EU probe sees Italian loan to Alitalia as unacceptable

BRUSSELS (Thomson Financial) - The European Commission said on Tuesday that an Italian state loan to airline Alitalia (Milan: AZA.MI) failed to meet EU bailout rules, according to information so far available in its state-aid probe.

'On the basis of the information at its disposal at this stage, it takes the view that this aid measure should not be declared compatible' with EU rules, the commission said in the European Union's Official Journal.

Europe's top competition watchdog launched an in-depth probe into the 300 million euro loan on June 11, warning at the time that it believed the measure was incompatible with EU rules.

Under the EU rules, Alitalia is banned from receiving public support until 2011 because of Italy's previous assistance to the carrier.

As Alitalia has already benefited from rescue and restructuring aid, Italy cannot, in principle, grant it any more aid.

The commission said in June its probe into the loan would focus on whether it was made on the same terms of a private investor and would allow all interested parties to voice their opinion.

So far in the investigation, the commission considered that the loan 'provides Alitalia with an economic advantage it would not have had under normal market conditions.'

The remarks were made in a formal invitation to interested parties to comment on the loan, which will be taken into account as part of the investigation.

Rival airlines such as Iberia (Madrid: IBLA.MC) and British Airways (LSE: BAY.L) have already condemned the loan publicly and Air France (Paris: FR0000031122) -KLM chairman Jean-Cyril Spinetta has said the Italian carrier needed an 'exorcist' to save it from bankruptcy.

source: http://uk.biz.yahoo.com/22072008/323/eu-probe-sees-italian-loan-alitalia-unacceptable.html