Corporate Governance Failure in Spain’s COVID State Aid – The Plus Ultra Case

Corporate governance is easiest when time is abundant, information is symmetrical and incentives are aligned. It becomes most revealing under stress: when urgency replaces deliberation, when political pressure crowds out professional scepticism, and when procedural shortcuts are justified as moral necessities. Crisis governance is therefore not a marginal topic in corporate oversight; it is its ultimate stress test.

The COVID-19 pandemic confronted governments and enterprises with exactly such a test. Across Europe, emergency state aid programmes were rolled out at unprecedented speed and scale. Billions of euros were mobilised to stabilise airlines, manufacturers, transport companies and critical infrastructure providers. The underlying logic was defensible and, in many cases, unavoidable: preserve economic continuity, employment and strategic capacity during an exogenous shock.

Yet emergency does not suspend governance. On the contrary, it heightens the need for it.

This cornerstone article examines how crisis conditions can expose latent weaknesses in governance systems by analysing the Plus Ultra Líneas Aéreas case in Spain. The case has been reported extensively in Spanish investigative media and subsequently picked up by international outlets. It involves the interaction between a financially fragile airline, private bridge financing with unusual conditions, and a large public rescue package administered by the Spanish state holding entity SEPI. According to public reporting, parts of the emergency funding appear to have flowed through complex financial structures that have since drawn the attention of prosecutors in multiple jurisdictions.

This article is not about determining guilt or innocence. Courts will do that. The governance question is different and more fundamental:
How could such a structure pass through corporate, shareholder and state oversight mechanisms during an emergency?

That question matters far beyond Spain. Similar emergency programmes were launched across Europe, often using comparable institutional architectures. The Plus Ultra case therefore functions as a governance laboratory: it allows us to observe how decision-making, controls, incentives and accountability behave when speed is prioritised over structure.

2. Crisis Governance: Speed Is Not a Substitute for Control

In governance literature, crises are often described using metaphors from engineering. A well-designed system is not one that never experiences stress, but one that deforms in predictable ways without collapsing. Emergency funding programmes are precisely such deformation zones. They test whether controls are resilient or merely cosmetic.

A recurring misconception in crisis management is the supposed trade-off between speed and control. This dichotomy is attractive politically but flawed analytically. Controls do not inherently slow decision-making; poorly designed controls do. Strong governance frameworks distinguish between essential safeguards and bureaucratic friction. In crises, the latter can and should be removed — the former cannot.

The key governance challenge is therefore not “how fast can we act?”, but “which controls are non-negotiable, regardless of time pressure?”

In corporate environments, boards typically insist on at least four non-negotiables, even in emergencies:

Clarity of ownership and beneficial interests
Transparency of funding structures and repayment mechanics
Alignment of incentives between stakeholders
Documented accountability for key decisions

Public-sector rescue programs should, in principle, apply similar standards. When they do not, emergency funding risks becoming a transmission belt between public balance sheets and private opportunism.

Read more on Corporate governance of state-owned enterprises from the OECD.

3. Spain’s COVID State Aid Architecture: SEPI as Governance Gatekeeper

To understand the governance implications of the Plus Ultra case, it is necessary to examine the institutional design of Spain’s emergency aid mechanism.

Spain channelled a significant portion of its COVID-related corporate support through SEPI (Sociedad Estatal de Participaciones Industriales), the state holding company responsible for managing government shareholdings and strategic investments. SEPI’s mandate during the pandemic was expanded to include the administration of a large rescue fund aimed at companies deemed strategically important or systemically relevant.

From a governance perspective, SEPI occupies an ambiguous position:

It is not a traditional regulator.
It is not a commercial investor in the private equity sense.
It operates at the intersection of politics, administration and corporate finance.

This hybrid role creates inherent tensions. On the one hand, SEPI is expected to act swiftly, supporting employment and national economic interests. On the other, it is expected to behave with the discipline of a long-term shareholder, safeguarding public funds and ensuring responsible governance at beneficiary companies.

Hybrid institutions require exceptionally clear governance frameworks, because they cannot rely on market discipline alone. In normal circumstances, SEPI’s processes involve layered review, inter-ministerial coordination and extensive documentation. During COVID, many of these processes were compressed.

Compression is not inherently problematic — unless it becomes opacity.

Read more on the European Commission’s State Aid Temporary Framework.

4. Plus Ultra Before the Rescue: Governance Fragility Pre-Crisis

A recurring theme in post-crisis analyses is that emergencies rarely create governance problems from scratch. More often, they amplify existing weaknesses.

Publicly available information suggests that Plus Ultra entered the pandemic in a vulnerable position. The airline was relatively small, operated in a competitive and politically sensitive market, and faced structural profitability challenges even before travel restrictions brought aviation to a near standstill.

From a governance standpoint, three characteristics are relevant:

Concentrated ownership structures
Concentrated ownership is not inherently problematic, but it increases reliance on a limited number of decision-makers and funding sources.
Limited financial resilience
Companies with thin capital buffers are structurally more exposed to emergency financing arrangements that prioritise short-term survival over long-term governance quality.
Dependence on external stakeholders
Airlines are uniquely exposed to state actors, both as regulators and as potential rescuers. This dual dependency complicates governance roles.

These factors do not imply misconduct. They do, however, suggest that any emergency funding arrangement should have triggered heightened scrutiny, not relaxed oversight.

Read more from the New Zealand Controller and Auditor-General: Getting it right: Supporting integrity in emergency procurement.

5. Bridge Financing and Public Money: A Governance Collision

One of the most instructive governance dimensions of the Plus Ultra case concerns the interaction between private bridge financing and anticipated public rescue funds.

According to investigative reporting, Plus Ultra received private loans during the period preceding the disbursement of state aid. These loans reportedly carried high interest rates and contained clauses that linked repayment directly to the arrival of public funds.

From a governance perspective, this structure raises fundamental questions:

Who bears the risk, and who captures the upside?
Were incentives aligned with the long-term viability of the company, or with short-term extraction?
Did approving authorities fully understand the economic substance of these arrangements?

In corporate governance, such structures are not uncommon — but they are typically subject to strict scrutiny by boards and audit committees. The reason is simple: when public or shareholder funds are effectively used as collateral for private financing, governance responsibility shifts dramatically.

The core issue is not legality but economic substance. If public funds function, de facto, as a repayment guarantee for private parties, then governance bodies must assess whether this aligns with the public interest they are mandated to protect.

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6. Oversight Under Pressure: When Process Replaces Judgement

A striking feature of many crisis-related governance failures is the reliance on formal compliance as a substitute for substantive judgement. Documents are filed, boxes are ticked, approvals are granted — yet the underlying risk is insufficiently challenged.

Public reporting suggests that SEPI was aware of the existence of private financing arrangements at Plus Ultra at the time of approving the rescue package. If accurate, this raises a classic governance dilemma: knowledge without intervention.

In governance theory, this is often described as the “illusion of control.” Institutions convince themselves that because procedures were followed, outcomes are defensible. Yet governance is not about procedure alone; it is about reasonable assurance that objectives are achieved without unacceptable risk.

Crisis conditions increase the temptation to rely on formalities. Files grow thicker as timelines shrink. Paradoxically, this often reduces true oversight.

7. Beneficial Ownership, AML and the Blind Spot of Emergency Governance

One of the most persistent weaknesses exposed by crisis funding programmes is the treatment of beneficial ownership and anti-money-laundering (AML) controls as procedural hurdles rather than substantive governance safeguards. Under normal circumstances, these controls are already imperfect. Under crisis conditions, they are often compressed to the point of fragility.

Spanish investigative reporting suggests that parts of the financing surrounding Plus Ultra involved entities registered in jurisdictions commonly associated with enhanced transparency risks, including offshore financial centres and banking intermediaries outside the European Union. Again, this observation is not a judgement; offshore structures can be legitimate. The governance question is different: how were these structures assessed, challenged and documented by decision-makers approving public funds?

In well-functioning governance systems, beneficial ownership analysis is not a binary exercise (“identified” versus “not identified”). It is a risk-based assessment that asks deeper questions:

Does the ownership structure materially affect incentives?
Does it introduce opacity inconsistent with public accountability?
Does it create dependency on actors beyond the effective reach of regulators?

During emergencies, these questions are often subordinated to urgency. Yet this is precisely when they matter most. Emergency funding amplifies the consequences of ownership opacity because public funds act as accelerants: they stabilise firms quickly, but they also magnify any governance weaknesses embedded in financial structures.

A recurring governance failure in crisis programmes is the implicit assumption that post-disbursement controls can compensate for weaker ex-ante scrutiny. In practice, this assumption rarely holds. Once funds are disbursed, leverage shifts. Oversight becomes reactive, politically sensitive and legally constrained. Governance, by definition, is strongest before the money flows.

8. State Holding Companies as Crisis Investors: A Structural Tension

The Plus Ultra case also illuminates a broader structural issue: the governance role of state holding companies when they are repurposed as emergency investors.

Entities such as SEPI are designed to operate in a hybrid space. They are expected to behave like disciplined shareholders while simultaneously pursuing public policy objectives. In stable environments, this dual mandate can be managed through clear governance frameworks and long-term investment horizons. In crises, the tension becomes acute.

Three governance risks emerge when state holding companies administer emergency funds:

8.1 Mandate Dilution

During emergencies, strategic clarity often gives way to political necessity. The question “should this company be rescued?” is replaced by “can we afford not to rescue it?” This reframing weakens the evaluative role of governance bodies.

8.2 Accountability Diffusion

Hybrid institutions operate at arm’s length from ministries, yet remain politically exposed. Decisions are formally technical but substantively political. When outcomes later attract scrutiny, responsibility is often dispersed across agencies, committees and legal frameworks — reducing individual accountability.

8.3 Shareholder Illusion

State holding companies are often described as “shareholders”. Yet unlike private shareholders, they rarely exercise exit options, pricing discipline or market signalling. Their governance tools are therefore limited to internal controls and contractual safeguards — precisely the instruments most strained under crisis conditions.

The governance lesson is uncomfortable but necessary: state holding companies are not naturally suited to crisis deployment unless their governance frameworks are explicitly redesigned for emergency use. Without such redesign, they risk becoming conduits rather than gatekeepers.

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9. The Problem of “Formal Approval”: When Process Masks Substance

A central theme emerging from the Plus Ultra case is the distinction between formal approval and substantive oversight. Public reporting indicates that relevant authorities were aware of private financing arrangements and nonetheless approved the rescue package.

From a governance perspective, awareness alone is insufficient. Effective oversight requires challenge, escalation and documented rationale. Merely noting the existence of complex financing structures does not address their implications.

This phenomenon is not unique to Spain. In governance failures across jurisdictions, a familiar pattern emerges:

Information is disclosed.
Information is acknowledged.
Information is not meaningfully acted upon.

The result is what governance scholars describe as procedural compliance without fiduciary substance. Decision-makers protect themselves through documentation, but the underlying risk remains unmitigated.

In corporate boards, this pattern is often corrected through the active role of audit committees, independent directors and external advisers. In public-sector rescue programmes, equivalent counterweights are frequently weaker or absent.

10. Emergency Funding and Incentive Misalignment

One of the most underappreciated governance risks in crisis funding is incentive inversion. Emergency programmes are designed to stabilise companies. Yet poorly designed funding structures can incentivise behaviour that undermines long-term viability.

In the Plus Ultra case, reported financing arrangements linked private repayment to the timing of public disbursements. From an incentive perspective, such arrangements deserve scrutiny because they may:

Prioritise short-term cash extraction over operational recovery
Reduce incentives for genuine restructuring
Shift risk asymmetrically onto public stakeholders

Good governance requires alignment between capital providers, management and societal objectives. Crisis funding disrupts this alignment by introducing a non-commercial actor — the state — whose objectives extend beyond financial return.

When governance frameworks fail to realign incentives explicitly, opportunistic behaviour becomes rational, even if not illegal. This is the uncomfortable truth of governance failures: they are often designed, not exploited.

11. Transparency After the Fact: The Limits of Ex-Post Accountability

A common defence of emergency programmes is that transparency and accountability can be restored after the crisis subsides. Parliamentary inquiries, audits and court proceedings are expected to correct any excesses.

From a governance standpoint, this reliance on ex-post accountability is deeply flawed.

Once funds have flowed, options narrow. Contracts are executed, companies stabilised or restructured, and political capital expended. Investigations may uncover weaknesses, but they rarely reverse outcomes. Governance is therefore not primarily about punishment; it is about prevention.

The Plus Ultra case demonstrates the limits of after-the-fact scrutiny. Investigations may clarify what happened, but they cannot retroactively impose governance discipline at the moment when it mattered most: the approval of the rescue itself.

12. What Boards Should Learn: Crisis Is Not an Excuse, It Is a Test

For corporate boards and supervisory bodies, the Plus Ultra case reinforces a lesson that has surfaced repeatedly across crises: governance relevance increases, not decreases, under pressure.

Boards often assume that emergency funding is primarily a shareholder or state matter, external to their fiduciary remit. This assumption is flawed. Once public funds become a material component of a company’s capital structure, governance obligations expand rather than contract.

Three board-level lessons stand out.

First, economic substance must override contractual form. Financing arrangements that appear legal and disclosed can still undermine governance objectives if their incentives conflict with long-term viability. Boards must ask not only whether structures are permissible, but whether they are appropriate given the source and purpose of funds.

Second, emergency liquidity must not bypass oversight architecture. Crisis committees, accelerated approvals and delegated authorities are legitimate tools — but only if they remain embedded within a clear accountability framework. Informality is not agility; it is governance erosion.

Third, boards must resist the comfort of collective inevitability. The argument that “there was no alternative” is often a post-hoc rationalisation rather than a contemporaneous assessment. Good governance demands documented consideration of alternatives, even if they are ultimately rejected.

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13. Audit Committees: The Last Line of Defence in Crisis Financing

If boards are the strategic conscience of governance, audit committees are its nervous system. In emergency funding contexts, their role becomes pivotal.

The Plus Ultra case illustrates how financial complexity can overwhelm traditional control functions, particularly when time pressure limits scrutiny. Audit committees should therefore recalibrate their focus during crises along three dimensions.

First, fund flow transparency must be elevated to a primary risk. Emergency funding introduces accelerated cash movements, layered intermediaries and conditional repayment mechanisms. Audit committees should insist on real-time visibility, not retrospective reconciliation.

Second, beneficial ownership and counterparty risk assessments should be treated as governance issues, not compliance exercises. When public money is involved, reputational and political risks amplify financial risks. Audit committees are uniquely positioned to connect these dimensions.

Third, audit committees must demand explicit documentation of judgement calls. Crises force trade-offs. Those trade-offs must be recorded, including dissenting views. This is not defensive bureaucracy; it is institutional memory.

The absence of such documentation is rarely interpreted charitably in hindsight.

14. Policymakers and State Actors: Designing for the Next Emergency

While corporate governance failures often attract attention, the Plus Ultra case also exposes the need for better governance design at the state level.

Emergency funding programmes should not be improvised overlays on existing institutions. They require bespoke governance architectures, designed explicitly for crisis conditions.

Four design principles emerge.

First, ex-ante safeguards must be non-negotiable. Speed can justify simplified procedures, but not the suspension of core controls such as ownership transparency, incentive alignment and conflict-of-interest assessment.

Second, hybrid institutions require explicit crisis mandates. State holding companies like SEPI should operate under predefined emergency governance frameworks, including enhanced disclosure, independent review mechanisms and sunset clauses.

Third, political accountability must be structured, not deferred. Parliamentary oversight should be embedded early, not retrofitted through inquiries after funds have been disbursed.

Fourth, policymakers must accept a difficult truth: not every company can or should be rescued. Governance frameworks lose credibility when strategic importance is defined ex post to justify decisions already taken.

15. Comparative Perspective: Why This Is Not a Spanish Anomaly

It would be tempting to frame the Plus Ultra case as a uniquely Spanish governance failure. That would be a mistake.

Across Europe, similar patterns emerged during COVID-related rescue programmes:

Compressed due diligence
Reliance on hybrid institutions
Blurred lines between political urgency and fiduciary discipline
Weak ex-ante incentive alignment

What differentiates cases is not intent, but institutional resilience. Jurisdictions with clearer crisis governance playbooks experienced fewer post-hoc controversies. Those without relied on improvisation — and paid the price in public trust.

The governance challenge, therefore, is not cultural or national. It is structural.

16. ESG, Public Trust and the Cost of Governance Failure

Emergency funding cases increasingly intersect with ESG debates, particularly the “G” dimension that remains the least mature and least standardised.

Public trust is a governance asset. Once eroded, it is costly to rebuild. When taxpayers perceive that emergency funds are diverted through opaque structures or misaligned incentives, legitimacy suffers — regardless of legal outcomes.

The Plus Ultra case underscores that governance failures carry social externalities. They undermine confidence not only in specific institutions, but in crisis responses more broadly. This has long-term implications for democratic resilience and policy effectiveness.

From an ESG perspective, the lesson is clear: governance cannot be treated as a secondary pillar. In crises, it becomes the foundation upon which environmental and social objectives either stand or collapse.

17. Conclusion – Crisis as a Mirror, Not an Excuse

The Plus Ultra case, as reported by Spanish investigative media and examined through a governance lens, is ultimately not about aviation, Spain or COVID. It is about how systems behave when stressed.

Crises do not create governance weaknesses; they reveal them. Emergency funding does not suspend fiduciary responsibility; it intensifies it. Speed does not justify opacity; it demands clarity.

For boards, audit committees and policymakers alike, the central governance lesson is uncomfortable but essential: the moments when governance feels least convenient are precisely the moments when it matters most.

If future crises are inevitable — and they are — then institutional learning from cases such as this is not optional. It is the price of credibility.

Source context

This analysis is based on publicly available reporting, including Spanish investigative journalism referenced by international media. Allegations cited remain subject to ongoing legal processes and are used here exclusively for governance analysis and institutional learning purposes.

FAQ’s – Crisis governance state aid

FAQ 1 — Why is emergency state aid such a high-risk governance environment?

Emergency state aid combines three destabilising forces: urgency, political pressure and weakened market discipline. Decisions must be made quickly, often with incomplete information, while traditional safeguards are compressed. At the same time, public actors replace private capital providers, but without equivalent pricing signals or exit mechanisms.

Governance systems struggle when speed substitutes judgement. Controls designed for stability are forced into acceleration, creating blind spots in ownership transparency, incentive alignment and accountability. This is why crises repeatedly expose governance weaknesses rather than creating new ones.

FAQ 2 — What makes hybrid state institutions especially vulnerable in crises?

Hybrid institutions such as state holding companies operate between politics and markets. In normal conditions, this balance can be managed. In crises, the dual mandate fractures. Political urgency overwhelms shareholder discipline, while accountability becomes diffused across ministries, agencies and committees.

Without a dedicated crisis governance framework, these institutions risk becoming conduits rather than gatekeepers. The problem is structural, not personal: governance tools designed for stability are misapplied under emergency pressure.

FAQ 3 — Is transparency after the fact enough to restore trust?

No. Ex-post transparency cannot substitute for ex-ante governance. Once funds are disbursed, leverage disappears. Investigations may clarify responsibility, but they rarely reverse outcomes or restore legitimacy.

Governance is preventive by nature. Its value lies in decisions not taken, risks not assumed, and structures not approved. Relying on later accountability mechanisms misunderstands the purpose of governance itself.

FAQ 4 — How should boards approach emergency funding decisions?

Boards must elevate economic substance over contractual form. Emergency funding often introduces complex repayment structures and incentive distortions. Boards should insist on understanding who benefits, who bears risk and how public funds alter strategic behaviour.

Crises do not reduce fiduciary duty; they intensify it. Documentation of judgement, alternatives and dissent is essential—not for legal defensiveness, but for institutional integrity.

FAQ 5 — What role should audit committees play during crises?

Audit committees become the central governance nerve. They must focus on fund flow transparency, beneficial ownership risk and real-time monitoring rather than retrospective assurance.

In crises, audit committees should meet more frequently, demand simplified but sharper reporting, and challenge assumptions that would be unacceptable in normal conditions. Their silence is often the most damaging governance failure.

FAQ 6 — What is the broader ESG relevance of crisis governance failures?

Governance failures undermine the credibility of ESG as a whole. When public funds are perceived as vulnerable to opportunism, trust erodes—not just in institutions, but in sustainability narratives more broadly.

The “G” in ESG is not procedural compliance. It is the system that determines whether environmental and social ambitions are credible. Crises expose this reality with uncomfortable clarity.