EU has until July 19 to make a new decision on TAP state aid

  • ECO News
  • 14 July 2021

The suspension of the effects of the annulment of TAP's state aid, ordered by the General Court of the EU, is almost over. The Commission will have to adopt a new decision by next Monday.

The General Court of the European Union overturned on May 19 the EU’s decision to back state aid to TAP for a total of €1.2 billion, following a complaint lodged by Ryanair, simultaneously determined the suspension of the effects of the annulment, in view of the serious impact on the company and the Portuguese economy. It gave the European Commission two options: either to proceed with an in-depth investigation, which did not happen, or to make a new decision within two months. The deadline expires next Monday. The restructuring plan is also not expected to arrive before that date.

“The General Court states, however, that if the Commission decides to adopt that new decision without initiating the formal investigation procedure provided for in Article 108 TFEU, that suspension of the effects of the annulment may not exceed two months from the date of delivery of the judgement,” the European court announced. This means that the suspension of the effects of the annulment ends on July 19.

ECO questioned the European Commission about this approaching deadline, but has not yet received an answer. What is expected, however, is that by that date Brussels will make a new decision that answers the questions raised by the General Court of the EU, preventing the annulment of the €1.2 billion injected into TAP in 2020 from materialising.

Restructuring plan also on hold

The response to the General Court and the approval of TAP’s restructuring plan are two processes running separately in the European Commission, but as far as ECO learnt from two sources, the “green light” to the second is not expected to arrive before the decision on the first. It could, at the very most, come on the same day.

The Minister of Infrastructure said on Monday in an interview with TVI24 that “the plan is no longer under negotiation” and that new developments are expected “in the coming days or weeks”. “There is work that has been done with the European Commission and we hope it will soon be approved,” he added.

Pedro Nuno Santos pointed out that, although there is no “green light” from Brussels yet, restructuring is already underway with the cutting of 2,000 personnel – “there are 2,400 fewer workers, a quarter of the workforce” – and the reduction of fleet capacity. “Between sales and returns, it’s almost 20 planes less at the end of the year, compared to the beginning of 2020. We have gone from 108 to 88 planes,” he said. He also mentioned cuts of 50% in pilots’ salaries and 25% for other workers, as well as the reduction of its services.

Questioned about the implications of a possible annulment of TAP’s state aid in 2020, he said that “it would be a drama for the country,” but assured that the government would continue “to find solutions to save TAP and the economy, which would be highly affected.

The General Court of the European Union annulled the injection of 1.2 billion on May 19, as it considered that the European Commission’s approval was not sufficiently justified. The Luxembourg-based institution upheld Ryanair’s appeal, but suspended the annulment in view of the serious impacts on the company and the economy, urging the Directorate-General for Competition (COMP) to present a new decision.

The Court considered that it was not unequivocally demonstrated that the state aid was the only possible way to proceed, nor that it does not unduly benefit third parties.