IMPLEMENTATION LEVEL

National

AFFECTED FLOW

Inflow

ANNOUNCED AS TEMPORARY

No

NON-TRADE-RELATED RATIONALE

No

ELIGIBLE FIRMS

all

JUMBO

No

TARIFF PEAK

No
← back to the state act
Inception date: 01 Aug 2009 | Removal date: 29 Nov 2012
Still in force

Bailout (capital injection or equity participation)

On 12 May 2010, the Czech authorities notified State aid for the restructuring of the company Ceské aerolinie, or "Czech Airlines".
 
The main business of Czech Airlines is scheduled air transport of passengers. In 2010, in this segment Czech Airlines operated a fleet of 44 aircrafts on scheduled flights to 67 destinations in over 40 countries in Europe, the Middle East, Central Asia and North Africa. In addition to its scheduled operations, Czech Airlines offers through its organisational departments or subsidies a number of other services such as charter flights, cargo transportation, aircraft maintenance and aircraft handling services.
 
In 2009, results reported to the management in mid-August showed a significant decline in average revenue of Czech Airlines. It became clear that the company was no longer able to run its business without immediate cost-cutting measures and financial assistance from external sources. The plan to be prepared was expected to propose measures to be taken by Czech Airlines in response to the dramatic decline in demand for services in the industry, with an emphasis on savings to be achieved in terms of staffing capacity and a reduction of the fleet. Therefore, in August 2009, the focus of Czech Airlines moved from day-to-day operational measures to the overall restructuring of the company's business.
 
The notified State aid consisted of the combination of the following three distinct measures:
1) A favourable interest rate with respect to a loan with a total amount of CZK 2.5 billion from the state owned company Osinek. The Czech authorities for the time being mention a potential State aid element in this transaction of CZK 92 million.
2) Debt-to-equity swap. De-collateralisation of the above mentioned loan and its capitalisation, which was implemented as of 30 June 2010 on the basis of Government Decree. In this process, all mortgage rights relating to the Osinek loan were lifted and the liability of CZK 2 500 million resulting from the loan was counted towards newly issued shares in the same nominal value.
3) Potential State aid for financing of aircraft purchase.
 
The Commission gave the following assesment:
 
"Article 107(1) TFEU requires that a measure, in order to be defined as State aid, favours "certain undertakings or the production of certain goods". In the case at issue, the Commission notes that the measures in question have been granted to Czech Airlines only. Thus they are selective within the meaning of Article 107(1) TFEU."

"Moreover, the measures at stake affect trade between Member States and distort or threaten to distort competition in the internal market. Thanks to them Czech Airlines are relieved from the costs that they would otherwise have to bear in its day-to-day operations. Indeed, Czech Airlines can continue operating and does not have to face the consequences normally deriving from its poor financial results over a long time laps. Czech Airlines is moreover in competition with other European Union airlines, in particular since the entry into force of the third stage of liberalisation of air transport ("third package") on 1 January 1993."

"On the basis of the above, the Commission considers at this stage that the measures identified above amount to State aid within the meaning of Article 107(1) TFEU. This appreciation is confirmed by the Czech authorities." (Par. 62-64 of the letter from the EC to Czech Republic - Brussels, 23.02.2011 K(2011)994 final)
 
A state measure in the GTA database is assessed solely in terms of theextent to which its implementation affects the extent of discriminationagainst foreign commercial interests. On this metric, the state aidproposed here is discriminatory.
 
 

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