Commission opens LOT state-aid probe

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European regulators have opened an in-depth probe into whether Zl804 million (around $260 million) in restructuring aid for Polish flag carrier LOT complies with EU state-aid rules.

In May, European regulators approved temporarily a €100 million ($135 million) rescue loan to LOT, after Poland committed to developing a restructuring plan aimed at securing the carrier's long-term viability. The nation subsequently notified the European Commission of plans for a €200 million capital increase to help LOT finance the restructuring plan, which covers a two-and-a-half-year period and is intended to restore viability by 2015.

"The Commission is concerned that the forecasts on long-term viability may not be realistic and that the proposed capacity reduction may not be adequate to compensate for the distortions of competition," it says in detailing the investigation. "The Commission also has doubts whether LOT's own contribution to the restructuring cost is sufficient."

The Commission will also examine LOT's eligibility for restructuring aid by considering whether the airline may have received aid from Polish state-owned airports when it was already in difficulty. EU law allows companies rescue and restructuring aid only once in a 10-year period under its "one time, last time" principle.

LOT has racked up nearly $550 million in net losses in five consecutive years of losses from 2008.

It is the latest in a series of probes the Commission has launched into public support measures for national flag carriers, including investigations at Adria Airways, Air Baltic, Estonian Air and SAS.