ANNOUNCEMENT 18 Oct 2011In October 2011, the government of Latvia announced a change in private-sector financial support.
NUMBER OF INTERVENTIONS
Official source SA.34191 - Letter from the EC to Latvia, Brussels 20.11.2012)
On 18 October 2011, Latvian authorities pre-notified the EC of a EUR 22.65 million loan in favor of A/S Air Baltic Corporation. (SA.33799.
Latvia's share in Air Baltic increased from 52.8 % in 2011 to 99.8 % on 30 November 2011 and finally 100 % on 8 June 2012. While the share of the private stakeholder BAS decreased to 0%. Hence, Air Baltic is considered to be a state company.
Over the years 2011-2012, Air Baltic received multiple loans and indirect grants from the state. On 3 October 2011, a first loan of EUR 22.65 million plus an additional EUR 19.82 million from BAS. The initial interest rate was set at 11-13%. On 13 December 2011, Latvia decided to cut the interest rate of the state loan to 2-4 %, this also applies to the loan from BAS. The same day, a second state loan was granted, EUR 94.86 million at an interest rate of 9-11 %. An additional EUR 5 million was granted to Air Baltic on 12 June 2012 and can be considered as a 'debt waiver' (par. 111, letter from the EC to Latvia, Brussels 20.11.2012.
The European commission argues that the interest rate of 11-13% was already below the market level, taking into consideration that 'Air Baltic was experiencing significant difficulties at the time... It is therefore unclear, whether at the time a private investor would have provided the company with a loan at such interest rate.' (par. 72 , letter from the EC to Latvia, Brussels 20.11.2012). Furthermore, the EC states that 'it seems reasonable to consider that a private investor would not have provided a loan to the company at an interest rate of merely '2-4' %.' (par. 75).
The EC concludes that:
"The measures identified affect trade between Member States and have the potential to distort competition as Air Baltic competes in the liberalized EU Market for air transport with other EU airlines. (par. 116). The EC confirms that 'the measures in question thus enable Air Baltic to continue operating because, unlike its competitors, it does not have to face the consequences normally deriving from its difficult financial results' (par. 117).
Therefore: "At this stage the Commission has doubts on the compatibility with the internal market of the different measures identified." (par. 128)
A state measure in the GTA database is assessed solely in terms of the extent to which its implementation affects the extent of discrimination against foreign commercial interests. On this metric, the state aid proposed here is discriminatory
The list of affected trading partners is based on the following reasoning: Identifying the ub of the benefiting airline and searching for all incoming direct flights.