State aid: Commission approves €200 million Danish loan in support of the Travel Guarantee Fund for travel cancellations due to coronavirus outbreak

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The European Commission has found a Danish State loan facility of up to DKK 1.5 billion (approx. €200 million) in support of the Travel Guarantee Fund (“Rejsegarantifonden”) to be in line with EU State aid rules. The loan was approved under the State aid Temporary Framework to support the economy in the context of the COVID-19 outbreak adopted by the Commission on 19 March 2020.

Executive Vice President Margrethe Vestager, in charge of competition policy, said: “The entire EU economy is experiencing a serious disturbance due to the coronavirus outbreak, and the travel and tourism industries are particularly hard hit. The €200 million Danish State loan in support of the Travel Guarantee Fund approved today ensures that liquidity remains available to travel organisers. This will allow them to settle quickly and efficiently travellers’ claims following travel disruptions linked to the coronavirus outbreak. We will continue to work in close cooperation with Member States to tackle the economic effects of the outbreak”.

The Danish support measure

Denmark notified to the Commission an aid measure in the form of a State loan under the Temporary Framework. The loan aims to support the Travel Guarantee Fund, which provides reimbursement to travellers in case of travel cancellations. In particular, the measure covers travel packages that were cancelled due to the exceptional circumstances caused by the coronavirus outbreak and the subsequent travel restrictions imposed by the Danish Government.

The loan aims (i) to ensure that sufficient liquidity remains available for travel organisers to counter the damage inflicted in the package travel market, (ii) to preserve the continuity of economic activity during and after the coronavirus outbreak, and (iii) to ensure the quickest possible settlement of related refunds or reimbursements to travellers. The measure has a total budget of DKK 1.5 billion (approx. €200 million).

The Commission found that the Danish measure is in line with the conditions set out in the Temporary Framework. In particular, the loan amount is designed to cover the Fund’s liquidity needs for the foreseeable future. The loan contract will be signed until the end of this year and the maturity of the loan will be 6 years. Furthermore, Denmark will ensure that the loan to the Fund will be fully dedicated to the reimbursement of cancelled package travel contracts due to the coronavirus outbreak. The measure will thus provide certainty to affected consumers whose trips were disrupted during the pandemic.

The Commission therefore concluded that the measure will contribute to managing the economic impact of the coronavirus outbreak in Denmark. It is necessary, appropriate and proportionate to remedy a serious disturbance in the economy of a Member State, in line with Article 107(3)(b) TFEU and the conditions set out in the Temporary Framework.

On this basis, the Commission approved the measures under EU State aid rules.

Background

The Commission has adopted a Temporary Framework to enable Member States to use the full flexibility foreseen under State aid rules to support the economy in the context of the coronavirus outbreak. The Temporary Framework provides for five types of aid, which can be granted by Member States:

(i)          Direct grants, selective tax advantages and advance payments: Member States will be able to set up schemes to grant up to €800,000 to a company to address its urgent liquidity needs.

(ii)         State guarantees for loans taken by companies from banks: Member States will be able to provide State guarantees to ensure banks keep providing loans to the customers who need them. These state guarantees can cover loans to help businesses cover immediate working capital and investment needs.

(iii)        Subsidised public loans to companies: Member States will be able to grant loans with favourable interest rates to companies. These loans can help businesses cover immediate working capital and investment needs.

(iv)        Safeguards for banks that channel State aid to the real economy: Some Member States plan to build on banks’ existing lending capacities, and use them as a channel for support to businesses – in particular to small and medium-sized companies. The Framework makes clear that such aid is considered as direct aid to the banks’ customers, not to the banks themselves, and gives guidance on how to ensure minimal distortion of competition between banks.

(v)         Short-term export credit insurance: The Framework introduced additional flexibility on how to demonstrate that certain countries are not-marketable risks, thereby enabling short-term export credit insurance to be provided by the State where needed. On 27 March, the Commission further expanded on that flexibility: following an urgent public consultation, the Commission decided to amend the Annex to temporarily remove all countries from the list of “marketable risk” under the Short-term export-credit insurance Communication. This will make public short-term export credit insurance more widely available in light of the current crisis linked to the coronavirus outbreak. Following the amendment, State insurers will in principle be able to step in and provide insurance for short-term export-credit risk for all countries, without the need for the Member State in question to demonstrate that the respective country is temporarily “non-marketable.” This amendment will be in place until 31 December 2020, with a possibility to review beforehand.

The Temporary Framework enables Member States to combine all support measures with each other, except for loans and guarantees for the same loan and exceeding the thresholds foreseen by the Temporary Framework.

The Temporary Framework also enables Member States to combine all support measures granted under the Temporary Framework with existing possibilities to grant de minimis aid company up to €200,000 over three fiscal years.

At the same time, Member States have to commit to avoid undue cumulation of support measures for the same companies to limit support to meet their actual needs.

Furthermore, the Temporary Framework complements the many other possibilities already available to Member States to mitigate the socio-economic impact of the coronavirus outbreak, in line with EU State aid rules. On 13 March 2020, the Commission adopted a Communication on a Coordinated economic response to the COVID-19 outbreak setting out these possibilities. For example, Member States can make generally applicable changes in favour of businesses (e.g. deferring taxes, or subsidising short-time work across all sectors), which fall outside State Aid rules. They can also grant compensation to companies for damage suffered due to and directly caused by the coronavirus outbreak.

The Temporary Framework will be in place until the end of December 2020. With a view to ensuring legal certainty, the Commission will assess before that date if it needs to be extended.

The non-confidential version of the decision will be made available under the case number SA.56856 in the State aid register on the Commission’s competition website once any confidentiality issues have been resolved. New publications of State aid decisions on the internet and in the Official Journal are listed in the State Aid Weekly e-News.

More information on the temporary framework and other action the Commission has taken to address the economic impact of the coronavirus pandemic can be found here.