Adria's state funding subjected to European scrutiny

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Slovenian government assistance to flag-carrier Adria Airways is to be scrutinised by European regulators to check whether it meets stringent rules on state aid.

The European Commission is sceptical about support including four capital injections, totalling more than €85 million, which were given to the carrier over the course of 2007-11.

It says it "doubts" that the funding was granted on market terms.

The capital injections were given either directly by the Slovenian government or by the state holding business advisory company PDP and its predecessor KAD.

KAD subscribed to two injections - in 2007 and 2009 - in their entirety, says the Commission, while PDP 80%-funded a 2010 injection, with the remaining 20% supported by two tourism agencies.

The fourth capital increase took place in 2011 when the government and PDP provided Adria with a €50 million cash injection and several banks, including state-owned Nova Ljubljanska Banka, converted nearly €20 million of debt into equity.

PDP and the the state-controlled operator of Ljubljana airport - Adria's operational base - also acquired the airline's maintenance arm, Adria Airways Tehnika, over the six months from October 2010 to March 2011. PDP took a 52% share while the airport operator picked up 48%.

European regulators have started an in-depth investigation into the measures taken on behalf of Adria which, the Commission says, has been suffering net losses since at least 2008.