EC orders 3 airlines to repay $13.6 million in ‘illegal subsidies’ – including about €2 m by Ryanair

The European Commission (EC) has ruled that airlines Ryanair, Tuifly and HLX must repay €12.7m ($13.8m) paid to them in ‘unfair subsidies’ to Klagenfurt Airport – Austria’s 5th largest commercial airport.  The amounts of ‘incompatible state aid’ the EC refers to are estimated at around €2m for Ryanair, €1.1m for Tuifly, and €9.6m for HLX. In a decision with huge ramifications, the EC ruled that ‘certain airport services and marketing agreements’ between Austria’s small Klagenfurt Airport and its historic airline users Ryanair, HLX and Tuifly have given these carriers ‘an undue advantage’ under EU state aid rules and are therefore technically illegal. (HLX was merged with Hapagfly in 2007 into the ‘then new brand’ Tuifly). The EC said the subsidies amount to state aid to the airlines. “Moreover, the agreements simply reduce the operating costs of the airlines, without contributing to common transport objectives. These agreements therefore distort competition.”  This ruling may reopen the debate on whether subsidies paid to airlines on behalf of small airports should continue to be illegal within the EU marketplace.  There are questions about other subsidies and if the EC will order airlines to repay any other subsidies paid to them to incentivise the use of small airports.  Ryanair says some airports not commercially viable destinations to fly to, without incentives.
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EC orders 3 airlines to repay $13.6m in ‘illegal subsidies’

By DOUG NEWHOUSE


The European Commission (EC) has ruled that airlines Ryanair, Tuifly and HLX must repay €12.7m ($13.8m) paid to them in ‘unfair subsidies’ to Klagenfurt Airport – Austria’s fifth largest commercial airport.

In a major decision with huge ramifications, the European Commission has ruled that ‘certain airport services and marketing agreements’ between Austria’s small Klagenfurt Airport and its historic airline users Ryanair, HLX and Tuifly have given these carriers ‘an undue advantage’ under EU state aid rules and are therefore technically illegal. (HLX was merged with Hapagfly in 2007 into the ‘then new brand’ Tuifly).

In its ruling, the EC said ‘no profit-driven airport manager would have concluded such loss-making agreements, they amount to state aid to the airlines. Moreover, the agreements simply reduce the operating costs of the airlines, without contributing to common transport objectives. These agreements therefore distort competition.’

EC: AMOUNTS TO BE REPAID RUN INTO MILLIONS OF EUROS

The ‘incentives’ issue involving Klagenfurt Airport in Austria now threatens to reopen the great debate on whether subsidies paid to airlines on behalf of small airports should continue to be illegal within the EU marketplace. (Photo credit: Klagenfurt Airport).

The amounts of ‘incompatible state aid’ the EC refers to are estimated at around €2m ($2.1m) for Ryanair, €1.1m ($1.1m) for Tuifly, and a mighty €9.6m ($10.4m) for HLX.

Significantly, this latest decision also reopens the great debate on state subsidies, which the EC has brought to the fore many times in the past. A big question mark now hangs over other EU airports and whether the EC will spread its net to order airlines to repay any other subsidies paid to them to incentivise the use of these facilities.

If so, then the ramifications could be very serious if other ’contributions’ are discovered and are ordered to be repaid, since the amounts involved will obviously make even more serious dents in the respective airlines’ balance sheets.

At the same time, the counter argument from some airports and airlines in the past – Ryanair as the world’s largest scheduled international airline in particular – has always been that without these incentives, some airports are simply not commercially viable destinations to fly to.

OTHER AIRPORTS AND AIRLINES POINT TO UNFAIR COMPETITION

However, this is countered by other airports and airlines who equally argue that such subsidies divert passengers from their ‘non-incentivised’ services and facilities in the marketplace.

For its part, the modestly-sized Klagenfurt Airport handled a total of 227,625 passengers in 2015 (+1.24%), offering both scheduled services and general business aviation facilities from its location in the south of the State of Carinthia in Austria.

Owned by the State of Carinthia and the City of Klagenfurt the airport’s annual passenger traffic has fluctuated between 200,000 to 500,000 between 2000 and 2015.

EC HAS CENSORED 7 AIRPORTS IN THE LAST YEARS

Meanwhile and also more broadly, the EC adds that it has ‘ample experience in assessing whether public measures for promoting airports and airlines are compatible with the internal market’ and it cites the adoption of seven decisions over the last two years where it has identified ‘various forms of incompatible operating aid to airlines’. These include the airports of Pau, Angoulême, Nîmes, Zweibrücken, Alghero, Altenburg and Sardinia.

The European Commission adds that this latest decision will be made available under case number SA.24221 in the State Aid Register on its competition website once outstanding ‘confidentiality issues’ have been resolved.

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Earlier:

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.

http://www.airportwatch.org.uk/2014/10/eu-orders-germanwings-ryanair-and-tuifly-to-repay-large-sums-for-subsidies-wrongly-obtained/


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.

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