12 December 2000 * in Case T-296/97, Alitalia
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ALITALIA V COMMISSION JUDGMENT OF THE COURT OF FIRST INSTANCE (Third Chamber, Extended Composition) 12 December 2000 * In Case T-296/97, Alitalia — Linee aeree italiane SpA, established in Rome, Italy, represented by F. Sciaudone and G.M. Roberti, of the Naples Bar, M. Siragusa, of the Rome Bar, G. Scassellati Sforzolini, of the Bologna Bar, M. Beretta, of the Bergamo Bar, and F.M. Moretti, of the Venice Bar, and initially by A. Tizzano, of the Naples Bar, with an address for service in Luxembourg at the Chambers of Elvinger, Hoss and Prussen, 2 Place Winston Churchill, applicant, v Commission of the European Communities, represented by D. Triantafyllou, of its Legal Service, acting as Agent, with A. Abate and E. Cappelli, of the Rome Bar, with an address for service in Luxembourg at the office of C. Gómez de la Cruz, of its Legal Service, Wagner Centre, Kirchberg, defendant, * Language of the case: Italian. II - 3875 JUDGMENT OF 12. 12. 2000 — CASE T-296/97 supported by Air Europe SpA, established in Gallarate, Italy, represented by L. Pierallini and A. Costantini, of the Rome Bar, with an address for service in Luxembourg at the Chambers of A. Lorang, 51 Rue Albert 1er, and by Air One SpA, established in Chieti, Italy, represented by M. Merola, of the Rome Bar, and A. Sodano del Foro Adele, of the Naples Bar, with an address for service in Luxembourg at the Chambers of A. Lorang, 51 Rue Albert 1er, interveners, APPLICATION for annulment of Commission Decision 97/789/EC of 15 July 1997 concerning the recapitalisation of the company Alitalia (OJ 1997 L 322, p. 44), THE COURT OF FIRST INSTANCE OF THE EUROPEAN COMMUNITIES (Third Chamber, Extended Composition), composed of: K. Lenaerts, President, J. Azizi, R.M. Moura Ramos, M. Jaeger and P. Mengozzi, Judges, Registrar: J. Palacio González, Administrator, having regard to the written procedure and further to the hearing on 27 June 2000, II - 3876 ALITALIA V COMMISSION gives the following Judgment Facts of the case 1 The applicant is an airline whose capital was held on 1 July 1996 as to approximately 90% by the Italian State finance company Istituto per la Ricostruzione Industriale SpA (hereinafter 'IRI'), the rest being held by private investors. 2 The applicant is the fifth largest European airline in terms of passenger-kilometres after British Airways, Lufthansa, Air France and KLM. Its turnover, in the order of ITL 7 830 billion in 1996 (approximately EUR 4 billion), is comparable to that of SAS and slightly less than that of Swissair. Although the applicant's network mainly covers Italy and Europe, it also includes almost 40 intercontinental destinations in North and South America, Africa, the Middle East and the Far East. 3 The applicant has holdings in other airlines. It has 100% control of Avianova, which in July 1996 became Alitalia Team SpA (hereinafter 'Alitalia Team') and has a 45% holding in the charter company Eurofly and a 27.61% holding in Air Europe. When the action was brought it had a 30% holding in the Hungarian national airline Malev. II - 3877 JUDGMENT OF 12. 12. 2000 — CASE T-296/97 4 The applicant also owns a limited number of shares in the capital of companies whose business is related to air transport. However, the carriage of passengers and goods by air accounts for 92% of total group turnover. 5 At the beginning of the 1990s the applicant suffered from under-capitalisation. During the same period it had to face up to difficulties connected with the Gulf War, the recession in the airline sector in 1992 and 1993 and increased competition resulting from the liberalisation of the air transport market. As a consequence, the applicant's average yield fell by 22% between 1990 and 1995. The applicant therefore reduced its costs and improved its productivity, in particular by reducing its ground staff. The operating costs per tonne-kilometre thus fell by 13% and the number of available tonne-kilometres rose by 60% during the period 1990 to 1995. 6 Despite those efforts, the applicant was unable to return to profitability. Its debt increased from ITL 653 billion in 1990 to ITL 3 420 billion in 1995, giving rise to substantial financial costs. 7 On 31 March 1996, the applicant's cumulative losses amounted to ITL 905 billion and its net assets had fallen to ITL 150 billion. In the light of that situation, the applicant adopted in July 1996 a restructuring plan for the period 1996 to 2000, accompanied by a plan for large capital injections by IRI. 8 The restructuring plan consisted of two phases, a restructuring phase (1996 to 1997) and a development phase (1998 to 2000). II - 3878 ALITALIA V COMMISSION 9 The restructuring phase was designed to reduce the applicant's operating costs and to bring its ratio of debt to equity down to a reasonable level. It therefore comprised a financial component and a management component. The manage ment component was intended to make the company competitive in the short term by pursuing three main aims: reducing costs, maximising receipts and selling non-strategic activities. 10 The reduction in costs, in particular, was to be achieved by productivity improvements and wage freezes. The agreement reached between the company and the trade union representatives on 19 June 1996 was to save costs, during the five-year period from 1996 to 2000, of more than ITL 1 000 billion. In return for that reduction in wage costs, the applicant's staff were to receive Alitalia shares to a value of ITL 310 billion (representing for the company a cost of ITL 520 billion with tax and social charges), corresponding to the annual saving achieved in labour costs. The plan also provided for the formation of a self-contained company, wholly controlled by Alitalia, which would engage new cabin personnel on less expensive terms. This new company, Alitalia Team, was set up on 23 July 1996. 11 The financial component of the plan notified to the Commission in July 1996 provided for capital injections totalling ITL 3 310 billion: ITL 1 500 billion to be provided by IRI by the end of 1996, 1 500 billion to be the subject of a second instalment to be paid in 1997 and ITL 310 billion for staff to have a stake in the company's capital, as stated in paragraph 10 above. Of the ITL 1 500 billion corresponding to the first instalment, ITL 1 000 billion had already been advanced to the applicant by IRI in June 1996. 12 The development phase was chiefly based on bringing the Malpensa hub into service as from 1998. According to the plan, the development of Malpensa airport would enable the applicant to reposition itself on one of the most II - 3879 JUDGMENT OF 12. 12. 2000 — CASE T-296/97 important and richest markets in Europe, namely that of Northern Italy. The creation of the Malpensa hub was to be accompanied by restructuring of the terminal at Rome-Fiumicino Airport, which at the time was the hub of the applicant's network. During the development phase, the applicant also planned to introduce shuttle services on the main domestic Italian routes, to reorganise its international network, to develop a series of alliances with foreign partners and to expand its fleet. Administrative procedure 13 By letter of 29 July 1996 the Italian authorities sent the Commission the restructuring plan. According to the Italian authorities, the plan was essentially intended to prepare for the privatisation of the applicant. It did not contain any State aid components. 14 By letter of 9 August, the Commission notified the Italian authorities that the intervention would be examined in the light of the provisions of Article 92 of the EC Treaty (now, after amendment, Article 87 EC) and in the framework of the procedure provided for in Article 93(2) of the EC Treaty (now, after amendment, Article 88(2) EC). 15 On 9 October 1996, the Commission decided to initiate the procedure provided for in Article 93(2) of the Treaty concerning the increases in capital envisaged in the plan. It notified the Italian authorities of its decision by letter of 21 October 1996, which was the subject of a notice published in the Official Journal of the European Communities on 16 November 1996 (OJ 1996 C 346, p. 13; herein after 'the notice of 16 November 1996'). II - 3880 ALITALIA V COMMISSION 16 In the notice of 16 November 1996 the Commission explained that its reason for initiating the procedure was the nature of the capital injections by IRI, which might be classified as State resources within the meaning of Article 92(1) of the Treaty, and its serious doubts concerning: — the existence of aid, in view of the low probability of IRI's financial aid being satisfactorily recompensed; — the possibility of applying one of the derogations provided for in Article 92(2) and (3) of the Treaty to any aid. 17 The Commission called on the services of an independent firm of consultants (Ernst & Young) to gather information on several of the questions about which it had expressed doubts. 18 By letter of 21 November 1996, the Italian authorities submitted their observations on the initiation of the procedure provided for in Article 93(2) of the Treaty. 19 The United Kingdom, Danish, Norwegian and Swedish Governments, eight airlines in competition with the applicant and two associations submitted observations following the initiation of the procedure. 20 On 11 December 1996, the consultants appointed by the Commission sent the Commission a report on the initial plan.