EU orders Germanwings, Ryanair and TUIfly to repay large sums for subsidies wrongly obtained

In February 2014 the European Commission adopted new guidelines on how Member States can financially support airports and airlines in line with EU state aid rules. The aim is to ensure fair competition. The aim is to avoid overcapacity and the duplication of unprofitable airports, or support for an airport that is too close to another. Aid is allowed if there is seen to be a genuine need for accessibility by air to a region, to help economic growth. Many low cost airlines have derived benefit from subsidies to airports, and now a number are having to make repayments for money they should not have obtained. The EU has confirmed that Germanwings must pay €1.2 million, Ryanair €500,000 and TUIfly €200,000 that they got from Germany’s Zweibruecken airport, in the form of lower fees.  Zweibruecken is only 25 miles from Saarbruecken airport.  Brussels Airlines separately faces an EU probe into €19 million that airlines at Belgium’s Zaventem airport received from the state to fund operating costs from 2014 to 2016. And there are other cases. Belgium’s Charleroi airport must give back €6 million in aid.
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Germanwings, Ryanair and TUIfly Told to Repay Airport Aid

Deutsche Lufthansa’s Germanwings, Ryanair Holdings Plc and TUI’s TUIfly were ordered by European Union regulators to repay illegal subsidies they got from Germany’s Zweibruecken airport in the form of lower fees.

Germanwings must pay €1.2 million, Ryanair €500,000 and TUIfly €200,000, the EU said in an e-mailed statement today.

Lufthansa affiliate Brussels Airlines NV separately faces an EU probe into €19 million that airlines at Belgium’s Zaventem airport received from the state to fund operating costs from 2014 to 2016.

“Duplicating unprofitable airport infrastructure or unduly favoring certain airlines wastes taxpayers’ money and distorts competition,” said Joaquin Almunia, the EU’s anti-trust chief. Governments can support airports to improve transport links in a region or help economic growth, he said.

The EU has been investigating subsidies to several regional airports across Europe that may have benefited Ryanair and rival carriers. The Brussels-based European Commission must approve large state subsidies to airports and airlines. The commission criticized as “a waste of public money” aid for Zweibruecken given that it is only 40 kilometers (25 miles) away from Saarbruecken airport.

Germanwings and Meridiana Fly SpA must also repay aid granted to them by Sardinia’s Alghero airport, the EU said, without saying how much money was involved.

Germanwings spokesman Heinz-Joachim Schoettes said the company would examine the EU decision. TUIfly spokesman Jan Hillrichs said the funds were used to advertise Zweibruecken airport and the company’s services in the region, according to the contract.

Charleroi Airport

Belgium’s Charleroi airport must give back €6 million  in aid, the EU said, ending a probe it started 12 years ago into aid for Ryanair to start routes at the airport, 56 kilometers south of the Belgian capital Brussels.

The EU said most of the aid was justified because it had helped the area’s economy grow. Belgium must demand a higher concession fee from the airport in future, the EU said.

Ryanair didn’t receive subsidies at airports in Charleroi, Germany’s Saarbruecken, Frankfurt-Hahn and Sweden’s Vasteras because it paid above-cost prices for fees, the EU said.

Ryanair legal director Juliusz Komorek said today’s decisions showed that Ryanair’s agreements with the four airports didn’t involve illegal state aid, following EU decisions on seven other airports. Ryanair stopped flying from Zweibruecken in 2009, the company said in an e-mailed statement.

Low-Cost Pioneer

Vincent Grassa, a spokesman for Charleroi airport, declined to comment because its management team is studying the case. Brussels Zaventem airport representatives also declined to comment because it didn’t directly receive the funding the EU is probing.

Regulators approved state funding for Frankfurt-Hahn, Saarbruecken, Alghero and Vasteras.

Ryanair, which helped pioneer the low-cost business model in Europe, reduces costs partly by operating from smaller airports. Before 1997, when Ryanair started its first route to Dublin, Charleroi airport had about 30,000 passengers a year, Ryanair said. It had 6.8 million passengers last year, the airport said on its website.

To contact the reporter on this story: Aoife White in Brussels at awhite62@bloomberg.net

http://www.bloomberg.com/news/2014-10-01/germanwings-ryanair-and-tuifly-told-by-eu-to-repay-airport-aid.html

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Transport & Environment (T&E) have produced a short (and easy to read) briefing on state aid for airports and airlines.

It is at     State Aid for Airports and Airlines


Earlier:

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Consultation on rules for European Commission state aid to airports and airlines

July 2013
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.
http://www.airportwatch.org.uk/?p=17424..


 

European Commission Commission adopts new guidelines for state aid to airports and airlines

20.2.2014
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.

 http://www.airportwatch.org.uk/?p=20007


 

European Commission to clarify state aid to airports – making ineligible those with over 3 million passengers per year

13.2.2014
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.
http://www.airportwatch.org.uk/?p=19947


Bankrupt Alitalia to get € millions of state aid from Italy’s state postal service

10.10.2013

The near-bankrupt Italian airline Alitalia is to receive an emergency capital injection from Italy’s state-owned post office. Italy’s government did not say how much Poste Italiane SpA, the Italian postal service, would be investing – but it might be up to €100 million.  The Italian government hope the link between  Poste Italiane and Alitalia would lead to a synergy of logistics, in passengers and cargo.  Italy’s civil aviation authority had warned just hours earlier that the airline risked being grounded if new financing was not found urgently. Alitalia needs some €455 million to stay afloat. The Italian government justified what amounted to state intervention saying Alitalia was considered a national asset.   It filed for bankruptcy in August, as high staff costs, industrial relations issues and surging oil prices further dented its finances. It is being suggested that Alitalia might be able to merge with Air France-KLM to help get it out of its financial problems. Alitalia went bankrupt in 2008, and was re-launched in 2009.

http://www.airportwatch.org.uk/?p=17904

 

…. and there are many more  ………..

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