Air Austral (UU, St. Denis de la Réunion) has welcomed Brussels' decision to authorise France's plan to grant it a EUR20 million euro (USD22.6 million) rescue loan.

Chairman and Chief Executive Officer Marie Joseph Malé called the European Commission's (EC) decision "highly encouraging". "This is a first step in the work we started several months ago. It is highly encouraging because it means we can begin 2022, a decisive year for us, from a stronger position,” he said in a statement. "For several weeks now, the airline has been focusing on drawing up a restructuring plan to be set in action within the next six months. The plan will guarantee long-term business continuity and job security."

Malé was reacting to the EC's January 18 announcement that it had greenlighted the loan in order to preserve the airline’s operations in the short term and help to avoid immediate losses in the face of its current pressing liquidity needs.

Brussels said France had demonstrated that the loan amount - which would mature in six months’ time at an interest rate that was “sufficiently remunerative for the aid” - was proportionate to the financing needed.

“Failing reimbursement within six months of the date of the grant, France has undertaken to notify the Commission of either a restructuring plan to restore the company's long-term viability, [or] a plan leading to the exit of Air Austral from the market.”

The Commission said Air Austral’s financial difficulties were mainly due to the severity and persistence of pandemic in the overseas territories where it operates.

It pointed out that Air Austral ensured the territorial continuity of Réunion and neighbouring Indian Ocean islands (Mayotte in particular) with metropolitan France. It also operated air links with countries in the southwest Indian Ocean and in Asia.

“The Commission, therefore, authorised the rescue measure considering that the positive effect of the aid outweighed the distortion of competition potentially caused by the state support,” the EC said.

France, together with the Regional Council of Réunion, previously provided financial support of EUR100 million (USD113 million) to Air Austral, including a EUR80 million (USD90.7 million) loan guarantee and a direct loan of EUR20 million. The French government has also mooted a merger between Corsair International (SS, Paris Orly) and Air Austral within the framework of European Union regulations.