certain governance commitments intended to provide incentives for an exit by the State and redemption of the State aid as soon as possible, are not appropriate or necessary to the same extent in these circumstances.
The Commission concluded that the measure aims at encouraging market investments while maintaining safeguards necessary to limit distortion of competition. Finnair does not hold a significant market power on the relevant markets on which it operates. Its hub airport Helsinki is not congested, meaning that landing and take-off slots are not in shortage. Therefore, no additional measures to preserve effective competition were necessary.
The Commission concluded that the recapitalisation measure will contribute to manage the economic impact of the coronavirus outbreak in Finland. It is necessary, appropriate and proportionate to remedy a serious disturbance in the economy of a Member State, in line with Article 107(3)(b) TFEU and the general principles as set out in the Temporary Framework.
On this basis, the Commission approved the measure under EU State aid rules.
On 18 May 2020, the Commission approved a Finnish aid measure consisting of a State guarantee on a €600 million loan to Finnair to mitigate the economic impact of the coronavirus outbreak on the company. The measure was approved under the State aid Temporary Framework adopted by the Commission on 19 March 2020, as amended on 3 April and 8 May 2020.
In case of particularly severe economic situations, such as the one currently faced by all Member States and the UK due the coronavirus outbreak, EU State aid rules allow Member States to grant support to remedy a serious disturbance to their economy. This is foreseen by Article 107(3)(b) TFEU.
On 19 March 2020, the Commission has adopted a Temporary Framework, as amended on 3 April and 8 May 2020, to enable Member States to use the full flexibility foreseen under State aid rules to support the economy in the context of the coronavirus outbreak. The Temporary Framework applies in addition to the existing possibilities already foreseen by existing EU State aid rules.
The non-confidential version of the decision will be made available under the case number SA.57410 in the State aid register on the Commission’s competition website once any confidentiality issues have been resolved. New publications of State aid decisions on the internet and in the Official Journal are listed in the State Aid Weekly e-News.
More information on the Temporary Framework and other action the Commission has taken to address the economic impact of the coronavirus pandemic can be found here.