European Commission: State aid granted to Blue Air is illegal

The government must recover from the Blue Air company the illegally granted state aid in the amount of almost 33.8 million euros (163.8 million lei) plus the related interest, the European Commission announced on Friday, through a press release. The EU executive concluded that Blue Air's restructuring plan was not able to restore the airline's long-term viability and was therefore incompatible with EU state aid rules.

The Commission's decision represents the completion of the detailed investigation started in April 2023 regarding the respective restructuring plan following the state aid granted in 2020 to the airline following the intervention of the Orban government.

In August 2020, the Commission approved two measures in favor of the airline: a public guarantee of almost 28 million euros (approximately 137 million lei) to cover damages directly caused by the coronavirus pandemic and a public guarantee of approximately 33.84 million euros (163.8 million lei) related to a rescue loan, intended to partially cover Blue Air's liquidity needs in the next six months.

The PNL government led by Prime Minister Ludovic Orban has agreed that, in the event that the public guarantee related to the rescue loan does not cease after six months from the first aid payment that took place in October 2020, to communicate to the Commission either a plan to liquidation or a comprehensive restructuring plan for Blue Air.

On October 26, 2020, SIF Banat-Crişana (SIF 1), whose president is Bogdan Drăgoi, announced on the stock exchange that it had fully collected the counter value in national currency of the amount calculated for the end of October 21, 2020, representing the principal loan and interest related to the issue of Blue Air Aviation corporate bonds, to proceed with the lifting of real estate mortgages instituted on the issue date. SIF 1 did not mention what amount it was, but in the June 2020 report, SIF 1 management indicated that Blue Air had to repay 6 million euros of the 9 million euros granted through the bond issue concluded on December 16, 2019.

Practically from the first payment of the state aid granted to Blue Air through EximBank, the airline paid the debt to SIF 1, without even trying to negotiate the payment or establish a payment schedule in installments, given the fact that it was facing a complicated financial situation.

All these operations were done with the complicity of the Orban government, but also of the PNL, knowing that Bogdan Drăgoi was secretary of state at the Ministry of Finance in the Tariceanu government and minister of finance (ed. - for almost two months) in the Hungarian government. Probably, through the lens of the relations he made with some leaders of the PNL during the period in which he held the previously mentioned positions, Bogdan Dragoi managed to see a legislative project on the SIFs voted, but also to benefit from the first installment from the state aid granted to the Blue Air company, which was mostly transferred to SIF1 accounts.

So now, after the decision of the European Commission, the Romanian state must recover from Blue Air what no longer exists, but the Drăgoi family, in this case SIF 1, remains with all the money returned by the air operator in October 2020.

We remind you that in April 2021, the Cîţu government communicated a restructuring plan that was then updated several times. In November 2022, the Romanian state repaid the loan and took a 75% stake in Blue Air after the airline suspended its operations in September 2022.

Following its in-depth investigation launched in April 2023, the Commission concluded that Blue Air's restructuring plan was not feasible, coherent and large enough to restore the airline's long-term viability within a reasonable time and without unduly distorting unfair competition in the single market. This conclusion was corroborated by Blue Air's inability to maintain its activity and its request, in March 2023, to open insolvency proceedings.

The restructuring plan was not updated either following the cessation of activity or the initiation of the in-depth investigation.

Measures supporting an inadequate and unrealistic restructuring plan that is not supported by sufficient market funding from investors after the bailout period are illegal under EU state aid rules.