26.6.2023
(33)
EN
Official Journal of the European Union
L 160/45
Based on the information provided by Portugal, six key factors contributed to the origin of Azores Airlines’ difficulties (37): (i) the reduced capacity utilisation (40-50 % below benchmark block hours per plane, its network plan being historically highly dependent on seasonal traffic and lack of overnight flights), (ii) a rise in the compensation costs due to irregularities in the flight schedule: from EUR 1,5 million in 2015 to EUR 4,5 million in 2019, whereas in 2018 alone, the cost of leased aircraft to solve disruptions was over EUR 15 million, (iii) high maintenance costs linked to legacy fleet needing heavy corrective maintenance in 2019 and high provisions required in 2019), (iv) extra costs with the execution of fleet replacement (late delivery of one A321 aircraft in 2019 led to the need for an extra lease, delays in crew training for new fleet leading to cancellations in the 2017 peak season), (v) sub-par revenue and performance given PSO requirements (schedule limitations for the four PSO routes limiting network, fleet and crew optimisation, PSO regulated fares limiting revenue potential, with the four PSO routes resulting in a negative EUR 13 million EBIT margin impact in 2019), (vi) increased pressure following, after 2015, the liberalisation of the Ponta Delgada – Lisbon route by low cost carriers, with entry by Ryanair, and TAP increasingly flying from SATA’s Ponta Delgada hub, for instance to North American destinations.
2.2.3.
Effects of the COVID-19 pandemic on the beneficiary’s operation and results
(34)
The effects of the COVID-19 pandemic in the aviation and tourism sectors have aggravated the difficulties of SATA.
The pandemic has triggered a sizeable and long-lasting demand shock mainly caused by travel and commerce restrictions put in place in Portugal, other Member States and in North America to curb its spread as from March 2020, and which have a visible effect on the real economy of the Azores (and also in the Autonomous Region of Madeira (38)).
(35)
Whereas SATA operated 44 000 flights in the two years preceding the COVID-19 outbreak between March 2018 and February 2020, SATA operated 34 821 flights in the period between March 2020 and February 2022, thus reducing its supply by 21 %.
With reference to the same periods and the impact on SATA’s operation, the number of passengers transported dropped by 43,5 % from 3,36 million to 1,9 million, the available seats per kilometre dropped by 43,2 % from 5 843 million to 3 326 million and the revenue per passenger kilometre dropped by 58 % from 4 582 million to 1 928 million.
Likewise, the number of passengers departing and arriving in the airfields operated by SGA dropped by 33 % from 0,56 million to 0,38 million and the operational revenues decreased by 46 % (39).
(36)
In terms of revenues lost since the outbreak of the COVID-19 pandemic, even assuming conservatively that SATA’s revenues would have increased at a growth rate of 5 %, which is lower than the growth rate of 7,8 % for SATA Air Açores and 5,1 % for Azores Airlines in the period between 2015 and 2019, the comparison shows loss of revenues amounting to, respectively, EUR 35,3 million for SATA Air Açores and EUR 180,3 million for Azores Airlines.
Despite measures taken to reduce non-fixed or semi-fixed costs, the impact on SATA’s EBITDA can be estimated to be approximately EUR 80 million, with a loss of net income of EUR 54,5 million in March 2020-February 2022 compared to March 2018-February 2020.
(37)
On 30 April 2021, the Commission approved, pursuant to Article 107(2)(b) TFEU, a EUR 12 million compensation to SATA Air Açores and Azores Airlines for direct damages suffered due to the travel restrictions that the ARA, Portugal and the authorities of other destination countries imposed between 19 March 2020 and 30 June 2020 to limit the spread of the COVID-19 pandemic (40).
However, the sharp decline on demand caused by the COVID-19 pandemic has persisted after June 2020 and the impact on SATA’s revenues and losses until now has been five to six times greater than the losses covered by damage compensation aid.
(37) Portugal’s submission of 2 December 2021, Annex 1 – SATA Restructuring and Strategic Plan 2021-25, p. 9.
(38) Commission Decision of 30 April 2021 in case SA.62505 (2021/N) COVID-19: Amendment of SA.56873 Direct grant scheme and loan guarantee scheme (OJ C 195, 21.5.2021, p. 22).
(39) Portugal’s reply to the Commission’s request for information submitted on 6 April 2022, p. 8-10.
(40) Commission Decision of 30 April 2021 in case SA.61771 (2021/N) - COVID-19 - SATA - Compensation of damages resulting from extraordinary events (OJ C 285, 16.7.2021, p. 7).