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.
Brussels, 20 February 2014 (Europa)
State aid: Commission adopts new guidelines for state aid to airports and airlines
The European Commission adopted today new guidelines on how Member States can support airports and airlines in line with EU state aid rules. 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. They are part of the Commission’s State Aid Modernisation (SAM) strategy, which aims at fostering growth in the Single Market by encouraging more effective aid measures and focusing the Commission’s scrutiny on cases with the biggest impact on competition (see IP/12/458).
Joaquín Almunia, Commission Vice-President in charge of competition policy, said: “The new state aid guidelines are a key ingredient for a successful and competitive European aviation industry. They will ensure fair competition regardless of the business model – from flag carriers to low-cost airlines and from regional airports to major hubs. Our aim is to ensure the mobility of citizens, while preserving a level playing field between airports and airlines.”
The new guidelines for State aid to airports and airlines promote sound use of public resources for growth-oriented initiatives. At the same time, they limit distortions of competition that would undermine a level playing field in the Single Market, in particular by avoiding overcapacity and the duplication of unprofitable airports.
Key features are:
- State aid for investment in airport infrastructure is allowed if there is a genuine transport need and the public support is necessary to ensure the accessibility of a region. The new guidelines define maximum permissible aid intensities depending on the size of an airport, in order to ensure the right mix between public and private investment. The possibilities to grant aid are therefore higher for smaller airports than for larger ones.
- 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. To receive operating aid, airports need to work out a business plan paving the way towards full coverage of operating costs at the end of the transitional period. As under the current market conditions, airports with an annual passenger traffic of below 700 000 may face increased difficulties in achieving full cost coverage during the transitional period, the guidelines include a special regime for those airports, with higher aid intensities and a reassessment of the situation after 5 years.
- Start-up aid to airlines to launch a new air route is permitted provided it remains limited in time. The compatibility conditions for start-up aid to airlines have been streamlined and adapted to recent market developments.
The formal adoption and publication of the new guidelines in the Official Journal in all EU official languages is foreseen for March 2014. For information purposes, the text of the new guidelines is available in English at:
Guidelines adopted on 20 February 2014 – Policy brief: New State aid rules for a competitive aviation industry )
Member States’ public funding of airports and airlines is currently assessed under the 1994 and 2005 Aviation Guidelines. The 1994 Aviation Guidelines were adopted in the context of the liberalisation of the market for air transport services and contain provisions for assessing social and restructuring aid to airlines in order to provide a level playing field for air carriers. They were complemented in 2005 by guidelines on the public financing of airports and on the start-up of airline services from regional airports. Today’s guidelines replace both the 1994 and the 2005 aviation guidelines.
Today, air transport contributes significantly to the European economy and plays a vital role in the integration and competitiveness of Europe. During the last decade, the market environment of the aviation industry has changed considerably. The EU’s liberalisation of air transport in 1997 paved the way for the emergence of low-cost carriers growing at a fast pace since 2005. In 2012 for the first time, low-cost airlines (44.8%) exceeded the market share of incumbent air carriers (42.4%), a trend which continued in 2013. The business model of low-cost carriers is intrinsically linked to small and uncongested regional airports allowing for quick turnaround times. This category of airports is predominantly publicly owned and subsidised by public authorities on a regular basis. Whilst certain regions are still hampered by poor accessibility and major hubs are facing increasing levels of congestion, the density of regional airports in certain areas has led to substantial overcapacity of airport infrastructure relative to passenger demand and airline needs.
In view of the significant market changes that have taken place in the last decade, the Commission has initiated a review of its aviation aid guidelines, with a first public consultation in 2011 aiming in particular to determine whether a revision would be necessary (see IP/11/445). The new guidelines take into account also the comments gathered in the second public consultation (July 2013, see IP/13/644) and the intensive dialogues with Member States, public authorities, airports and airlines, associations and citizens. The guidelines take stock of the new legal and economic situation concerning the public financing of airports and airlines and specify the conditions under which such public financing constitutes state aid within the meaning of Article 107(1) of the Treaty on the Functioning of the European Union (TFEU). When financing involves state aid, the guidelines set out the conditions under which it is compatible with the Single Market. The Commission’s assessment is based on its experience and decision-making practice, as well as on its analysis of current market conditions in the airport and air transport sectors; it is therefore without prejudice to its approach towards other infrastructures or sectors.
New publications of state aid decisions on the internet and in the Official Journal are listed in the State Aid Weekly e-News.
See also MEMO/14/121
The truth behind (not so) cheap flights – the immense annual state subsidies to small airports & cheap airlines
Date added: February 18, 2014
In a recent blog, Jacek Krawczyk, who is the president of the Employers’ Group of the European Economic & Social Committee, describes how the current system of state subsidies to European airports and airlines works – and how damaging its effects are. He says aviation needs to be treated like any other business, a “level playing field” without financial help given to some airlines, and the sector should have less subsidy. In response to the question how Ryanair flights can be so cheap, the answer is that they get subsidies for flying into small regional airports. This artificially boosts demand for flights. As much as 20% of Ryanair’s revenues are from subsidies, from reduced taxes, preferential ground handling rates and marketing funds. These subsidies could be as much as €10 per passenger to the airline. Krawczyk says almost half of European airports (of which there are too many) generate losses, and more than half if state aid is subtracted from their revenues. The low cost carriers say they get cheap deals with airports by standard business negotiations, while regular airlines get huge amounts of subside direct from governments, from being out-competed by the low cost carriers. “There is a great opportunity here to prepare the first in-depth, complete and PUBLIC report showing how much public aid is pumped into the aviation sector and how those resources are spent.”
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.