The European Commission approved a Portuguese state aid to support the restructuring of the Azorean airline SATA, amounting to 453.25 million euros in state loans and guarantees. The decision comes almost two years after the initial request from the Government of the Azores and puts an end to the in-depth investigation that the competition services opened into past aid to SATA.

Brussels considers, “at this point”, that the injections of capital from the Azores in Sata are illegal aid

“The European Commission has approved, under the European Union rules on state aid, Portugal’s plans to grant restructuring aid to SATA Air Açores for a total amount of 453.25 million euros.” The measure is intended to “allow the company to finance its restructuring plan and restore its long-term viability,” reports the Commission.

The aid involves direct loans of 144.5 million euros and the assumption of debt of 173.8 million euros. The amount of 318.2 million euros will become the capital of the carrier. State guarantees of 135 million euros are also planned to obtain loans from financial institutions until 2028.

Remedios establishes sale of control of Azores Airlines

The approved plan provides for measures to reduce costs and increase efficiency, as well as the sale of the controlling stake in Azores Airlines, the company that operates flights outside the Azores, and the separation and disposal of ground handling activities. A reorganization of the corporate structure of the SATA group is also planned, with the creation of a holding company that will replace SATA in the share control of the subsidiaries.

It also provides for SATA’s obligation to have a maximum limit on its fleet until the end of the restructuring plan and the prohibition, also until that period, of any acquisition of aircraft.

The European Commission concluded that the state aid was “necessary and appropriate” to ensure that SATA, a company in financial difficulties, is viable in the long term without the need for permanent state support. Brussels considered that the proposed divestments will allow competitors to maintain part of the routes currently served by the public carrier of the Azores, in addition to the services of general and public interest provided by SATA.

SATA’s financial difficulties began before the pandemic, having led the Azores regional government to inject money into the company without prior notice to the European Commission. This situation gave rise to an in-depth investigation to find out if illegal aid had been granted when the Azores began talks with Brussels about the support to be given in the context of the pandemic.

In question were three capital increases carried out in the years prior to the pandemic, which Brussels, however, considered that SATA had reimbursed the State with interest.

The investigation was opened in August 2020 after the approval of a first emergency aid of 133 million euros to SATA. In April 2021, the Commission approved a further €122.5 million in support to respond to urgent liquidity needs until the final decision on this process is made, which was announced on Tuesday.

For the vice president of the European Commission, Margrethe Vestager, the measure now approved will guarantee territorial continuity between the Azores and mainland Portugal and the European Union, while allowing the return to viability of the regional company SATA. At the same time, the aid will allow SATA to reorganize its activities, improving operations and schedules and reducing operating costs. Public support is accompanied by safeguards that limit potential distortions of competition.