62001TJ0301_EN
Parties
Grounds
Operative part
Parties
In Case T‑301/01,
Alitalia – Linee aeree italiane SpA,
established in Rome (Italy), represented by M. Siragusa, G.M. Roberti, G. Scassellati Sforzolini, F. Moretti and F. Sciaudone, lawyers,
applicant,
v
Commission of the European Communities,
represented by V. Di Bucci, acting as Agent, and A. Abate and G. Conte, lawyers,
defendant,
APPLICATION for annulment of Commission Decision 2001/723/EC of 18 July 2001 concerning the recapitalisation of the company Alitalia (OJ 2001 L 271, p. 28),
THE COURT OF FIRST INSTANCE OF THE EUROPEAN COMMUNITIES (Fifth Chamber, Extended Composition),
composed of M. Vilaras, President, M.E. Martins Ribeiro, F. Dehousse, D. Šváby and K. Jürimäe, Judges,
Registrar: C. Kantza, Administrator,
having regard to the written procedure and further to the hearing on 24 October 2006,
gives the following
Judgment
Grounds
Background to the dispute
1. Alitalia – Linee aeree italiane SpA (‘Alitalia’ or ‘the applicant’) is an airline in which approximately 90% of the capital was held on 1 July 1996 by the Italian State finance company Istituto per la ricostruzione industriale SpA (‘IRI’), the rest being held by private investors.
2. At the beginning of the 1990s, Alitalia suffered from undercapitalisation. During that period, it faced difficulties connected with the Gulf War, the recession in the airline sector in 1992 and 1993 and increased competition resulting from the liberalisation of the air transport market. As a result, the applicant was obliged to reduce its costs and improve its productivity but, despite those efforts, it was unable to return to profitability.
3. In the light of that situation, the applicant adopted in July 1996 a restructuring plan for the period 1996 to 2000. That plan, which the Italian authorities notified to the Commission by letter of 29 July 1996, consisted of a restructuring phase and a development phase. The financial component of the plan provided for a capital injection totalling 2 750 billion Italian lira (ITL) to be provided by IRI and to be paid in three instalments, the second instalment to be paid in May 1998 and the third in May 1999.
4. On 9 October 1996, the Commission decided to initiate the procedure provided for in Article 88(2) EC to examine the increases in capital envisaged in the plan (OJ 1996 C 346, p. 13). At various stages of the procedure, the Commission sought the advice of independent consultants (‘the Commission’s consultants’).
5. The original plan underwent a number of changes in the course of the procedure. The final version was sent to the Commission by the Italian authorities on 26 June 1997.
6. On 15 July 1997, the Commission adopted Decision 97/789/EC concerning the recapitalisation of the company Alitalia (OJ 1997 L 322, p. 44) (‘the 1997 decision’). The Commission considered that the injection of capital provided by IRI to Alitalia constituted State aid compatible with the common market, provided that the Italian authorities fulfilled 10 undertakings listed in Article 1 of the 1997 decision.
7. In view of new undertakings given by the Italian authorities following breaches of the conditions laid down in the 1997 decision which had come to light during the first six months after that decision had been adopted, the Commission did not raise any objections in its decision of 3 June 1998 to the payment of the third instalment of the capital injection by IRI.
8. By application lodged at the Registry of the Court of First Instance on 26 November 1997, Alitalia brought an action for annulment of the 1997 decision. In its judgment of 12 December 2000 in Case T‑296/97 Alitalia
v Commission
[2000] ECR II‑3871 (‘the Alitalia I judgmen t ’), the Court granted Alitalia’s action for annulment of the 1997 decision in view of the Commission’s failure to state the reasons for which it had used the same minimum rate of return (‘the minimum rate’) as that it had determined in Commission Decision 96/278/EC of 31 January 1996 concerning the recapitalisation of the company Iberia (OJ 1996 L 104, p. 25) (‘the Iberia decision’), manifest errors of assessment relating to the exclusion of the insolvency costs which IRI would have to bear in the event of Alitalia going into liquidation from the calculation of the internal rate of return (‘the internal rate’) and the failure to take account of the adjustments made to the restructuring plan in June 1997.
9. On 1 June 2001, at its request, the Commission’s consultants presented a report to it updating their previous analysis, which had been carried out in the course of the procedure leading to the adoption of the 1997 decision, so as to take account of the final version of the restructuring plan in calculating the minimum rate and the internal rate.
10. On 18 July 2001, the Commission adopted Decision 2001/723/EC concerning the recapitalisation of the company Alitalia (OJ 2001 L 271, p. 28) (‘the contested decision’).
The contested decision
11. Having stated in its legal assessment that Article 233 EC does not in this case require it to reopen the procedure which led up to the 1997 decision or to repeat the entire procedure before adopting a new decision, the Commission devotes 20 recitals (recitals 15 to 34 in the preamble to the contested decision) to an analysis of the criterion of the private investor.
12. With regard to the determination of the internal rate of the operation, the Commission is cognisant of the fact that the calculation of anticipated revenue should include the insolvency costs which IRI would have to bear if Alitalia were to go into liquidation. The Commission concludes its analysis by stating that the internal rate for IRI on its investment of ITL 2 750 billion in Alitalia capital is either 25.2% or 26.1% for 1997, according to the taxation applicable taken into account (recital 23 in the preamble to the contested decision).
13. With regard to calculating the minimum rate required by a private investor acting in accordance with market principles, on the basis of the information in its possession, and in particular the report produced by its consultants, the Commission considers the minimum rate to be around 30%, in view of the size of the sum involved and, more especially, the risks inherent in the operation which, despite improvements to the plan in June 1997, remain very high. It states in that connection that the risks inherent in the capital injection to Alitalia in July 1997 are at least as high as those involved in the capital injection received by Iberia in January 1996. In recitals 30 and 31 in the preamble to the contested decision, the Commission explains the ways in which the situation of those two undertakings is comparable, in spite of a number of specific differences.
14. In recital 33 in the preamble to the contested decision, the Commission concludes that the annual minimum rate which an investor acting in accordance with market principles would require in such circumstances in order to give Alitalia a capital injection of ITL 2 750 billion is higher than the internal rate for such an operation.
15. In its conclusion (recitals 35 to 37 in the preamble to the contested decision), the Commission considers that it has remedied the two errors of assessment and the failure to present a clear statement of reasons established by the Court in the Alitalia I judgment. As to the remaining reasoning for the contested decision, the Commission refers to the relevant paragraphs of the statement of reasons in the 1997 decision, which should, in its view, be deemed to form an integral part of the contested decision without there being any need to reproduce them (recital 36 in the preamble to the contested decision).
16. On the basis of that reasoning, the Commission adopted the contested decision, the operative part of which is as follows:
‘ Article 1
The aid granted by [the Italian Republic] to the company Alitalia … in the form of a capital injection of ITL 2 750 billion, payable in three instalments, intended to cover the restructuring of the company in accordance with the plan notified to the Commission on 29 July 1996 and adjusted on 26 June 1997, is compatible with the common market and the [European Economic Area] Agreement pursuant to Article 87(3)(c) [EC] and Article 61(3)(c) of the [European Economic Area] Agreement, subject to compliance with the obligations and conditions laid down in Articles 1, 2 and 3 of [the 1997] decision, as quoted in recital 1 of this Decision.
Article 2
The Commission has no objection to the payment of the second instalment of the capital injection to the company Alitalia …
Article 3
This Decision is addressed to the Italian Republic.’
17. The 10 conditions referred to in Article 1 of the contested decision, which are set out in recital 1 in the preamble to that decision, are as follows:
‘(1) to adopt the behaviour of a normal shareholder towards Alitalia; to enable it to be managed in accordance with commercial principles only and not to become involved in its management for reasons other than those strictly related to the Italian State’s status as a shareholder;
(2) not to grant Alitalia any further capital payment or any other aid in any form, including loan guarantees;
(3) that, until 31 December 2000, the aid shall be used by Alitalia solely for the purposes of restructuring the company and not for acquiring new shareholdings in other air carriers;
(4) not to give Alitalia priority in any way over other Community companies, in particular as regards the allocation of traffic rights (including those relating to third countries [outside] the European Economic Area), slot allocation, ground-handling assistance and access to airport facilities where preferential treatment would be contrary to Community law. In particular, the Italian authorities confirm that they will not apply any measure that is contrary to Community law and guarantee that:
(a) they shall immediately start and by 31 December 1998 at the latest shall have completed the procedure of revising Agreement No 4372 of 15 April 1992 …, as approved by Decree of 16 April 1992, in order to bring the Agreement in[to] line with Community regulations, in particular as regards the “right of priority”, “government interference”, “compatibility with the regulations on the liberalisation of air transport” and “airport privileges”;
(b) a de facto revision of the Agreement has already taken place with regard to the above points following the exchange of letters with Alitalia on the basis of Article 50 of the Agreement, the exchange making it clear that the Agreement applies only if it is compatible with Community law;
(c) Alitalia renounces its right of priority pursuant to Article 3 of the above Agreement;
(d) in coordinated or fully coordinated Italian airports, it will, before the start of the 1997-98 winter season, appoint a coordinator who does not have any link whatsoever with Alitalia and acts completely independently of it;
(5) [to guarantee] that, until 31 December 2000, the available capacity of aircraft operated by Alitalia or by other carriers under agreements whereby Alitalia assumes the commercial risk for such capacity (wet leasing, block space, joint venture agreements, etc.) shall not exceed the following limits:
(a) the number of seats available shall not exceed 28 985, of which 26 350 will be for Alitalia’s own fleet;
(b) the increase in the number of seat-kilometres available for each calendar year
– within the European Economic Area excluding Italy, and
– within Italy
shall not exceed 2.7%, on the understanding that no growth is to be authorised if the growth in the corresponding markets remains lower than 2.7%. However, if the growth rate in the corresponding markets exceeds 5%, supply may be increased, above 2.7%, by the percentage of the increase beyond 5%;
(6) [to ensure] that Alitalia shall have an analytical accounting system that makes it possible to determine, in the short term and for each route, a profitability ratio defined as the ratio between the full revenue and the full costs (the full cost being equivalent to the sum of the variable costs and fixed costs) for the particular route;
(7) [to guarantee] that, until 31 December 2000, Alitalia shall refrain from offering fares lower than those offered by its competitors for an equivalent service supplied on the routes which it operates;
(8) [to guarantee] that Alitalia shall dispose of its shareholding in Mal[é]v by … at the latest;
(9) [to guarantee] that Alitalia shall continue with the full implementation of the restructuring plan notified to the Commission on 29 July 1996 and adjusted on 26 June 1997, in particular as regards meeting the productivity, profitability and financial restructuring objectives set out in paragraph VI;
(10) to submit to the Commission, by the end of March 1998, March 1999, March 2000 and March 2001, an annual report on the progress of the restructuring plan, Alitalia’s economic and financial situation, and the compliance with these requirements. The report shall include a description (giving the particulars of co-contractors) of the commercial or operational cooperation agreements concluded by Alitalia during the previous year. The Commission shall, if necessary, have the information given in each of the reports checked by an independent consultant chosen by the Commission in agreement with the Italian Government.’
Procedure
18. By application lodged at the Registry of the Court of First Instance on 30 November 2001, Alitalia brought the present action.
19. On 13 February 2002, Alitalia also brought an action seeking to recover compensation in respect of damage suffered by it as a result of the adoption of the 1997 decision and the contested decision. However, it withdrew that action and the case was removed from the register by order of the President of the Third Chamber of the Court of First Instance of 8 April 2003 in Case T‑35/02 Alitalia
v Commission
(not published in the ECR).
20. By letter of 19 June 2002, the Commission notified the Italian Republic of its decision concerning the State aid registered under the numbers C 54/96 and N 318/02 relating, respectively, to the payment of the third instalment of aid for the restructuring of Alitalia, approved by the Commission on 18 July 2001, and new recapitalisation of EUR 1.432 billion (‘the decision of 19 June 2002’). The decision of 19 June 2002 was amended by Decision C (2002) 3151 final of 27 August 2002 and was published in the Official Journal of the European Communities
on 4 October 2002 (OJ 2002 C 239, p. 2). By application lodged at the Registry of the Court of First Instance on 21 November 2002, Air One SpA, an Italian airline, sought annulment of the decision of 19 June 2002 (Case T‑344/02). Alitalia intervened in those proceedings in support of the forms of order sought by the Commission.
21. By joint application of 5 September 20 02, the parties requested that the present proceedings be stayed. The proceedings were stayed until 30 November 2002 by order of the Court of 19 September 2002.
22. An amendment to the contested decision was published in the Official Journal on 8 April 2003 (OJ 2003 L 90, p. 54). First, the last sentence of recital 20 in the preamble to the contested decision, which stated that Alitalia accepted the figure of ITL 750 billion for the total insolvency costs, was removed. Secondly, in the last sentence of recital 22 in the preamble to the contested decision, the figures for IRI’s participation in Alitalia on 31 December 2000 were amended.
23. By letter of 10 March 2004, the Court requested Alitalia to define its position on the assertion in the rejoinder lodged by the Commission on 24 April 2003 that Alitalia no longer had any interest in proceeding with the action. Alitalia responded to that request by letter of 1 April 2004.
24. Upon hearing the report of the Judge-Rapporteur, the Court decided to open the oral procedure and, by way of measures of organisation of procedure under Article 64 of the Rules of Procedure of the Court of First Instance, put written questions to Alitalia and to the Commission. The parties replied to those questions within the prescribed period.
25. The parties presented oral argument and their answers to the questions put by the Court at the hearing on 24 October 2006.
Forms of order sought by the parties
26. The applicant claims that the Court should:
– annul the contested decision in its entirety;
– in the alternative, annul Article 1 of the contested decision in so far as the Commission makes the compatibility of the disputed capital injection subject to compliance with the conditions imposed in the 1997 decision;
– order the Commission to pay the costs.
27. The Commission contends that the Court should:
– dismiss the action;
– order the applicant to pay the costs.
Admissibility
A – Arguments of the parties
28. The Commission submits in its rejoinder that Alitalia no longer has any interest in the action.
29. First of all, the Commission contends that the recapitalisation of Alitalia was fully authorised and achieved since, in the decision of 19 June 2002, it did not raise any objections to the payment of the third and final instalment of the aid. Alitalia would therefore not gain any benefit at all from the annulment of the contested decision. On the contrary, such an annulment would deprive the decision of 19 June 2002 of its legal basis.
30. Secondly, the Commission observes that the present action could not facilitate an action for damages, since Alitalia withdrew the claim it brought for that purpose in Case T‑35/02.
31. Lastly, the Commission points out that an action, registered under number T‑344/02 and still pending before the Court, was brought by Air One against the decision of 19 June 2002 and that Alitalia intervened in those proceedings in support of the forms of order sought by the Commission. It therefore takes the view that, if Alitalia wishes to maintain the decision of 19 June 2002, it must accept the consequences with regard to the present action.
32. In its reply of 1 April 2004 to the questions put by the Court concerning the Commission’s claim that it no longer had an interest in bringing proceedings, Alitalia submits that a judgment declaring that the contested capital injection was not State aid would enable it to seek such aid in the future. By contrast, the contested decision deprived it of such a possibility, since, in normal circumstances, it could not be granted any further aid. Moreover, the effect of such a judgment would be that the payment of the third instalment of the contested capital injection should not have been subject to prior authorisation by the Commission.
33. In addition, according to Alitalia, the judgment to be given by the Court in the present case will have an impact on Case T‑344/02. If the contested capital injection were no longer to be classified as State aid, a number of Air One’s pleas in law would be doomed to fail.
34. Lastly, Alitalia submits that the fact that it withdrew from Case T‑35/02 does not preclude it from bringing a new claim for damages, since the limitation period for instituting such an action has not expired. In any event, a judgment annulling the contested decision in the present case would strengthen its position in any new claim for damages that it might bring to obtain compensation for the loss arising from the contested decision.
B – Findings of the Court
35. For the purposes of considering the admissibility of this action, it must be observed that, according to settled case-law, an action for annulment brought by a natural or legal person is not admissible unless the applicant has an interest in seeing the contested measure annulled. That interest must be vested and present (see Case T‑141/03 Sniace
v Commission
[2005] ECR II‑1197, paragraph 25 and the case-law cited).
36. In order for such an interest to be present, the annulment of the measure must of itself be capable of having legal consequences or, in accordance with a different form of words, the action must be liable, if successful, to procure an advantage for the party who has brought it (see Case T‑310/00 MCI
v Commission
[2004] ECR II‑3253, paragraph 44 and the case-law cited).
37. The conditions governing the admissibility of an action must be judged, subject to the separate question of the loss of an interest in bringing proceedings, at the time when the application is lodged (see Case T‑131/99 Shaw and Falla
v Commission
[2002] ECR II‑2023, paragraph 29 and the case-law cited). However, in the interest of the proper administration of justice, that consideration relating to the time when the admissibility of the action is assessed cannot prevent the Court from finding that there is no longer any need to adjudicate on the action in the event that an applicant who initially had a legal interest in bringing proceedings has lost all personal interest in having the contested decision annulled on account of an event occurring after that application was lodged. For an applicant to be entitled to pursue an action seeking the annulment of a decision, he must retain a personal interest in the annulment of the contested decision (see the order in Case T‑28/02 First Data and Others v Commission
[2005] ECR II‑4119, paragraphs 36 and 37 and the case-law cited).
38. Clearly, the Commission did not dispute Alitalia’s interest in bringing proceedings in its defence of 25 March 2002. Moreover, the Court stated in the Alitalia I judgment (paragraph 74) as follows:
‘… [T]he fact that the Commission, in the [1997] decision, classified IRI’s investment in the applicant as State aid clearly operated to the applicant’s detriment. It meant that the Commission was able, in the [1997] decision, to examine the compatibility of the measure with the common market and to impose conditions directly affecting the applicant’s operations.’
39. In its rejoinder of 24 April 2003, the Commission submitted that Alitalia had lost any interest in bringing proceedings on account of new circumstances which had arisen since that time. Those are, first, the decision of 19 June 2002, in so far as the Commission elected, in particular, in that decision not to raise any objections to the payment of the third instalment of aid to Alitalia and, secondly, the order of 8 April 2003 in Case T‑35/02 Alitalia
v Commission, referred to in paragraph 19 above, by which the President of the Third Chamber of the Court ordered the removal of Case T‑35/02 from the register, following Alitalia’s withdrawal.
40. In the decision of 19 June 2002, the Commission decided to ‘formally acknowledge payment of the second instalment of the aid granted to [Alitalia], which was authorised by the 1997 decision and confirmed in 2001, and not to raise any objections to the payment of the third instalment’. Alitalia therefore received all of the aid in question. It was no longer subject to the obligations and conditions that were to be complied with during the period in which the plan was being implemented.
41. However, the effect of the contested decision, which continues to classify the contested capital injection as State aid, is to make payment of the third instalment of aid subject to authorisation by the Commission. The contested decision therefore forms the legal basis of the decision of 19 June 2002 in so far as the Commission did not, in that decision, raise any objections to that third payment.
42. Accordingly, if the Court were to annul the contested decision on the ground that it classifies the contested capital injection as State aid, such an annulment would have legal consequences for the decision of 19 June 2002, which would have no legal basis.
43. The parties disagree as to the exact nature of those consequences.
44. According to Alitalia, if the contested decision were annulled, the decision of 19 June 2002 would be devoid of purpose as regards the payment of the second and third instalments of the aid in question and the pleas put forward in that regard by Air One in its action against the decision of 19 June 2002 in Case T-344/02 would be ineffective. Air One would therefore no longer be able to challenge those payments.
45. For its part, the Commission argues that, if the contested decision were annulled, it would have to re-examine the new Alitalia recapitalisation plan for 2002 to determine whether it constituted State aid.
46. Clearly, in both cases, in so far as it concerns the payments of aid in question, Air One’s action against the decision of 19 June 2002 could no longer succeed, since it would have no legal basis.
47. Alitalia therefore maintains an interest in bringing proceedings and there is no need to examine the other arguments submitted in that regard.
Substance
48. Alitalia relies, essentially, on six pleas in law. The first plea alleges procedural defects, the second infringement of the rights of defence, the third infringement of Article 233 EC on the ground that the contested decision does not comply with the Alitalia I judgment, the fourth infringement and misapplication of Articles 87 EC and 88 EC in the application of the private investor test, the fifth infringement of Article 87(3) EC in laying down the conditions for granting the aid, and the sixth infringement of Article 253 EC. It is appropriate to consider first of all the sixth plea, alleging infringement of the obligation to state reasons.
A – The plea alleging infringement of the obligation to state reasons
49. This plea can be divided essentially into two parts, the first relating to the grounds of the conclusions in the contested decision and the second to the conditions imposed in that decision.
1. Insufficient reasons given for the conclusions in the contested decision
a) Arguments of the parties
50. Drawing attention to the case-law on the obligation incumbent upon the Community institutions to give reasons for their acts, particularly in matters of State aid, Alitalia argues that the contested decision cannot rely on the 1997 decision because the Court of First Instance annulled that decision, which has retroactive effect. Consequently, the contested decision must establish its own legitimacy independently.
51. It is not at all clear, in any event, how the Commission applied the criterion of the private investor operating on market principles in the contested decision. As regards the minimum rate, the Commission simply makes a comparison with the situation in the Iberia decision. In the contested decision, no reference is made to the fact that financial investors were consulted on the final version of the restructuring plan. No account was taken of the final content of the programme. Alitalia refers, in particular, to the acceleration of the plan to set up Alitalia Team SpA (a low-cost company), the ground-handling agreements, the implementation of the fares initiatives and to redundancies – a whole number of features whose impact, in its view, could have been assessed, since six months had passed since the beginning of the implementation of the plan.
52. As regards the internal rate, Alitalia submits that the contested decision is so lacking in transparency that the Court itself will have to have recourse to additional information to be able to review whether the Commission’s arguments are well founded. Insufficient indications were given for it to be possible to assess the calculation of the final value of Alitalia or that of the insolvency costs which IRI would have to bear in the event of Alitalia going into liquidation.
53. Alitalia maintains that the Commission could have annexed the June 2001 report of its consultants to the contested decision or incorporated the salient parts of that report into the body of the decision.
54. Alitalia concludes that the contested decision is seriously vitiated by a failure to state adequate reasons and thus infringes Article 253 EC.
55. Throughout its written pleadings, the Commission disputes the claim that the statement of reasons in the contested decision is inadequate. It adds that the pleas in law and arguments put forward by Alitalia demonstrate that the statement of reasons fully served its purpose, namely by enabling the persons concerned to understand the manner in which the Commission has applied the Treaty and, where necessary to defend their rights, while at the same time permitting the Community judicature to exercise its power of review.
b) Findings of the Court
56. According to settled case‑law, the question whether the statement of the grounds for a decision meets the requirements of Article 253 EC must be assessed with regard not only to its wording but also to its context and all the legal rules governing the matter in question. While the Commission, in the statement of reasons for a decision, is not required to address all the issues of fact and law raised by interested parties during the administrative procedure, it must none the less take account of all the circumstances and all the relevant factors of the case so as to enable the Court to review its lawfulness and make clear to the Member States and the persons concerned the circumstances in which the Commission has applied the Treaty (see Joined Cases T‑371/94 and T‑394/94 British Airways and Others
v Commission
[1998] ECR II‑2405, paragraph 94 and the case-law cited).
57. The answer to the question whether a Community measure fulfils the obligation laid down in Article 253 EC to state the reasons on which it is based depends on the nature of the act in question and on the context in which it was adopted. Thus, where the party concerned was closely involved in the process by which the contested decision came about and is therefore aware of the reasons for which the administration considered that the request should not be granted, the scope of the obligation to state reasons will be defined by the context thus created by the party’s involvement in that process. In such circumstances, the requirements of the applicable case-law are considerably relaxed (see Case T‑504/93 Tiercé Ladbroke
v Commission [1997] ECR II‑923, paragraph 52 and the case-law cited).
58. For the purpose of examining whether the obligation to state reasons was satisfied in the present context, it should be pointed out that the procedure for reviewing State aid is a procedure initiated in respect of the Member State responsible for granting the aid and that the parties concerned within the meaning of Article 88(2) EC, which include the recipient of the aid, cannot themselves seek to debate the issues with the Commission in the same way as may that Member State (see Case T‑198/01 Technische Glaswerke Ilmenau v Commission
[2004] ECR II‑2717, paragraph 61 and the case-law cited).
59. It is in the light of those principles that it is necessary to consider whether the statement of grounds for the contested decision meets the requirements of Article 253 EC.
60. Clearly, the facts and considerations having decisive importance in the context of the contested decision which enable the circumstances in which the Commission made a fresh application of the criterion of the private investor operating on market principles, following the annulment by the Court of the 1997 decision, to be clearly ascertained are set out in the contested decision itself (see, to that effect, Joined Cases T‑374/94, T‑375/94, T‑384/94 and T‑388/94 European Night Services and Others
v Commission
[1998] ECR II‑3141, paragraph 95).
61. As regards the grounds for the determination of the minimum rate, it is necessary to refer first of all to recitals 24 to 29 in the preamble to the contested decision, which set out the reasons relating to the specific situation of Alitalia which justify setting the minimum rate at 30%. Before specifying the risks that are particular to the undertaking, recital 25 in the preamble to the contested decision begins as follows:
‘In this case, on the basis of the information in its possession and, in particular, the consultants’ report, the Commission considers the minimum rate to be around 30% in view of the size of the sum involved and, more especially, the risks inherent in the operation. This rate of at least 30% allows for the possibility that the restructuring plan will not develop as planned and that the actual return on the investment will, in the final analysis, be significantly less. Indeed, the rate cannot fail to be higher than the cost of equity capital since the latter does not take account of all the risks associated with the company, for, despite the improvements following adjustments to the restructuring plan in February and June 1997, as notified to the Commission on 26 June 1997, Alitalia must still be considered a company with a very high specific risk. …’
62. In recitals 30 and 31 in the preamble to the contested decision, the Commission also gives the reasons for the minimum rate being fixed in the present case by comparison with the rate it established in the Iberia decision (see paragraphs 109 to 111 below).
63. Moreover, the contested decision contains a formal statement of the reasons as to the account taken of the final version of the restructuring plan in assessing the minimum rate.
64. Recital 27 in the preamble to the contested decision states as follows:
‘The latest amendments made by the Italian authorities to the restructuring plan in June 1997, as notified to the Commission on 26 June 1997, are not such as to invalidate the calculation of the [minimum] rate. In addition to the Italian authorities’ decision that Alitalia should bear employees’ early retirement costs, the amendments include taking faster action to cut company expenditure by transferring Alitalia personnel to Alitalia Team more quickly than anticipated, reducing the total amount of the capital injection from ITL 2 800 to ITL 2 750 billion, and releasing Alitalia’s shares in the Hungarian company, Mal[é]v, and in six regional Italian airports. While they undoubtedly reduce the inherent risks of the operation and increase the rate of return on the capital injection, these amendments are none the less not very significant and have far less impact than the earlier amendments by the Italian authorities to the restructuring plan in February 1997. Indeed, the June 1997 amendments have very little impact on the main results of the plan and on the expected share dividends …’
65. The contested decision then sets out a table evaluating that impact. Reasons are therefore also given concerning that point in the contested decision.
66. The reasons for the determination of the internal rate are to be found in recitals 19 to 23 in the preamble to the contested decision, which set out the factors on which the Commission based its calculation, recital 20 covering the insolvency costs and recital 22 the final value, in particular.
67. Moreover, Alitalia was closely involved in the procedure which led to the adoption of the 1997 decision, a procedure which was not annulled by the Court (see paragraphs 96 to 101 below). Alitalia had access, in particular, to the second and third reports of the Commission’s consultants, which it annexes to its application in this case.
68. Alitalia’s contention that the Commission could have annexed its consultants’ report of 1 June 2001 to the contested decision is irrelevant in the present case for the purpose of substantiating its argument alleging a failure to state reasons. In so far as it alleges infringement of the rights of defence, that contention will be examined in paragraphs 164 to 177 below.
69. Account must also be taken of the fact that the contested decision was adopted after the 1997 decision and after a judgment of the Court annulling that decision, namely the Alitalia I judgment (see, to that effect, Case C‑56/93 Belgium v Commission
[1996] ECR I‑723, paragraph 87). The Alitalia I judgment sets out the facts of the case (paragraphs 1 to 12), the administrative procedure which led to the adoption of the 1997 decision (paragraphs 13 to 35) and the content of the 1997 decision (paragraphs 36 to 48). The contested decision was therefore adopted in a context which was well known to the applicant (see, to that effect, Case T‑17/02 Olsen v Commission
[2005] ECR II‑2031, paragraph 97).
70. Consequently, the contested decision clearly contains sufficient reasoning as regards the factors referred to by Alitalia in the first part of the plea, namely the determination of the minimum rate and the internal rate and, lastly, the manner in which the criterion of the private investor operating on market principles was applied.
71. As to the remainder, in so far as Alitalia disputes the merits of the reasons given for the determination of the minimum rate and the internal rate, reference should be made to paragraphs 178 to 370 below.
2. Failure to give adequate reasons in the contested decision for the conditions imposed in the 1997 decision
a) Arguments of the parties
72. Alitalia argues that the contested decision is not based on any adequate reasoning as regards the conditions under which the contested capital injection was to be regarded as compatible with the common market. It adds that the Commission cannot contend that the reasons given in 1997 remained valid in 2001, since the difference between the minimum rate and the internal rate was no longer 10% but only 3.9%. There is no assessment of that factor in the contested decision. Alitalia states that it does not challenge the conditions as they were imposed in the 1997 decision but claims that the Commission could not reimpose those same conditions in connection with the contested decision without giving adequate reasons for so doing.
73. The Commission replies that it proceeded on the basis of stating reasons by reference to other documents, as is evidenced by recitals 1 to 36 in the preamble to the contested decision. Moreover, the conditions are in fact undertakings given by the Italian authorities and cannot be attributed to the Commission, so no reasons need be given in that regard. The Commission adds that, although set out on the basis of references to other documents, the grounds for the contested decision did not prevent Alitalia from understanding the essential basis of the decision.
b) Findings of the Court
74. The conditions under which the contested capital injection was to be regarded as compatible with the common market, as set out in the 1997 decision, are reproduced in recital 1 in the preamble to the contested decision. Moreover, as for grounds of the decision, the Commission makes express reference, in recital 36 in the preamble to the contested decision, to ‘the relevant paragraphs of the statement of reasons in the 1997 decision’.
75. Alitalia states that, obviously, it does not challenge the conditions as they were imposed in the 1997 decision but claims that the Commission could not reimpose those same conditions in connection with the contested decision without giving adequate reasons for so doing.
76. Clearly, therefore, the second part of this plea, which is raised in a general form by Alitalia, does not relate to the form, which it does not dispute, but to the substance of the reasons given for imposing the same conditions in the contested decision as those imposed in the 1997 decision. That part of the plea must therefore be examined in the context of paragraphs 399 to 418 below. Where necessary, that issue will be addressed in greater detail in the course of the examination of each of those conditions in response to some specific criticisms of the statement of reasons formulated by Alitalia which are outside the scope of this plea.
77. Alitalia has therefore failed to establish in this general plea that the statement of reasons for the contested decision is inadequate and, accordingly, that plea must be rejected in its entirety.
B – The plea alleging infringement of Article 233 EC
78. Alitalia alleges that the Commission infringed Article 233 EC both in the context of the first part of its first plea, on the ground that it failed to initiate a new investigation procedure, and in the context of its third plea. It is appropriate to consider those points together.
1. Arguments of the parties
79. Alitalia submits that, as a consequence of a judgment annulling a decision, the defendant institution is required, by virtue of Article 233 EC, to take the necessary measures to reverse the effects of the illegalities as found in the judgment. In the case of an act that has already been executed, this may take the form of restoring the applicant to the position he was in prior to that act.
80. According to Alitalia, it has been consistently held in case-law that the institution is required under Article 233 EC to comply with the annulment judgment by having regard to both the operative part and the grounds of the judgment and by assessing very carefully the effects of the annulment judgment on the earlier stages of the procedure. The institution may resume the procedure from the point at which the defect which was criticised by the Court arose only if a formal or procedural defect is involved. The institution is obliged to reopen the procedure ab initio
where it does not have the information necessary to carry out a new assessment of the case that has been investigated.
81. In the present case, according to the applicant, the defects criticised by the Court in the Alitalia I judgment were substantive, so that the Commission was obliged to instigate a new investigation procedure.
82. In support of that contention, Alitalia claims, first of all, that the Court criticised the Commission’s substantive assessments on two fundamental points, namely the failure to take account of the insolvency costs and of the final version of the restructuring plan submitted in June 1997.
83. Moreover, according to Alitalia, the Commission should in any event have reopened the formal investigation procedure under Article 88(2) EC because it did not have available to it a full and undisputed range of information and the assessment as to whether the aid was compatible with the common market created serious difficulties which were not overcome during the preliminary stage. Alitalia considers, in particular, that a new survey among institutional investors was necessary to determine the minimum rate. In its view, in order to obtain new analytical data, the Commission should also have had recourse to new technical expertise and engaged in a discussion of the issues with Alitalia and the Italian authorities.
84. The Commission also infringed Article 233 EC by clearly distorting the content of the Alitalia I judgment, with which the contested decision did not comply.
85. Thus, in the contested decision, the insolvency costs were assessed at ITL 750 billion whereas, according to the Alitalia I judgment, they were ITL 1 140 billion. That figure of ITL 750 billion was not the subject of any discussion, did not feature in the 1997 decision and was not accepted by Alitalia.
86. As regards the final version of the restructuring plan, Alitalia submits that, in order to comply with the Alitalia I judgment, the Commission, in revising its calculations to take account of that version of the plan, was obliged to proceed on the basis of the by then irrefutable assumption that that plan would enhance the viability of the contested operation and reduce the inherent risks. Alitalia claims that the internal rate should consequently have been increased and the minimum rate decreased. In Alitalia’s view, the Commission could not therefore have concluded that the final amendments to the plan had ‘very little impact’ on the abovementioned parameters and left the calculations unaltered.
87. In particular, as regards the risks, the Commission did not quantify the impact of the final amendments to the restructuring plan. The minimum rate therefore remained unchanged. Moreover, the Commission did not repeat the stages which had led it initially to set that rate at 30%. Nor did it alter its assessment regarding the similarity between the respective situations of Alitalia and Iberia or seek any further expert advice.
88. With regard to the internal rate, Alitalia observes that the rate of 26.1% which appears in recital 23 in the preamble to the contested decision is the same as the rate obtained at the conclusion of the calculation annexed to the rejoinder by the Commission in Case T‑296/97. That calculation was therefore simply ‘recycled’ in the contested decision and fails to take account of all the elements in the final version of the restructuring plan.
89. Moreover, the comments of the Court on the failure to give adequate reasons for transposing the minimum rate applied in the Iberia decision to Alitalia in the 1997 decision calls into question the very basis of the Commission’s reasoning. According to Alitalia, in the Alitalia I judgment, the Court did not confine itself to criticising the 1997 decision on the ground that it was insufficiently reasoned. It criticised the very fact that a comparison was made between Alitalia and Iberia. The Court found that there was a real contradiction between, on the one hand, the Commission’s decision to adopt for Alitalia the same minimum rate applied in the Iberia decision and, on the other hand, the assessments made by the Commission and its consultants of the less-serious risks posed by Alitalia’s restructuring plan in comparison with the Iberia plan. Accordingly, the Court found that it was not appropriate to fix the minimum rate applicable to Alitalia at 30% by reference to the rate applied to Iberia. The contested decision is therefore, by implication, in conflict with the Alitalia I judgment and does not, as required under Article 233 EC, comply with it. In putting forward new reasons to support that disproportionate minimum rate, the Commission thus created new grounds of justification which it had never presented in the course of the administrative procedure and the Court must therefore reject them.
90. The Commission contends that Alitalia’s objections are based on a misunderstanding of the scope and effects of the Alitalia I judgment and of the obligations imposed on the Commission by Article 233 EC. The effect of the judgment delivered by the Court was to annul only the final assessment carried out by the Commission and not the investigation procedure which led to the adoption of the 1997 decision. The unlawfulness of the 1997 decision does not extend to the preparatory acts, with the effect that the Commission could and indeed should have resumed the investigation procedure precisely from the point at which the unlawful act had occurred, namely when the 1997 decision was definitively adopted.
91. In particular, the Court confined itself in the Alitalia I judgment to criticising a flaw in the reasoning and did not dispute that the situations of Alitalia and Iberia were comparable. In addition, the decision in the contested decision to retain a minimum rate of 30% was based on Alitalia’s particular situation and it is not the case that it was repeated purely by reference to the Iberia case.
92. It is apparent from recital 20 in the preamble to the contested decision that the insolvency costs were included in the calculation of the internal rate. The Commission states that the table which it prepared in Case T‑296/97, which was annexed by Alitalia to its application in the present case, already indicated that those costs had been included in the calculation of the internal rate. The Commission explains that it believed that it was possible for it to deduce that Alitalia agreed with the sum of ITL 750 billion from the fact that it had not disputed that figure in Case T‑296/97 and had, moreover, referred to it in its pleadings. The Commission now notes that that is not the case while at the same time maintaining that it is irrelevant in the present case, since it did not form the basis of the reasoning given in the contested decision. The Commission also states that the reasons for which it set those costs at ITL 750 billion are set out in recital 20 in the preamble to the contested decision and were presented in its consultants’ reports of 21 February and 18 June 1997, which are annexed by Alitalia to its application.
93. The Commission claims that it re-examined the internal rate and the minimum rate in the light of the amendments to the final version of the restructuring plan. It observes that the internal rate, which was set at 20% in the 1997 decision, was set at 26.1% in the contested decision as a result of including the insolvency costs in the calculations. The Commission specified the relevant components of the calculation in recitals 19 to 23 in the preamble to the contested decision.
94. The Commission goes on to state that the determination of the minimum rate depends, inter alia, on subjective factors, such as the investor’s attitude towards risk, so that any consultation carried out subsequently would have been distorted by knowledge of developments in the sector in general and the undertaking concerned in particular. Nevertheless, the Commission’s consultants actually took the amendments to the final version of the restructuring plan into account and came to the view that the economic and financial effects of those amendments were not such as to change the minimum rate, originally set at 30%.
95. The Commission also points out that setting a minimum rate that w ould be required by a private investor is a question of making a forecast and not a subsequent assessment. It follows that the results for 1997 could not have been taken into account.
96. In any event, the Commission claims that, even if there is a substantive defect in the annulled act, it is possible to base a new decision on a review procedure followed previously, where the facts to be assessed are exactly the same as those already examined in the initial decision. It submits that it would have been unrealistic to carry out a new investigation involving institutional investors in 2001 in order to determine retrospectively the minimum rate they would have considered appropriate had their opinion been sought in 1997 in the light of the final amendments to the restructuring plan.
2. Findings of the Court
97. Pursuant to Article 233 EC, the institution whose act has been declared void is required to take the necessary measures to comply with the annulment judgment.
98. In order to comply with an annulment judgment and to implement it fully, the institutions are required to have regard not only to the operative part of the judgment but also to the grounds which led to the judgment and constitute its essential basis, in so far as they are necessary to determine the exact meaning of what is stated in the operative part. It is those grounds which, on the one hand, identify the precise provision held to be illegal and, on the other hand, indicate the specific reasons which underlie the finding of illegality contained in the operative part and which the institutions concerned must take into account when replacing the annulled measure (Joined Cases 97/86, 99/86, 193/86 and 215/86 Asteris and Others
v Commission
[1988] ECR 2181, paragraph 27).
99. The procedure for replacing such a measure may thus be resumed at the very point at which the illegality occurred (see Case C‑458/98 P Industrie des poudres sphériques v Council
[2000] ECR I‑8147, paragraph 82 and the case-law cited).
100. According to established case-law, annulment of a Community measure does not necessarily affect the preparatory acts (Case C‑415/96 Spain
v Commission
[1998] ECR I‑6993, paragraph 32; see also, to that effect, Case C‑331/88 Fedesa and Others [1990] ECR I-4023, paragraph 34). The annulment of an act concluding an administrative proceeding which comprises several stages does not necessarily entail the annulment of the entire procedure prior to the adoption of the contested act, regardless of the grounds, procedural or substantive, of the judgment pronouncing the annulment (see Case T‑2/95 Industrie des poudres sphériques
v Council
[1998] ECR II‑3939, paragraph 91 and the case-law cited).
101. Where, in spite of the fact that investigation measures have been taken allowing an exhaustive analysis to be made of the compatibility of the aid, the analysis carried out by the Commission is incomplete, thus making the decision unlawful, the procedure for replacing that decision can be resumed at that point by means of a fresh analysis of the investigation measures (see, to that effect, Spain
v Commission, paragraph 34).
102. Since the operative part of the Alitalia I
judgment contains a decision of invalidity, it is in the light of those principles identified by the case-law that it is necessary to determine whether, in the contested decision, the Commission took the necessary measures to comply with the judgment and, as part of that analysis, to examine in particular whether the grounds of that judgment placed the Commission under an obligation to resume the whole procedure from the beginning.
103. First of all, it must be noted that, contrary to Alitalia’s submissions, case-law does not dictate that it is not necessary for the entire procedure prior to the adoption of a measure adopted in replacement of another to be repeated only where that measure was annulled on the ground of procedural defects (Case T‑2/95 Industrie des poudres sphériques
v Council, paragraph 91).
104. In the Alitalia I judgment, the Court clearly stated that ‘[t]he method which the Commission employed in the [1997] decision cannot be criticised as such’ (paragraph 99). However, the Court annulled the 1997 decision on the ground that it was vitiated by ‘an error of reasoning in so far as it adopt[ed] for IRI’s investment the same minimum rate as that determined in the Iberia decision’ (paragraph 137). It also annulled the 1997 decision on the ground that the Commission had made manifest errors of assessment in considering, first of all, ‘on the basis of the reasons put forward in the [1997] decision, that the insolvency costs relating to the loans granted by Cofiri [a company forming part of the IRI group] should be excluded from the calculation of the internal rate’ (paragraph 150) and, secondly, ‘that the adjustments made to the restructuring plan in June 1997, which, on its own admission, reduced the risks inherent in that plan and further increased the profitability of the undertaking, had no impact on the calculation of the minimum rate and the internal rate and, accordingly, on the appraisal of whether IRI’s investment satisfied the private investor test’ (paragraph 169).
105. It is necessary to examine the grounds which led the Court of First Instance to those conclusions in the Alitalia I judgment.
106. With regard, in the first place, to the failure to state adequate reasons for the setting of the minimum rate, it must be noted that, before examining that plea, which was raised by the applicant, the Court considered and rejected the applicant’s complaints concerning the factors on which the Commission and its consultants based their decision in setting the minimum rate. In particular, the Court stated that ‘none of the matters put forward by the applicant [gave] any reason to doubt that the experts consulted by [the Commission’s consultants] did not have the information necessary to assess the minimum rate in the present case’ (paragraph 121).
107. In examining the failure to state adequate reasons, after setting out the considerations which led the Commission to fix the minimum rate at 30% in the Iberia decision (paragraph 128), the Court stated that, throughout the administrative procedure, the applicant had maintained that its situation was not comparable to Iberia’s situation, insisting, in particular, that the elements of uncertainty that characterised the Iberia case did not apply in its case (paragraph 131). However, the Court found that ‘the Commission did not explain in the [1997] decision why it considered it necessary to apply to IRI’s investment the same minimum rate of 30% as it had adopted in the Iberia decision although the findings made in the [1997] decision [gave] the impression, in particular, that a number of the risk factors which [had] led the Commission, in the Iberia decision, to fix the minimum rate at that level, which was very high and far higher than market rates, were not present, or were present to a lesser extent, in the Alitalia case’ (paragraph 136). The Court concluded from this that the 1997 decision was vitiated by defective reasoning.
108. It is apparent from the examination of the first ground of annulment that it does not call into question the review procedure which resulted in the fixing of the minimum rate at 30%. Nor, contrary to Alitalia’s submissions, did the Court consider that the minimum rate could not have been fixed at 30% or invalidate any comparison between Iberia and Alitalia. It follows that the first ground on which the Court annulled the 1997 decision did not preclude the possibility that the measure could be remedied on the basis of available information if a more detailed statement of reasons were given.
109. In the contested decision, after describing at length, in recitals 25 to 29 in the preamble, the reasons, relating to the specific situation of Alitalia, justifying the fixing of the minimum rate at 30% and stating, in recital 30, that that rate was the same as that applied by the Commission in the Iberia decision, the Commission explains why it ‘considers that the risks inherent in the capital injection to Alitalia in July 1997 are at least as high as those involved in the capital injection received by Iberia in January 1996’. The Commission pursues the comparison further in recital 31 in the preamble to the contested decision.
110. In that connection, with regard to the social situation of the two companies which was referred to by the Court in the Alitalia I judgment, the Commission now states that it is ‘[a]nother feature the two companies have in common, from an investor’s point of view’. It claims that ‘[t]he investor would no doubt observe that, in both cases, both sides of industry have made commitments to a certain extent to accepting improvements in productivity and reductions in production costs, but would consider more importantly the social disputes experienced by both airlines in the years leading up to the capital injection as well as the challenge facing both companies of transforming their business culture, adapting the characteristics of a public body that has enjoyed a long period of monopoly to the new market conditions’ (recital 31 in the preamble to the contested decision).
111. Next, with regard to whether the Alitalia restructuring plan was realistic when compared with the uncertainty that characterised the recapitalisation of Iberia, a difference which was also referred to by the Court in the Alitalia I judgment, the Commission explained, again in recital 31 in the preamble to the contested decision, that ‘a hypothetical investor would see the risk factors involved in Iberia’s situation as being more than outweighed by the twofold uncertainty of Alitalia’s situation with regard to the conditions of the company’s development at Malpensa airport (a key part of the plan) and with regard to the effects of the liberalisation of Italy’s internal civil aviation market’. It points out, in that regard, that ‘[t]he Spanish internal civil aviation market was actually liberalised several years before the Italian internal market and [that], in 1996, it [was] already possible to see its impact on Iberia, whilst in 1997 the effects of the liberalisation of the Italian internal market on Alitalia [were] still very hard to identify’. The Commission adds that ‘Iberia has a privileged position in the market for routes between Europe and Latin America, whilst Alitalia has no such advantage’.
112. In the light of the foregoing considerations, the Commission must be regarded as having complied with Article 233 EC, since it provided an adequate statement of reasons in the contested decision.
113. In the second place, as regards the two manifest errors of assessment, the Court held, first of all, in the Alitalia I judgment that ‘in the [1997] decision the Commission state[d] that, for the purpose of calculating the internal rate, … it [was] not necessary to include … the costs which IRI [would] have to bear in the event of Alitalia’s bankruptcy’ (paragraph 142). It then set out the reasons given by the Commission for excluding the insolvency costs (paragraph 144) before going on to reject them, and added that the Commission’s reasoning concerning the insolvency costs was circular (paragraphs 146 to 149). The Court concluded from this that ‘the Commission [had] made a manifest error of assessment in considering, on the basis of the reasons put forward in the [1997] decision, that the insolvency costs relating to the loans granted by Cofiri should be excluded from the calculation of the internal rate’ (paragraph 150). The Court then rejected the applicant’s argument that the internal rate was incorrectly calculated because the Commission obliged it to assume the cost of the early retirement of 700 of its staff (paragraphs 152 to 156).
114. It is clear that in the Alitalia I judgment, without calling into question the review procedure or the accuracy of the basic data collected in the course of that procedure, in particular that relating to the insolvency costs, the Court declared the failure to take account of the insolvency costs in calculating the internal rate unlawful.
115. That error in the selection and final processing of the available information could have been remedied by including those costs in the calculation of the internal rate. The Commission was therefore correct in stating, in recital 20 in the preamble to the contested decision, that such costs ought to be included in the present instance.
116. The Commission estimated the total insolvency costs at approximately ITL 750 billion, a figure which Alitalia cannot claim to have become aware of for the first time in the contested decision, without having had the opportunity to discuss it. In fact, as early as the report of 21 February 1997 (annexed by Alitalia to the application and considered by the Court as an integral part of the reasons for the 1997 decision), the Commission’s consultants’ conclusion of their analysis of the insolvency costs was that those costs should not exceed ITL 750 billion, rather than the figure of ITL 1 140 billion put forward by Alitalia.
117. It is clear, as is acknowledged by Alitalia itself, that in the Alitalia I judgment the Court did not rule on whether that figure of ITL 750 billion was justified. Nor, however, did it endorse the figure of ITL 1 140 billion proposed by Alitalia in support of its first action (paragraph 138). It cannot therefore be deduced from the Alitalia I judgment that, in order to comply with the grounds of the judgment, the Commission was required to take account of a particular figure for the insolvency costs.
118. Moreover, the assertion in recital 20 in the preamble to the contested decision that Alitalia accepted the figure of ITL 750 billion was removed from the contested decision by way of amendment (see paragraph 22 above).
119. Furthermore, in the Alitalia I judgment (paragraph 150), the Court found that the Commission had made a manifest error of assessment ‘on the basis of the reasons put forward in the [1997] decision’. In other words, the Court did not rule out the possibility that the Commission could rely on more appropriate grounds.
120. The Court also stated that ‘in an action for annulment, it is not for [it] to reassess the internal rate for the investment and to determine whether that rate, on the assumption that the insolvency costs should have been included in its calculation, is still lower than the minimum rate’ (paragraph 151). The Court did not therefore rule out the possibility either that the internal rate might be lower than the minimum rate.
121. In view of the foregoing considerations, the Commission therefore complied with Article 233 EC in the contested decision by including the insolvency costs in the calculation of the internal rate without resuming the review procedure ab initio .
122. Lastly, as regards the account taken of the final adjustments made to the restructuring plan in June 1997, the Court examined, first of all, in the Alitalia I judgment, the chronology of events (paragraphs 158 to 161). It then set out the Commission’s arguments that the final adjustments to the restructuring plan could not have had a decisive impact (paragraph 163). It rejected those submissions on the ground that they related to events which had occurred after the adoption of the 1997 decision (paragraph 164). Finally, the Court stated that, as described by the Commission, the minimum rate was directly proportionate to the risk inherent in the investment and the internal rate, according to the Commission, expressed the underlying internal rate of return. However, the Court added that ‘the Commission itself stated in the [1997] decision that the final improvements to the restructuring plan in June 1997 reduce[d] the risks inherent in the restructuring plan and further increase[d] the profitability of the capital injection’. The Court concluded that ‘[it was] apparent, therefore, that those final amendments [were] of such a kind as to cause the internal rate to rise (increased profitability) and the minimum rate to fall (reduced risks)’ (paragraph 167). Accordingly, the Court considered that the Commission should have reassessed the minimum rate and the internal rate on the basis of the final version of the restructuring plan in order to be able to make an accurate assessment of whether IRI’s investment satisfied the private investor test (paragraph 168). The Court concluded that ‘the Commission made a manifest error of assessment in considering that the adjustments made to the restructuring plan in June 1997, which, on its own admission, reduced the risks inherent in that plan and further increased the profitability of the undertaking, had no impact on the calculation of the minimum rate and the internal rate and, accordingly, on the appraisal of whether IRI’s investment satisfied the private investor test’ (paragraph 169).
123. It follows from the above that, in the Alitalia I judgment, the Court found that the error of assessment had occurred at the last stage of the decision-making process, after the final improvements had been made to the restructuring plan. The Court does not call into question the review procedure, in particular as regards the collection and inspection of the data on those final improvements. Nor does it rule on the minimum rate or the internal rate calculated in the previous reports of the Commission’s consultants. Contrary to the argument put forward by Alitalia, the Court does not give any indication of what those rates should be. On the contrary, it states that it is not for the Court, in an action for annulment, ‘to reassess the minimum rate and the internal rate for the investment or to decide whether a private investor would have made the investment which IRI proposed to make at the time when the [1997] decision was adopted’ (paragraph 170).
124. The obligation imposed on the Commission by the Alitalia I judgment was therefore to take account of the final version of the restructuring plan in calculating the minimum rate and the internal rate. It is therefore necessary to determine whether the Commission complied with that obligation.
125. As regards the fixing of the minimum rate, it is apparent from recital 27 in the preamble to the contested decision that the Commission took account of the amendments to the plan relating to the fact that Alitalia bore the costs of the early retirement programme, that it took faster action to cut expenditure on personnel by transferring Alitalia personnel to Alitalia Team more quickly than anticipated, that it reduced the amount of the capital injection from ITL 2 800 billion to ITL 2 750 billion and that Alitalia’s shares in the Hungarian company, Malév, and in six regional Italian airports were released.
126. The Commission also provided figures demonstrating the impact of those amendments in recital 27 in the preamble to the contested decision.
127. However, in recitals 25 to 28 in the preamble to the contested decision, the Commission set out a number of factors which, in its view, increased the risks of the operation and thus neutralised the effects of the adjustments in question.
128. As regards the fixing of the internal rate, Alitalia suggests that the rate of 26.1% which appears in recital 23 in the preamble to the contested decision is simply a repetition of the rate already fixed previously by the Commission. The Commission did not therefore, in its view, reassess that rate in the light of the final version of the restructuring plan, as it was, however, required to do pursuant to the Alitalia I judgment.
129. In the 1997 decision, the Commission fixed the internal rate as being close to 20% (point VII, paragraph 8). The rate of 26.1% is therefore not a repetition of the rate taken into account in the first procedure which concluded with the Alitalia I judgment.
130. It is apparent from the Alitalia I judgment that the Commission had asserted ‘in its rejoinder that that rate, recalculated on the basis of the final version of the plan, [was] no more than 26.1%, even including the insolvency costs’ (paragraph 163). A table was annexed to that document. The Court did not take that percentage into account for the simple reason that, according to the case-law, ‘[i]n order to assess the legality of the contested decision, the Court takes into consideration only the matters which the Commission had at its disposal when it adopted the contested decision’ and that ‘[a]ny argument of the Commission relating to events which occurred after the adoption of the [1997] decision [was] therefore [to] be disregarded’ (paragraph 164).
131. It follows that, at the stage of the rejoinder in Case T‑296/97, the Commission had already recalculated that rate on the basis of the final version of the plan, fixing it at 26.1%, but that the Court, without examining it, had rejected the possibility of taking it into account, since it did not appear in the 1997 decision. It cannot be deduced from the Alitalia I judgment that that rate of 26.1% did not take account of the final version of the restructuring plan.
132. There was therefore nothing to prevent the Commission from referring in the present proceedings to the table which it had drawn up for the purpose of Case T‑296/97 and which was annexed by Alitalia to the application in these proceedings. However, the Commission considered it appropriate to approach the consultants whose assistance it had sought before the adoption of the 1997 decision to ask them, in particular, ‘to calculate either the internal rate of return on the capital injection or the appropriate minimum rate taking account of the terms of the [Alitalia] judgment [I]’ (recital 10 in the preamble to the contested decision).
133. In their report of 1 June 2001, annexed to the defence, the Commission’s consultants state that the cash flow forecasts annexed to the rejoinder in Case T‑296/97 correspond to those provided by Alitalia in the final version of the June 1997 plan, with the exception of the final value of the company at the end of the year 2000, for reasons linked to the company’s growth rate after that year and the different value attributed to the ‘standard’ cash flow for 2000. Moreover, the negative cash flow resulting from underwriting the increases in capital anticipated for June 1997 (ITL 1 000 billion), March 1998 (ITL 500 billion) and March 1999 (ITL 250 billion) were updated using the risk-free rate. In addition, two possibilities were envisaged with regard to the amount of IRI’s contribution, namely 79% or 86%.
134. The Commission also explains, in recitals 19 to 23 in the preamble to the contested decision, how it arrived at the internal rate of 25.2% or 26.1%, according to the taxation applicable. It explains, inter alia, in recital 22, the method used for determining the value of Alitalia at the end of 2000.
135. It follows that neither the Commission’s consultants nor the Commission itself were content simply to reproduce their earlier calculations.
136. Moreover, it is apparent from the report of 1 June 2001 that the Commission’s consultants took account of the reduction in the increase in capital, the release of other shares, the acceleration of the restructuring of Alitalia and the fact that it bore the costs of the early retirement programme. They provided figures illustrating the effects of those new circumstances on the principal economic data of the plan.
137. Furthermore, the Commission could not take account of information that was not available to it when the 1997 decision was adopted (see, to that effect, Case C‑482/99 France
v Commission
[2002] ECR I‑4397, paragraph 71). It was therefore required not to take account of the period during which the plan was implemented, between the 1997 decision and the contested decision.
138. In conclusion, the Commission also complied with Article 233 EC as regards the abovementioned ground on which the 1997 decision was annulled in the Alitalia I judgment.
139. In accordance with the case‑law cited in paragraphs 98 to 101 and 137 above, since the situation to be assessed was the same as that assessed in the 1997 decision and the Court did not criticise the review procedure, it was possible for the Commission to resume that procedure at the stage at which the Court found that a failure to state adequate reasons and errors of assessment had occurred. In order for it to comply with Article 233 EC and the operative part and grounds of the Alitalia I judgment, it was sufficient for the Commission to state adequate reasons for its choice of the same minimum rate as that it had applied in the Iberia decision, to include the insolvency costs in the calculation of internal rate and to take account of the final version of the restructuring plan in calculating the minimum rate and the internal rate.
140. None of the arguments put forward by Alitalia calls that conclusion into question.
141. In fact, as regards, first of all, the argument that the Commission should have reopened the formal investigation procedure since it did not have available to it full uncontested information, the Commission opened the formal investigation procedure under Article 88(2) EC on 9 October 1996 and that procedure was concluded with the 1997 decision.
142. Since the 1997 decision was annulled by the Court of First Instance, the procedure for replacing such a measure could therefore be resumed at the very point at which the illegality had occurred. Following the Court’s annulment of the 1997 decision, the Commission was not required to recommence the procedure by going back further than the precise point at which that illegality had occurred (see paragraph 99 above). In the present case, the illegalities censured by the Court do not go back as far as the opening of the procedure.
143. Next, with regard to the claim that it was necessary, after the amendments made to the restructuring plan by the 26 June 1997 version, to publish a new notice in the Official Journal and to reopen the formal investigation procedure in order to consult once more the financial investors and experts, there is no provision in Council Regulation (EC) No 659/1999 of 22 March 1999 laying down detailed rules for the application of Article [88 EC] (OJ 1999 L 83, p. 1) requiring a procedure to be reopened where adjustments are made to the initial plan in the course of the formal investigation, even though such adjustments are envisaged in Article 7(2) and (3) of Regulation No 659/1999.
144. Moreover, it is clear from the Alitalia I judgment, in particular paragraphs 123, 133, 143 and 163 to 167, that the Court criticised the Commission for failing to give adequate reasons for or to take account of information available to it of which it was aware. Since it had available to it the information necessary for the fresh analysis required by the Court and, in particular, the final improvements made to the restructuring plan in June 1997 (paragraph 167), the Commission was not under an obligation to start the investigation of the case afresh or even to supplement it by consulting once more the investors and experts or by resorting to new technical expertise.
145. Contrary to what Alitalia submits, it is apparent from the document produced by the Commission at the request of the Court setting out the tasks entrusted to its consultants after the annulment of the 1997 decision that the Commission did not instruct them to gather new information but to supplement and update their earlier report by including the insolvency costs in the calculation of the internal rate and taking account of any effects of the adjustments to the plan in the final version of June 1997 in calculating the internal rate and the minimum rate. The description of the tasks entrusted to the Commission’s consultants also specifies that the consultants had already carried out the bulk of the work when they contributed to the preparation of the rejoinder lodged by the Commission on 13 July 1999 in Case T-296/97.
146. Moreover, it would in any event be contrary to case-law to oblige the Commission to reopen the procedure in order to seek items of information relating to the period after the 1997 decision had been adopted. In fact, in order to examine whether or not the State has adopted the conduct of a prudent investor operating in a market economy, it is necessary to place oneself in the context of the period during which the financial support measures were taken in order to assess the economic rationality of the State’s conduct, and thus to refrain from any assessment based on a later situation (see paragraph 137 above).
147. It follows that the first part of the first plea, alleging procedural defects, and the third plea, alleging that the contested decision did not comply with the Alitalia I judgment, are unfounded.
C – The plea alleging infringement of the obligation to adopt a decision within a period of two months, laid down in Article 4(5) of Regulation No 659/1999
1. Arguments of the parties
148. In the second part of its first plea, Alitalia submits that, after the annulment of its earlier decision in the Alitalia I judgment, the Commission had two months within which to adopt a decision, pursuant to Article 4(5) of Regulation No 659/1999. In its view, the Commission did not comply with that obligation.
149. Alitalia adds that it would undermine the principle of legal certainty if an institution were permitted freely to choose the period for complying with a judgment annulling a decision adopted concerning State aid. That applies a fortiori since the Commission did not avail itself of the right to lodge an appeal against the Alitalia I judgment before the Court of Justice and therefore that judgment had become final, so that Alitalia was able to regard its legal situation as being definitively clarified.
150. The Commission’s failure to take any steps between the notification of the Alitalia I
judgment and the adoption of the contested decision also entailed an implicit decision that the disputed aid was compatible with the common market under Article 4(6) of Regulation No 659/1999.
151. In its reply, Alitalia adds that, even if the Commission were not under an obligation to reopen the formal procedure for investigating the contested operation and Article 7(6) of Regulation No 659/1999 therefore applied, the overall length of the procedure was in any event excessive. It in fact took the Commission almost 19 months from the date of notification of the plan to grant aid in order to reach a final decision in the present case. A little more than seven months also elapsed between the delivery of the Alitalia I judgment and the adoption of the contested decision. Such a period is unreasonable, since the Commission did no more than reassess the results of the investigation procedure and took no active steps during the first four months.
152. For the Commission, the premiss on which the second part of the first plea is based is clearly incorrect. The Alitalia I judgment did not take the procedure back to the preliminary stage but to the conclusion of the formal investigation procedure. It follows that the Commission was not bound by the mandatory two-month time-limit laid down in Article 4(5) of Regulation No 659/1999 but to the non-mandatory time-limit of 18 months imposed in Article 7(6). In the present case, the total period of just over 16 months which was required for the adoption of the contested decision is therefore less than that mandatory period.
153. Moreover, the case-law recognises that an institution whose measure has been annulled should be allowed a reasonable period within which to give effect to the annulment judgment. The period available to the Commission in the present case cannot therefore be deduced automatically from Article 7(6) of Regulation No 659/1999. On the contrary, it is necessary to take account of the nature and the extent of the measures necessary for the adoption of a new decision.
154. According to the Commission, Alitalia’s argument in the reply alleging that a ‘reasonable period’ had elapsed is a new plea. Since it was raised belatedly, it is inadmissible and, what is more, unfounded.
2. Findings of the Court
155. The obligation of a Community institution to give effect to an annulment judgment delivered by the Community judicature derives from Article 233 EC. It has been recognised by the Court of Justice that compliance calls for the adoption of a number of administrative measures and is not normally possible immediately: the institution is allowed a reasonable period within which to comply with a judgment annulling one of its decisions. The question whether or not the period was reasonable depends on the nature of the measures to be taken and the attendant circumstances (see Case T‑73/95 Oliveira
v Commission
[1997] ECR II‑381, paragraph 41 and the case‑law cited).
156. In the present case, a little over seven months elapsed between the delivery of the Alitalia I judgment and the adoption of the contested decision. That period cannot be regarded as excessive for the purpose of giving practical effect to the Alitalia I judgment, in particular by making, on the basis of the available information, a fresh application of the private investor operating on market principles test – which requires in-depth financial analysis.
157. Moreover, for the purpose of monitoring new aid which the Member States intend to grant, Article 88 EC distinguishes between the preliminary investigation stage and the formal investigation procedure. The preliminary investigation stage provided for in Article 88(3) EC is intended merely to allow the Commission a sufficient period of time for reflection and investigation so that it can form a prima facie opinion on the draft aid plans notified to it, thus enabling it to conclude that the aid plans do not constitute aid, that they are compatible with the common market or that the existing doubts as to their compatibility make it necessary for an in-depth investigation to be carried out (Case 120/73 Lorenz
[1973] ECR 1471, paragraph 3, and Case C‑204/97 Portugal
v Commission
[2001] ECR I‑3175, paragraph 34). Having regard to the interest of Member States in being informed of the position quickly, the preliminary investigation stage must, in principle, be regarded as an urgent matter and is accordingly subject to a mandatory two-month period that runs from the receipt by the Commission of complete notification ( Lorenz, paragraph 4, and Case C‑334/99 Germany v Commission
[2003] ECR I‑1139, paragraphs 49 and 50).
158. The formal investigation procedure provided for in the first subparagraph of Article 88(2) EC is essential where the Commission is unable to satisfy itself after the preliminary investigation stage that a plan does not constitute aid or that, despite constituting aid, it is compatible with the common market. The aim of the procedure is therefore to enable the Commission to be fully informed of all the facts of the case by carrying out all the requisite consultations, as it is under a duty to do, before reaching its final decision, as well as to protect the rights of potentially interested third parties by allowing them to make their views known (Case T‑171/02 Regione autonoma della Sardegna v Commission
[2005] ECR II‑2123, paragraph 32).
159. In the present case, the Court considered that, after the annulment of the 1997 decision, the Commission was not required to repeat the whole procedure from the beginning by going back beyond the precise point at which the illegality sanctioned by the Court had occurred, that is, the final stage of the formal investigation procedure (see paragraphs 97 to 144 above).
160. Since the entry into force of Regulation No 659/1999 on 16 April 1999, the formal investigation procedure has been subject to an indicative period of 18 months, which runs from the date on which the procedure was initiated. As the period of 18 months provided for in Article 7(6) of Regulation No 659/1999 is indicative only, it is necessary to consider whether, in the present case, it is apparent from the progress of the formal investigation procedure that the Commission failed to take a reasonable amount of time or acted too slowly (see, to that effect, Regione autonoma della Saredgna v Commission, paragraphs 56 and 57).
161. The Commission decided to initiate the procedure laid down in Article 88(2) EC on 9 October 1996 and adopted the 1997 decision on 15 July 1997. After the Court annulled that decision in the Alitalia I judgment, delivered on 12 December 2000, the Commission adopted the contested decision on 18 July 2001. It follows that the formal investigation had taken a little over nine months before the annulment judgment and was resumed a little over seven months after that judgment was delivered. Therefore, the overall duration of the formal investigation did not exceed the period laid down in Regulation No 659/1999.
162. Moreover, Alitalia cannot claim that the principle of the protection of legitimate expectations was infringed on the sole basis that the Alitalia I judgment was not appealed. In fact, that judgment did not exclude the possibility that the contested decision could be remedied. Furthermore, the period available to the Commission to give practical effect to that judgment was longer than the two-month period within which it would have had to lodge its appeal against the judgment.
163. In conclusion, the second part of the first plea alleging procedural defects must also be rejected.
D – The plea alleging infringement of the rights of defence
1. Arguments of the parties
164. Alitalia complains that the contested decision is unlawful in so far as the Commission seriously infringed its rights of defence. The Court of Justice has placed express emphasis on the importance of the rights of defence in matters of State aid and acknowledged, in particular, that the recipients of State aid may rely on the protection of those rights.
165. Alitalia submits that, in any event, the recipient of aid must have the right to submit comments.
166. However, in spite of requests made to that end, it was not given the opportunity to express its opinion either on whether it was appropriate to adopt a new decision after the annulment of the 1997 decision or on the content of such a decision. There was no exchange of arguments with the Italian authorities or Alitalia on the report of the Commission’s consultants. However, respect for all procedural safeguards was all the more necessary since the Commission was not obliged to resume the position which it had adopted in the 1997 decision.
167. The Commission deduces from the fact that the administrative procedure in matters of State aid is initiated only in relation to the Member State concerned that only Member States can rely on actual rights of defence.
168. In any event, Alitalia’s right to submit comments had been guaranteed since 1996 by the publication of the decision to initiate the formal investigation procedure. Following the publication of that decision, Alitalia did in fact state its point of view. Its action for the annulment of the 1997 decision also enabled it to defend its arguments. Since the purpose of the investigation procedure remained the same after the Alitalia I judgment and the facts on which it relies in the contested decision are exactly the same as those relied on in the 1997 decision, the Commission submits that it was not necessary to invite Alitalia to submit its comments once again.
2. Findings of the Court
169. According to settled case-law, respect for the rights of defence is, in all proceedings initiated against a person which are liable to culminate in a measure adversely affecting that person, a fundamental principle of Community law which must be guaranteed even in the absence of specific rules. That principle requires that the person concerned be afforded the opportunity during the administrative procedure to make known in an effective manner his views on the truth and relevance of the facts, charges and circumstances relied on by the Commission (see Joined Cases T‑228/99 and T‑233/99 Westdeutsche Landesbank Girozentrale and Land Nordrhein-Westfalen v Commission
[2003] ECR II‑435, paragraph 121 and the case‑law cited).
170. The administrative procedure regarding aid is initiated only against the Member State concerned. Undertakings that receive aid and the local authorities within that State which grant the aid are considered, in the same way as competitors of the recipients of the aid, only to be ‘interested parties’ in this procedure (see Westdeutsche Landesbank Girozentrale and Land Nordrhein-Westfalen
v Commission, paragraph 122 and the case-law cited).
171. Moreover, it is settled case-law that, in the context of an examination under Article 88(2) EC, the Commission is required to give notice to the parties concerned to submit their comments. With regard to that duty, the Court of Justice has ruled that the publication of a notice in the Official Journal is an appropriate means of notifying the persons concerned that the procedure is to be initiated, while also pointing out that the sole aim of this communication is to obtain from persons concerned all information required for the guidance of the Commission with regard to its future action (see Westdeutsche Landesbank Girozentrale and Land Nordrhein-Westfalen
v Commission, paragraphs 123 and 124 and the case-law cited).
172. This case-law confers on the parties concerned the role of information sources for the Commission in the administrative procedure instituted under Article 88(2) EC. It follows that, far from enjoying the same rights of defence as those which individuals against whom a procedure has been instituted are recognised as having, the parties concerned have only the right to be involved in the administrative procedure to the extent appropriate in the light of the circumstances of the case (see Westdeutsche Landesbank Girozentrale and Land Nordrhein-Westfalen
v Commission, paragraph 125 and the case‑law cited).
173. Since Alitalia does not enjoy the same rights of defence as those which individuals against whom a procedure has been instituted are recognised as having, it is necessary to determine whether, on the basis of such case‑law, it was involved in the administrative procedure to the extent appropriate in the light of the circumstances of the case.
174. It is apparent from the Court’s findings in the Alitalia I judgment that the Italian authorities and Alitalia were closely involved in the investigation of the disputed aid before the adoption of the 1997 decision, which was replaced by the contested decision after the former had been annulled. Moreover, the Commission was required to base its new analysis solely on information which was available to it at that time (see paragraph 137 above) – information in respect of which both the Italian Republic and Alitalia had already defined their position, so that it was unnecessary to consult them afresh. Finally, with the publication of a notice in the Official Journal of 16 November 1996 (OJ 1996 C 346, p. 13), the third parties concerned were ensured the right to submit their comments and there is no provision in Regulation No 659/1999 requiring that that opportunity be made available to them again where the original plan has been amended during the investigation procedure.
175. With regard in particular to the argument concerning the report of the Commission’s consultants of 1 June 2001, even though it must be concluded in the circumstances of the case that some form of obligation arose to consult the Italian authorities on that report, it cannot be inferred from the Westdeutsche Landesbank Girozentrale and Land Nordrhein-Westfalen v Commission
case‑law that the same obligations should be extended to the third parties concerned. The latters’ role is essentially that of a source of information and they do not enjoy the same rights of defence as those which individuals against whom a procedure has been instituted are recognised as having (see paragraph 172 above).
176. In any event, as is apparent from paragraph 145 above, since the very limited task entrusted to its consultants by the Commission was simply to update their previous report by taking account of the grounds of the Alitalia I judgment, its purpose was ‘only [to provide] the Commission with technical assistance’ (recital 10 in the preamble to the contested decision) in its analysis and assessment of the information available to it, as could have been provided by a Commission department. In the parts of the contested decision devoted to the legal assessment of the contested capital injection, there is no express reference to the report of 1 June 2001. That report cannot therefore be regarded as a vital document as regards the grounds of the contested decision.
177. On the basis of all the above considerations, the second plea must be rejected.
E – The plea alleging infringement and misapplication of Articles 87 EC and 88 EC
178. Alitalia submits that the errors made by the Commission in the contested decision relate, for the most part, essentially to the correction of the errors identified by the Court in the Alitalia I judgment. After making a number of preliminary observations on the private investor test, it disputes the determination of the minimum rate and that of the internal rate.
1. Determination of the minimum rate
179. Alitalia challenges the application in its case of the minimum rate used in the Iberia decision, the failure to take account of the final version of the restructuring plan and the use of incorrect premisses.
a) The application of the minimum rate used in the Iberia decision to Alitalia
Arguments of the parties
180. Alitalia complains that the Commission failed to carry out a detailed comparison of its situation with that of Iberia, to which the Commission refers in order to justify the minimum rate of 30%. It contends that the arguments set out by the Commission in recitals 30 and 31 in the preamble to the contested decision had already been rejected by the Court in the Alitalia I judgment.
181. Alitalia also maintains that those arguments are incorrect. Alitalia and Iberia are not companies of comparable scale. The capital injections are substantially the same in both cases only because the Commission failed to take account of a recapitalisation which the Spanish company benefited from. It is manifestly incorrect to state that the greater the increase in capital, the higher the risk. To state that the two companies operate in a market which is not at the geographical centre of Europe is to disregard the geographical location of the north and centre of Italy. Iberia did not secure real agreements with the unions to improve the level of unit costs but simply enjoyed a limited short-term agreement, whereas Alitalia already had an innovative long‑term agreement which also provided for a share‑ownership scheme for employees to ensure wider employee participation. The liberalisation of the Spanish civil aviation market was a threat to Iberia, in so far as the ground-handling services it provided to other companies was liberalised, whereas the liberalisation of the Italian civil aviation market gave Alitalia the opportunity to develop a self-handling project in that sector. The projects for Malpensa airport (Italy) were not the central components of the economic and financial projections of the contested plan. Alitalia also fails to understand in what way the fact that it did not enjoy a privileged position on certain routes could constitute a risk factor liable to have an effect on the minimum rate. The social situation of Iberia, which experienced continuous strikes, is different from that of Alitalia. The effects of the liberalisation of the Italian civil aviation market were properly taken into account in the contested plan without undue optimism. By contrast, it would be incorrect to claim that it was already possible fully to assess the effects of the liberalisation of the Spanish market on Iberia’s market share when the Commission took the Iberia decision.
182. Finally, the reference to Continental Airlines, Air Partners and Air Canada in recital 32 in the preamble to the contested decision is totally irrelevant.
183. For its part, the Commission contends that Iberia and Alitalia are comparable to the extent that they are both medium-sized companies and have a similar value. Next, Alitalia suffered above all from the disadvantage of not having a prime market, comparable to that represented by Latin America for Iberia. Moreover, in terms of labour relations, Alitalia’s position is more sensitive than that of Iberia. In addition, in the case of Alitalia, it is necessary to take account of the uncertainty connected with the liberalisation of the Italian market that was imminent in 1997.
184. Lastly, the Commission disputes the fallacious use which Alitalia makes of the case involving investment by Air Canada and Air Partners in Continental Airlines.
Findings of the Court
185. First of all, the Commission’s assessment of whether an investment satisfies the private investor test is a complex economic matter. In adopting a measure entailing such a complex economic assessment, the Commission enjoys a wide discretion and any judicial review of such a measure, even though it is generally thorough as far as the question of whether a measure falls within the scope of Article 87(1) EC is concerned, is confined to establishing that the rules of procedure and the rules relating to the duty to give reasons have been complied with, to verifying the accuracy of the facts relied on in making the contested decision and that there has been no manifest error in the assessment of those facts or misuse of powers. In particular, it is not for the Court to substitute its economic assessment for that made by the institution which adopted the decision (see Alitalia I judgment, paragraph 105 and the case‑law cited).
186. In the second place, it is apparent from the analysis set out in paragraphs 106 to 112 above that, in the Alitalia I judgment, the Court did not challenge the principle itself of a comparison being made between Alitalia and Iberia but simply stated that the reasoning was defective in that regard. Alitalia is therefore incorrect in claiming that the Court had already rejected the factors for comparison set out in recitals 30 and 31 in the preamble to the contested decision.
187. It is in the light of those considerations that it is necessary to consider the arguments put forward by the parties.
188. In the first place, in recital 30 in the preamble to the contested decision, the Commission sets out a series of respects in which both Alitalia and Iberia may be compared. Both companies have a turnover of approximately EUR 4 billion, they operate in the same sector of the economy in a context of ongoing liberalisation within the Community, their internal market is not at the geographical centre of Europe and they recorded systematic losses throughout the years prior to the capital injection from which they both benefited. Furthermore, at the time of the capital injection, both Iberia and Alitalia were in dire financial straits characterised by high indebtedness and a virtually zero level of capital assets. In recital 31 in the preamble to the contested decision, the Commission adds that another feature the two companies have in common, from an investor’s point of view, is their social situation.
189. However, Alitalia disputes several of those points.
190. First of all, with regard to Alitalia’s argument that certain figures cannot be compared, it is clear that Iberia and Alitalia are, as the latter acknowledges, medium-scale undertakings when compared with large and small airlines. In its reply to a written question from the Court on this subject, the Commission provided a number of tables produced by the Association of European Airlines (AEA). It emerges from these that, in terms of turnover, seat-kilometres available and the number of passenger-kilometres transported, Alitalia and Iberia are in the same medium-scale category.
191. Moreover, at the hearing, the parties did not dispute the consolidated turnover for Alitalia and Iberia put forward by the Commission and confirmed that those were figures which lent themselves to comparison; formal note was taken of this in the minutes of the hearing.
192. Secondly, with regard to Alitalia’s disputing the claim that the two companies operate in a market which is not at the geographical centre of Europe, that argument is based essentially on the assertion that the centre-north of Italy cannot be regarded as a market outside the centre of Europe. The Italian internal market covers all of Italy and not just the north of the country and therefore a comparison cannot be made by comparing the north of Italy with the whole of Spain from a geographical point of view.
193. Furthermore, it cannot be disputed that Spain and Italy are in a comparable geographical location within Europe, their internal market not being in central Europe.
194. Thirdly, the contention that the social situation of the two undertakings is similar is unfounded. Alitalia does not deny that there were ‘social disputes experienced by both airlines in the years leading up to the capital injection’ (recital 31 in the preamble to the contested decision). The two undertakings therefore had a comparable history in that regard, which could influence an investor, as the Commission observes in the contested decision. As regards the future, while Alitalia draws attention to its long‑term union agreement, it does so in order to contrast this not with Iberia’s failure to act but with its ‘limited short-term agreement’. Since that difference essentially relates to the duration of action taken with a view to the future, it cannot be concluded that it was manifestly incorrect to consider that ‘another feature the two companies have in common, from an investor’s point of view, is their social situation’.
195. Secondly, in recitals 30 and 31 in the preamble to the contested decision, the Commission highlights features by which the two companies can be distinguished in terms of risk, while at the same time indicating that some of these are counterbalanced by other factors.
196. It is apparent, first of all, from recital 30 in the preamble to the contested decision that there is a significant difference between the amounts of the capital injections in question, namely EUR 1.42 billion for Alitalia and EUR 0.522 billion for Iberia, which, according to the Commission, increased the risk associated with the Alitalia recapitalisation plan.
197. In this connection, while it is accepted, as Alitalia acknowledges, that Iberia obtained two capital injections – one in 1992 and the other in 1995 – in the Iberia decision, the Commission gave a decision on only the second of these, which was for EUR 0.522 billion, fixing the minimum rate at 30% for that operation alone. In the present case, however, the figure in question is EUR 1.42 billion. It cannot therefore be regarded as being manifestly incorrect to state that, in the case of Alitalia, the operation entailed prima facie a greater risk for the investor.
198. It is apparent, secondly, from recital 31 in the preamble to the contested decision that Iberia’s productivity is lower than Alitalia’s and that Iberia faces uncertainties inherent in the effects of the liberalisation of the ground-handling market in Spain. Nevertheless, Iberia enjoys a privileged position in the market on routes between Europe and Latin America. For its part, Alitalia suffers from a twofold uncertainty relating to its development at Malpensa airport and the liberalisation of the Italian civil aviation market.
199. Alitalia states, however, that it fails to understand in what way the fact that it does not enjoy a privileged position on certain routes can constitute a risk factor.
200. In that regard, first of all, such a claim clearly cannot form the basis of a plea alleging a manifest error of assessment and is, moreover, inconsistent with the Commission’s assertions in the contested decision. Alitalia has neither disputed that it does not enjoy a privileged position on certain routes nor denied that Iberia enjoys a privileged position on the routes in question. Secondly, the Commission has explained in its written pleadings that, with regard to Latin America, Iberia had a market for which it had developed a solid commercial strategy and, accordingly, its future was much less prey to uncertainty, or, in other words, to a risk factor. To consider that the privileged position of an airline on certain routes may procure for it an advantage which reduces the risk factor for that company is not manifestly incorrect.
201. Next, the Commission does not deny that the liberalisation of the ground-handling market in Spain had some effect on Iberia but points out that ground-handling operations accounted for only 13% of its turnover, a proportion which is even lower if the whole group is taken into account (recital 31 in the preamble to the contested decision). Alitalia does not dispute that percentage. No manifest error of assessment can therefore be said to have been made in that regard.
202. As regards the liberalisation of the Italian civil aviation market, it should be noted that Alitalia does not dispute the effects but states that it took account of these in its plan. That fact alone cannot eliminate the risks inherent in such a liberalisation from an investor’s point of view nor, therefore, preclude it from being taken into account for the purpose of determining the minimum rate. It must also be noted that the liberalisation of the Spanish civil aviation market began before that of the Italian market. The Commission is therefore correct to state that it was already in a position to gauge the effects of that liberalisation on Iberia, whereas the effects on Alitalia of the opening of the Italian internal market were still very uncertain in 1997.
203. Finally, as regards the arguments relating to Malpensa airport, after denying it in its application, Alitalia admitted in its reply that the Malpensa hub formed a vital part of its strategy for the development of the company.
204. Moreover, it is apparent from the Alitalia I judgment that ‘[t]he development phase was chiefly based on bringing the Malpensa hub into service as from 1998’ (paragraph 12). Furthermore, the Malpensa hub is one of the ‘key elements of the plan’ mentioned in an Alitalia document to which that judgment refers (paragraph 120).
205. It cannot therefore be disputed that the development of the Malpensa hub constituted a vital part of the Alitalia restructuring plan. The fact that Alitalia was able to show in its accounts the benefits of the development of that hub only for the last two years of the plan cannot, from the investors’ point of view, eliminate the risk inherent in that operation or therefore preclude it from being taken into account for the purpose of determining the minimum rate. Nor can it be disputed that that risk was particular to Alitalia and did not affect Iberia.
206. In conclusion, the above analysis has not brought to light any manifest error of assessment on the part of the Commission in comparing the situation of Alitalia with that of Iberia. The Commission was entitled, without making any manifest error, to adopt in the present case a minimum rate of 30%, which was the same as that applied in the Iberia case, because the situations of the two airlines were comparable. In any event, in the reasons given for fixing the minimum rate at 30%, the comparison of the two companies is presented simply as an ancillary or confirmatory point.
207. It should also be added, in response to Alitalia’s objection to the reference made by the Commission in recital 32 in the preamble to the contested decision to Continental Airlines, that, in the comparison which it made with the situation of that American company, the Commission took account of a period up to November 1998. The Commission therefore made use of information which was not available to it when it adopted the 1997 decision. The Commission, however, must not make any assessment based on a subsequent situation (see paragraph 137 above).
208. The reference made in recital 32 in the preamble to the contested decision to the American company Continental Airlines must therefore be regarded as irrelevant and there is no need to examine Alitalia’s submissions on that point. The fact that ancillary and purely confirmatory reference is irrelevant cannot, however, adversely affect the Commission’s reasoning or the legality of the contested decision.
b) Failure to take proper account of the effect of the final version of the plan in calculating the minimum rate
Arguments of the parties
209. Alitalia observes that the Commission acknowledges, in recital 27 in the preamble to the contested decision, that the final adjustments made to the restructuring plan in June 1997 ‘reduce[d] the inherent risks of the operation’. According to Alitalia, that finding should have led the Commission to adopt a lower minimum rate than that fixed previously.
210. Alitalia adds that, in order to assess the risk of an investment in an undertaking and the resulting minimum rate, analysts take into account its financial exposure as against its capital and reserves. In order to translate that equation into a meaningful indicator of financial risk, it is, however, essential to compare its particular ratio of debt to equity (gearing) with the average debt-equity ratio of comparable undertakings. Since the gearing ratio of Alitalia was comparable to that of its major competitors, it cannot, contrary to what the Commission stated in recital 28 in the preamble to the contested decision, be one of the factors which may entail a higher minimum rate than that normally applicable for an investment in that sector.
211. The Commission contends that it is irrelevant to compare the gearing ratio of Alitalia at the end of the restructuring plan, in 2000, with that of other companies, as Alitalia did.
212. The Commission submits that, in recital 28 in the preamble to the contested decision, it underlines the fact that the final adjustments to the plan had no effect on the gearing level or the weight to be attached to it in the context of all the factors as a whole that are taken into consideration by the private investor when deciding whether or not to invest.
Findings of the Court
213. The Commission states in recital 27 in the preamble to the contested decision that the final version of the Alitalia restructuring plan reduced the inherent risks of the operation and increased the rate of return on the capital injection. However, it took the view that the adjustments to the plan were ‘none the less not very significant and [had] far less impact than the earlier amendments by the Italian authorities to the restructuring plan in February 1997’.
214. It must be noted (see paragraphs 125 to 136 above and recitals 10 and 27 in the preamble to the contested decision) that the Commission provided figures demonstrating the impact of those amendments and that, on that occasion, it repeated the calculations carried out by its consultants in their report of 1 June 2001, which is annexed to the defence. Alitalia fails to make any specific substantive complaint about those calculations.
215. In recital 28 in the preamble to the contested decision, the Commission pursues its argument as follows:
‘In this respect, it is worth adding that in 2000 Alitalia’s indebtedness, and the ratio of debt to equity (gearing ratio), is not significantly different. This, however, is precisely the data which an investor would see as crucially important when assessing the risks he would be incurring by financing the operation. The changes made to the restructuring plan in June 1997 thus have a virtually negligible impact on any assessment made by an investor guided purely by commercial criteria, considering that the inherent risks of the operation, as described above, continue to exist.’
216. It is apparent from the replies to the written questions from the Court that Alitalia does not dispute the fact that, in the final version of the plan, the gearing ratio had not undergone a significant change but it contends that no such change was necessary, since its gearing ratio was in line with the average for the sector.
217. The Commission did not therefore make a manifest error of assessment in finding that the gearing ratio for 2000 was not significantly different. The fact that Alitalia’s gearing ratio was, as it claims, average for the sector does not in any way undermine that finding.
218. Consequently, Alitalia has not established that the Commission failed to take proper account of the effects of the final version of the restructuring plan for the purpose of determining the minimum rate.
c) Taking account of erroneous premisses in calculating the minimum rate
Arguments of the parties
219. Alitalia considers that the minimum rate should be fixed on the basis of the cost of the undertaking’s own resources, that is to say, on the basis of the anticipated return for investing risk capital in that undertaking. That return is itself determined by a formula reflecting the general risk inherent in investing and the particular risk inherent in investing in a particular undertaking.
220. Alitalia fails to understand how the Commission can, on the one hand, assess the cost of its equity capital at 14% and, on the other hand, arrive at a minimum rate of 30%. Alitalia is of the view that an assessment of the cost of the equity capital at 14%, evaluated in accordance with the capital asset pricing model (CAPM), already takes account of the risks factors for the air transport sector as well as the specific risk factor inherent in the undertaking. It is apparent from the report of the Commission’s consultants of 18 June 1997 that they had arrived at that percentage on the basis of a particularly high ‘coefficient β’ of 1.23, representing the correlation between the variability of the market return and that of the return of the company in question, as listed on the Stock Exchange, which already reflects a value judgment as regards the risk presented by the contested investment.
221. Alitalia takes issue with the various risk factors enumerated by the Commission in recitals 25 and 26 in the preamble to the contested decision.
222. Alitalia then submits that it registered positive operating results during the period preceding the plan but that it has not had net positive results for a number of years because of an imbalance between its own resources and those of third parties, an imbalance which the restructuring plan was intended in particular to address. Moreover, during the first half of 1997, Alitalia registered a better operating profit than that projected in the plan. Finally, IRI was in a special situation as a holding company which was already a shareholder of the company, which, for the purpose of evaluating the investment, gave it greater knowledge of and a greater capacity for understanding the company.
223. In response to the Commission’s assertion that the hypotheses regarding the future development of the company’s productivity, operating expenditure, seat occupancy levels and unit earnings on which the plan is based are rather optimistic, Alitalia states that the Commission’s consultants accepted the projections in the company’s plan and did not put forward other data capable of rebutting them. The Commission even acknowledged that the plan, as improved and adapted in January 1997, was realistic.
224. As regards the role to be played by the Malpensa hub in the anticipated recovery, Alitalia submits that it had a very minor role in the plan, even though the project in question was undoubtedly very important for the company. It states that the impact of putting that hub into operation would be felt only after 2000 and that it had not been included in the calculation of the final value as a matter of prudence. As regards the distance between Malpensa and Milan (Italy), it is comparable to that between other European airports and the cities they serve, such as Gatwick or Stansted (United Kingdom), Munich (Germany) and Oslo (Norway). The same applies to the time it takes to reach Malpensa airport from Milan.
225. With regard to the liberalisation of the Italian internal market, Alitalia contends that the plan took due account of the fact that Alitalia would lose greater market share than all other European air carriers by anticipating a 23% drop in its average yield. Moreover, Alitalia argues that it is irrelevant for the Commission to argue that the Italian internal market was in fact liberalised only at the end of 1995 and that there was a great deal of uncertainty as to how Alitalia would be able to face up to the competition.
226. Alitalia claims that its unit operating costs were in line with those of its main competitors. In its view, in the contested decision, the Commission adopted a different position from that it had adopted in that regard in the 1997 decision because it carried out an ex post examination of the developments in the company’s results.
227. Finally, with regard to the serious social difficulties experienced by Alitalia in 1995 and 1996, the applicant states that the change brought about in its business culture was given concrete expression in the union agreements signed in 1996. No strike took place during the whole of the investigation stage.
228. The Commission submits that the determination of the minimum rate is, in the present case, an operation which must be viewed from a historical perspective, based on a prospective assessment taking into account the psychological and subjective degree of the propensity or aversion to risk in a particular sector which is as interdependent as the air transport sector. In its view, the calculation of the minimum rate must take account of the risks inherent in the project in question.
229. The cost of equity capital, estimated at 14% according to the CAPM, is irrelevant for the purpose of the minimum rate and, instead, is a matter to be taken into consideration in calculating the internal rate. The coefficient β was used only for the purpose of calculating IRI’s total participation in Alitalia on 31 December 2000. That coefficient represents the particular risk of the undertaking in the context of the Stock Exchange and was of no particular importance since Alitalia was not sufficiently quoted.
230. The Commission maintains that Alitalia’s results for the first half of 1997 are irrelevant, since they were not known at the time when the 1997 decision was adopted.
231. Alitalia’s argument seeking to demonstrate that the effect of the Malpensa hub was only minor is in total contradiction to the expectations expressed by that company in the first version of the restructuring plan. The Commission also disputes the arguments claiming that the Malpensa hub can be compared to Gatwick, Stansted, Munich and Oslo airports.
232. According to the Commission, the liberalisation of the Italian internal market was particularly important for Alitalia as the Italian Republic was the only large Member State in the Community to have made the maximum possible use of the opportunities offered by Council Regulation (EEC) No 2408/92 of 23 July 1992 on access for Community air carriers to intra‑Community air routes (OJ 1992 L 240, p. 8) to protect its market for the exclusive benefit of its national airline. Consequently, in 1997, at the time of the liberalisation and the end of its monopoly, the risk of serious repercussions for Alitalia could not be ruled out. Moreover, of the three examples given by Alitalia, only the case of the Kingdom of Spain is pertinent, since the United Kingdom of Great Britain and Northern Ireland and the Federal Republic of Germany had liberalised their markets at a very different period from the reference period of 1992 to1995 chosen by Alitalia.
233. The Commission states that the unit operating costs referred to in the fourth indent of recital 26 in the preamble to the contested decision relate to the period 1996 to1997 and not 2000, the year when the plan was completed. That being the case, it states that it is indisputable that Alitalia’s unit costs were 12% greater than the average among its European competitors.
234. Lastly, the Commission submits that the fact that there were no strikes is not conclusive. In fact, the minimum rate would have been considerably higher than 30% if there had been strikes during the investigation procedure.
Findings of the Court
235. Alitalia makes a number of complaints concerning the method used to calculate the minimum rate and disputes the choice of risks taken into account by the Commission in determining that rate.
– Method of calculating the minimum rate
236. In the Alitalia I judgment (paragraphs 98 and 99), the Court observed that, in order to determine whether IRI’s investment satisfied the private investor test and, therefore, to assess whether the investment contained components of State aid within the meaning of Article 87(1) EC, the Commission was guided by the principles set out in its notice on the application of Articles [87 EC] and [88 EC] and Article 61 of the European Economic Area Agreement (EEA) to State aid in the aviation sector (OJ 1994 C 350, p. 5) (‘the aviation notice’). In the 1997 decision (point VII), the Commission compared the amount of IRI’s investment with the value of expected future cash flows from the project, discounted at the minimum rate which a private investor would require. It concluded that, in that case, the internal rate was still below the minimum rate and that, accordingly, the investment did not satisfy the private investor test. The Court added that the method which the Commission employed in the 1997 decision could not be criticised as such.
237. In recital 25 in the preamble to the contested decision, the Commission states that ‘[i]n this case, on the basis of the information in its possession and, in particular, the consultants’ report, [it] considers the minimum rate to be around 30% in view of the size of the sum involved and, more especially, the risks inherent in the operation’. It adds that ‘[t]his rate of at least 30% allows for the possibility that the restructuring plan will not develop as planned and that the actual return on the investment will, in the final analysis, be significantly less’. It goes on to state that ‘[i]ndeed, the rate cannot fail to be higher than the cost of equity capital since the latter does not take account of all the risks associated with the company’.
238. As regards Alitalia’s complaint concerning the ratio of one-to-two between the rate of 14% fixed for the cost of its equity capital and the minimum rate, it is abundantly clear from the contested decision that the Commission took account of Alitalia’s equity capital, calculated using the CAPM, first of all, to assess the value of IRI’s participation in Alitalia in December 2000 (recital 22 in the preamble to the contested decision) and, next, to determine, on the basis of those data, the internal rate (recital 23 in the preamble to the contested decision) and not the minimum rate.
239. A reading of the second and third reports of the Commission’s consultants, annexed to the application, also confirms that the rate of 14% was calculated in order to evaluate one of the factors to be taken into account in determining the internal rate.
240. Since the rate of 14% is used for the purpose of calculating the internal rate and not the minimum rate, Alitalia is incorrect in challenging the use of that rate in its criticism of the determination of the minimum rate of 30% and in highlighting the ratio between those two rates of one‑to‑two.
241. Moreover, in recital 22 in the preamble to the contested decision and in its pleadings, the Commission states that the cost of equity capital, calculated using the coefficient β for Alitalia, takes account of the risks inherent in the situation of the company as a whole, in particular in the context of the Stock Exchange, as well as the risks pertaining to the sector concerned. The Commission contends that, since Alitalia was not sufficiently quoted in the period 1996 to1997, the figure of 14% and the coefficient β for Alitalia calculated in 2000 is the result of a necessarily theoretical operation, based on the coefficient β for other comparable airlines. It stresses that the coefficient β thus calculated cannot reflect the specific risk of Alitalia during the years 1996 and1997 and that the weighted average cost of capital defined in this way ‘does not take Alitalia’s specific risk situation into account’ (recital 22 in the preamble to the contested decision).
242. The minimum rate takes account of ‘the size of the sum involved and, more especially, the risks inherent in the operation’ (recital 25 in the preamble to the contested decision). The Commission’s method is therefore consistent, especially since Alitalia itself states the determination of the minimum rate is the result not of the application of a mathematical formula, but of an empirical approach which does not lose sight of the financial and investment objectives of an investor comparable to a public investor (see also recital 24 in the preamble to the contested decision).
243. Finally, the Commission did not make a manifest error of assessment in taking the view that the particular position of IRI, as a holding company which was already a shareholder in Alitalia, did not give it, for the purpose of evaluating its investment, greater knowledge of and a greater capacity for understanding the company. In fact, IRI is an investment holding company that is wholly-owned by the Italian State. The reference parameters for calculating the minimum rate are not those of the State but those used by the market. Moreover, since it was already a shareholder in Alitalia, IRI could have had an interest in overstating the value of the company. It follows that it cannot be assumed that IRI’s shareholding in Alitalia necessarily placed it in a better position to assess the minimum rate that would be required by a private investor acting in accordance with market principles.
244. Accordingly, Alitalia’s complaints concerning the method of calculating the minimum rate employed by the Commission are unfounded.
– Risks taken into account by the Commission
245. Since Alitalia disputes the risks taken into account by the Commission in determining the minimum rate in the contested decision, it is necessary to examine them individually.
246. First of all, Alitalia does not dispute, as such, the Commission’s assertion that, traditionally, margins in the air transport sector are limited, with extreme variations in profits and losses (the first indent of recital 25 in the preamble to the contested decision). Rather, its argument is that the risk factors inherent in that sector of activities have already been taken into account from a different aspect.
247. It must be noted, first, that, in the contested decision, account is taken of those risk factors, by the use of the coefficient β in the CAPM formula, only for the purpose of determining one of the elements of the internal rate, namely the final value at the end of 2000 (recital 22 in the preamble to the contested decision). Moreover, the coefficient β does not specifically express the risk inherent in the sector concerned. As Alitalia acknowledges, it makes it possible to measure the correlation between the variability of the market return and that of the return of the undertaking to which the evaluation relates.
248. Furthermore, the determination of the minimum rate cannot be regarded from the same perspective as that of the internal rate, which is, instead, based on the application of a mathematical formula. The minimum rate that would be required by a private investor acting in accordance with market principles in order to engage in such a financial operation must be evaluated in an empirical and prospective manner, in view, in particular, of the risks inherent in such an operation (see paragraph 242 above). In those circumstances, among the specific risks inherent in the operation in question, a private investor would be entitled to take account of the fact that the operation is to be carried out in the air transport sector, in which, traditionally, margins are limited, with extreme variations in profits and losses.
249. The Commission did not therefore make a manifest error of assessment in referring to that risk in recital 25 in the preamble to the contested decision.
250. Secondly, it is clear that Alitalia did not dispute that its accounts showed no significant profits (second indent of recital 25 in the preamble to the contested decision). The fact that one of the objectives of the contested plan was to remedy its undercapitalisation does not in any way alter the fact that Alitalia was in a dire financial situation, which was a risk liable to be taken into account by a private investor before subscribing to any increase in capital.
251. That finding cannot be affected by the fact that, during the first half of 1997, Alitalia registered a better operating profit than that projected in the restructuring plan. Even if it were possible on the basis of those figures to forecast future profits under the plan, those figures became known, in any event, after the risk assessment had been carried out for the purpose of the 1997 decision and could not therefore have been taken into account (see paragraph 137 above).
252. The estimate of the results for the first quarter of 1997, which showed a stronger recovery than anticipated, was based on unrevised provisional figures, which Alitalia did not challenge. The fact that the data in question were unreliable, in conjunction with the extreme brevity of the period in question, entitled the Commission to take the view that those data did not affect its assessment of the risk associated with the fact that Alitalia’s accounts had shown no significant profits since the end of the 1980s, in spite of the improvement in its situation from 1994.
253. Thirdly, as regards the Commission’s assertion that the hypotheses regarding the future development of the company’s productivity, operating expenditure, seat occupancy levels and unit earnings on which the plan is based are rather optimistic (first indent of recital 26 in the preamble to the contested decision), it should be noted that the report of the Commission’s consultants of 18 June 1997, which is annexed to the application, mentions, on the one hand, certain changes made to the previous plan and states that the revised plan is more prudent than the original one. However, on the other hand, that report highlights the fact that the plan still retains optimistic elements and that it may be difficult to attain some of its objectives. The elements which it specifies are precisely those set out in the first indent of recital 26 in the preamble to the contested decision, which is why that decision refers to ‘rather optimistic’ hypotheses.
254. Moreover, in the additional report, annexed to the report of 18 June 1997, the Commission’s consultants evaluated the overall viability of the restructuring plan and the adequacy of the contested capital injection. They explained that, in their earlier reports, they had analysed the main features of the plan in order to assess the rate of return which a potential investor would reasonably require to invest in Alitalia. The Commission’s consultants added that, in that context, the elements which they considered ‘optimistic’ had been used to assess the rate of return required by a private investor. However, they went on to say that those elements did not mean that the plan was not viable.
255. It follows that Alitalia cannot dispute the fact that rather optimistic hypotheses were used in its restructuring plan by relying on the fact that, in that supplementary report, the Commission’s consultants had concluded that the restructuring plan was, on the whole, viable. Indeed, that supplementary report and the main report of 18 June 1997 specifically refer to those optimistic elements.
256. In any event, the fact that certain particular hypotheses were considered generous or optimistic cannot be regarded as being contradictory in itself with an assessment that the restructuring plan was viable on the whole.
257. Lastly, contrary to Alitalia’s assertions, in the checks which they carried out to monitor the progress of the plan, the Commission and its consultants did not always find that productivity and operating costs objectives had been met. It is apparent in particular from the extract from the report prepared by the Commission’s consultants in July 1999, annexed by Alitalia to the reply, that the operating costs were higher than forecast in the plan and that, while in some cases better than in 1997, the productivity objectives had not been attained.
258. In any event, Alitalia’s argument and the data produced in support thereof must be rejected in so far as they are based on ex post factors.
259. The Commission did not therefore make a manifest error of assessment in including, among the additional risk factors which a private investor could take into account, the fact that the hypotheses regarding the future development of the company’s productivity, operating expenditure, seat occupancy levels and unit earnings on which the plan was based were rather optimistic.
260. Fourthly, as regards the risks associated with the fact that the specific potential of the new airport at Malpensa and the details of how the hub would be put into service were in fact still largely unknown (second indent of recital 26 in the preamble to the contested decision), reference must be made to paragraphs 203 and 204 above, from which it is apparent that Malpensa airport formed a vital part of the restructuring plan. Accordingly, the Commission did not make a manifest error of assessment in stating that the anticipated recovery was dependent to a large extent on the opening of the Malpensa airport after 1998.
261. Alitalia did not challenge the Commission’s assertion that, although the new Malpensa airport would offer far more slots than were then available at Linate (Italy) airport, which was already completely saturated, the slots would also be available to Alitalia’s competitors. However, an increase in competition constitutes a risk for Alitalia.
262. As regards the comparison in terms of distance with other European airports, the distance between Munich airport and the centre of Munich, namely 37 km, is not comparable to the distance between Malpensa airport and the centre of Milan, regardless of whether the Commission’s figure of 55 km is accepted or that put forward by Alitalia, that is, 48 km. As for the other three airports in question, that distance may be regarded as comparable. Malpensa is therefore one of the airports which is furthest from the city it serves. However, a number of objections have to be made to the comparison made by Alitalia relating to the size of the airports in question and their place within the airport system at issue. First, Oslo airport is not the same size as that of Milan and, secondly, Gatwick and Stansted airports are not the main airports for London (United Kingdom), unlike Malpensa airport, which was intended to fulfil that role for Milan. The risk associated with distance could therefore be regarded as greater in the case of Malpensa.
263. In any event, the fundamental risk inherent in opening Malpensa airport after 1998 is summarised in the last sentence of the second indent of recital 26 in the preamble to the contested decision, as follows:
‘The specific potential of the new airport and the details of how the hub will be put into service are in fact still largely unknown.’
264. Alitalia does not dispute this. The Commission did not therefore make a manifest error of assessment in considering that the putting into service of the Malpensa hub was an additional risk factor which a private investor may have taken into account.
265. Fifthly, with regard to the liberalisation of the Italian internal market (third indent of recital 26 in the preamble to the contested decision), it is not disputed that that occurred only at the end of 1995.
266. In its arguments seeking to justify the 26% yield which it employed in its plan, Alitalia uses the United Kingdom, Germany and Spain as points of comparison.
267. However, during the reference period, neither the United Kingdom nor Germany was in a comparable situation to that of Italy. Those two countries had in fact opened their internal market in the 1980s – one at the beginning and the other at the end. Subsequently, they fully liberalised their market at Community level, the former in 1993 and the latter in 1997, according to the information provided by Alitalia. That situation cannot be compared to that of Italy, which proceeded with the liberalisation of both markets – internal and Community – almost simultaneously, in 1996 and 1997 respectively, thus obliging Alitalia to face new competition on both fronts at the same time. That situation therefore increased the risks inherent in the operation from a private investor’s point of view.
268. Accordingly, the Commission did not make a manifest error of assessment in mentioning, among the risk factors which a private investor might take into account, the liberalisation of the Italian internal market at the end of 1995 and the uncertainty as to how Alitalia, which up to that point had enjoyed a monopoly, would be able to face the competition.
269. Sixthly, as regards the Commission’s claim that Alitalia’s unit costs continue to be higher than those of its main competitors in Europe (fourth indent of recital 26 in the preamble to the contested decision), it should be noted that that wording does not rule out the possibility of an improvement in the situation. On the contrary, the use of the verb ‘to continue’ would, in fact, suggest this.
270. The Commission confirms that it based its assessment on the figures provided to it in 1996. Alitalia observes that those figures relate, in fact, to 1994 and that its costs subsequently improved. To demonstrate that improvement, it annexes to its reply statistical data from an AEA publication.
271. It should be recalled that the Commission was required to use the data available at the time when the 1997 decision was adopted (see paragraph 137 above). However, the statistical data produced by Alitalia are from a confidential AEA publication, the copy of which on the Court file does not bear an official date, although the date of 26 June 1998 has been written by hand. The Commission claims that that publication came out only at the end of 1997 and was produced for the first time by Alitalia at the reply stage in the present proceedings. Alitalia has therefore failed to establish that the Commission was or could have been aware of those data when the 1997 decision was adopted.
272. The Commission cannot therefore be criticised for having based its decision on data available to it at the time when the 1997 decision was adopted or for adhering to the fact that Alitalia’s unit costs remained 12% higher than those of competing undertakings, as stated in the 1997 decision.
273. Seventhly, with regard to the contention that the company was affected by serious social disputes in 1995 and 1996 and, more generally, that the change in ‘business culture’ was likely to be hard to manage (fifth indent of recital 26 in the preamble to the contested decision), the first point is clearly not in dispute and could have led a private investor to regard the changes that would be necessary as a risk, in spite of the conclusion of union agreements, which could not dispel all the uncertainty as to the staff’s reaction to such measures.
274. It must be concluded at the end of this examination of the risks invoked by the Commission in support of its decision to fix the minimum rate at 30% that it did not make any manifest error of assessment.
275. The plea alleging infringement and misapplication of Articles 87 EC and 88 EC in determining the minimum rate must therefore be rejected.
2. Determination of the internal rate
276. In this context, Alitalia disputes the amount of the insolvency costs included by the Commission in the calculation of the internal rate, the fact that it assessed the internal rate on the basis of the final version of the plan, the parameters used by the Commission and the effect of the conversion of loans into capital on the calculation of the internal rate.
a) The amount of insolvency costs
277. The question of the inclusion of the insolvency costs has already been addressed in paragraphs 113 to 121 above, but o nly from the angle of infringement of Article 233 EC in the light of the Alitalia I judgment. In this context, the issue is to determine whether, in its assessment, the Commission proceeded on the basis of incorrect facts or made manifest errors of assessment.
Arguments of the parties
278. Alitalia points out, first of all, that, contrary to the Commission’s assertion in recital 20 in the preamble to the contested decision, it never accepted the Commission’s figure of ITL 750 billion.
279. Alitalia observes that the first instalment of the capital injection enabled it to repay ITL 900 billion in short-term loans to IRI, which would not have been repaid if the company had been bankrupt. That figure of ITL 900 billion represents the minimum and not the maximum insolvency costs which it was thus possible to avoid. In the light of the fact that ITL 900 billion was repaid, the assessment of the insolvency costs at ITL 750 billion is incomprehensible and unsupported.
280. More specifically, Alitalia explains how it arrived at the figure of ITL 1 140 billion for the cost to IRI in the event of the company going into liquidation, a figure which, in its view, is the average of the minimum and maximum insolvency costs. Alitalia claims that the insolvency costs in the contested decision should therefore be increased by ITL 236 billion, which would increase the internal rate by more than 4%.
281. Alitalia does not accept that it overestimated the risk, in the short term, of losses in respect of advance payments for the acquisition of the fleet of aircraft. In its view, advance payments on equipment are not recoverable in the event of insolvency.
282. Alitalia also denies that it underestimated the sales value of the fleet. In that case, its assessment was based on the sales values indicated in industry guides, which, in its opinion, should be discounted by between 25 and 45%, according to whether the sale is made on the basis of an ongoing concern or as a result of compulsory sale. The value of aircraft sold in units of more than two or three should, it argues, be reduced by at least 12% and the valuations must be tailored to each type of aircraft. Finally, as the percentage discount cannot be greater than 10 to 15% of the wholesale as compared with the retail price, to which must be added the 20% stipulated by the Commission, giving a total of 30 to 35%, Alitalia also submits that the Commission does not adduce any evidence in support of its assertions.
283. Alitalia also disputes that it overestimated the liquidation costs. In its estimate of those costs at approximately 10% of the disposable value, Alitalia took account of the period of time that would be required for the proceedings to be concluded and the costs of the insolvency proceedings. As regards those costs, it states that it is impossible for it to challenge the sum deemed to be appropriate by the Commission, since that sum is not stated and its estimate, according to the report of the Commission’s consultants of 18 June 1997, is based on the latter’s own experience.
284. Lastly, Alitalia refers to the fact that its liquidation would have had negative consequences for IRI’s financial position by having a damaging effect on the valuation of Alitalia’s debt and would have given rise to higher insolvency costs. Prudently, however, it fails to quantify that effect.
285. All in all, Alitalia states that, by taking into account insolvency costs averaging ITL 1 140 billion, the return on the investment would have been 33%.
286. The Commission notes that Alitalia did not accept the fact that it took the sum of ITL 750 billion into account and at the same time explains how it arrived at that figure.
287. The Commission explains that the reasons which led it to arrive at that figure are set out in recital 20 in the preamble to the contested decision and in its consultants’ reports of 21 February and 18 June 1997. It states that the table which it prepared in the course of the procedure which led to the Alitalia I judgment and which is annexed by Alitalia to the application already included the insolvency costs in the calculation of the internal rate.
288. The Commission also takes issue with Alitalia’s assertion that it systematically used extreme values in determining the internal rate. It provides examples of parameters advantageous to Alitalia which it used in that calculation.
289. The Commission points out that any error which, if corrected, would not raise the internal rate above the minimum rate of 30% would have no effect on the legality of the contested decision. The Commission demonstrates, by means of various tables, the differences between its assessment and that of Alitalia and attributes these to the valuation attributed to the fleet which guarantees the loans and that attributed to the repayment of unsecured creditors upon the winding-up of the company.
290. Next, the Commission considers that the fact that the first instalment of the capital injection was used to repay loans of ITL 900 billion does not justify an assessment of the insolvency costs in the same amount.
291. The Commission disputes Alitalia’s evaluation in a number of respects. It provides a table setting out the differences between the parties as regards the evaluation of sums to be repaid to creditors and states that those differences relate to the headings ‘Advance payments on equipment’, ‘Fleet’, ‘Debts’ and ‘Insolvency costs’.
292. The Commission is of the view that advance payments on equipment are fully recoverable. In fact, contractual provisions under which aircraft supply contracts may be terminated do not preclude the reimbursement of advance payments. Moreover, it would not have been justified, in the light of the information available at the relevant time, to proceed on the assumption that such credits would be totally lost or to exclude the possibility that the contracts might be sold to other companies.
293. As regards the value of the fleet in the event of insolvency, the Commission states that the valuation must be based on the 1996 values and not those for 1999 or 2000, as Alitalia incorrectly claims. The Commission states that it proceeded on the basis of the detailed estimate in the June 1997 report of its consultants, according to which the market value of the aircraft would be discounted at the rate of between 10 and 20%. In order to verify its estimate, the Commission’s consultants used, with the assistance of an expert in the sector, a guide used in the industry, which gives the prices of passenger aircraft in considerable detail. The percentage discount cannot be greater than a reduction of 20% by comparison with the wholesale price, which would already be reduced by 8% or 9% by comparison with the retail price.
294. The Commission assesses the insolvency costs at between ITL 64 and 92 billion, whereas Alitalia considers them to be between ITL 287 and 427 billion. The Commission submits that, for the purpose of properly assessing those costs, a distinction can be made under Italian law between two insolvency schemes, namely voluntary liquidation and the collective insolvency procedure. Voluntary liquidation is carried out by an external liquidator, whose costs are 1% of the assets recovered, to which is added the cost of the liquidator’s remuneration, corresponding to 0.75% of the final value of the liabilities, such figures being taken from the scales of charges of Italian expert accountants. Under the collective insolvency procedure, it is the liquidator or the judicial auditor who receives up to 0.9% of the assets recovered, to which is added a maximum remuneration of 0.37% of the liabilities as assessed (Articles 1 and 2 of Ministerial Decree No 570 of 20 July 1992). In both cases, it is then necessary to examine the fees incurred by experts so that the value upon realisation of the assets which are the subject of the liquidation can be assessed. Those fees are calculated in accordance with the fee scales of the various professional associations to which the experts belong. In the case of Alitalia, reference must be made to the fee scales for engineers and architects, which, in cases of this kind, levy a charge of 0.5% on each asset valued. According to the Commission, by applying the maximum fees for the liquidator and for the expert, the insolvency costs thus amount to 2.2% of the total liquidated assets in the case of liquidation or 1.49% of the total liquidated assets under the collective insolvency procedure.
295. As regards the taking into account of the time factor in calculating the insolvency costs, the Commission contends that it is incorrect to state that a period of six years would have been necessary to complete the liquidation of all Alitalia’s assets. That figure is the result of applying statistical averages – which, moreover, have only a marginal bearing on limited companies and large industrial groups – to an operator which is fundamentally different, such as a large national company. But, even if that average period of six years were taken into account, it would be untrue to say and impossible to demonstrate that the total sum realised under the procedure would be received all at once, at the end of the procedure, since the creditors can be paid in stages as the liquidation of the assets progresses. It is therefore impossible to assess the effect of the time factor in an accurate or convincing manner. Moreover, if account were to be taken of a loss on the loans on account of the time factor, such a loss would have to be attributed not to the nominal value of the loans themselves but to their discounted value, which would be significantly lower.
296. Lastly, the Commission observes that the impact of the liquidation of Alitalia on IRI would be negligible. The only exposure to the insolvency costs would be the debts guaranteed by IRI of ITL 41 billion. That figure represents barely 0.16% of the IRI group’s indebtedness, which cannot in any way be compared with the capital injection of ITL 2 750 billion and, accordingly, would have no effect on the overall assessment of the IRI group.
Findings of the Court
297. First of all, it should be noted that, on 8 April 2003, the Commission published an amendment to the contested decision, in which it took formal notice of the fact that Alitalia had not accepted the assessment of the insolvency costs in the sum of ITL 750 billion (see paragraph 22 above).
298. The reasons for that figure are to be found in recital 20 in the preamble to the contested decision and in the report of the Commission’s consultants of 18 June 1997, referred to in the same recital, to which Alitalia had access (see paragraphs 66 and 67 above). Those reasons were subsequently stated in the Commission’s written pleadings, in particular in the defence. It cannot therefore be maintained that reasons were not given for that figure of ITL 750 billion.
299. However, Alitalia disputes the assessment of the insolvency costs in the sum of ITL 750 billion, in the same way as the Commission disputes the figure of ITL 1 140 billion put forward by Alitalia for those costs. The difference between them relates essentially to the manner in which account should be taken of the repayment of ITL 900 billion in short‑term loans, the recovery of advance payments for the purchase of new aircraft, the value of the fleet in the event of insolvency and the evaluation of the insolvency costs.
300. First of all, with regard to the issue between the parties as to whether the ITL 900 billion in loans repaid with the aid of the first instalment of the capital injection constitutes the maximum or the minimum insolvency costs that could have been avoided, it is irrelevant for the purpose of determining whether the figure deemed to be appropriate for all the insolvency costs by the Commission is justified. Moreover, none of the evidence adduced by the parties justifies the claim that the sum repaid of ITL 900 billion should be regarded in itself as the maximum or minimum extent of the insolvency costs that could have been avoided.
301. Secondly, as regards the question whether the advance payments made for the purchase of new aircraft are recoverable, as Alitalia acknowledged, when it adopted the 1997 decision the Commission was not aware of the memorandum of understanding between the aircraft manufacturer McDonnell Douglas and Alitalia, which stipulated that Alitalia had withdrawn from the purchase of five aircraft and McDonnell Douglas had retained the advance payment of 500 000 US dollars (USD) per aircraft. The Commission could not therefore have taken account of that fact.
302. Furthermore, even if that example were to be taken into account in the Court’s examination of the practice in that area, Alitalia could in any event find no justification for drawing any inference whatsoever, as regards other orders, from its inability to recover the advance payments for those five aircraft, especially as it acknowledges itself the highly personal nature of that memorandum of understanding.
303. Alitalia also relies on the fact that, ‘generally’, the contracts for the purchase of aircraft which it concluded did not provide for the repayment of any advance sums. However, it has failed to adduce any evidence of this.
304. In fact, the termination for insolvency clause in the asset purchase agreement concluded between Airbus Industrie and Alitalia in 1989, and annexed to the application, does not exclude repayment of advance payments. It does not give an express definition of the vendor’s rights in the event of the purchaser’s insolvency. Even more to the point, it does not provide that any advance payment is to be repaid in full to the purchaser. In any event, a single contract is not sufficient to establish a general practice.
305. Alitalia has therefore failed to establish that, when the 1997 decision was adopted, there was an established practice whereby all advance payments made in respect of the purchase of new aircraft were forfeited. Accordingly, the Commission cannot be regarded as having made a manifest error of assessment in not basing its calculations on the fact that all such advance payments are not recoverable in full.
306. Moreover, in response to a written question from the Court, Alitalia, while stating that it was absolutely impossible to recover those advance payments, did not consider it appropriate to address the issue of what effect a partial recovery of those payments might have on the amount of the insolvency costs and the calculation of the internal rate. It is apparent from the simulation exercise carried out by the Commission in its response to the written question from the Court that recovery of up to 50% of the advance payments would have no effect on the internal rate and non-recovery or recovery limited to 25% would increase the rate by 1%.
307. It follows that, even if the principle that the advance payments were recoverable in full were to be regarded as incorrect, such an error would have no impact on the Commission’s final finding that the internal rate is lower than the minimum rate. That error has no bearing on the issue and could not be sufficient to warrant the annulment of the contested decision, since, in the particular circumstances of the case, it could not have had a decisive effect on the outcome (see, to that effect, Case T‑126/99 Graphischer Maschinenbau
v Commission [2002] ECR II‑2427, paragraph 49 and the case‑law cited).
308. Thirdly, with regard to the sales value of the fleet, referring to its consultants’ report of 18 June 1997, the Commission states, in recital 20 in the preamble to the contested decision, that the figure put forward by the Italian authorities is an underestimation.
309. In that report, it is stated that:
‘Alitalia, in assessing the current market value of its used aircraft, reduced the current value indicated in aircraft catalogues, applying a discount ranging between 25 and 45%. Lower discount rates (10-20%) might be more reasonable, if one also considers that Alitalia, in its calculation, includes, in addition to the discounts, the financial effects of a one-year selling process.’
310. It is also apparent from the defence that, in order to verify the initial assessment carried out in 1997, the Commission’s consultants, assisted by an expert in the field, used a price list from a guide used in the industry which sets out in detail the prices of passenger aircraft. That guide sets out the following criterion:
‘Fleet values are discounted from wholesale price (average price paid by dealers or airlines for four or more aircraft) at one half of one per cent times number of aircraft in fleet not to exceed 20 per cent discount.’
311. It is clear that Alitalia does not provide any evidence in support of its reliance on a discount of between 25 and 45%. It states that the industry guides indicate percentage discounts for the simultaneous sale of two or more aircraft but do not make any provision for cases involving exceptional sales. Its case is therefore exceptional and requires a particularly high discount, which it establishes itself without producing any documentation in support of its contentions. It is true that Alitalia refers to statements made in a speech by Mr B., Chairman of International Aircraft Remarketing LLC, at a conference in 2001.
312. However, in addition to the fact that the latter’s assessment, which dates from 2001 and not the period in question, is of a rather personal nature, the discount he referred to in his speech, that is a discount of between 15 and 30%, is closer on average to that employed by the Commission (20%) than that argued for by Alitalia (an average of 35%).
313. The Commission did not therefore make a manifest error of assessment in applying a discount of 20% to the sale price indicated in industry guides, in which account is taken of the type of aircraft and whether it is of modern or old design.
314. Moreover, Alitalia contradicts itself when it states, on the one hand, that it is necessary to include an additional discount for combined sales of a large number of aircraft of the same kind and, on the other hand, that such a large fleet cannot be sold overnight and the calculations must take account of the time factor.
315. As regards Alitalia’s argument that court orders for sale can give rise to significant discounts and that the example to the contrary cited by the Commission has no probative value on account of the fact that the type of aircraft in question was very much sought after, it can, at best, be concluded from the issue as debated between the parties that, for the same type of aircraft, even one that is very sought after, the price obtained on sale in the course of insolvency proceedings may be slightly lower or slightly higher than the prices indicated in industry guides.
316. However, it is apparent from the table produced in this connection by Alitalia in its reply that the sale price obtained in insolvency proceedings is, in any event, higher than the wholesale price indicated in the industry guide, which is given there by way of comparison. The Commission bases its calculations on the wholesale price and a maximum discount of 20% is applied to that price (see paragraph 310 above). The two examples put forward by Alitalia therefore support the Commission’s argument that the resale price for aircraft in insolvency cases does not necessarily lead to significant reductions. The examples cited by Alitalia do not, in any event, support its argument in favour of a discount of between 25 and 45% (or an average of 35%).
317. Finally, the Commission correctly stated that the value of the fleet to be taken into account is the resale price that prevailed at the time of the 1997 decision.
318. Alitalia has therefore failed to demonstrate that, by applying a 20% discount to the wholesale resale price for aircraft indicated in industry guides in order to assess the value of its fleet, the Commission made a manifest error of assessment.
319. Fourthly, the Commission also criticises the Italian authorities for having overestimated the insolvency costs, referred to in recital 20 in the preamble to the contested decision. Moreover, the report of the Commission’s consultants of 18 June 1997, to which it refers, states as follows:
‘Alitalia determined the liquidation costs (essentially the compensation of the official receiver and the expenses he [is] supposed to [incur]) as a percentage (10%) of the realised assets. According to the official professional fees and to our experience, the mentioned amount appears too high.’
320. First of all, it should be pointed out that, contrary to Alitalia’s assertions, in the reasons given for the insolvency costs, neither the Commission nor its consultants confined themselves to referring to their personal experience but also indicated the professional fee scales prevailing at the relevant time.
321. It is apparent from the defence that the calculation of the insolvency costs is essentially based on those professional fee scales and that very little weight is attached to personal experience. In fact, the Commission used the official fee scales of the professional association of expert accountants for the external liquidator and those applying under Ministerial Decree No 570 of 20 July 1992 for the trustee in bankruptcy and the fee scales for engineers and architects for the expert, which it applied to the total assets in the estimated insolvency statements of 31 March 1996, provided by Alitalia. In that calculation, the Commission used the maximum rates applicable for the liquidator, the trustee in bankruptcy and the expert. Alitalia was thus in possession of the information necessary to challenge the Commission’s evaluation of the insolvency costs. It cannot therefore claim that no adequate reasons were given in that regard.
322. Furthermore, Alitalia did not contest the use of the fee scales of the Italian professional associations. It maintains that the insolvency costs should not be confined to the calculation carried out by the Commission but should take account of the time required to conclude the liquidation procedure and the experience acquired in that field by IRI within its group.
323. As regards whether the time factor should be taken into account, while it is true that a procedure of that nature can take six years, the insolvency costs cannot be said to be evenly spread out throughout that period, with the realisation of the assets taking place only at the end of that period.
324. In any event, Alitalia has failed to explain in what way or to what extent the time factor is relevant for the purpose of the 10% insolvency costs it applies. In fact, in the reply, Alitalia recalculated all the insolvency costs by discounting the debts which, in its view, were recoverable. Consequently, in addition to the fact that that new estimate of the insolvency costs must be rejected as it was raised for the first time at the reply stage, it does not deal specifically with the costs of the liquidation.
325. As regards the examples put forward by Alitalia in referring to the experience acquired by IRI within its group, the Commission, unchallenged by Alitalia, submits that those examples relate to voluntary liquidation, not bankruptcy. The figures in question therefore have no significance.
326. In any event, Alitalia does not give any precise indication as to the method or the calculations used which led it to assess the insolvency costs at 10% of the assets. Nor has it adduced any evidence capable of establishing that the Commission made a manifest error of assessment in its evaluation of the insolvency costs.
327. It follows from all the above considerations that the Commission did not make a manifest error of assessment in evaluating the insolvency costs at ITL 750 billion.
b) Assessment of the internal rate on the basis of the final version of the restructuring plan
Arguments of the parties
328. Alitalia submits that by stating, in recital 27 in the preamble to the contested decision, that the amendments to the plan in June 1997 had very little impact on the main results of the plan and on the expected share dividends, the Commission totally fails to have regard to the fact that the setting-up of the low‑cost company, Alitalia Team, had been accelerated and the main projects for the discontinuity and optimisation of costs were under way, which had the effect of reducing the risk relating to the attainment of the plan’s efficiency targets.
329. As a preliminary point, Alitalia criticises, as constituting an error of assessment, the fact that the Commission used the rate of 79% to represent IRI’s holding in the capital of the company. On the basis of the legislation in force at the time, it argues that that percentage should have been 86%.
330. Alitalia observes that the factors which explain the Commission’s calculation of the internal rate in the contested decision are set out only in recital 22 in the preamble, which, however, provides extremely insubstantial information, from which it is not possible, in any case, fully to understand the operations carried out. The few parameters indicated in the contested decision are the same as those which appear in the table annexed to the rejoinder in the action brought against the 1997 decision.
331. Alitalia claims that the Commission should explain how it arrived at the rate of 26.1% on the basis of both the original and new versions of the plan.
332. In reply, the Commission states that the strategies formulated in the final version of the plan improved its prospects but could not of themselves constitute proof that it would actually be fully achieved. The content of the new plan had only a limited effect on the assessment of the internal rate.
333. According to the Commission, its calculation was based on two alternative parameters, namely that IRI’s holding in Alitalia amounted to 79% or 86%, because of the uncertainty which prevailed in July 1997 as to the applicable tax legislation. However, for the purpose of calculating the internal rate, it used the more favourable of the two (86%) and arrived at the conclusion that the internal rate was, at most, 26.1%.
334. The Commission points out that there is an unfortunate material error in recital 22 in the preamble to the contested decision as to the value of IRI’s holding in Alitalia in December 2000, which was not ITL 4 206 billion or ITL 4 330 billion but ITL 4 179 billion or ITL 4 550 billion. The Commission calculated the internal rate at 25.2% or 26.1% on the basis of the correct figures, however.
335. As regards the method of calculation which enabled it to reach that conclusion, the Commission refers to the explanatory table in the defence.
Findings of the Court
336. With regard to the arguments alleging a failure to take account of the final version of the restructuring plan, reference should be made to paragraphs 124 to 138 above.
337. As to the correction of the material error pointed out by the Commission, reference should be made to paragraph 22 above.
338. The details of the parameters and method used by the Commission in calculating the internal rate will be examined in connection with the next part of the plea now under consideration (paragraphs 352 to 361 below).
339. Alitalia’s complaint that the rate of 79% rather than 86% was used to represent IRI’s participation in Alitalia capital is not convincing. It is apparent from recital 23 in the preamble to the contested decision that the internal rate is 25.2% or 26.1% according to which of the two hypotheses is taken into account and not on the basis of the figure of 79% alone. Accordingly, the rate of 86% is in any event taken into account by the Commission in the contested decision. In those circumstances, even if the higher figure resulting from the application of the rate of 86% is taken, the internal rate remains lower than the minimum rate.
340. Finally, in so far as Alitalia’s arguments seek to rely on an absence of reasons or inadequate reasoning, the Court has already held that Alitalia cannot rely on a failure to state reasons as regards the calculation of the internal rate (see paragraph 66 above). As to the substance, it is possible to understand, on the basis of recitals 19 to 23 in the preamble to the contested decision, the method and the basic data used by the Commission to calculate the internal rate. The first two reports of the Commission’s consultants, which formed an integral part of the 1997 decision and to which the contested decision refers, provide the details.
341. Moreover, the Alitalia I
judgment (paragraph 163) referred to the fact that the Commission asserted in its rejoinder that the internal rate, recalculated on the basis of the final version of the plan, is no more than 26.1%, even including the insolvency costs. The Court referred in that connection to the rejoinder and to an annex to the rejoinder lodged in the proceedings in Case T‑296/97. Alitalia confirms in the application in the present proceedings that it had access to that document and annexes it to the application.
342. Furthermore, in response to the arguments put forward by Alitalia in the application, the Commission provides still further additional information on the parameters which it used to calculate the internal rate. It follows that Alitalia cannot claim that it does not have available to it the information necessary to challenge the Commission’s determination of the internal rate.
c) The objection that some of the parameters used by the Commission are incorrect
Arguments of the parties
343. In the first place, on the assumption that the calculation of the internal rate on which the contested decision is based is the same as that annexed by the Commission to its rejoinder in Case T‑296/97, Alitalia submits that the calculation of the value of the company is flawed, since it takes account of the gross operating margin (‘GOM’) indicated in the penultimate version of the plan and not that in the final version, namely ITL 1 485 billion.
344. In the second place, Alitalia contends that, in calculating the instalments of the capital injection anticipated for 1996 and 1997, the Commission was not entitled to use the risk-free rate of 6.6%. The calculation of the internal rate should not provide for cash flow to be discounted but should envisage that it will be reinvested at the internal rate. To proceed on the assumption of risk-free discounting amounts to contending that the investor is under a legal obligation to pay over the capital injection in any event, for contractual reasons, and that the investor could be relied on to be able to make the payment to an extent that makes him comparable to a central bank in a country with a sound economy. In the present case, however, IRI was not obliged to pay the capital regardless of how the investment developed. Moreover, Alitalia states that, as an undertaking, IRI’s cost of debt capital was higher than the risk‑free rate.
345. In the third place, Alitalia submits that the plan made provision for contingency costs, representing 30% of the income, in order to provide for any delays in implementing the plan. However, it considers that the calculation of the cash flow for the reference year should not include such amounts, since the plans had progressed beyond the stage those provisions were intended to cover. There is a contradiction in the Commission’s reasoning which, on the one hand, does not reduce the expected rate of return, even in the light of the final version of the plan which contains important contingency provisions, and persists in setting it at 30%, and, on the other hand, refuses to take account, in calculating the value of Alitalia, of the fact that contingency provisions should be reduced over time.
346. In the fourth place, Alitalia contends that the growth rate of 4.5% for the long-term cash flow used by the Commission operates to the disadvantage of the final value of the company on 31 December 2000. The Commission arrived at that rate by using, in particular, two key parameters, namely the yield variation and the air transport multiplier, the values for which are lower than those laid down in external sources. The Commission failed to take account of the positive effect which Malpensa airport would have on Alitalia traffic. Alitalia maintains that growth in the air transport sector has not yet reached its peak in Europe. It argues that, even if the situation in the United States were taken as a reference, the growth forecast for passenger traffic in the North American market is in the region of 6.6%. According to Alitalia, it was therefore reasonable to anticipate nominal growth of 6.5%, that is, real growth of 3.9%, during the first five years, and then for those figures to stabilise at, respectively, 4.5% and 1.95%.
347. According to Alitalia, by simply correcting the last three factors, the internal rate rises to 42.3%, even if the insolvency costs are maintained at ITL 750 billion.
348. The Commission maintains that the value of the company was based on a GOM of ITL 1 485 billion. It sets out in the defence the calculations which led it to assess the internal rate at 26.1%.
349. It submits that the use of the method of discounting future aid instalments at the risk‑free rate of 6.6% is justified by the very nature of cash flows. The increase in equity capital to which IRI had already subscribed represented a cost for Alitalia, the nature of which was totally unambiguous and for which the terms of payment could be considered only in terms of ‘costs-opportunity’. Moreover, Alitalia’s claim that it would reduce the remaining capital instalments to 61.9% does not represent an accurate evaluation of the investment project because it would attribute to the payments remaining to be made by IRI a much lower value than they had in reality.
350. As for the contingency measures, the Commission states that, in the final version of the plan, provision was made for ITL 47 billion, which, when compared with the GOM of ITL 1 485 billion, gives them a limited effect of 3.2%. Moreover, it states that provision should have been made for a contingency, equally for a normal year, on account of the ambitious nature of the recovery plan, the high number of projects, the precarious position which the company was in and the general trends in the sector. Alitalia’s argument is tantamount to claiming that it would have met all its objectives in 2000 and therefore no contingencies would have been necessary.
351. The Commission also maintains that prudence is required in setting the cash flow growth rate. The European aviation sector is approaching maturity so that a significant increase in growth can no longer be anticipated. According to some writers, the growth factor, or ‘factor G’, is simply the anticipated rate of inflation. In the particular case of Alitalia, the application of the Fischer equation, taking into account the effects of inflation, estimated at 2.5%, gives a real growth rate of 1.95%. The Commission also refers to Guatri’s treatise on the valuation of companies, according to which it emerges from a large body of international data, in particular from the United States, that factor G is generally between 0 and 5%, values between 1 and 3% being the most common. The Commission also points out an error in the formula used by Alitalia to calculate the final value in that it forgot to multiply the numerator by (1 + G), in accordance with the Gordon formula.
Findings of the Court
352. First of all, as regards the GOM, it is clear that the calculations which led the Commission to set the internal rate at 26.1%, the percentage figure which appears in the defence, do indeed take account of the figure of ITL 1 485 billion, which is the figure in the final version of the restructuring plan. The Commission also produces in the rejoinder calculations from which it is apparent that, if it were based on the GOM of the penultimate version of the plan, that is, ITL 1 462 billion, the internal rate would be 24.6%. Alitalia is therefore incorrect in claiming that the wrong GOM was taken into account.
353. Secondly, as regards the application of the risk‑free rate of 6.6% in the calculation for discounting the future aid instalments, at the time in question IRI had already subscribed to an increase in Alitalia capital and did so regardless of whether the situation had a positive or negative outcome and the results of its investment. For Alitalia, no uncertainty therefore attached to that capital injection. Since great reliance could be placed on the investor to make the payment, cash flow between IRI and Alitalia was not comparable to other cash flows which were subject to uncertainty as to whether the restructuring plan would be accomplished. In such circumstances, the application of the disputed risk‑free rate is justified. Consequently, the Commission did not make a manifest error of assessment in using the risk‑free rate for the purpose of calculating the discount on the instalments of capital from IRI.
354. Thirdly, with regard to Alitalia’s arguments concerning contingency provisions, it refers, essentially, first of all, to the need for account to be taken of the progress of the plan and, secondly, to the dual use made of this, since that risk was also taken into account in calculating the minimum rate. As to the first of those factors, it should be recalled that, in order to assess the internal rate, the Commission had to base its decision on the information available to it at the time when the 1997 decision was adopted (see paragraph 137 above). It could not therefore take account of the way in which the plan subsequently developed or of any subsequent reduction of risk, even if there had been such a reduction. As to the second factor, the fact that the general risk represented by the investment for a private investor is taken into account in calculating the minimum rate cannot, of itself, preclude the inclusion in the calculation of the internal rate of contingencies which may be justified in the circumstances. Given the context in which the operation took place and, in particular, the company’s debt, the scale of the restructuring plan and the trends in the sector in 1997, the Commission did not make a manifest error of assessment in making provision for ITL 47 billion by way of contingencies.
355. Fourthly, Alitalia’s challenge of the cash flow growth rate is not convincing either. In support of its contention that a growth rate of 6.5% can reasonably be anticipated (or real growth of 3.9%), Alitalia simply relies on the 1996 annual report of the International Air Transport Association (IATA) – which it does not produce – according to which annual passenger traffic growth of 6.6% is forecast for the North American market, and the 2001 report – which it does not produce either – according to which the growth in turnover for American airlines between 1996 and 2000 was 3.7% per annum. Alitalia’s challenge of the yield variation and the air transport multiplier applied by the Commission is based on a study carried out by Boeing.
356. In the report of 18 June 1997, the Commission’s consultants examined the values taken into account by Alitalia for those two factors and explained, for each of them, their choice:
‘On the basis of our analysis, we determined the GNP multiplier in 1.4. This value is consistent with the US Dept of Transportation analysis on the US market for the period 1980-1995.
The most important reasons behind our decision are the following:
– higher values (UBS, Boeing) refer to the world-wide market;
– Alitalia’s most relevant markets (domestic and international) can be considered, after the US one, amongst the more mature, with lower prospective growth rates;
– as a consequence, in the long term, the US market multiplier (which has recently reduced) seems to be more realistic.
With reference to the real yield growth rate adopted by Alitalia on the basis of the Boeing studies, some considerations can be made:
– in the long term, a study from McDonnell Douglas foresees an average decline of 1.47%;
– both the mentioned studies (McDonnell Douglas, Boeing) were prepared by aircraft manufacturers; therefore they can be considered optimistic;
– the estimates were prepared referring to the world-wide market, while the Alitalia market has to be considered much more competitive than the average;
– AEA historical data appear to be lower than those from Boeing and the forecasts for the period 1996-2000 are more prudent.
On the basis of the above and our experience, it appears that the negative trend of the yield could be worse.’
357. Moreover, the Commission supports its choice of a real growth rate of 1.95% by referring to Guatri’s treatise on the valuation of companies, according to which it emerges from a large body of international data, in particular from the United States, that the growth factor is generally between 0 and 5%. The Commission then reproduces a table from the same source, which shows that the average values are between 1 and 3%. The Commission’s choice cannot therefore be regarded as extreme.
358. It was undoubtedly difficult to assess, on the basis of the information available in July 1997, the effect of the development of Malpensa airport on Alitalia’s growth rate. The prudence which the Commission displayed in those circumstances cannot constitute a manifest error of assessment (see paragraphs 260 to 264 above). Furthermore, the opening-up of the Italian aviation market to competition gave rise to a number of uncertainties such as to cast doubt on whether Alitalia would grow at a greater rate than the rest of the sector. At the very least, such a hypothesis could not be taken for granted.
359. In view of all the foregoing considerations and the wide discretion enjoyed by the Commission in this complex economic field, the Commission did not make a manifest error of assessment in setting the cash flow growth rate at 4.5% (or real growth of 1.95%).
360. Finally, it should be observed that Alitalia appears to acknowledge in its reply the error pointed out by the Commission in the formula it used to calculate the final value.
361. The above analysis has not therefore disclosed any manifest error of assessment in the parameters used by the Commission to calculate the internal rate.
d) The effect of the conversion of loans into capital on the calculation of the internal rate
Arguments of the parties
362. According to Alitalia, as the majority of the capital injection of ITL 1 000 billion was used to repay to IRI loans totalling ITL 900 billion and must be regarded as a conversion of loans into capital, the capital increase which IRI envisaged providing was in reality only ITL 1 850 billion.
363. If that amount is taken into account, the internal rate becomes 28.7%. If the GOM of ITL 1 462 billion incorrectly applied by the Commission is rectified, the internal rate rises to 30.1%. Moreover, the minimum rate should have been revised downwards, since the provision of funds was limited.
364. The Commission replies that, in any event, the internal rate would still be lower than the minimum rate, since it would be 28.7%. The Commission disputes Alitalia’s argument that, if the conversion operation had not been effected, the whole of the capital would have been lost in the insolvency procedure. Indeed, according to the Commission’s projections, the conversion would have made it possible to pay unsecured creditors at the rate of 30%.
365. The Commission also maintains that the injection of ITL 2 750 billion capital into Alitalia and the repayment of the Cofiri loans were two separate transactions. In the present case, the total amount of the investment is ITL 2 750 billion, consisting of ITL 1 850 billion in the form of a capital contribution and ITL 900 billion in the form of a conversion of loans into capital.
Findings of the Court
366. In the Alitalia I judgment (paragraph 145), the Court stated that ‘[i]t is not disputed that the main part of the capital injection of ITL 1 000 billion made in 1996 was used to repay to IRI loans amounting to approximately ITL 900 billion and that that operation can be regarded as a conversion of loans into capital’.
367. However, while the parties agree on classifying the operation as a conversion of loans into capital, they disagree on the effects this has. According to Alitalia, the amount of loans repaid must simply be deducted from the amount of IRI’s anticipated capital injection.
368. It cannot be disputed that the repayment of the loans and the contested capital injection constitute two separate operations, which cannot therefore be treated as equivalent, even though, from an arithmetical point of view, the sum injected is roughly the same as the sum repaid. The conversion of loans into capital changes the nature of the asset held and the effects which flow from this for the holder. Loans bear interest at a given rate and over a given period, whereas dividend yields are uncertain. Moreover, the order in which creditors’ claims are satisfied is different in the event of insolvency, precedence being given to other creditors over shareholders. It follows that, from a private investor’s point of view, the uncertainties associated with the two operations are different. Even though the main part of the IRI capital injection of ITL 1 000 billion in 1996 was used to repay the Cofiri loans totalling ITL 900 billion, that injection still represents an investment for IRI and must be taken into account as such in the determination of the internal rate. Accordingly, the Commission did not make a manifest error of assessment by not simply deducting the repaid loans from the total amount of the investment, namely ITL 2 750 billion.
369. The question whether all the capital would have been lost, had the loans not been converted into capital, is irrelevant for the purpose of assessing the effect of that conversion of loans into capital on the calculation of the internal rate as carried out by the Commission. For the sake of completeness, it should be added that, in any event, the internal rate calculated by Alitalia on the basis of the figure of ITL 1 850 billion, that is to say, by deducting the amount of the conversion of loans into capital, is still lower than the minimum rate.
370. On the basis of all the foregoing considerations, it is established that the Commission did not make a manifest error of assessment in the determination of the internal rate.
F – The plea alleging infringement of Article 87(3) EC
371. In connection with this plea, Alitalia criticises the fact that the conditions laid down in the 1997 decision before it was annulled by the Court were repeated in the contested decision without being reviewed. It considers those conditions to be disproportionate, discriminatory, unlawful and unjustified.
372. The Commission contends that this plea is inadmissible on the ground that Alitalia has no interest in bringing proceedings. It is therefore necessary to begin by considering whether this plea is admissible.
1. Admissibility
a) Arguments of the parties
373. The Commission states that the conditions in question were not imposed in the contested decision or in the 1997 decision but are, in reality, undertakings given by the Italian authorities. It follows that, in its view, those undertakings are not extrinsic to the project on which it gave a decision as regards compatibility but, rather, an integral part of the project. Those undertakings cannot be attributed to the Commission but to the Italian authorities.
374. In those circumstances, it follows, in the Commission’s view, from the judgment in Case T‑212/00 Nuove Industrie Molisane
v Commission
[2002] ECR II‑347 that the operative part of the contested decision does not adversely affect the interests of Alitalia and it therefore has no interest in bringing proceedings. Similar reasoning was followed by Advocate General Mischo in his Opinion in Case C‑242/00 Germany v Commission
[2002] ECR I‑5603, I‑5605.
375. In the rejoinder, the Commission also calls into question the ‘effectiveness’ of the complaints concerning those conditions. It points out that the contested decision was adopted in 2001, approximately seven months after the implementation of the restructuring plan, set for 31 December 2000, had been completed, which meant that the obligations Alitalia was under by virtue of the contested conditions ceased to have effect at the same time. Any annulment of those conditions would therefore confer no benefit on Alitalia, either economically or from a legal standpoint.
376. Alitalia considers that neither the judgment nor the submissions relied on by the Commission are capable of supporting the latter’s argument. In fact, in Nuove Industrie Molisane
v Commission, the Court did not in any way rule out the possibility for the undertaking concerned to challenge the parts of a decision adversely affecting it if they were the result of concessions made by the national authorities to the Commission.
b) Findings of the Court
377. It is apparent from Article 1 of the contested decision that the aid in question was declared compatible with the common market ‘subject to compliance with the obligations and conditions laid down in Articles 1, 2 and 3 of [the 1997] decision, as quoted in recital 1 of this Decision’.
378. Moreover, it is apparent from the description of the progress of the administrative procedure in the Alitalia I judgment (paragraphs 13 to 35) that the Italian authorities, in their letter of 26 June 1997, undertook to comply with a number of conditions. However, it is also apparent from that judgment (paragraphs 29 and 30) that the Commission had initially informed Alitalia and the Italian authorities that it was not in a position to adopt a positive decision on the matter on the basis of the criterion of the private investor operating on market principles. Subsequently, it sent to Alitalia an informal document containing, on the one hand, possible changes to improve the restructuring plan and, on the other hand, an indication of the conditions to which authorisation of State aid to Alitalia would be subject.
379. Furthermore, in the rejoinder, the Commission states that, in exceptional cases, the aviation notice (paragraph 38) provides that ‘the Commission will not be able to authorise restructuring aid unless under very stringent conditions’. It explains that it has consistently applied those rules by making all aid authorised previously in respect of other companies subject to conditions comparable to those imposed upon Alitalia. The Commission adds that it follows that, if it had failed to make the aid to Alitalia subject to the conditions which are being criticised in these proceedings, the contested decision would be unlawful because it would infringe Article 87 EC, the aviation notice and general principles of law, such as the principle of equal treatment.
380. The Commission cannot therefore claim that those conditions are not attributable to it but simply the result of undertakings given by the Italian authorities. Those conditions were undoubtedly discussed by the Commission, Alitalia and the Italian authorities and those authorities undertook to comply with them. The fact remains, however, that the Commission has exclusive jurisdiction to find that aid is incompatible with the common market (Case 78/76 Steinike & Weinlig [1977] ECR 595, paragraph 9, and Case T‑73/98 Prayon-Rupel
v Commission
[2001] ECR II‑867, paragraph 40). In exercising that exclusive jurisdiction, the Commission could – and indeed should, as it states – make the decision declaring the aid compatible subject to certain conditions.
381. In those circumstances, the plea against the conditions which made the aid in question subject to compatibility with the common market in the contested decision cannot be regarded as inadmissible on the ground that those conditions are not attributable to the Commission.
382. The case‑law cited by the Commission cannot cast doubt on that conclusion.
383. While it is true that in its judgment in Nuove Industrie Molisane
v Commission the Court declared the action inadmissible, it did not, to that end, base its decision on the argument put forward by the Commission that the choice of the contested adjustment coefficient had been made directly by the Italian authorities and not the Commission itself. That judgment cannot therefore be interpreted as ruling out the possibility for the undertaking receiving the aid to challenge, before the Community judicature, the conditions to which a decision adversely affecting it is made subject, where those conditions have been the subject of negotiations between the Commission and the national authorities and even of undertakings given by those authorities.
384. Moreover, contrary to what the Commission contends, the judgment in Nuove Industrie Molisane v Commission
is not based on the fact that a decision authorising aid is not capable of adversely affecting the rights of the Member State or the undertaking receiving the aid. On the contrary, in that case, the Court considered that the fact alone that the contested decision declared the notified aid compatible with the common market and did not therefore, in principle, adversely affect the applicant in that case did not relieve it of its duty to examine whether the Commission’s assessment had binding legal effects such as to affect that applicant’s interests. The Court cited in that regard, by analogy, the judgment in Joined Cases T‑125/97 and T‑127/97 Coca-Cola v Commission
[2000] ECR II‑1733, paragraph 79.
385. As regards the judgment in Case C-242/00 Germany v Commission, unlike the present case, the dispute was between the Member State and the Commission. The Federal Republic of Germany’s action was held to be inadmissible because the Court of Justice found that the contested decision did not of itself have a scope unfavourable to the applicant Member State and thus did not adversely affect it. However, in the present case, the Italian authorities cannot be regarded as having themselves requested that the conditions to which the declaration of compatibility was made subject in the contested decision should be imposed upon them and that decision cannot therefore be regarded as not having a scope unfavourable to the Italian Republic. Those considerations apply a fortiori to Alitalia, which was, moreover, adversely affected by the contested decision, as stated in paragraph 38 above.
386. As regards the ‘effectiveness’ of the plea relating to the conditions in question, it should be noted, in the first place, that, in its principal heads of claim, Alitalia bases its plea seeking annulment of the contested decision in its entirety on the claim that those conditions are unlawful and, as is apparent from paragraphs 35 to 47 above, it maintains an interest in seeking that annulment. Alitalia therefore maintains an interest in demonstrating that the conditions at issue are unlawful.
387. In the second place, an act which has already been carried out is still capable of having legal consequences. The act could have produced legal effects during the period when it was in force and its effects are not necessarily eradicated by reason of its having been carried out (see, to that effect, Case T‑102/96 Gencor
v Commission
[1999] ECR II‑753, paragraph 41). At the very least, conditions imposing, inter alia, a limitation on capacity available and the disposal of shares affected Alitalia’s rights during the implementation of the restructuring plan. In addition, the imposition of certain conditions, such as the disposal of shares, had a lasting effect on Alitalia’s situation which continued after the implementation of the restructuring plan was completed.
388. Accordingly, Alitalia has an interest in challenging the conditions in question.
2. Substance
389. Alitalia makes a number of complaints against the conditions laid down in the contested decision. Some are of a general nature while others are specific to the conditions in question. It is therefore necessary to examine them separately.
a) Complaints of a general nature against the conditions laid down in the contested decision
Arguments of the parties
390. Alitalia submits that, in the contested decision, the Commission simply repeats the conditions set out in the 1997 decision. Since the 1997 decision was annulled by the Court, those conditions have no legal basis. Alitalia states that it does not challenge the conditions as imposed in the 1997 decision but contends that it is impossible for the Commission to reimpose the same conditions in the context of the contested decision without providing adequate reasons for so doing.
391. Alitalia also claims that the Commission should have reviewed the contested conditions in the light of the final version of the plan and the increased viability it engendered. That obligation arises because the Court annulled the 1997 decision on the ground, inter alia, that the Commission had not adopted that decision on the basis of the final version of the restructuring plan.
392. Lastly, Alitalia submits that the conditions are, in any event, disproportionate, discriminatory, unlawful and unjustified. Since the restructuring plan satisfied the criteria laid down in the aviation notice, it should have been approved as such without there being any need to impose additional conditions. Those conditions imposed sacrifices and very serious restrictions on the company, contrary to the guidelines (the aviation notice and the Commission communication to the Member States on the application of Articles [87 EC] and [88 EC] and of Article 5 of Commission Directive 80/723/EEC to public undertakings in the manufacturing sector (OJ 1993 C 307, p. 3)), which provide that conditions are to be imposed in only two cases. By imposing those conditions, the Commission greatly discriminated against Alitalia by comparison with other airlines which had recently been the subject of State aid procedures, including, in particular, Air France. Never before had the Commission imposed such a major series of stringent restrictions on the management autonomy of a company. It cannot be claimed that such conditions were a response to any alleged abusive conduct on the part of Alitalia, which should have been the subject of a different procedure.
393. The Commission submits that, in order properly to assess the contested conditions, which were the result of lengthy consideration and three-way meetings among the Italian authorities, Alitalia and the Commission itself, it is necessary to analyse the extremely serious situation which the company was in 1996.
394. As regards the claim that the conditions were unlawful, the Commission states that Alitalia appears to be unaware of the very close connection between the conditions and the plan, the conditions forming the backbone of the plan. In its criticisms, Alitalia seems to have total disregard for the Community interest, whereas, in order for aid to be considered compatible in accordance with Article 87(3)(c) EC and paragraph 41 of the aviation notice, it is necessary for that interest to be satisfied.
395. As regards the claim that the conditions at issue are disproportionate, the Commission maintains that, apart from conditions 4 and 8, which are specific to the case of Alitalia, the majority of the conditions are customary and imposed in all authorisations for restructuring aid. Only three of them, that is, conditions 3, 5 and 7, had a real economic and financial impact, which does not in any way entail the adverse effects that Alitalia suggests it has without adducing any evidence whatsoever. In that context, reference to disproportion of any kind is totally unwarranted.
396. With regard to the claim that the conditions should have been reviewed following the amendments to the plan, the Commission states that Alitalia fails to specify which conditions or the practical effects such a review was supposed to have. Moreover, those conditions were finalised after the final amendments were made to the plan and took account of them. Finally, since the rate of return in the plan rose from 25.7% to 26.1%, it was not possible to conclude that this would have any major impact on the substance of the conditions.
397. As regards the alleged failure to state adequate reasons, the Commission refers to recital 36 in the preamble to the contested decision.
398. With regard to the alleged discrimination which Alitalia suffered, in particular by comparison with Air France, the Commission states that Alitalia appears to have overlooked the fact that the Commission established the criteria for certain conditions by reference to Commission Decision 94/653/EC of 27 July 1994 concerning the notified capital increase of Air France (OJ 1994 L 254, p. 73) (‘the Air France decision’) at the express request of the Italian authorities and, indeed, in accordance with the principle of equal treatment.
Findings of the Court
399. First of all, as regards the claim that the conditions at issue have no legal basis, that basis is to be found, first, in the notification by the Italian authorities of the restructuring plan and, secondly, in Article 7(4) of Regulation No 659/1999. The latter provision states that:
‘The Commission may attach to a positive decision conditions subject to which an aid may be considered compatible with the common market and may lay down obligations to enable compliance with the decision to be monitored.’
400. The conditions in question cannot therefore be regarded as lacking in legal basis.
401. In the second place, with regard to the alleged obligation to review the conditions in the light of the final version of the plan, it is apparent from the Alitalia I judgment (paragraph 33) that the Italian authorities’ undertakings, which are set out in their letter of 26 June 1997 (annexed to the defence) and correspond exactly with the conditions in the contested decision, were given to the Commission by those authorities at the same time as the final version of the restructuring plan.
402. It follows from the fact that the final version of the plan and the Italian authorities’ undertakings were delivered at the same time and that, accordingly, the conditions in the contested decision are the same as those the Italian authorities undertook to comply with, that there is no need for those conditions to be reviewed in order for them to be adapted to the final version of the plan.
403. For the sake of completeness on this point, it should be observed that not all the conditions in question were directed at restoring the undertaking’s profitability. Many of the conditions sought to prevent distortions of competition, so that the increase in the internal rate should not necessarily have led to the conditions being adjusted. However, Alitalia has failed to put forward any specific argument dealing with that fact.
404. In the third place, as regards the argument that the conditions are unlawful, the Commission may in principle make a decision authorising aid under Article 87(3)(c) EC subject to conditions for ensuring that the authorised aid does not alter trading conditions to an extent contrary to the general interest (Joined Cases T‑244/93 and T‑486/93 TWD v Commission
[1995] ECR II‑2265, paragraph 55, and British Airways and Others
v Commission, paragraph 288).
405. Moreover, according to established case‑law, the Commission may lay down for itself guidelines for the exercise of its discretionary powers by way of documents such as the guidelines in question, provided that they contain directions on the approach to be followed by that institution and do not depart from the Treaty rules (see, to that effect, Case T‑17/03 Schmitz-Gotha Fahrzeugwerke
v Commission
[2006] ECR II‑1139, paragraph 42).
406. The aviation notice, which is referred to in recital 15 in the preamble to the contested decision, requires restructuring aid to be part of a programme aiming to restore the health of the airline so that it can, within a reasonable period, be expected to operate viably. The Commission can authorise restructuring aid only in exceptional cases and under very stringent conditions (paragraph 38(1) and (2) and paragraph 41).
407. It follows that, in a decision adopted on the basis of Article 87(3)(c) EC, such as the contested decision, the Commission can impose any condition it deems necessary to ensure that the undertaking receiving the aid will be viable following its restructuring.
408. On the other hand, none of the provisions referred to above requires all the conditions imposed in that context to be necessary for ensuring that the undertaking is restored to viability. On the contrary, it is apparent from the aviation notice that the Commission must also endeavour to limit, as far as reasonably practicable, distortions of competition (paragraph 41) and to ensure that the government refrains from interfering in the management of the company for reasons other than those stemming from its ownership rights (paragraph 38(5)) and that the aid is used exclusively for the purposes of the restructuring programme and is not disproportionate to its needs (paragraph 38(6)).
409. Contrary to what Alitalia states, paragraph 38(3) of the aviation notice does not provide that the Commission can impose conditions only in two cases, namely if it is dictated by the need to restore financial viability or there is overcapacity on the market. In fact, that paragraph is worded as follows:
‘If restoration to financial viability and/or the situation of the market require capacity reductions, this must be included in the programme.’
410. In so far as Alitalia appears to rely on the Community guidelines on State aid for rescuing and restructuring firms in difficulty of 9 October 1999 (OJ 1999 C 288, p. 2), those guidelines are not applicable in the present case because the restructuring plan was communicated to the Commission by the Italian authorities by letter of 26 July 1996. For the sake of completeness, those guidelines do not support Alitalia’s argument. Point 3.2.2(c)(i) of the Community guidelines on State aid for rescuing and restructuring firms in difficulty provides that ‘where there is a Community-wide or EEA‑wide structural excess of production capacity in a market served by the recipient, the restructuring plan must make a contribution, in proportion to the amount of aid received and its impact on that market, to the improvement of market conditions by irreversibly reducing production capacity’. Point 3.2.2(c)(ii) of the guidelines states that, ‘where, on the other hand, there is no Community‑wide or EEA‑wide structural excess of production capacity in a market served by the recipient, the Commission will nevertheless examine whether compensatory measures should be required’.
411. Accordingly, the Commission can impose conditions even where there is no structural excess of production capacity. Contrary to what Alitalia contends, the Commission was therefore not required to demonstrate that there was a structural excess of production capacity in order to be able to make authorisation of the aid subject to conditions.
412. In the fourth place, as regards the general argument that the conditions in question are disproportionate, the simple fact that the rate of return improved in the final version of the plan cannot mean that the Commission was required to accept it unconditionally. As already pointed out, the Commission must also endeavour to limit any distortions of competition to which the plan may give rise. It can therefore, to that end, make authorisation of the plan subject to certain conditions.
413. Moreover, Alitalia’s argument is of a general nature and is not supported by any concrete evidence. First, Alitalia fails to establish in what way the conditions imposed are disproportionate vis-à-vis its situation. Secondly, it cannot be presumed that its situation was comparable to that of the companies referred to above which had previously been the subject of Commission decisions. Furthermore, even if its management autonomy were very much reduced, that would not suffice to establish that the conditions imposed upon it were disproportionate.
414. In the fifth place, it will be appropriate to return to the argument alleging that conditions were imposed which discriminated against Alitalia in comparison with its competitors, in particular Air France, in the examination of the complaints that are specific to certain conditions. However, at this stage, it should be pointed out, in general terms, that the Court rejected a similar complaint in its judgment in British Airways and Others
v Commission
(paragraph 443). In that judgment, the Court held that, when the restructuring plan was considered in that light, the Commission was clearly not under an obligation to provide specific explanations comparing Air France’s plan and those of other airlines such as Lufthansa and British Airways. Those plans, in fact, related to other companies that were restructured during a different period. Consequently, such a comparison is not a sufficient basis for discrimination to be established, bearing in mind the context, which will vary.
415. In the sixth place, as regards the adequacy of the reasons given for those conditions and the argument that it was not possible to reimpose them in the contested decision, reference should be made, first of all, to paragraphs 74 to 77 above.
416. Secondly, in order to adopt and state reasons for the contested decision, the Commission was obliged to place itself in the context of the period during which the financial support measures were taken and thus to have recourse to the information that was available to it at the time when the 1997 decision was adopted and it could not, therefore, take account of later circumstances (see paragraph 137 above).
417. In addition, the Commission concluded in the contested decision that the minimum rate was greater than the internal rate, in spite of the fact that the latter had increased. The final conclusion, namely that the operation in question was classified as State aid, is thus the same as that of the analysis carried out in the 1997 decision. The fact that the capital injection was classified as State aid means that an assessment had to be carried out as to its compatibility with the common market and the conditions in question are linked to that issue of compatibility. Since the conditions are not directly linked to the internal rate, the fact that that rate increased did not oblige the Commission to amend them and provide appropriate reasons for so doing.
418. All the general complaints made by Alitalia concerning the conditions in the contested decision must therefore be rejected.
b) Specific complaints made against certain conditions in the contested decision
419. Alitalia specifically challenges conditions 2 to 8 in the contested decision. It is appropriate to examine each of them separately.
Condition 2: Prohibition of new aid
– Arguments of the parties
420. According to Alitalia, the condition requiring the Italian authorities to undertake ‘not to grant Alitalia any further capital payment or any other aid in any form, including loan guarantees’, was, due to its general nature, arbitrary and excessively onerous for it, especially at a time when the entire sector in question was experiencing an extremely serious crisis.
421. That condition is contrary to the logic underlying the aviation notice. In that notice, the Commission simply stated that restructuring aid could, in principle, be granted only once. It stated that no additional aid should be necessary for the duration of the programme but ‘would leave the door open as to the future’.
422. Lastly, Alitalia claims that it is incorrect to state that that condition is imposed in all decisions authorising restructuring aid for competing airlines. In its decision of 22 July 1992 concerning a capital injection and complete restructuring and investment programme for the company Iberia, one of the conditions imposed by the Commission for the authorisation of the aid was that the aid should be ‘the last during the strategic plan’.
423. The Commission is of the view that condition 2 is fully justified and cannot be classified as arbitrary or excessively onerous. That condition appears in all decisions authorising restructuring aid for airlines.
424. The Commission states that the prohibition of aid derives from Article 87(1) EC and, obviously, an individual decision cannot amend the Treaty. In the Commission’s view, it is therefore in that context that the condition imposed must be interpreted. That condition is necessarily limited in scope, since it was applicable only during the restructuring of Alitalia and did not preclude the grant of horizontal aid for investments that are different and unconnected to those covered by the restructuring plan, subject to compliance with Article 87(3) EC.
– Findings of the Court
425. The parties disagree as to the scope of the prohibition of new aid in the contested decision. Alitalia regards it as a general and arbitrary condition which is unlimited time.
426. The general prohibition in principle of State aid stems from Article 87(1) EC and not the contested decision. That prohibition does not in any case prevent the Member States from notifying the Commission of new aid projects, pursuant to Article 88(3) EC. Responsible for investigating such projects, the Commission has drawn up guidelines governing its assessment of aid projects of certain types or in certain sectors, including the aviation sector by means of the aviation notice.
427. It is apparent from paragraph 38(2) of the aviation notice that the Commission ‘normally requests the written assurance from the government that the present aid will be the last cash injection from public funds or any other aid, in whatever form, [for the duration of the programme], in conformity with Community law’.
428. Read in the light of those provisions, condition 2 cannot therefore be regarded as being of a general or arbitrary nature.
429. As regards the claim that condition 2 is unlimited in time, subject to the application of Article 87(1) EC, the undertakings given by the Italian authorities and repeated in the contested conditions are, as is apparent from the aviation notice and was confirmed by the Commission in the defence, limited to the duration of the restructuring plan. The scope of condition 2 as such is therefore necessarily limited in time.
430. Alitalia is incorrect in disputing that such a condition is imposed in all other Commission decisions of this kind authorising restructuring aid for airlines by invoking the Commission decision of 22 July 1992 authorising restructuring aid for the company Iberia. As Alitalia itself states in the reply, one of the conditions in that decision was that the aid was to be ‘the last during the strategic plan’. The Commission is therefore correct in stating that, in that decision, while the prohibition is expressed in terms that are slightly different from those in the contested decision, the substance is the same, the condition in both cases being limited to the duration of the restructuring plan (see the preceding paragraph). The sole example put forward by Alitalia cannot therefore alter the fact that such a condition is to be found in all Commission decisions of that kind.
431. Nor has Alitalia attempted to establish that the presence of such a condition was justified in the case of the other companies in question but not in its own case.
432. Condition 2 does not therefore suffer from any of the defects alleged by Alitalia and, consequently, its complaints in that regard must be rejected.
Condition 3: Prohibition on acquiring shareholdings in other air carriers
– Arguments of the parties
433. Alitalia claims that condition 3, which obliges the Italian authorities ‘[to guarantee] that, until 31 December 2000, the aid shall be used by Alitalia solely for the purposes of restructuring the company and not for acquiring new shareholdings in other air carriers’, is disproportionate and discriminatory.
434. Alitalia submits that Commission Decision 94/118/EEC of 21 December 1993 concerning aid to be provided by the Irish Government to the Aer Lingus group (OJ 1994 L 54, p. 30) (‘the Aer Lingus decision’) and Commission Decision 94/696/EC of 7 October 1994 on the aid granted by Greece to Olympic Airways (OJ 1994 L 273, p. 22) (‘the Olympic Airways decision’) simply prohibited those companies from acquiring shareholdings in other Community or EEA airlines. It adds that there is no prohibition of that kind in Commission Decision 91/555/EEC of 24 July 1991 on aid to be granted by the Belgian Government in favour of the Community air carrier Sabena (OJ 1991 L 300, p. 48) (‘the Sabena decision’).
435. Alitalia also maintains that its situation is not comparable to that of Air France, which was clearly more critical and, accordingly, a prohibition was justifiable in the case of that company. It considers that the prohibition in its case is totally disproportionate once it is established that the amount of aid and the aid intensity are appropriate for the purpose of meeting the restructuring needs and guarantee a return that is higher than the average in the sector.
436. Alitalia adds that it is even more apparent that condition 3 is excessive and discriminatory when seen in conjunction with condition 8, which requires Alitalia to dispose of its shareholding in Malév. In that connection, the Commission obliged Air France simply to dispose of its foreign interests within its core business.
437. The Commission contends that conditions 3, 5 and 7, which are the hard core of the reconstruction, must be ‘taken as a whole’, since they are directed at the same objectives, namely to restore Alitalia to viability and competitiveness by 2000 and to limit the distortions of competition inherent in aid. They achieve a balance between the interests of Alitalia and the common interest.
438. The Commission then explains that the breadth of the prohibition on acquiring new shareholdings stems from the liberalisation of the aviation market at EEA level in 1997. In that regard, the Commission refers to the aviation notice.
439. The Commission points out that the Aer Lingus and Olympic Airways decisions relied on by Alitalia pre-date that liberalisation. Furthermore, those companies had an essentially regional sphere of operation and were not, therefore, major players in the global market. That is not the case with Air France. The Air France decision laid down the same prohibition as that imposed on Alitalia in the contested decision, which is justified by the fact that both companies pursue global strategies and are, to an extent, competitors in the same market.
440. Finally, the Commission argues that condition 3 was not an unjustified limitation on the use to be put by Alitalia of its funds but rather the corollary of the obligation upon Alitalia to use that aid only for the purpose of restructuring and not that of its expansion, in accordance with paragraph 38(4) of the aviation notice.
– Findings of the Court
441. It is not in dispute that the Community air transport sector was liberalised in stages and that that programme was completed in 1997. That liberalisation programme was the core element of the aviation notice, as is apparent from its introduction. Under the heading ‘Liberalisation of the Community’s air transport’, the Commission states as follows:
‘1. Community air transport has been characterised by a high level of State intervention and bilateralism.
…
The Council has, however, now completed its liberalisation programme for Community air transport. Therefore, in a situation of increased competition within the Community there is a clear need for a stricter application of State aid rules.
2. The measures on market liberalisation and competition, which are now in force, have fundamentally changed the economic environment of air transport.
…
In the more competitive environment State aids might be of substantially increased strategic importance for governments looking for measures to protect the economic interest of their own airlines. This could lead to a subsidy race which would jeopardise both the common interest and the basic objectives of the liberalisation process.’
442. Moreover, in paragraph 38(2) of the aviation notice, the Commission draws attention to the fact that ‘the full completion of the common aviation market in 1997 will considerably increase competition within the common market’. It adds that, under those circumstances, it ‘will not be able to authorise restructuring aid unless under very stringent conditions’. The Commission even makes that point again at the end of paragraph 41.
443. In paragraph 38(4) of the aviation notice, the Commission states that ‘the programme to be financed by the State aid can only be considered not contrary to the common interest … if it is not expansive; that means that its objective must not be to increase the capacity and the offer of the airline concerned, to the detriment of its direct European competitors’.
444. Lastly, in paragraph 38(6) of the aviation notice, the Commission indicates that the aid ‘must only be used for the purposes of the restructuring programme and must not be disproportionate to its needs’. It concludes that ‘[t]he company must for the period of the restructuring refrain from acquiring shareholdings in other air carriers’.
445. It follows that condition 3 imposed upon Alitalia is one of the specific conditions to which the Commission made its approval of the aid subject, as laid down in the aviation notice, to which the contested decision refers. Those conditions, which must be seen in the context of the liberalisation of the air transport market, were established by the Commission by reference to Article 87(3)(c) EC, which provides that restructuring aid may be compatible with the common market if it does not adversely affect trading conditions to an extent that is contrary to the common interest. The fact that the Commission took account of the liberalisation of trade and the common interest is, therefore, in conformity with Community law.
446. Nor does the fact that condition 3 was applied to it discriminate against Alitalia.
447. It is true that in the Aer Lingus and Olympic Airways decisions, the Commission simply prohibited those companies from acquiring shareholdings in, respectively, any Community or EEA air carrier. However, as the Commission points out, both those decisions pre-date the liberalisation of the market and the adoption of the aviation notice (December 1994). Those considerations are of even greater relevance in the case of the Sabena decision, which, while not imposing a prohibition of that nature, dates back to 1991. Since they do not share the same context, the conditions laid down in those decisions cannot be compared to those imposed in the contested decision.
448. For the sake of completeness, even if it had been necessary to take account of the precedents established prior to the liberalisation of the market and the adoption of the aviation notice, on account of its size and the market it serves, Alitalia is closer to Air France than Aer Lingus or Olympic Airways. In the Air France decision, the Commission made authorisation of the aid subject to a condition with the same scope as that imposed upon Alitalia in the contested decision, namely that ‘during the implementation of the plan, the aid is used exclusively by Air France for the purposes of restructuring the company and not acquire new holdings in other air carriers’.
449. In conclusion, condition 3 cannot be regarded as disproportionate or discriminatory towards Alitalia and the complaints made in that regard must, therefore, be rejected.
Condition 4: Prohibition of preferential treatment for Alitalia
– Arguments of the parties
450. Condition 4 of the contested decision obliged the Italian authorities to put an end to certain preferential treatment which Alitalia enjoyed. According to Alitalia, the legislation applicable to air transport in Italy, in particular Agreement No 4372 of 15 April 1992, as approved by the Decree of 16 April 1992, is totally consistent with the relevant provisions of Community law. Condition 4 is therefore unjustified and misconceived. Moreover, no reasons are given for imposing that condition.
451. In addition, a letter from the Italian Ministry of Transport stated, first of all, that Alitalia had renounced its right of priority, as required under the 1997 decision, that, secondly, Alitalia’s unused traffic rights had been forfeited, and, thirdly, that the objective criteria for allocating the traffic rights withdrawn from Alitalia or made available on another basis were being drawn up.
452. Finally, Alitalia does not accept that a Commission decision adopted on the basis of Articles 87 EC and 88 EC can have an effect on the allocation of traffic rights to or from non‑member countries outside the EEA. It submits that those rights are, in fact, governed by a series of agreements under international law, which fall outside the Commission’s competence.
453. The Commission replies that the prohibition in question has its origins in the general prohibition of discrimination in Article 12 EC, as supplemented by the legislation providing for the liberalisation of the air sector. The Commission could not authorise aid that was contrary to a rule or principle of Community law and, therefore, incompatible with Community law.
454. According to the Commission, Agreement No 4372 conferred upon Alitalia a series of privileges, set out in Article 1(4) of the 1997 decision. It adds that those privileges gave rise to legitimate complaints on the part of the companies which intervened in the procedure, as is evident from Point IV of the 1997 decision. The Commission also refers to Point VI(4) of the 1997 decision, which states that the Italian authorities recognised that preferential treatment had been given to Alitalia as regards traffic rights, slot allocation, ground-handling assistance and access to airport facilities. That favourable treatment continued until January 1998.
– Findings of the Court
455. Pursuant to Article 87(3)(c) EC, the Commission can declare restructuring aid compatible with the common market only where such aid does not adversely affect trading conditions to an extent contrary to the common interest. The Commission was therefore obliged in the circumstances to verify whether that condition had been satisfied, especially as the interested parties, which had submitted observations in the course of the formal investigation which preceded the adoption of the 1997 decision and was then resumed for the purpose of the adoption of the contested decision, had expressly requested that the preferential treatment which Alitalia had enjoyed in a number of areas should cease.
456. When the Commission carried out its investigation prior to the adoption of the 1997 decision, Agreement No 4372 was not compatible with Community law. In fact, in the letter of 26 June 1997, annexed to the defence, the Italian authorities guaranteed that they would ‘i nitiate immediately and complete by 31 December 1998 at the latest the review procedure’ for that agreement. The existence of a ‘de facto review’ of Agreement No 4372 which provided that it was to apply only in so far as it was compatible with Community law could not be regarded as sufficient for the purpose of amending the law and ensuring its application.
457. Alitalia cannot therefore claim that Agreement No 4372 was, from the outset, compatible with Community law or even that the review procedure intended to ensure that it was compatible was completed at the time when the 1997 decision was adopted. Condition 4 was thus necessary in order to ensure that the aid did not adversely affect trading conditions and was compatible with the common market. Consequently, that condition was justified and Alitalia, which was closely involved in the procedure which led to the adoption of the 1997 decision and subsequently the formal investigation which was resumed for the purpose of adopting the contested decision, cannot claim that it was unaware of the reasons for that condition.
458. The Commission cannot rely on the letter of 6 February 1998 to the Commission from the Italian Ministry of Transport, which was reproduced in the Commission communication of 18 September 1998 on the second instalment of restructuring aid for Alitalia approved by the Commission on 15 July 1997 (OJ 1998 C 290, p. 3), since it post-dates the adoption of the 1997 decision and, accordingly, cannot be taken into account for the purpose of determining whether that condition was justified at that date. The same applies to the Commission’s claim that the preferential treatment in question continued until it was dealt with in the course of technical meetings in July and August 1999.
459. As regards the argument that a Commission decision adopted on the basis of Articles 87 EC and 88 EC cannot have any effect on the grant of traffic rights from countries outside the EEA, such a situation is clearly not contemplated in the condition in question, which concerns, in particular, ‘the allocation of traffic rights (including those relating to third countries outside the EEA)’.
460. With regard to traffic to non‑member countries, it must be borne in mind that airlines also compete on routes to countries outside the EEA and the Commission must accordingly take account of this in its assessment of the aid measure in question (see, to that effect, British Airways and Others
v Commission, paragraph 273).
461. It is also to be noted that the requirement under condition 4 not to give preferential treatment to Alitalia is imposed on the Italian authorities, in particular as regards the allocation of traffic rights. The Commission is not, therefore, directly involved in that allocation. The complaint that the Commission does not have competence in that regard is therefore redundant.
462. Consequently, Alitalia’s complaints concerning condition 4 must be rejected.
Condition 5: Restriction of capacity
– Arguments of the parties
463. Alitalia submits that condition 5 imposed a dual condition as regards the available capacity of the aircraft it operated, that is, a restriction on the number of seats available and a restriction on the annual increase in the number of seat‑kilometres available. That condition is disproportionate, discriminatory and in contradiction to condition 1, which provides that Alitalia must have management autonomy in order to be able to make the maximum use of market opportunities. That condition would paralyse it by preventing it from operating with the necessary flexibility on the market. When it laid down those conditions, the Commission failed correctly to assess Alitalia’s particular situation and the economic context in which it operated. Furthermore, the Commission justified the restriction imposed on the company by having recourse to purely formal reasoning, based on paragraph 38(4) of the aviation notice.
464. Alitalia then states that the parameter used for condition 5(a), that is, a restriction on the number of seats available, is particularly restrictive, especially when compared with that imposed in the Air France decision, in which the Commission simply set a maximum ceiling by reference to the number of aircraft in its fleet. That applies a fortiori since, in the present case, the restriction applied to all the aircraft of the Alitalia group. Moreover, the condition at issue applied to all countries outside the EEA and is thus beyond the scope of the aviation notice.
465. Alitalia then states that condition 5(b), which limits the annual increase in the number of seat‑kilometres available, was clearly lifted directly from condition 8 in the Air France decision. That condition is totally unjustified and discriminatory in so far as it was applied to an economically viable undertaking. The content of that condition is more stringent than that applied in the case of Air France, since it affected Alitalia as a whole, whereas the Air France decision distinguished between Air France, Air Charter and Air Inter. The restriction imposed upon Alitalia also affected national traffic and thus contained an additional element of rigidity. Moreover, the restriction on Alitalia’s rate of growth was taken directly from the Air France decision without any explanation being given. Finally, for 1999 and 2000, the Commission lowered even further the ceiling imposed in the 1997 decision.
466. The Commission maintains that the restriction on capacity and prohibition of price leadership are ‘two faces of the same coin’. In its view, price and quantity are the two main variables generally relied on by undertakings to define their industrial and business strategies. By influencing either of those variables, different effects may be achieved, while pursuing the same aim of limiting supply. Those two variables are therefore negotiable and were the subject, in the case of Alitalia, of lengthy negotiations in which Alitalia’s representatives fully participated. Those conditions are thus the result of detailed, complex and sensitive market assessments carried out by the Commission with due regard to the need to exchange arguments and with the assistance of external consultants. The Commission states that, in such circumstances, the Court can declare invalid only a manifest error in the assessment of the facts or in the application of the Treaty.
467. The Commission states that it has already explained the reason for the restriction on capacity, which was, in accordance with paragraph 38(3) and (4) of the aviation notice, to enable the undertaking to be restored to viability.
468. Alitalia’s complaint that it was discriminated against by comparison with Air France as regards the restriction on available seats is the result of a misunderstanding, since the Air France decision set limits on both the seat-kilometres available and the number of authorised flights.
469. The complaint that Alitalia was allegedly prohibited from entering into commercial partnerships is equally redundant, since it was authorised to enter into partnerships on the basis of condition 5.
470. The Commission is of the view that Alitalia’s arguments concerning the restriction on the annual growth rate for seat‑kilometres available fail to take account of the obligation incumbent upon Alitalia to have regard to the Community interest. The differences as regards the conditions imposed on Air France in 1994 can be explained by the new circumstances which arose, as set out in the aviation notice. Following changes brought about in the market, the situations of the two companies were not always comparable.
471. The Commission also considers that, if the growth in capacity and supply of the company concerned cannot be greater than market growth, it must necessarily be lower than or, at most, equal to that rate and, therefore, Alitalia’s argument alleging disregard for paragraph 38(4) of the aviation notice is incomprehensible. By setting the rate at 2.7% and allowing for possible adjustments, the Commission fully complied with that provision.
472. Finally, as regards the distinction made in the Air France decision between Air France and Air Inter, the Commission states that it did not impose on the latter the growth restriction imposed on the former because it had taken the measures necessary to ensure that the authorised aid would not place Air Inter at an advantage and, most importantly, that the complaints made in that regard were clearly rejected by the Court in British Airways and Others
v Commission .
– Findings of the Court
473. In the first place, condition 5, which limits the capacity available to Alitalia, is clearly not in contradiction to condition 1. Condition 1 provides that the Italian authorities must undertake to ‘adopt the behaviour of a normal shareholder towards Alitalia; to enable it to be managed in accordance with commercial principles only and not to become involved in its management for reasons other than those strictly related to the Italian State’s status as a shareholder’. Condition 1 is directed at the Italian State in order to restrict its involvement in the management of Alitalia. Its primary purpose is to ensure that the Italian State behaves like a normal shareholder and not, as the applicant claims, to grant Alitalia management autonomy.
474. In any event, Alitalia cannot, in the present circumstances, claim entitlement to full management autonomy. That would be contrary to Article 87(3)(c) EC and, thus, to the condition that the restructuring aid did not adversely affect trade to an extent contrary to the common interest.
475. Paragraph 38(4) of the aviation notice provides that, as ‘[a]id granted in the aviation sector affects trading conditions between Member States’, the programme to be financed by the State aid can only be considered not contrary to the common interest if its objective is ‘not to increase the capacity and the offer of the airline concerned, to the detriment of its direct European competitors’. That provision also states that ‘[i]n any case, the programme must not lead to an increase beyond market growth in the number of aeroplanes or the capacity (seats) offered in the relevant markets’.
476. It should be added that paragraph 38(3) of the aviation notice provides that ‘if restoration to financial viability and/or the situation of the market require capacity reductions, this must be included in the programme’.
477. The provisions of the Treaty in conjunction with those to which, on that basis, the Commission bound itself in the aviation notice thus authorise the Commission to lay down conditions on capacity in order to ensure that Alitalia is restored to viability and to safeguard the common interest.
478. As regards the various forms of discrimination which Alitalia claims it suffered by comparison with Air France, inter alia, while there can be no grounds for denying that the Commission is entitled to compare the restructuring measures contemplated by Alitalia with those adopted by other airline companies, the fact remains that the restructuring of a company must focus on its own specific problems, and the experience of other companies, in different economic and political contexts and at other times, may be irrelevant (see, to that effect, British Airways and Others
v Commission, paragraph 135).
479. The Commission is correct in stating that the context in which the Air France decision was taken was different from that of the contested decision in that the restructuring of Air France took place over the period 1994 to 1996 and that of Alitalia between 1996 and 2000. The latter took place in the context of a market that was in the process of becoming fully liberalised and thus one of increased competition, in which more stringent State aid rules were imposed in response to an obvious need, as stated in the aviation notice. That difference in context is sufficient to diminish the relevance of any comparison that may be made between the conditions imposed on either company.
480. Moreover, and in any event, Alitalia is incorrect in stating that, in the Air France decision, the Commission simply set a maximum ceiling by reference to the number of aircraft in its fleet. It is, in fact, apparent from Article 1(8), (11) and (12) of the Air France decision that the Commission imposed on Air France and Air Charter restrictions on both the number of seat‑kilometres available and the number of authorised routes.
481. Furthermore, in that case, all the aid was to benefit Air France and its subsidiaries alone, to the exclusion of Air Inter (see Article 1(1) of the Air France decision). That arrangement was endorsed by the Court in its judgment in British Airways and Others
v Commission . Alitalia cannot therefore draw an argument from the fact that the condition imposed in the Air France decision did not apply to Air Inter.
482. Furthermore, Alitalia’s argument comparing its case with that of Air France is contradictory. At times, it relies on the fact that its situation is comparable to that of Air France and that, accordingly, the same conditions should have been applied to it and not more stringent conditions, such as the restriction on seats available (condition 5(a)). But with regard to the annual growth rate of the number of seat‑kilometres (condition 5(b)), it argues, conversely, that the Commission was incorrect in applying to it the same restriction as that applied to Air France, since its situation was not comparable.
483. As regards the growth rate of 2.7% imposed in condition 5, it is clear, first of all, that the aviation notice simply provides that there must not be an increase beyond market growth in the number of aircraft or the seats offered in the relevant markets (see paragraph 475 above). Setting a rate below the growth rate in the relevant markets is not, therefore, contrary to the aviation notice.
484. In the second place, that rate of 2.7% applied, according to the contested decision, to ‘the increase in the number of available seat-kilometres for each calendar year’, ‘within the EEA excluding Italy’ and ‘within Italy’. What this is, therefore, is simply one of the parameters of the general situation and Alitalia’s growth. The figures provided by Alitalia in response to questions from the Court on that point refer, in a general manner, to ‘Alitalia’s growth rate’ and do not provide any further detail. Furthermore, the figures in one of the tables provided relate to the international network and not to the EEA.
485. Alitalia has consequently failed to establish that that rate, which is set in condition 5 and is, moreover, subject to increase, is disproportionate.
486. It should be added that, in any event, the parameters established by the Commission, such as the maximum number of seats available and the maximum annual growth rate for the number of seat‑kilometres available, form part of a complex economic assessment. In that connection, therefore, the Commission enjoys wide discretion.
487. Alitalia has failed to demonstrate any manifest error in the Commission’s assessment of its particular situation and context.
488. In particular, Alitalia cannot claim that condition 5(b) is unjustified and discriminatory in so far as it applied to an economically sound undertaking. Indeed, the situation which the Commission was obliged to take into account when the contested decision was adopted, namely that which prevailed when the 1997 decision was adopted, which is described, inter alia, in the Alitalia I judgment (paragraphs 5 to 7), was one in which it was impossible for the airline to return to profitability, with debts giving rise to substantial financial costs and considerable losses.
489. Alitalia is also incorrect in relying on an alleged ban on entering commercial partnerships as a result of condition 5. In recital 1 in the preamble, the contested decision refers, first, to the Italian authorities’ undertaking to submit a report containing a description ‘of the commercial or operational cooperation agreements concluded by Alitalia during the previous year’ (condition 10). Secondly, the contested decision refers expressly to the capacity available on aircraft operated by Alitalia ‘or by other carriers under agreements whereby Alitalia assumes the commercial risk for such capacity (wet‑leasing, block-space, joint-venture agreements, etc.)’. The conclusion of such agreements was, therefore, not in any way excluded.
490. Furthermore, with regard to the argument that the condition in question applied to countries outside the EEA, it must be noted that that condition relates to the maximum number of seats available to the Alitalia fleet and the restriction on growth in the number of seat‑kilometres available ‘within the EEA excluding Italy’ and ‘within Italy’.
491. Furthermore, even if it were true that the maximum ceiling for 1999 and 2000 was lowered, it is irrelevant, since it post-dates the facts to be taken into account.
492. Finally, the reasons for condition 5 are evident in the contested decision and the 1997 decision, to which the contested decision refers, and it is possible from these to understand the grounds on which the Commission imposed that condition (see paragraph 74 above).
493. Consequently, all the complaints relating to condition 5 must fail.
Condition 6: Having in place an analytical accounting system
– Arguments of the parties
494. Alitalia submits that condition 6, which required it to have in place an analytical accounting system for each route it operated, is excessive and unjustified.
495. That condition necessitated a total reorganisation of Alitalia’s accounting structure, a rather complex operation entailing substantial administrative costs. It is excessive, since the 1997 decision had already provided that Alitalia should stop operating a considerable number of routes. Moreover, whether routes were profitable could not be determined by reference to one route alone but had to be analysed in the general context of the entire company network.
496. Alitalia maintains that condition 6 is at variance with the practice followed by airline companies which manage their accounts ‘in accordance with the principle of network analysis’, that is, taking an overall view of the various routes operated. In addition, none of the Commission’s decisions on State aid in the airline sector lays down such a condition. That condition therefore departs, without any justification, from the normal practice of airlines and the Commission.
497. Alitalia also argues that the Commission lacks the competence to impose such a condition, since its application is not confined to routes within the EEA.
498. Lastly, Alitalia states that condition 6 cannot be justified by reference to condition 10 (proper implementation of the plan, demonstrated by annual reports). It claims that it could have fulfilled the obligation laid down in condition 10 perfectly well by producing the data on all the routes it operated. In any event, to impose such a burden on it for the sole purpose of facilitating the task of the Commission’s consultants is unjustifiable.
499. In response, the Commission maintains that the introduction of an analytical accounting system was dictated by the need for transparency and to monitor the various stages of the implementation of the plan. That method made it possible, in particular, to review, within a very short period, trends in profitability for each route, including routes outside the EEA which have an impact on the company’s profitability. That condition was the corollary to – or the premiss of – Alitalia’s proper compliance with condition 10, a point which the latter does not challenge.
500. The Commission states that condition 6 is not to be found in other decisions because the companies in question did not have the same problems as Alitalia.
– Findings of the Court
501. Condition 6 obliges the Italian authorities to ensure that ‘Alitalia shall have an analytical accounting system that makes it possible to determine, in the short term and for each route, the profitability ratio defined as the ratio between the full revenue and the full costs (the full cost being equivalent to the sum of the variable costs and fixed costs) for a particular route’.
502. At the outset, it should be observed that, contrary to what Alitalia claims, condition 6 does not require it, strictly speaking, to have a separate analytical accounting system for each route but simply to put into place an accounting system which makes it possible swiftly to determine the profitability ratio for each route, which is not quite the same thing. Alitalia’s argument is therefore based on a misconceived interpretation of the condition in question.
503. With regard to that condition, it should be recalled that, pursuant to Article 87(3)(c) EC, the Commission can declare compatible with the common market only restructuring aid that does not adversely affect trade to an extent contrary to the common interest. It must therefore be able to determine the effect of the measures in question on trade. Furthermore, the aviation notice states in paragraph 38(8) that ‘any such aids must be structured so that they are transparent and can be controlled’. The requirement to have in place an analytical accounting system must therefore be seen in that context. That accounting system is one of the means enabling the Commission to ‘verify how the restructuring programme, which is financed with the help of the State aid, is realised’ (paragraph 40 of the aviation notice).
504. As regards Alitalia’s other complaints concerning condition 6, first of all, the requirement to have in place an analytical accounting system making it possible to determine the profitability ratio for each route cannot be regarded as being at variance with the practice of analysing the profitability of the undertaking on the basis of all the various routes operated. One does not rule out the other and may form the basis of the other or be an adjunct to it.
505. However, even though that condition imposes an additional burden on Alitalia, it cannot be regarded as excessive in the light of the need for the Commission to be able swiftly to verify whether the plan is in fact being properly implemented, in particular with a view to the payment of further instalments, especially as the plan, in its amended version, provided, as Alitalia itself acknowledged, that the company should stop operating a considerable number of routes and frequencies deemed to be unprofitable. In order for that measure to be implemented, it was therefore necessary to have in place an accounting system which made clear the profitability of each route.
506. Condition 6 does not serve the same purpose as condition 10. The latter is, in fact, directed at reviewing, overall, the implementation of the restructuring plan, the viability of the undertaking and whether the conditions imposed are being complied with, whereas the purpose of condition 6 is to make precise information available on the profitability of each route. It cannot therefore be assumed that condition 10 would have enabled the Commission swiftly to determine the profitability ratio for each route. According to paragraph 38(1) of the aviation notice, when evaluating the programme, the Commission must be particularly attentive to, inter alia, ‘the closing-down of unprofitable routes’. That would be impossible if it did not have at its disposal a precise mechanism enabling it to assess whether each of those routes was making a loss.
507. In the second place, the fact that other Commission decisions on State aid do not lay down such a condition cannot be construed as discrimination against Alitalia. First, the general context had changed (see paragraphs 441, 447 and 479 above). Secondly, the accounting system in place at Alitalia could have differed from that at the other companies in question, so that it may have been necessary to lay down a special condition in its case. It is apparent from the judgment in British Airways and Others
v Commission
(paragraph 135) that the Commission is not obliged to reproduce exactly the same conditions as in the past but it must take account of the context of the operation and the undertaking’s own particular situation.
508. In the third place, Alitalia is incorrect in stating that the Commission lacks the competence to impose such a condition since its application is not confined to routes within the EEA. In fact, the airline companies established within the EEA also compete on routes to countries outside the EEA. The Commission was therefore entitled to adopt a measure with a view to monitoring whether Alitalia complied with competition rules on the routes in question (see paragraph 460 above).
509. As a consequence, Alitalia’s complaints concerning condition 6 must be rejected.
Condition7: Prohibition of the practice of price leadership
– Arguments of the parties
510. Alitalia also challenges condition 7, which provided that, until 31 December 2000, it was to refrain from offering fares lower than those offered by its competitors for an equivalent service supplied on the routes which it operated.
511. Alitalia claims that there is no mention of the prohibition of price leadership in the document sent by the Commission to the Italian authorities on 14 May 1997. It follows that that condition was not the subject of discussion and constitutes an infringement of the rights of defence.
512. The applicant also maintains that condition 7 is excessive and discriminatory by comparison with the manner in which the Commission treats other airline companies. It states that, in the Air France decision, the Commission confined the prohibition of price leadership to routes operated by Air France within the EEA, whereas in its case the prohibition extended to all the routes it operated, including routes outside the EEA. Moreover, the duration of the prohibition imposed was longer for Alitalia than it was for Air France. Such severity towards Alitalia is all the less justified since it was in a much more serious situation than Air France.
513. The prohibition of price leadership was also much more damaging to Alitalia than it was to Air France, because, in the case of the former, it occurred against the background of the definitive opening-up of the market to competition and the unconditional liberalisation of traffic and freedom to set prices.
514. It is also apparent that condition 7 is discriminatory from the fact that no prohibition of price leadership was imposed in the 1992 Iberia decision or in the Aer Lingus decision and that such a prohibition was limited to regular routes between Athens (Greece) and Stockholm (Sweden) and between Athens and London in the Olympic Airways decision.
515. Alitalia also questions whether the Commission is competent to enact such a measure, given that the kind of conduct at which that condition is aimed does not have a direct impact on Community trade. It refers, in that regard, to the aviation notice.
516. Alitalia then submits that condition 7 is unlawful in so far as it seeks to curb conduct ‘without any actual verification as to whether it is in fact unlawful’. Alitalia finds support for its contention that price leadership must be assessed on a case-by-case basis in the approach which the Commission itself adopted to Air France’s failure to comply with such a prohibition.
517. Alitalia submits that the judgment of the Court of Justice in Case C‑225/91 Matra v Commission
[1993] ECR I‑3203, paragraph 41, confirms that this plea is well founded.
518. Finally, Alitalia observes that condition 7 is contrary to the logic underlying the contested decision. That prohibition is, in fact, capable of seriously undermining the profitability of the company. In particular, it prevented Alitalia from appropriately facing increasing competition at national and international level, opening new routes and launching new shuttle services on busy routes.
519. According to the Commission, the prohibition of price leadership is intended to prevent a company receiving public funds from gaining market share to the detriment of competing companies which do not have that advantage. It is aimed at restoring competition rules and helps to achieve the objective of reducing production capacity referred to in the aviation notice. The Commission points out that it imposed such a condition in the Olympic Airways and Air France decisions.
520. The Commission adds that the prohibition of price leadership was the subject of lengthy negotiations and was proposed by the Italian authorities in their letter of 26 June 1997. Those authorities even favoured a prohibition of price leadership over a greater reduction in capacity. It was also at the express request of Alitalia that the prohibition was extended to flights on all routes in preference to a simple limitation on the number of flights. The active involvement by the Italian authorities and Alitalia during the administrative procedure thus explains the difference to be found between the contested decision and the Air France decision. Moreover, there is no prohibition of price leadership in the decision of 22 July 1992 authorising restructuring aid for the company Iberia or in the 1993 Aer Lingus decision because those decisions were adopted before the liberalisation of the markets. In the Olympic Airways decision, the prohibition related simply to routes which posed particular problems.
521. As regards whether it is competent to impose the conditions in question, the Commission submits that, by virtue of Article 87(3)(c) EC, it is competent to impose any condition necessary to enable Alitalia to recover its economic and financial viability. The competence conferred on it by that provision is wholly separate from that conferred on it by Article 82 EC. It also derives competence from that same provision to impose conditions concerning flights outside the EEA, since there is competition among Community airlines not only on routes within the Community but also on air routes to and from non-member countries. Furthermore, it is apparent from Article 71(1)(a) EC and Article 80(2) EC that those routes fall within the scope of the common transport policy.
522. Lastly, the Commission observes that, by complaining that, as a result of price leadership, it cannot attract new customers to new routes or encourage those customers to fly more often, Alitalia is in effect claiming that it benefited from the aid in order to reserve for itself a greater market share by removing it from competition.
– Findings of the Court
523. In the first place, as regards the alleged infringement of the rights of defence, it has already been stated in paragraphs 169 to 172 above that the administrative procedure in matters of State aid is initiated only in relation to the Member State concerned, which alone enjoys the protection of the rights of defence. Essentially, the role that is conferred upon the parties concerned, which include the recipients of the aid, is that of information source for the Commission. It follows that, far from being able to rely on the rights of defence conferred upon persons in respect of whom a procedure is initiated, the parties concerned simply have the right to be involved in the administrative procedure to a degree that is appropriate in the circumstances of the case. Alitalia cannot therefore rely on an infringement of the rights of defence. Moreover, Alitalia was closely involved in the administrative procedure preceding the adoption of the 1997 decision and that procedure was not declared void.
524. In the second place, the difficulty with Alitalia’s arguments alleging that it was subject to discrimination by comparison with other airline companies that were the subject of earlier Commission decisions is that the general context in which those decisions were taken and the individual situations of the companies concerned cannot be compared (see paragraph 507 above). It would be contrary to the procedure of assessing a company’s conduct on a case-by-case basis, advocated by Alitalia, for the Commission to be required to reproduce in exactly the same form the same conditions in all its decisions on State aid in the air transport sector.
525. Moreover, Alitalia’s argument contains a further contradiction (see paragraph 482 above). On the one hand, with regard to the routes in question and the length of the prohibition, it asks to be treated in the same way as Air France – which presupposes a comparable situation. On the other hand, in other respects, it relies on a different context – and therefore one that is not comparable – namely the liberalisation of the market which took place in the meantime, generally authorising airlines to set their own fares.
526. While Alitalia relies on the liberalisation of the air transport market, it is apparent from the aviation notice that that event was intended to make the Commission more stringent in the authorisation of State aid and the conditions it imposed. Thus, for example, paragraph 41 of that notice states:
‘The full completion of the common aviation market in 1997 will considerably increase competition within the common market. Under such circumstances, the Commission will not be able to authorise restructuring aid, unless in very exceptional cases and under very stringent conditions.’
527. In the third place, the Commission’s competence to impose a condition such as condition 7 is based on Article 87(3)(c) EC, which authorises the Commission to declare State aid for the purpose of restructuring compatible with the common market only if it does not adversely affect trading conditions to an extent that is contrary to the common interest. As the Commission stated in the second subparagraph of paragraph 37 of the aviation notice, ‘[i]t is in the light of this latter requirement, to be interpreted in the context of the air transport industry, that the Commission has to determine the conditions which will usually need to be met in order to be able to grant an exception’. The Commission enjoys discretion in such matters. Even though the aviation notice does not allude expressly to prohibition of price leadership, such a prohibition clearly helps in attaining the objective that aid should not adversely affect trading conditions to an unacceptable degree, in accordance with the Treaty.
528. In the fourth place, while it is clear from the general scheme of the Treaty that the procedure under Articles 87 EC and 88 EC must never produce a result which is contrary to the specific provisions of the Treaty, the fact remains that the procedure to be followed under Article 81 EC et seq. and that to be followed under Article 87 EC et seq. are independent procedures, governed by specific rules (see, to that effect, Matra v Commission, paragraphs 41 and 44). The present procedure is not governed by Article 82 EC but by Article 87 EC. Alitalia’s arguments concerning the need to render unlawful anti-competitive activities on a case-by-case basis are, therefore, irrelevant.
529. In the fifth place, it has already been stated, in paragraph 460 above, that Alitalia is incorrect in claiming that the Commission does not have competence to impose a condition which extends to routes operated outside the EEA. The imposition of that condition is justified because Alitalia is competing for those flights with other airline companies established within the Community.
530. In the s ixth place, Alitalia’s argument that condition 7 is contrary to the logic underlying the contested decision, in so far as it could seriously undermine the profitability of Alitalia, must fail. In accordance with paragraph 38(1) and (2) of the aviation notice, the purpose of the aid was to restore the company to viability. Contrary to what Alitalia appears to consider, the purpose was not to enable it to expand, to commence new services on routes it did not serve or to launch new shuttle services on busy routes.
531. As regards the reasons for that condition, reference should be made to paragraphs 74 to 77 above. In the contested decision, as in the 1997 decision, the Commission refers, inter alia, to Articles 87 EC and 88 EC and to the aviation notice, which oblige the Commission to ensure that the aid does not have the effect of transferring the difficulties of the company receiving it to its competitors. On the basis of that reasoning, it is possible to understand the grounds which led the Commission to impose that condition.
532. Since the above examination has revealed nothing capable of affecting the validity of condition 7, the objections raised against it must be rejected.
Condition 8: Disposal of the shareholding in Malév
– Arguments of the parties
533. Alitalia submits that no adequate reasons were given for condition 8 of the contested decision, which required it to release its shareholding in Malév. That obligation, it argues, is in contradiction to the considerations set out in the 1997 decision, which state that Alitalia was to pursue a policy of refocusing its activities in order to concentrate more on its core business and ‘would … be unable to dispose of assets relating to its main activities without compromising the plan’s success’ (18th subparagraph of point VIII). Alitalia claims, however, that its shareholding in Malév was an asset that was inextricably linked with its core business.
534. Alitalia contends that that condition is also discriminatory, since, in the Air France decision, the Commission required the French company merely to dispose of the Le Méridien hotel chain, which was not a strategic part of its business.
535. Lastly, Alitalia maintains that condition 8 lacks any legal basis in so far as the purpose of a restructuring plan is to enable a company to be restored to profitability and not to achieve profitability equal to or greater than that in the private sector. Even if that condition had not been imposed, the restructuring plan would have made it possible to improve the financial health of the airline so that, within a reasonable period, it would have been restored to viability, that is to say, in the normal course of things, without any further aid, in accordance with paragraph 38(1) of the aviation notice.
536. In response, the Commission states that the disposal of Alitalia’s shareholding in Malév was negotiated and accepted by Alitalia in the course of the administrative procedure. As the synergies between Alitalia and Malév were extremely weak, the shareholding in question was not regarded as a strategic asset. The disposal of the shareholding was necessary in order to consolidate the financial part of the restructuring plan. The Commission also observes that Alitalia fails to state the reasons for which the disposal of the shareholding was liable to have adverse effects.
– Findings of the Court
537. With regard to the claim that condition 8 is in contradiction to some of the considerations set out in the 1997 decision, it must be noted that Alitalia cites that decision only in part. In fact, the Commission did not, in the 1997 decision, take the view that the shareholding in Malév was a core part of Alitalia’s business. On the contrary, the sale of that shareholding was regarded as part of Alitalia’s refocusing on its core business, as is apparent from the following:
‘Like most competitor companies which had to cope with the crisis in air transport in the early 1990s, Alitalia is also pursuing a policy of refocusing its activities on its core business, namely air transport itself. Therefore, following the disposal of the shares in the capital of Società Aeroporti di Roma in 1995, the plan provides in particular for the forthcoming sale of the headquarters building at Magliana and of Alitalia’s shareholdings in Alfa Romeo Avio, SISAM, the computerised reservation system Galileo, Mal[é]v and six regional Italian airports.
On this basis, the extremely positive results expected by the year 2000 should both meet the company’s needs in terms of working capital and funding of investments essential for long-term business and open up the prospect of long-term viability. They should also inspire confidence in investors and pave the way for the development of alliances with other companies.
…
By refocusing its activities on its core business and shedding a large amount of its investment, Alitalia is helping to cover the financial needs from its own resources.
…
The resources provided by the aid would also seem to be necessary since Alitalia is unable to substitute sufficient resources from the sale of assets. As indicated above, the company has already embarked on a policy of disinvestment and refocusing on its core business. However, although the resources of about [ITL] 600 billion thus released will make it possible to reduce the capital increase to be made, they are out of all proportion to the financial requirements of the plan. The company would, moreover, be unable to dispose of assets relating to its main activities without compromising the plan’s success.’
538. As set out in the 1997 decision, the sale of the shareholding in Malév was, therefore, intended to cover Alitalia’s financial needs and make it possible to reduce the amount of aid. This can be understood from the statement of reasons in the 1997 decision, to which the contested decision expressly refers (see paragraphs 74 to 77 above).
539. Moreover, Alitalia has not put forward any evidence capable of establishing that the Commission was not entitled to regard its minority shareholding in Malév (30%) as a non-strategic asset or to consider that the sale of that asset was necessary to limit the aid injection and ensure that the aid was proportionate to its needs under the plan. It follows that the Commission cannot be regarded as having made a manifest error of assessment in that regard.
540. Furthermore, it is not apparent from the contested decision, the provisions relied on by the Commission or its written submissions in these proceedings that the sole objective of the conditions imposed in the contested decision was to improve the viability of the restructuring plan.
541. In fact, the Commission initially took the view that the plan for the restructuring of the company communicated on 29 July 1996 was not adequate to warrant a positive decision. Alitalia then informed the Commission that it intended to adjust the plan. After considering the adjustments, the Commission subsequently notified the Italian authorities, by letter of 18 April 1997, that it was not in a position to adopt a positive decision on the matter on the basis of the principle of the private investor operating on market principles, due to both the difficulties inherent in the fact that account had been taken of the insolvency costs to be borne by IRI in the event of Alitalia’s bankruptcy and the extent of the commercial risk which the plan still presented. A third phase therefore commenced, during which meetings were held between the Italian authorities and the Commission. It was possible as a result of those meetings to make additional improvements to the plan in certain areas, namely the cost reduction was to be accelerated, the amount of the proposed capital increase to be reduced and Alitalia’s shares in the Hungarian company Malév and in six regional Italian airports to be disposed of.
542. It is evident that, initially, the plan did not satisfy the conditions necessary for it to be regarded as compatible with the common market. The disposal of Alitalia’s shares in Malév was one of the improvements which enabled the Commission, after consulting its consultants, to take the view that the plan was realistic and would enable Alitalia to be restored to viability within a reasonable period of time. That disposal was, therefore, an essential prerequisite for the aid to be declared compatible with the common market.
543. Alitalia cannot, therefore, claim that the only purpose of condition 8 was to improve the viability of the plan and that, even without that condition, the plan would have improved the financial health of the company so that it would, within a reasonable period, have been possible to restore its viability. Alitalia has, in any event, failed to demonstrate that that is the case.
544. Accordingly, none of the objections raised against condition 8 is justified.
Implied condition: Assumption of early retirement costs
– Arguments of the parties
545. Alitalia states that the initial version of the plan envisaged the early retirement of 700 staff. Following a request for clarification from the Commission, which argued that the cost of such a measure itself constituted State aid, the Italian authorities stated that that was not the case, not only because that measure was one of general application but also because the beneficiary of that measure was not the undertaking itself but its staff. Nevertheless, warning the Italian authorities that it intended to initiate an ad hoc procedure, the Commission succeeded in imposing upon them the requirement that Alitalia should be liable for all the costs of the early retirement programme.
546. Since it was impossible to obtain a positive decision from the Commission unless it funded the early retirement programme, Alitalia indicated that it was prepared to bear those costs on condition that the Commission accepted that the operation satisfied the private investor test.
547. Alitalia maintains that, in its action in Case T‑296/97, it criticised the Commission for adversely affecting the outcome of the calculation of the internal rate of return by taking the cost of that measure into account and, moreover, for imposing that precondition upon it without heeding its positive effects on the company. In the Alitalia I judgment, the Court ruled only on the complaint concerning the calculation of the internal rate but not on the course of action taken by the Commission.
548. On the basis of those facts as stated by Alitalia, it makes two complaints against the contested decision. In the first place, the Commission did not ask itself, in 2001, whether it was appropriate to maintain the position it had adopted in 1997. No arguments were exchanged on this subject, in spite of the fact that the situation had changed. According to Alitalia, if the Commission had had doubts at the time whether the scheme was compatible with the common market, it should have subsequently either dispelled them or confirmed them by initiating a procedure.
549. In the second place, in the contested decision, the Commission unreasonably made approval of IRI’s investment in Alitalia conditional upon the latter accepting the obligation to pay the costs of the early retirement of 700 of its staff, an unlawful condition in that it is based on a misinterpretation of the relevant Italian legislation, a superficial analysis of the early retirement scheme, an application of the principles of the Treaty which discriminated against Alitalia and improper use of its powers on the part of the Commission by obliging Alitalia to bow to its will and make the payment before the 1997 decision.
550. In the view of the Commission, Alitalia is attempting to relaunch a debate that has already been adjudicated on by the Court in the Alitalia I judgment. It argues that it is incontestable that the company accepted that it should bear the costs in question, since it was accepted, first of all, by the Italian authorities, which clearly did not wish that the Commission should continue to examine the early retirement scheme in detail in the light of State aid. It adds that it could not fail to initiate the procedure under Article 88(2) EC if it had serious doubts about the nature of the scheme in question, and do so free from any constraint.
– Findings of the Court
551. The Court held as follows in the Alitalia I judgment (paragraphs 152 to 156):
‘Second, the applicant claims that the Commission arbitrarily required it to assume the cost, which under Decree-Law No 546 of 23 October 1996 (converted into Law No 640 of 20 December 1996) was to be borne by the State, of the early retirement of 700 of its staff, reducing by at least two points, according to the calculations of the Commission’s consultants, the profitability rate of IRI’s investment.
As the Commission rightly observes, however, the applicant gave an irrevocable commitment, before the [1997] decision was adopted, to assume the costs of the early retirement of 700 employees ... For that reason, the legal assessment and the operative part of the [1997] decision contain no trace of the applicant’s decision to bear those costs. The Commission only takes note of them in the part of the [1997] decision entitled ‘‘The Facts’’.
Although the applicant initially gave the commitment in question on condition that the final decision recognised that the recapitalisation constituted an investment which satisfied the private investor test, that commitment became irrevocable when it placed the relevant funds in escrow in July 1997 ... The Commission should therefore have ascertained whether the investment satisfied the private investor test in the light of that new situation.
Last, during the administrative procedure the applicant could have resisted the pressure allegedly brought to bear by the Commission to give the commitment in question or, in the alternative, it could, as for the other conditions, have avoided giving an irrevocable unilateral commitment. If the applicant had taken that approach during the administrative procedure, the Commission would have adopted a position on the question of the costs of the early retirement of 700 employees in the [1997] decision or in another decision whose legality would have been open to review by the Court.
It follows that the applicant’s argument that the internal rate was incorrectly calculated because the Commission obliged it to assume the cost of the early retirement of 700 of its staff must be rejected.’
552. It follows from this that the Court ruled not only on the claim that the internal rate was miscalculated due to the fact that the early retirement costs were taken into account but also on the alleged pressure exerted by the Commission to give the commitment in question. The Court considered that Alitalia could have resisted that pressure or avoided giving an ‘irrevocable’ unilateral commitment. The argument alleging pressure was, therefore, rejected and cannot be re-examined in these proceedings.
553. Alitalia is also incorrect in claiming that the Commission should have re-examined in 2001 the position it had adopted in 1997. In fact, in order to take a new decision after the 1997 decision had been annulled by the Court, the Commission was required to put itself back in the context of the 1997 decision and assess the plan notified in the light of the information that was available to it at that time (see paragraph 137 above).
554. Finally, the initiation of the procedure under Article 88(2) EC is subject to strict rules. Since Alitalia had given an irrevocable commitment to assume the early retirement costs, the Commission could no longer initiate any procedure against the Italian Republic in order to examine the early retirement scheme from a State aid point of view.
555. Alitalia’s complaints concerning the implied condition relating to the early retirement scheme must therefore be rejected.
556. Since none of Alitalia’s complaints concerning the contested conditions has been upheld, the fifth plea must be rejected.
557. It follows that both the first and the second heads of claim must be rejected.
558. In the light of the foregoing considerations, the action must be rejected in its entirety.
559. There is no need to grant Alitalia’s request for measures of inquiry. First, the Commission produced its consultants’ report of 1 June 2001 as an annex to the defence. Secondly, the various factors taken into account in the calculations and assessments which are disputed are apparent from the case-file, and in particular the annexes to Alitalia’s application.
Costs
560. Under Article 87(2) of the Rules of Procedure, the unsuccessful party is to be ordered to pay the costs if they have been applied for in the successful party’s pleadings. Since Alitalia has been unsuccessful, it must be ordered to pay the costs, in accordance with the form of order sought by the Commission.
Operative part
On those grounds,
THE COURT OF FIRST INSTANCE (Fifth Chamber, Extended Composition)
hereby:
1. Dismisses the action;
2. Orders Alitalia – Linee aeree italiane SpA to pay the costs.