Air Nostrum’s fleet renewal, after the carrier was pledged up to €9 million ($10 million) in local-government support on environmental grounds.

The probe relates to the funding of 10 Bombardier CRJ1000s that Air Nostrum committed to acquire in 2017.

“At this stage, the Commission has doubts that the total intended aid support of €9 million to Air Nostrum falls within the General Block Exemption Regulation (GBER) and complies with the guidelines on state aid for environmental protection and energy,” the Commission said, announcing the investigation Oct. 29.

The Valencia regional government granted Air Nostrum a subsidy of up to €3 million in 2018 and intends to grant up to a further €6 million in 2019-2020. Spain is claiming an EU state-aid exemption on environmental grounds, because the funds are being used to renew Air Nostrum’s fleet with more efficient aircraft.

If certain conditions are met, EU member states are allowed to support measures that have a positive impact on the environment, but the Commission questions whether the state aid actually incentivized Air Nostrum to take more fuel-efficient aircraft, or whether it would have placed the order regardless of the aid.

“Granting aid in a context where a large company would have invested, in any event, in newer and greener planes would merely reduce the company's ordinary operating costs, which its (local) competitors have to meet without aid. This leads to competition distortions at the expense of taxpayers,” the Commission said.

Air Nostrum had already renewed its fleet with 18 CRJ1000s, before 2017, without any state aid.

The Commission is now inviting any interested parties to submit comments, as it further-investigates the case.

Air Nostrum acknowledged the investigation, which it said was triggered by a complaint by Irish LCC Ryanair, but added that the “grant agreement” with the Valencia regional government respects all regional, national and community legislation.

“The European Investment Bank backed this project in July 2017, approving credit lines based on the reduction of CO2 emissions and lower fuel consumption of the new aircraft that are gradually replacing the CRJ200 and CRJ900 aircraft in the Air Nostrum aircraft fleet. The transport sector has previously received these types of grants designed to favor investments that minimize the environmental effect of its aircraft fleets. Air Nostrum has, to date, still not received any of the authorized grants,” Air Nostrum said.

Victoria Moores victoria.moores@informa.com