Cyprus Airways Airbus A330. Courtesy photo

European antitrust regulators are evaluating whether Cyprus Airways illegally received more than €100 million ($130 million) in public support. In the meantime, the European Commission has barred the Cypriot government from providing any further public support to the airline without prior approval while it assesses whether a €31.3 million capital increase and €73 million rescue aid loan fall outside of European law.

Earlier this year, the Cypriot State contributed €31.3 million to a capital increase, while “private participation was minimal,” according to the Commission. This could break rules where government owners must act in the same manner as a private investor.

“At this stage, the Commission has doubts that the capital increase was made on market terms. Indeed, in view of the company's financial difficulties and viability prospects, the majority of private shareholders decided not to participate in the capital increase,” the Commission said.

Cyprus Airways also “appears” to have received payments from the €73 million rescue aid loan, potentially breaking the “standstill obligation” where state aid must not be granted before the Commission has approved it. This approval is unlikely because Cyprus Airways received rescue and restructuring aid in 2007, so it is blocked from receiving further bailout for 10 years.

Announcing a doubling of its full-year net losses, Cyprus Airways recently said its future depended on getting the green light from the Commission.

Air Baltic, Adria Airways and Estonian Air are also being investigated by the Commission for state aid.