The latest Commission’s decision on state aid to airports and airlines

The EU regime for state aid to airport and airlines has been recently overhauled with the new guidelines for state aid to airports and airlines the European Commission adopted in February 2014 (the 2014 guidelines; for a short introduction to the new guidelines see here; and for a first comment see here and here). Having said that, It may be worth taking stock and have a quick look at the latest aviation state aid cases made by the Commission over the past few months on the basis of the previous guidelines for state aid to airports (the2005 guidelines).

To start, the Commission assessed the compatibility with the internal market of bilateral agreements concluded by Ryanair with airport managers in the SA.22932 case (Marseille ProvenceAirport) and in the SA.18855 case (AarhusAirport). By these agreements the managers of the airports of Marseille and Aarhus committed to grant Ryanair discounts on airport charges and marketing incentives as well. The Commission found the agreements were compliant with EU law as they met the private operator test. This test rests around the principle of market economy investor on which the Commission relies to ascertain whether public measures  confer undue competitive advantage on the recipient of aid, which is one of the constitutive element of an illegal state aid. In that regard, in the Marseille Provence Airport and Aarhus Airport cases the Commission indeed ruled out that the discounts and incentives awarded by the airport managers to Ryanair amounted to state aid. Indeed, the Commission believed that such measures would have granted by a private operator on the same conditions and in the same circumstances.

In the Marseille Provence Airport case the Commission also considered the different fees applied by the airport manager to airlines using, respectively, the traditional terminal mp1 and the newly built terminal mp2, which was reserved to low cost carriers. The question was whether the lower charges applied to the users of mp2 constituted illegal state aid. The Commission reached the conclusion that they did not. Indeed, the pricing policy implemented by the airport manager complied with the market economy investor principle. The issue of different airport charges was also considered by the Commission in the 2014 guidelines. The Commission made it clear that pricing differentiation is an acceptable practice, provided that it meets the market economy operator test and it abides with the competition provisions and the relevant provisions in sectoral regulation (see para. 62).

Interestingly, the Commission examined bilateral agreements between the airport manager and many airlines in the case SA.15376 (Berlin Schönefeld Airport). None of these agreements, however, have been found to give rise to state aid concerns. On the contrary, the Commission established that the airport manager concluded those agreements on market terms. Indeed, the agreement were likely to improve the financial situation of the airport.

In the same case the Commission examined the tenancy agreement between the airport manager and easyJet whereby the latter was given the right to use some facilities, such as  certain offices and check-in desks. The agreement did not breach EU law as it was based on market terms.    

The Commission also started an in-depth investigation on the marketing agreements between the local authorities and the carriers operating at the airports of Girona-Costa Brava and Reus in the SA.33909 case (Airports of Girona-Costa Brava and Reus). According to the Commission the agreements might distort the internal market in two ways. First, the measures in the above agreements in favour of airlines appeared to be illegal state aid. Second, the agreements might confer undue advantage on the airport managers relieving them by the costs they would have occurred in.

In SA.22932 (Marseille ProvenceAirport), SA.35388 (Gdynia Airport), SA.35388 (Ostrava Airport), SA.37125 (Notre-Dame-des-Landes Airport), SA.36377 (Memmingen Airport) and SA.35378 (Vaasa  Airport) the Commission enquired into whether the investments made by public authorities for the construction of new airport facilities and/or the modernization of existing facilities amounted to illegal state aid.

In Notre-Dame-des-Landes Airport, Memmingen Airport and Vaasa Airport the funded projects had as object the development of regional airports. The granting authorities submitted detailed business plans indicating that the public funds were necessary and that there existed growing demand for air links the existing facilities could not meet. Therefore, the Commission took the view that the public funding was compatible with the internal market.

Alike, in Marseille Provence Airport the public funds granted for the restructuring of the airport, the building of a new terminal for low cost carriers and the development of a freight terminal were not found to involve state aid. Also the € 2,5 million project notified by the Czech authorities in the Ostrava Airport case was cleared by the Commission. The public support was intended to finance the upgrading of taxiway centerline lights and illuminated check points at the airport of Ostrava. The Commission took the view that the notified measure would not distort competition for manifold reasons. First, the facility was open to all users. Second, in the medium term it had satisfactory prospects of profitability. Third, the aid did not exceed the funding gap and was below the maximum allowed aid intensity. Fourth, in the region there were no uncongested airports the competition with which would be distorted by the publicly funded support granted to the airport of Ostrava.  

Instead, in Gdynia Airport the public funding granted by the local authorities of Gdynia and Kosakowo to build a new regional airport was found to be in breach of state aid provisions. The business plan submitted by the local authorities was based on too optimistic assumptions on air transport demand. In the view of the Commission the airport would be unprofitable, considering that in the region there was another airport using only its 60% of capacity. Importantly, Gdynia Airport was the first case in which the Commission banned public funding to airports because it breached state aid rules. Incidentally, the Commission would have made the same decision had it assessed the project under the new Guidelines. In the 2014 Guidelines the Commission stated that the publicly funded airport facility must meet in the medium term the forecasted demand of the airport users in the catchment area of the airport. And the Commission was skeptical about the medium prospect of the profitability of an airport facility when in the catchment area of that airport  there exist another airport not fully using  its capacity (paras. 85-86). Similar circumstances arose in the Gdynia Airport case.

Finally in the case SA.15376 (BerlinSchönefeld Airport) the Commission dealt with the question whether a number of measures taken by FBS, the manager of Berlin Schönefeld Airport, complied with state aid rules. Other than the bilateral agreements with a number of airliners and the agreement with easyJet discussed above, these measures also included a profit and loss transfer agreement between FBS and its subsidiaries. The German authorities launched a massive plan for the re-organization of the airport system of city of Berlin, including, among other things, the building of the new airport of Berlin Brandeburg in the same place as the Schönefeld Airport. The profit and loss transfer agreement provided for the compensation of the losses suffered by the Schönefeld Airport through the revenues generated by the other airports managed by FBS. Neither this arrangement was found to constitute state aid as, in the Commission view, it did not confer any advantage to the Schönefeld Airport. The decision to keep the Schönefeld Airport open during the works to build the new airport made economically sense and complied with the principle of private market investor. In that regard, the Commission took the view that the Berlin Brandeburg airport project would have been negatively affected in many ways by an early closure of the Schönefeld Airport.