The Legal Impacts of COVID-19 in the Travel, Tourism and Hospitality Industry

33 Recapitalisation aid has been used to help, among others, large companies in the tourism and related sector in situations when significant amounts of equity aid was needed to prevent the market exit of companies that had been viable before the COVID-19 outbreak. The SA.59812 case 134 is a recent example of large amounts recapitalisation aid granted a significant player of the tourism market. In the decision, Commission approved a massive financing package of maximum 1.25 billion euros to TUI (equity and hybrid capital, half of which was conditionally granted), a major German-based conglomerate operating hotels, cruise ships, airlines and travel agencies in multiple Member States. Recognising that the beneficiary had been severely and negatively affected by the travel restrictions, the Commission authorised the aid as the beneficiary was facing insolvency. According to the Commission’s press report, the recapitalisation aid measure was used because the liquidity aid previously granted to TUI under other aid categories of the Temporary Framework were insufficient, which is indeed the case when recapitalisation aid is warranted according to the Temporary Framework (i.e. when liquidity aid is insufficient and, as a result of the protracted demand shock and dropped revenues, equity is needed to make sure companies viable before the crisis are not forced to exit the market due to the pandemic). 135 The SA.56943 136 case is an example of aid used in an industry with strong ties to tourism as it involved the recapitalisation of an airline, airBaltic. The beneficiary is an airline in majority state ownership by Latvia, and was not in difficulty at the end of 2019 (it even budgeted a modest net profit for 2020 before the outbreak), but it had to cancel tens of thousands of flights in 2020. According to the Commission’s decision, without the equity injection of the state, airBaltic would become insolvent because of its projected 2020 losses (200-300 million euros) and a pre-pandemic bond issue that airBaltic would default on if it could not maintain a certain cash balance. In the decision, the Commission accepted that all the conditions of recapitalisation aid mentioned above were met (aid was kept at the minimum level necessary, the pricing had been set in accordance with 134 The decision authorising the aid was issued on 4 January 2021ű. https://ec.europa.eu/commission/presscorner/detail/en/IP_21_7 ( accessed on 5 March 2021) 135 Point 44 of the Temporary Framework and points 4-5 of the second amendment. 136 Commission decision C(2020) 4665 final of 3 July 2020 (SA.56943 (2020/N) – COVID-19: Recapitalisation of airBaltic)