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EU Commission Approves Restructuring Aid for Adria

Brussels, 09 July (STA) - The European Commission okayed on Wednesday a total of EUR 85.46m in restructuring support provided by Slovenia to flag carrier Adria Airways between 2007 and 2011. The Commission concluded after an investigation that the individual measures either did not constitute state aid or were aid compliant with EU rules.

The Commission launched an investigation in November 2012 over doubts regarding compliance, including in capital injections executed in 2007, 2009, 2010 and 2011.

In the only case where measures constituted state aid, the EUR 50m capital injection provided in 2011 by the state directly, the Commission found the procedure to include a "restructuring plan that will enable Adria to become viable in the long term without unduly distorting competition in the single market".

The Commission notes that the cancellation of scheduled routes, the surrender of slots and reduction of the fleet led to a capacity reduction that will limit the distortions of competition.

"Moreover, two capital injections in 2007 and 2009 and the sale of an Adria Airways subsidiary in 2010 were carried out on market terms and therefore did not involve any state aid," the Commission said about the other injections, which were mostly secured by state-run funds.

Also, "Adria Airways will sell several assets, including AAT, in order to bear part of the restructuring costs", the Commission highlights in a report that means Adria will not need to return the funds like was for instance the case with Slovenian sports goods manufacturer Elan.

Adria chairman Mark Anžur welcomed this, saying the company can now focus on the execution of its new business model, which is becoming more low-cost carrier oriented or is a kind of hybrid.

Pointing out that Adria expects to end in the black this year, Anžur argued the Commission had based its decision on the present positive business trends and new business model as much as it had on the implementation of the restructuring plan.

Anžur is moreover increasingly convinced that the state-owned company can also survive without a strategic partner.

"The condition for survival is successful operations and this is what we are proving. In the end this was also recognised by the European Commission," he told the STA.

Adria is on the government's list of 15 companies slated for privatisation, but no sales procedure was launched during the wait for the Commission's decision.

The outgoing government announced last week it would also halt other privatisation cases that were already ongoing to leave the final decision on privatisation to the new cabinet.

Adria, founded in 1961, is a member of the Star Alliance, the largest global airline alliance, and presently executes 180 regular flights each week.

It presently has 394 employees and is expecting a profit this year after almost breaking even in 2013. The number of passengers rose by 10% to 189,000 in the first quarter while year-on-year operating profit for the period was up by EUR 2.1m.

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