The European Commission has approved a €290 million Belgian aid measure to support SN Group, which is composed of SN Airholding and its sole subsidiary Brussels Airlines, in the context of the coronavirus outbreak. The aid measure consists of a €287 million loan and an equity injection of around €3 million. The aid measure was approved under the State aid Temporary Framework.
Executive Vice-President Margrethe Vestager, in charge of competition policy, said: “Brussels Airlines plays an important role in terms of jobs and connectivity in Belgium. The airline has been suffering substantial losses as a result of the travel restrictions that Belgium and other governments had to impose to limit the spread of the virus. With this €290 million support package, which mostly takes the form of a loan with subsidised interest rates, but also includes a minor equity injection, Belgium will provide SN Group, to which Brussels Airlines belongs, with the liquidity that it urgently needs to withstand the impact of the current crisis. At the same time, Belgium will be sufficiently remunerated for the risk taxpayers assume, and the support will come with strings attached to limit distortions of competition.”
Brussels Airlines is a major network airline with its main hub at Brussels International Airport. Together with its parent company SN Airholding, Brussels Airlines belongs to SN Group, which in turn is fully owned by Deutsche Lufthansa AG (DLH). Since the start of the coronavirus outbreak, Brussels Airlines, and more generally SN Group, have suffered a significant reduction of their services, resulting in high operating losses and a significant liquidity shortage.
Belgium notified to the Commission under the Temporary Framework a €290 million aid package in favour of SN Group, comprising:
- a 6-year loan of up to €287.1 million with subsidised interest, not convertible into equity, that may be drawn down in disbursements of minimum €30 million upon request; and
- a recapitalisation of €2.9 million in the form of “profit sharing certificates” (“parts bénéficiaires” / “winstaandelen”), a hybrid instrument that qualifies as equity under Belgian accounting rules.
The measure is part of a larger support package granted by Germany to the entire Lufthansa Group, to which SN Group belongs. As a result of the Belgian support measure, the overall aid previously granted to the Lufthansa Group will be proportionally reduced. Notably, the loan will proportionally reduce the State guaranteed loan granted to DLH as individual aid by Germany under the scheme approved by the Commission decision of 22 March 2020. The amount of the recapitalisation will proportionally reduce the recapitalisation of DLH approved by the Commission decision of 25 June 2020.
- With respect to the loan with subsidised interest rates, the Commission found that: (i) the amount is linked to SN’s Group liquidity needs in the foreseeable future and does not exceed double the annual wage bill of SN Group; (ii) the interest rates applicable to the loan fully comply with the reference rates and credit risk margins laid down in the Temporary Framework; and (iii) the loan is limited to a six-year duration.
- With respect to the recapitalisation, the Commission found that: (i) the amount does not exceed the minimum needed to ensure SN Group’s viability and does not go beyond restoring its capital structure before the coronavirus outbreak; (ii) the State will receive an appropriate remuneration for the investment; (iii) the investment includes enough exit incentives for the company to redeem the aid as soon as possible; (iv) until full redemption of the recapitalisation, SN Group is subject to a dividend ban; and (v) until at least 75% of the recapitalisation is redeemed, a strict limitation of the remuneration of the management (“membre de la direction des bénéficiaire” / “management van de begunstigden”), including a ban on bonus payments, is applied, and SN Group is in principle prevented from acquiring a stake of more than 10% in competitors or other operators in the same line of business. SN Group will have to publish information on the use of the aid received, including on how the use of the aid received supports its activities in line with EU and national obligations linked to the green and digital transformation.