The European Commission has opened an investigation into the plan by the Spanish region of Valencia to grant €9 million to regional airline Air Nostrum.
The money is said to be used to renew Air Nostrum's fleet is in line with EU state aid rules.
In 2018, the regional government of Valencia approved the granting of a subsidy worth a maximum €3 million to Air Nostrum.
Furthermore, the regional government intends to grant an additional subsidy of maximum €6 million over the period 2019-2020.
Spain is arguing that the measure falls under the environmental protection rules of the 2014 General Block Exemption Regulation (GBER) and that it does not, therefore, need to be notified for the Commission's assessment under State aid rules.
The GBER and the Guidelines on State aid for environmental protection and energy enable member States to support measures that have a positive impact on the environment.
In order to be in line with EU State aid rules, however, these measures need to fulfil certain conditions to ensure that they have the intended positive effect on the environment.
The Commission has doubts that the total intended aid support of €9 million to Air Nostrum falls within the GBER and complies with the Guidelines on State aid for environmental protection and energy.
The Commission will investigate whether the decision by Air Nostrum in 2017 to acquire 10 more fuel-efficient Bombardier CRJ-1000 aircraft was directly triggered by the support, in line with the requirements set out in the GBER and the Guidelines, or whether the investment in the more environmentally friendly option would have been carried out in any event, even absent the public support.
Air Nostrum had already renewed its fleet with 18 Bombardier CRJ-1000 aircraft before 2017 without any State aid. Moreover, the GBER only applies to measures to support investments by the beneficiary airline.
Under the GBER, for a leasing to qualify as an investment, the leasing contract needs to include the obligation (and not merely the option) to purchase the aircraft. The Commission has doubts at this stage that the type of leasing used by Air Nostrum meets this condition.