(3) (a) and (c) provides for exceptions in respect of aid to promote or facilitate the development of certain regions. The proposed aid scheme, however, does not qualify for the exceptions provided for in Article 92 (3) (a) since, in Belgium, the standard of living is not abnormally low nor is there serious underemployment. Nor can the aid scheme be described as intended 'to facilitate the development . . . of certain economic areas' (Article 92 (3) (c), since it does not serve the purposes of any earlier investment or of job creation as is stipulated in the Commissions's 1979 communication on regional aid systems (2). In any case, the Belgian Government has put forward no regional arguments in support of the proposed aid.
As for Article 92 (3) (b), the evidence suggests that the aid in question was not intended to promote the execution of an important project of common European interest nor to remedy a serious disturbance in the Belgian economy. Moreover, the Belgian Government has not invoked this.
With regard to the exception under Article 92 (3) (c) for 'aid to facilitate the development of certain economic activitites', the Commission may consider some restructuring aid as compatible with the common market if it meets a number of conditions (3). These conditions must be seen in the context of the two principles enunciated in Article 92 (3) (c) - i.e. that the aid must be required for developing the activity from the standpoint of the Community and that the aid may not adversely affect trading conditions to an extent contrary to the common interest (4).
These criteria have been interpreted in a sectoral (aviation) context in Memorandum No 2 which stipulates that the Commission may in certain cases decide in accordance with Article 92 that aid may be granted to individual airlines which have serious financial difficulties, provided certain conditions are met:
(a) The aid must form part of a programme, to be approved by the Commission, to restore the airline's health, so that it can, within a reasonably short period, be expected to operate viably without further aid. Thus the aid must be of limited duration. If the restoration of financial viability requires capacity reductions, this would be included in the programme. Any alterations in the programme would also have to be approved by the Commission. Naturally any proposed changes to the aid would also have to be notified to the Commission.
(b) The aid in question must not transfer the difficulties from that Member State to the rest of the Community.
(c) Any such aid must be structured so that it is transparent and can be verified.
In the case of Sabena it must at first be concluded that the company is, if assessed by normal commercial standards, in a difficult financial position. On the basis of the latest figures submitted on 9 July 1991 by the Belgian Government, the debt-equity ratio of about 4: 1 is, against normal standards of the airline industry, very poor. The operations of the airline (Sabena World Airlines) led in 1990 to a net loss of Bfrs 7 462 billion on a total turnover of Bfrs 42 055 billion. Additional losses totalling Bfrs 259 million have been suffered by the subsidiaries Sabena Catering and Sabena Technics.
This weak financial situation results from various reasons among which low labour productivity and high personnel costs have played a major role.
In the short run the crucial point for Sabena will be, on the one hand, to make full use of the market potential Brussels offers and, on the other hand, to keep cost factors under control.
The intention of the air carrier Sabena to reduce the staff by 29 % and the willingness of the Belgian State to compensate for the cost of these lay-offs can be seen, under these circumstances, as important steps for regaining commercial viability.
In addition, the Government's request to develop a new commercially-oriented company statute and to increase substantially the share of private risk capital suggests a political willingness to restrict the role of the State to that of a normal shareholder and to abstain from (potentially cost-increasing) interventions for other than commercial reasons.
However, the contents of Sabena's new company statute must be clarified.
The fact that the decisions on the company's new statutes have yet to be taken has to be considered as an uncertainty in relation to the company's and the Belgian State's effective commitment to put the company on a genuine commercial footing and to solve, thereby, one of the most important underlying reasons for the developments during the past. Any decision of the Commission approving the measures must, therefore, be linked to the modification of the company statutes of Sabena.
It is also essential to ensure that new shareholders do not enjoy privileges and guarantees. Such guarantees could only be taken as a lack of confidence on behalf of private investors in the possibility of re-establishing long-term viability. Since arrangements with new shareholders have yet to be concluded, approval by the Commission would necessitate checking the Belgian State's commitment in this field. Only the provision of genuine risk capital sufficiently indicates the commercial viability of the restructuring concept. It is, therefore, necessary to oblige the Belgian Government to report regularly on the substance of decisions taken in this context.
The aid in question must be granted degressively and be clearly linked to the restructuring process.
The two-step approach envisaged by the Belgian Government can be seen as some form of degressive support. The Belgian Government has committed itself in a sufficiently clear way not to go ahead with the second capital injection of Bfrs 9 billion if an airline partner has not been found and if private shareholders will not contribute at least Bfrs 10 billion to Sabena's restructuring process. Major private investments following a massive 'clean-up' of the burden resulting from the past can be seen as ensuring the degressive nature of the whole operation.
The intensity of the aid must be reasonably related to the size of the underlying problems in order to keep possible distortions of competition to a minimum.
The question whether the proposed support for Sabena will go beyond the level required for the purpose of restoring the company, needs to be assessed in a broader context taking into account the aeropolitical environment.
The Belgian Government has, in the past, taken cautious steps to open up the Belgian market and to grant, to a limited extent and only on an individual case-by-case basis, licences for scheduled air transport to other carriers, namely to TEA.
The question whether the proposed aid amounts exceed the level required for achieving the objectives of the restructuring process also depends on the use of the additional funds.
The business plans presented by the company concerned indicate that these resources will largely be used for two purposes.
Firstly for writing off accumulated debts. Between 1984 and 1990 financial debt had increased from Bfrs 17 to 43 billion. The corresponding poor debt-equity ratio will be improved in order to re-establish commercial viability.
Secondly, resources will be used to fulfil modernization needs. The fleet modernization will require investments amounting to Bfrs 46 250 billion until 1995. The new equipment is required in order to lower operating costs and to comply with stricter noise emission rules as established by Community legislation.
These investments will not increase the capacities offered by Sabena. The restructuring of Sabena's network towards profitable routes will initially lead to a reduction of the capacities measured as available ton-kilometres (ATK) from nearly 2 000 million in 1990 to about 1 300 million ATKs in 1993. Afterwards an increase in line with the overall development of traffic volume is expected.
However, the aid could at the end of the restructuring process eventually lead to improving Sabena's financial standing (i.e. debts-equity ratios) above levels actually achievable by some of Sabena's competitors.
Information made available to the Commission suggests that the Belgian authorities and the company concerned envisage a debt-equity ratio of about 1: 25 as an objective to be achieved by the end of the recapitalization process.
In a normal micro-economic and sectorial environment this level can be considered as indicating a well-balanced financial situation in line with standards of the industry.
At present however, certain Community air carriers have, due to the general difficult situation of the aviation industry, a less sound financial structure.
Under these circumstances the financial support is justifiable only under the condition that the Belgian Government commits itself to avoid all forms of privileged treatment in areas determining the competitiveness of companies operating to and from Belgium.
V
In the light of the foregoing, the Commission considers that the exception laid down in Article 92 (3) (c) of the EEC Treaty can be applied to the aid measures proposed by the Belgian Government for supporting the restructuring programme of the air carrier Sabena if a number of conditions are fulfilled in order to ensure that the aid does not adversely affect trading conditions to an extent contrary to the common interest,
HAS ADOPTED THIS DECISION:
