European Commission opens the floodgates to public aid for airports and low-cost airlines
Responding to the announcement of the new EC guidelines on state aid allowed to airports and airlines in the EU, the European transport NGO “Transport & Environment” said it was outraged at the increase in subsidies to be allowed. The guidelines will allow regional airports and the airlines serving them to keep receiving subsidies worth an estimated €2-3 billion a year. This means an increased flow of taxpayers’ money towards regional airports for at least the next decade, and allow infrastructure aid for expanding airport facilities to continue permanently – regrettably including no meaningful checks on duplication of airports within a few hundred kilometres of each other. The guidelines also declare that past operating aid, which up till now has been illegal, will retroactively be made legal. T&E says this “gives a new blank cheque to airports and airlines that fail to boost local economies. Why must everybody pay so that the better off can fly more often and for cheaper?” Operating aid is designed to cover the cost of running small airports, such as personnel and maintenance. Instead, operating aid has been used to lower airport fees to attract low-cost carriers, distorting competition and fuelling artificial demand for flying.
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Commission opens the floodgates to public aid for airports and low-cost airlines
Brussels, 20 February 2014 (Transport & Environment)
The European Commission today published its final guidelines on state aid for aviation, which will allow regional airports and the airlines serving them to keep receiving subsidies worth an estimated €2-3 billion a year.
The guidelines sanction an increased flow of taxpayers’ money towards regional airports for at least the next decade, and allow infrastructure aid for expanding airport facilities to continue permanently – regrettably including no meaningful checks on duplication of airports within a few hundred kilometres of each other. The guidelines also declare that past operating aid, which up till now has been illegal, will retroactively be made legal.
Transport & Environment (T&E) expresses outrage that the guidelines open the floodgates to increased operating aid for airports.
Bill Hemmings, aviation manager at Transport & Environment, said: “The Commission openly acknowledges that operating aid is the most distortive form of aid. Yet with its new state aid guidelines, it not only legalises past subsidies, but also gives a new blank cheque to airports and airlines that fail to boost local economies. Why must everybody pay so that the better off can fly more often and for cheaper?”
Operating aid is designed to cover the cost of running small airports, such as personnel and maintenance. Instead, operating aid has been used to lower airport fees to attract low-cost carriers, distorting competition and fuelling artificial demand for flying. Giving taxpayer money to airports in the form of operating aid has been illegal in the past, as it is a basic principle of competition law that EU states propping up one industry over another distorts trade.
In its rules published today, the Commission legalised this aid and granted an ‘amnesty’ to previous aid, declaring it legal retroactively. The final guidelines are not subject to parliamentary oversight and will be used for the Commission’s legally binding future decisions.
State aid is the primary reason that smaller airports have grown so much faster than larger airports. In the period between 2004 and 2012, airports under 1m passengers grew by 135%, airports under 5m passengers by 79% and airports over 5m passengers by ‘only’ 29%.
“Making operating aid legal is a quick fix by the Commission to make its life easier. Countless regional airports have been abusing subsidies for a decade knowing full well it was illegal. Instead of turning a blind eye to the dirtiest subsidy in the EU, the Commission should have established sound environmental and economic sustainability criteria for recipients of this aid,” Hemmings concluded.
Aviation is the most carbon intensive transport mode, responsible for about 5% of global warming. If aviation were a country it would be ranked 7th in the world for CO2 emissions – between Germany and Korea. Yet Europe already exempts airlines from fuel taxes, and airline tickets from VAT; subsidies worth EUR 40 billion. Now they have been given the green light to expand state aid subsidies, which will promote more highly polluting low-cost flights.
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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:
http://ec.europa.eu/competition/state_aid/modernisation/index_en.html
Guidelines adopted on 20 February 2014 – Policy brief: New State aid rules for a competitive aviation industry 
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Earlier:
European Commission Commission adopts new guidelines for state aid to airports and airlines
February 20, 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.
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The truth behind (not so) cheap flights – the immense annual state subsidies to small airports & cheap airlines
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.”
Click here to view full story…
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European Commission to clarify state aid to airports – making ineligible those with over 3 million passengers per year
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.
Click here to view full story…
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