EU probes 3.2 billion euro restructuring aid for airline TAP

By Foo Yun Chee

BRUSSELS (Reuters) -EU competition regulators will investigate whether a 3.2-billion-euro ($3.8 billion) restructuring plan for ailing Portuguese airline TAP is proportionate and complies with EU state aid rules, the European Commission said on Friday.

The overhaul plan involves around 2,000 job cuts by 2022, pay cuts of up to 25%, a reduced fleet and the sale of non-core assets.

The EU watchdog said it would investigate whether TAP or market operators would provide a sufficient contribution to the restructuring cost and also whether measures would be adopted to offset any negative impact on competition.

The Commission also re-adopted an earlier decision clearing a 1.2-billion-euro rescue loan for TAP after Europe's second-highest court in May annulled its approval because regulators had not provided adequate reasons.

Rival Ryanair had challenged the TAP rescue loan, which forms part of the 3.2 billion euro restructuring aid and will be converted into equity.

Portugal's infrastructure ministry said the EU probe would focus on assessing the compatibility of the aid with the rules for supporting companies in difficulty.

"This is an important step for the European Commission to make more solid, namely from a legal point of view, the solutions that may be found to ensure the future viability of TAP without dependence on public resources," the ministry said in a statement.

($1 = 0.8464 euros)

(Reporting by Foo Yun Chee; Editing by Toby Chopra)