European Commission approves €750 million German State guarantee scheme for the Travel Insolvency Fund in the context of the coronavirus outbreak

The European Commission has approved, under EU State aid rules, a €750 million German scheme in the form of a State guarantee for loans that may be taken out by the Travel Insolvency Fund (‘the Fund’), to reimburse travellers in case of insolvency of package travel organisers.

Executive Vice-President Margrethe Vestager, in charge of competition policy, said: “The package travel industry has been hit hard by the coronavirus outbreak. In order to ensure that consumers are protected at all times, this €750 million German State guarantee scheme ensures that sufficient support is available to refund consumers for travel services cancelled due to the pandemic, in case package travel organisers become insolvent. We continue working in close cooperation with Member States to find workable solutions to mitigate the economic impact of the coronavirus outbreak, in line with EU rules.”

The German support measure

Under the Package Travel Directive, package travel organisers are required to ensure that travellers will be reimbursed for sums they have already paid for services, which were not ultimately provided, either fully or in part, because of insolvency of the organiser. For this purpose, Germany will set up the Travel Insolvency Fund, financed by contributions from package travel organisers, which will be operational as of 1 November 2021.

Germany notified to the Commission a €750 million State guarantee to ensure that sufficient resources are available for the refund of consumers for cancelled travel services, in cases where package travel organisers become insolvent and available assets in the Fund are insufficient to cover the consumer refunds.

Under the scheme, the aid will take the form of a State guarantee on future loans that may be taken out by the Fund in case of insolvency of participating package travel organisers. The aid will cover 100% of the loan amounts, on condition that the overall amount guaranteed does not exceed the target capital of €750 million minus the assets of the Fund and the collaterals provided by the package travel organisers.

The Commission assessed the measure under EU State aid rules, and in particular Article 107(3)(b) of the Treaty on the Functioning of the European Union (TFEU), which enables the Commission to approve State aid measures implemented by Member States to remedy a serious disturbance in the economy of a Member State.

The Commission found that the scheme notified by Germany is compatible with the principles set out in the TFEU. In particular, (i) the guarantee fee premiums to be paid by the Fund are in line with those set in the Temporary Framework; (ii) the guarantee is limited in time, i.e. until 31 October 2027 at the latest; and (iii) the guarantee will not exceed 100% of the loan amounts.

The Commission concluded that the measure is necessary, appropriate and proportionate to remedy a serious disturbance in the German economy, in line with Article 107(3)(b) TFEU and the general principles set out in the Temporary Framework.

On this basis, the Commission approved the measure under EU State aid rules.

 

Comments are closed.