The European Commission has approved a Danish state guarantee of up to €137 million (€149 million) for Scandinavian Airlines (SAS), ruling that the funding is in line with EU state-aid rules.

“The Danish public guarantee of up to €137 million will enable Denmark to compensate SAS for part of the damage suffered due to the coronavirus outbreak,” EC EVP and competition commissioner Margrethe Vestager said.

Vestager acknowledged that aviation has been hit “particularly hard” by the COVID-19 outbreak. She added that the EC is working closely with member states to find “workable solutions” to support companies.

SAS, which is active in Denmark, Sweden and Norway, normally provides two-thirds of intra-Scandinavian connectivity. The revolving credit facility guarantee will compensate SAS for flight disruption caused by Danish travel restrictions.

“Since the start of the coronavirus outbreak, SAS has suffered a significant reduction of its services, resulting in high operating losses,” the EC said.

COVID-19 is being viewed by the EC as “an exceptional occurrence” that justifies some member-state intervention. However, any compensation has to be connected to the virus.

“The Commission found that the Danish measure will compensate the damage suffered by SAS that is directly linked to the coronavirus outbreak. It also found that the measure is proportionate,” the EC said.

If the damages sustained by SAS ultimately prove lower than the Danish state support, the EC will activate a “claw-back mechanism” to recover the aid.

“The exact damage suffered by SAS as a result of the outbreak will be quantified after the coronavirus crisis, based on the airline's operating accounts for the year 2020. The method used to quantify the damage will be subject to the Commission's prior approval,” the EC said.

On March 13, 2020, the EC adopted a communication on a coordinated economic response to the COVID-19 outbreak. This was followed by a temporary state-aid framework, adopted on March 19 and amended on April 3, giving member states greater flexibilty to support their economies in light of COVID-19.

“The temporary framework, based on Article 107(3)(b) TFEU, recognizes that the entire EU economy is experiencing a serious disturbance,” the EC said, adding that the framework will remain in place until the end of December 2020, with potential for further extension.

Photo credit: SAS