European Commission to clarify state aid to airports – making ineligible those with over 3 million passengers per year
Across Europe, State aid to small regional airports has until now been ambiguously regulated by measures that date from 1994 and 2005. Much of the aid has probably been illegal, because it has been operational aid that is used to subsidise airport fees for airlines. These savings are then passed on to customers – subsidising their flights. Budget airlines such as Ryanair have taken advantage of this situation and made a lot of profit on it, as well as encouraging artificially cheap air travel. The European Commission is now to produce new guidelines on state aid to airports and airlines, to be publicised on 19th February. The Commission has 50 pending cases of suspected violations of state aid rules, but none has been acted upon for fear of forcing small airports to close. Large airports and airlines have complained that they are being put at a disadvantage by subsidies to their smaller competitors. It is likely that the new guidelines will only allow state aid for 10 years from now, and introduce a threshold so airports with over 3 million passengers per year are not eligible. Environmental campaigners are angry that the guidelines will legitimise a previously illegal practice. It will cause a growth in air travel, contrary to the aim stated by the EU’s white paper on transport of moving passengers from air to rail.
Commission to clarify state aid to airports
‘Brussels South’ airport in Charleroi will no longer be allowed to receive state aid under guidelines to be issued by the European Commission on Wednesday (19 February).
State aid to small regional airports has until now been ambiguously regulated by measures that date from 1994 and 2005. Much of the aid has probably been illegal, because it has been operational aid that is used to subsidise airport fees for airlines. These savings are then passed on to customers. Budget airlines such as Ryanair have taken advantage of this situation.
The Commission has 50 pending cases of such suspected violations of state aid rules, but none of them has been acted upon for fear of forcing small airports to close. Large airports and airlines have complained that they are being put at a disadvantage by subsidies to their competitors.
According to a draft seen by European Voice, the Commission is planning to allow operational state aid which may have been previously illegal, but only for up to ten years. This ten-year timeframe would begin now, not from when the state aid began. The draft appears to indicate that the previous aid would be given an ‘amnesty’, and the Commission would apply the new rules.
The news will be welcomed by some regional airports, but not all. The guidelines would also introduce a threshold saying that airports with more than three million passengers per year cannot receive state aid. This would rule out Charleroi, which has 6.5 million per year.
Environmental campaigners are angry that the guidelines will legitimise a previously illegal practice. They say it will cause a growth in air travel, contrary to the aim stated by the EU’s white paper on transport of moving passengers from air to rail. “The Commission openly acknowledges that operating aid is the most distortive form of aid,” said Bill Hemmings, aviation manager at green transport group T&E. “This would not only keep the status quo of billions of euros in public money to support loss-making airports and routes, but even to sanction past illegal aid practices.”
But the Airports Council International Europe (ACI) says that airports need the help. At an event on airport state aid last month, ACI president Arnaud Feist said that while the group welcomes the increased clarity, there are concerns about the impact of the rules on Europe’s remote regions. “Many MEPs share these concerns, and they have publicly called on [Commission] President [José Manuel] Barroso not to cause a shutdown in Europe by imposing unrealistic limitations on the financing of smaller airports,” he said. “The implications go beyond the aviation sector.”
THE chief executive of Edinburgh Airport has questioned a decision to subsidise flights between Dundee and London with public money – claiming the move has “implications for fair competition”.
In an open letter, Gordon Dewar called on the Dundee City Council leader to justify the use of taxpayers’ money to retain routes to Stansted Airport – branded “vital” by the authority – when Edinburgh has 44 daily flights to the English capital.
Describing Dundee Airport as “publicly owned and loss making”, Mr Dewar said the council money would be better spent supporting a direct coach service to Edinburgh Airport.
It has been reported Dundee City Council will pay half the cost of running Dundee Airport’s new stand-in service to Stansted until a new operator can take over later this year. But Dundee council chiefs are tight-lipped about the value of their investment due to “commercial confidentiality”.
In his letter, Mr Dewar said: “From an economic appraisal perspective [Dundee City Council leader Ken Guild] would appear to be considering investing taxpayers’ money in saving a maximum of one hour’s access time but offering two frequencies a day to a single airport versus 44 frequencies a day to a choice of six London airports.
“Saving one hour’s drive at the Dundee end of the journey may therefore cost hours of waiting time in London waiting for a very infrequent service.”
He said he would be interested to hear the “economic justification” for the “saving between 20 and 60 minutes per passenger valued at something of the order of £2 per trip”.
Mr Dewar called for a meeting to discuss the issue and the “implications for fair competition and private investment in infrastructure for Scotland”.
Mr Guild said the London route had played an important role in the “ongoing regeneration of Dundee”.
He said: “We are keen that this service continues for the benefit of the city.”
Aviation expert Laurie Price, from Mott MacDonald consultants, expressed sympathy for Dundee’s position, arguing that, by Mr Dewar’s reasoning, Edinburgh Airport operations should be transferred to Glasgow.
He said: “As a private company, of course Gordon Dewar doesn’t want this but equally why is the tram link, being developed with public money, going out to the airport? How much public money went into that?
“I would imagine the subsidy going in from Dundee for air services from London is infinitely less than the public expenditure on the Edinburgh tram.”
Transport Scotland took a very political stance, insisting it will support both airports.
“We are confident there is a place for services from Dundee,” a spokesman said. “In Scotland’s increasingly competitive aviation sector we want to secure a future for the airport.”
Dear Councillor Guild,
I noted with interest the recent media coverage around the creation of a new route between Dundee and Stansted airports. In particular, I was interested in the assertion that Dundee City Council was devoting funds to making the route viable.
I have to say that given the significant travel options and minimal travel time between Dundee and the airports in Edinburgh and Aberdeen, we were surprised with the announcement the description of the route as ‘vital’.
I would seek clarification on the application of a ‘development area’ in this case and the double subsidy that a route subsidy represents when operating out of a publically owned and loss making airport.
Can I ask you to review your decision and meet with me to explore getting better connections between Dundee and Edinburgh Airport thereby using public funds more effectively?…
…Perhaps a better response to improving connectivity and accessibility through investment would be to consider supporting a direct coach service to Edinburgh Airport or perhaps seeking a route change from the existing Dundee-Edinburgh service.
It is my belief, that the cost of subsidy should be measured against the alleged ‘benefit’ of avoiding a maximum of one hour’s worth of travel, whether that is by rail or road…
…I would very much appreciate the opportunity to discuss this issue with you further where we can perhaps deal with the other issues of distortions of markets and implications for fair competition and private investment in infrastructure for Scotland.