European Commission investigating state support for Air Baltic

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The European Commission has opened an "in-depth investigation" of Air Baltic to assess whether historic financial support by the Latvian government contravenes EU rules on state aid.

The EU's executive body says it will scrutinise "various public support measures" taken during 2010 and 2011, while inviting "interested third parties" to air their views.

Its inquiry follows two complaints submitted to the Commission by Baltic Aviation Systems (BAS) - formerly a 47.2% stakeholder in the airline - and Inga Piterniece, a former board member of BAS.

Commenting on the prospect of an investigation last week, Air Baltic said: "The complaint of BAS is a reminder to us that the past issues have to be clarified. For this, we have established a team of experts and advisers to tackle the issues raised as a result of this complaint."

It added that over the course of any investigation, the flag carrier plans to "raise serious concerns [about] whether BAS, as complainant, has given an entire and complete picture to the Commission".

The investigation will focus on six financial measures taken by the Latvian government in recent times, the Commission says in a statement.

These include a 16 million lat ($29.4 million) loan in October 2011, which subsequently had its interest rate "substantially reduced"; the first tranche of a 41.6 million lat loan in December 2011; and the acquisition by Latvia and BAS of 0%-coupon bonds issued by Air Baltic in 2010.

The Commission will assess "whether these measures constitute state aid in the meaning of EU rules, i.e. if they procured an economic advantage to Air Baltic over its competitors in the EU single market".