The European Commission has opened an “in-depth investigation” into two tranches of funds Romania handed to the now-defunct carrier Blue Air (Romania) (BLA, Bucharest Henri Coanda) in August 2020, with the intention of assessing whether the support measures were in line with EU state aid rules.

Blue Air had been experiencing financial difficulties since 2019, and in March 2020 the outbreak of the coronavirus pandemic deepened its woes. The airline suspended its flight operations in September 2022, failed to find investors, and was effectively nationalised last December when the state took a 75% stake in the company. Last month, Blue Air entered court-led insolvency proceedings.

In a statement released on April 17, the European Commission recounted that it had approved the two August 2020 measures in favour of Blue Air, namely a EUR28 million euro (USD30.1 million) public guarantee to compensate for damages resulting from the travel restrictions resulting from the pandemic, and a EUR34 million (USD37.3 million) public guarantee on a rescue loan to partly cover Blue Air’s liquidity needs for the following six months.

Romania committed at the time to terminating the loan guarantee after six months or, if not, to sending either a liquidation plan or a comprehensive restructuring plan for Blue Air to the commission for assessment. In April 2021, Bucharest dispatched a restructuring plan for the airline covering the period from August 2020 to September 2025 along with details such as expected private finance. This plan has been updated several times, including an extension of the duration of the guarantee to six years to 2026.

“At this stage, the commission has concerns that the restructuring plan and the aid measures implemented to support this plan are not in line with EU state aid rules, in particular with the guidelines on rescue and restructuring aid,” the statement said. “The commission will now carry out an in-depth investigation to determine whether its initial concerns are confirmed.”

In particular, it will examine whether the restructuring plan can restore Blue Air’s long-term viability without further publicly funded bailouts; whether the airline’s own or market contributions to the restructuring costs have been “sufficient, real, actual, and free of any aid, so as to ensure that the restructuring aid is proportionate”; and whether measures are in place to limit any distortions of competition created by the aid.

The investigation gives Romania and interested third parties the opportunity to submit comments, the statement concluded. Three weeks ago, the European Union General Court in Luxembourg dismissed legal action brought by Wizz Air (W6, Budapest) against the European Commission for agreeing to the same Romanian state aid given to Blue Air.