THE European Commission instigated its latest airline state aid investigation yesterday after rejecting Italian carrier Alitalia's case for a three trillion lire (£1.25 billion) bail out partly funded by the Italian government.
"At this stage, the Commission is not convinced by these arguments in view of the present situation of the company and of the restructuring plan submitted by Italy," the EU executive said in a statement.
Alitalia told the Commission of its intended cash injection last July, saying that £619 million would be paid by its largest shareholder, the state owned holding company Istituto per la Ricostruzione Industriale (IRI).
Italian authorities said that, in making such a payment, IRI was acting as any private investor would and therefore the money did not come under the EU's state aid rules.
The Commission rejected this on the grounds that Alitalia's private investors, who hold 10 per cent of the airline stock, showed no indication of providing any money.
It added that the second instalment in 1997, was "not covered by the sort of guarantees a private investor might be expected to demand".
The Commission gave details of Alitalia's planned restructuring package, a two phased effort running from 1996 to 1997 and from 1998 to 2000.
Yesterday's move brings Alitalia into a long line of companies that have been targets of Commission state aid investigations including state owned carriers such as Spain's Iberia, Air France, Greece's Olympic Airways, Ireland's Aer Lingus, and TAP Air Portugal.
