The European Commission finds operating aid to the Lappeenranta Airport to be compatible with the internal market

By the decision handed down in the Laappeenranta Airport case[1], the European Commission has ruled that the operating aid granted by the Finnish authorities to the airport manager fulfilled the compatibility conditions for operating aid set out by the 2014 Aviation Guidelines[2]. Therefore, the Commission approved the financial support to the Laappeenranta Airport.

The objected national measure
The Laappeenranta Airport is a small publicly owned airport in South-Eastern Finland near the Russian border. After the cease of the previous scheduled flights, the airport is currently served only by charter flights with a volume of annual passengers of roughly 35,000. In 2016 the Finnish authorities submitted a business plan for the development of the airport over the 2016-2024 period. To this end, Finland granted operating aid to the Laappeenranta Airport. The awarded public fund was limited to 80% of the initial operating funding gap for the 2016-2019 period. The Finnish authorities also committed to limit the amount of the public aid to be granted to the airport to the actual operating funding gap.
The aid was notified to the Commission that opened an Article 107 TFEU investigation into it.

The decision of the Commission
The Commission held that the financial support granted to the Laappeenranta Airport constituted state aid within the meaning of Article 107 TFEU. Then, it considered whether the public aid could be declared compatible with the internal market on the basis of the compatibility conditions for operating aid that were introduced by the 2014 Aviation Guidelines. The compatibility conditions can be summarized as follows: a) contribution to a well-defined objective of common interest; b) need for State intervention; c) appropriateness of the aid measure; d) incentive effect; d) proportionality of the aid; e) avoidance of undue effects on competition and trade between Member States; g) transparency of aid.

a) Contribution to a well-defined objective of common interest
The Commission accepted the Finland’s submission that the operating aid in question contributed to common interest objectives by ensuring the continued operation of the Laappeenranta Airport. Given that there is no other airport in the catchment area of the aided airport, the operating aid should improve the accessibility to the area surrounding the Laappeenranta Airport, thereby stimulating regional development and the creation of new jobs.

b) Need for State intervention
The business plan submitted by Finland clearly shows the inability of the airport to cover its operating costs until 2019, which makes public aid necessary. Due to its small size, the airport could not cover its operating costs without public funding.

c) Appropriateness of the aid measure
Because of its financial situation, the Laappeenranta Airport is unlikely to obtain and reimburse loans to cover its operating funding gap. For operating aid to comply with the appropriateness compatibility condition, the aid amount must be established ex ante as a fixed sum covering the expected operating funding gap. The objected national measure satisfied this requirement determining the maximum aid amount on the basis of the initial operating funding gap for the 2016-2019 period.

d) Incentive effect
The business plan submitted by Finland indicates that in the absence of the public aid the airport would be unable to maintain its current level of operation. Then, the Commission took the view that without the aid the airport would have close down.

e) Proportionality of the aid.
The 2014 Aviation Guidelines say that for airports with less than 700,000 passengers per year it  would be difficult to fully cover their operating costs. Accordingly, the maximum permissible aid to these airport is determined in 80% of the initial operating funding gap of the airport during the first 5 years of the 10-year transitional period in the 2014 Aviation Guidelines. Finland confirmed that the amount of public aid granted to , the Laappeenranta Airport did not exceed this threshold.

f) No distortion of competition and trade
Crucially, the catchment area of the aided airport did not comprise any other airports. Hence, the operating aid in question is unlikely to negatively affect competition and trade in the internal markets as there is no risk that aid would result in the duplication of unviable airport facilities.

Final remarks
Arguably, the most relevant innovation introduced by the 2014 Aviation Guidelines is the possibility for national authorities to have operating aid granted to airport approved by the aid in question satisfies a set of compatibility conditions. In Laappeenranta Airport the operating aid under scrutiny met all these conditions. This appears to be a clear-cut case, considering the isolated location of the aided airport, whose catchment area does not encompass any other airports, and its very small size and air traffic. As a result, the operating would be unlikely to fund the duplication of unprofitable airport facilities that may distort competition and trade.







[1] European Commission, Case SA.44097 (2016/N)- Finland-Operating aid to Laappeeranta Airport.
[2] Commission guidelines on State aid to airport and airlines, OJ C 99, 04.04.2014, p. 3.

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