Aid for Slovenia’s Adria, Latvia’s AirBaltic Probed by EU

Government aid for Slovenia’s Adria Airways d.d. and Latvia’s AirBaltic AS faces European Union probes over concerns that state support wasn’t granted on market terms.

The European Commission will examine about 85.5 million euros ($109.6 million) in capital increases given to Adria by the Slovenian government and the sale of a unit to state-owned companies, it said in an e-mailed statement today.

The Brussels-based regulator will also investigate the terms offered on 57.6 million lats ($106.1 million) of Latvian state loans to AirBaltic among other state measures.

EU rules restrict amounts of aid nations can give to prop up carriers weighed down by the bloc’s sovereign debt crisis and high oil prices. Malev, Hungary’s unprofitable state-owned airline, went bankrupt earlier this year after the EU ordered it to repay state loans and guarantees. Barcelona-based Spanair also collapsed and SAS Group is shrinking its business amid the economic turmoil.

“Adria Airways believes that all capital boosts in the period 2007-2011 for the company and its units don’t represent state aid” because all transactions were made on the same terms as a private investor, the Brnik, Slovenia-based company said in an e-mail. Adria will “offer unlimited help and support to all involved in order to prove the necessity of measures being probed.”

Government Payments

The EU regulator must approve all large government payments to companies under rules that forbid states from paying companies’ running costs. It often requires restructuring measures from companies that seek state aid and can order firms to repay aid already received.

The investments were made “according to the market economy investor principle and therefore are not in contradiction with EU norms,” the Latvian Transport Ministry said in an e-mailed statement.

Peter Bajec, a spokesman for the Slovenian finance ministry, declined to comment.

The EU separately ended a probe into Polskie Linie Lotnicze LOT SA’s sale of units, saying the Polish carrier’s transactions were made under market conditions and weren’t a form of state support. Regulators had to examine the sale to check there weren’t hidden subsidies because no open and transparent tender had been organized, the EU said in a statement.

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