Let me start with the widest possible picture. The contribution of aviation to man-made climate change stands at 5%
. The Commission says that in Europe the sector adds €140 billion to GDP and 2.3 million jobs, both of which represent 1% of the EU total. The takeaway: aviation is five times more climate intensive than the average economic activity in Europe. Still, the industry is fighting like mad, in unison with foreign airlines and governments, to get out of the emissions trading system. Moreover, there is still no tax on fuel and no VAT on tickets – exemptions worth €40 billion a year
On top of all this, the Commission has allowed an almighty, and entirely avoidable, mess of subsidised regional airports to sprout up. Many of the over 400 regional airports in the EU are desperately trying to woo low-cost carriers using taxpayers’ money. Some are barely half an hour’s drive apart. Elephant Ryanair is adept at playing the small airport mice off against each other and using their services for (almost) nothing. This makes rock-bottom fares possible, the purchase of which is the cheapest and fastest way to heat the planet. Traffic from small airports is exploding: 130% growth over the past decade, versus ‘only’ 29% for the larger airports.
Of course, all this makes a mockery of fair competition in the aviation market.
How could this happen? Well, we have had the equivalent of butchers approving their own meat: until a few years’ back, the Commission’s transport department was in charge of policing state aid. It is in these people’s job description to care more about airports than about taxpayers. The result has been that, despite operating aid in principle being illegal, since 2005 only four cases have been declared illegal with repayments ordered. Dozens of cases have been approved and an estimated 50 or so have been left entirely undecided. And this is the tip of the iceberg, the known cases; it’s anyone’s guess how big the underwater bit is.
Late 2009, the Commission’s competition department finally took over. But for four long years they did nothing either; four years during which subsidies became even more entrenched. And now the word is out. Airports with under 700,000 passengers can be 80% subsidised with a review in five years. For airports with between 700,000 and 3 million, the rate is 50% – but in 10 years’ time they have to be phased out. That is 2023 – two generations of politicians from now.
To add insult to injury, the Commission has said that it will decide the mountain of some 60 undecided cases on the basis of the (much more lenient) new rules. The message: ‘Don’t worry about cheating; if enough of you do it, we change the rules.’
For the short term, the only way to insert some credibility in the policy is to now start policing it vigorously. We will surely watch the Commission’s decisions closely.
Looking forward, the US offers some pointers
for a better solution by making the industry pay for subsidies to smaller airports. There is no better way to make clear that free lunches don’t exist.
The idea of people flying Ryanair with other people’s money simply does not belong to the 21st century. It’s time for Europe to get that.
European Commission Commission adopts new guidelines for state aid to airports and airlines
The European Commission has now adopted new guidelines on how Member States can financially support airports and airlines in line with EU state aid rules. The EC says the guidelines are “aimed at ensuring good connections between regions and the mobility of European citizens, while minimising distortions of competition in the Single Market.” The aim is to ensure fair competition for flag carriers down to low-cost airlines, from regional airports to major hub airports and avoid overcapacity and the duplication of unprofitable airports. Aid is allowed if there is seen to be a genuine need for accessibility by air to a region. Operating aid to regional airports (with less than 3 million passengers a year) will be allowed for a transitional period of 10 years under certain conditions, in order to give airports time to adjust their business model. Airports will less than 700 000 passengers a year get more favourable treatment. Start-up aid to airlines to launch a new air route is permitted provided it remains limited in time. The formal adoption of the new guidelines in is expected by March 2014.
European Commission to clarify state aid to airports – making ineligible those with over 3 million passengers per year
Date added: February 17, 2014
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.
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Economist: Proposed EU rules on state aid aim to stem the flow of money from taxpayers’ pockets to Ryanair
Article in the Economist gives a useful set of insights into airport subsidies at small airports across Europe, which are now due to be reduced after consultation. The Economist says Europe has over 450 airports, mostly small and loss-making. About 85% are publicly owned. Local politicians’ enthusiastic sponsorship of airports, to boost regional economies, has in turn contributed to the rapid growth of low-cost airlines, since the airports have used their subsidies to offer cheap landing fees and other sweeteners to persuade the cheap carriers to fly there. Ryanair is the sole or dominant carrier at many of the airports under investigation, and has been getting effective subsidies of as much as €11 per passenger. There may be as much as €3 billion of taxpayers’ money given in EU-approved aid to small airports each year, and more that is not sanctioned. EU laws ban state aid if it seriously distorts markets and though there have been many investigations into this, none has yet reached a conclusion. Some smaller airports will find it hard to pay Ryanair and other budget airlines enough to keep them flying there. With tighter rules, some of the 80-odd European airports with under 1m passengers will be at risk of closing.
Consultation on rules for European Commission state aid to airports and airlines
Under the European Commission, state aid is granted to various sectors of the economy. However, a key issue is the impact it has on distorting the market, and giving an unfair advantage to those companies or organisations receiving it. Airports and airlines are one sector that receives large amounts of state aid through the EC. The Commission’s DG Competition is tasked with overseeing state aid. There have been earlier sets of guidelines on state aid to airports and airlines, but there is a current consultation – due to end on 25th September (which may be extended). The exact amount of state aid given to the aviation sector is somewhat shady, but is at least €3 billion, for those subsidies that are fully notified.There have been widely publicised cases, such as that of Ryanair at Charleroi airport. Transport & Environment have produced an easy-to-read briefing on the state aid situation, and people are urged to respond to the consultation. The state aid gives the aviation industry unmerited subsidy, and helps to encourage very high carbon travel.