EU steps up probe of Estonian Air funding

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Estonia's flag carrier is under intensified scrutiny by the European Commission after a loan from the national government was increased.

In February, the European Commission opened an investigation to examine whether state aid rules had been breached by support supplied to Estonian Air - including a rescue loan.

Later that month, says the Commission, the loan was increased by €28.7 million, of which €16.6 million has been paid to the airline.

"The extension of the investigation will give interested third parties an opportunity to comment on this additional measure," says the Commission. "It does not prejudge the outcome of the investigation."

The Commission calculates that "several public interventions" since 2009 have provided Estonian Air with capital injections totalling over €57 million.

EU rules dictate that a company can receive rescue aid only once in 10 years.

In certain circumstances, rescue aid is permitted "for urgent structural measures that are necessary to ensure the survival of a company in difficulty". Estonia contends that €23.8 million out of the €28.7 million loan is for financing of urgent structural measures, and that these "should enable Estonian Air to implement certain aspects of the proposed restructuring, to downsize the business and minimise losses immediately".

The state owns more than 97% of Estonian Air, which has posted heavy losses since 2006.