EU clears massive €2.2bn investment package by German government to complete Berlin Brandenburg airport
The European Commission has approved financial support for Berlin’s long-delayed airport project, deciding that German government funding aimed at completing the facility is in line with EU state aid rules. The EU said the planned investment is “made on market terms and will thus involve no state aid to airport operator FBB.” FBB is co-owned by the Berlin city authority, the surrounding region of Brandenburg and the German federal government. In January 2016, Germany notified plans by the airport’s public shareholders to grant a €1.1 billion shareholder loan and a shareholder guarantee covering additional debt financing of up to €1.1 billion to FBB. The financing to be covered by the shareholder guarantee will be provided by commercial banks. Part of the investment is to address technical issues (for example, with the fire protection system), and to enhance noise protection. The rest will be used to increase capacity, as traffic growth will exceed the previous forecasts on which the initial project was based. Interventions by public authorities in companies can be considered free of state aid when they are carried out at conditions that a private investor would have accepted (according to the so-called “market economy investor principle” – even if no private investor had considered the investment attractive. The airport was initially meant to open in 2011 but has had a succession of show-stopping problems.
The European Commission on Wednesday approved financial support for Berlin’s long-delayed airport project, deciding that German government funding aimed at completing the facility is in line with EU state aid rules.
Brussels concluded that the planned investment is “made on market terms and will thus involve no state aid to airport operator FBB.”
Work began at the site in 2006 with the aim of having the airport online as a major international hub starting in 2011. But the timeline repeatedly slipped over technical and other challenges. It’s still unclear when commercial services can begin.
In January, Germany told the Commission that it would provide a shareholder loan of €1.1 billion and guarantees for an additional €1.1 billion in bank loans to the operator of the airport, Flughafen Berlin Brandenburg. FBB is co-owned by the Berlin city authority, the surrounding region of Brandenburg and the German federal government.
The so-called Berlin Brandenburg Willy Brandt Airport has been built next to the existing facility at Schönefeld in the city’s southeast.
The city’s second existing airport at Tegel in the northwest will be closed once the new site is up and running.
State aid: Commission clears public investment package to complete Berlin Brandenburg airport
Brussels, 3 August 2016 (European Commission press release)
The European Commission has found a German public investment package to complete the construction of Berlin Brandenburg airport Willy Brandt to be in line with EU state aid rules. The investment will be made on market terms and will thus involve no State aid to airport operator FBB.
In January 2016, Germany notified plans by the airport’s public shareholders to grant a €1.1 billion shareholder loan and a shareholder guarantee covering additional debt financing of up to €1.1 billion to the developer and future operator of the airport, Flughafen Berlin Brandenburg (FBB).
The financing to be covered by the shareholder guarantee will be provided by commercial banks. Part of the investment is to address technical issues (for example, with the fire protection system), and to enhance noise protection. The rest will be used to increase capacity, as traffic growth will exceed the previous forecasts on which the initial project was based.
Interventions by public authorities in companies can be considered free of state aid when they are carried out at conditions that a private investor would have accepted (according to the so-called “market economy investor principle” – MEIP).
In this context, the Commission carried out a detailed economic analysis, assessing FBB’s long-term business plans and market forecasts. The Commission then compared the planned investment project with various alternative scenarios. This assessment found that expanding and completing the airport was the most profitable option, especially taking account of steadily increasing passenger numbers, as forecast by independent market studies. In addition, the Commission carried out a stress-test to determine whether the investment scenario was robust enough to overcome a number of risks, such as a further delay of the airport opening, or higher costs. Even in the worst-case-scenario, the investment would remain profitable.
The Commission therefore concluded that a private investor seeking long-term profitability would have been ready to provide the same funding package on similar terms, to finally ensure that the airport is completed and made operational. Moreover, the terms of the shareholder guarantee are commensurate with market practice and thus confer no unfair advantage on the airport operator.
For historical reasons, Berlin originally had 3 airports: Tegel and Schönefeld, both still operating, and Tempelhof, which was closed in 2008. Tegel and Schönefeld are operated by FBB. The new airport, ‘Berlin Brandenburg Airport Willy Brandt’, is being developed and will also be operated by FBB. Once the new airport is operating, the Tegel airport will be closed down.
FBB is owned by the Länder of Berlin and Brandenburg, holding 37% of the shares each, and the Federal Republic of Germany, holding 26 %. In the mid-1990s, these public shareholders decided to build a single airport for Berlin and its surrounding area. The airport project incorporates and develops part of the Schönefeld site.
In 2009, when it looked at public financing for the project, the Commission found that one single airport at this location would have a positive impact on the entire region and would in particular improve access to the Berlin-Brandenburg region and increase its attractiveness for new investment.
Construction of Berlin Brandenburg airport started in 2006. The opening of the airport was initially scheduled for 2011 but has been repeatedly postponed, mainly due to technical problems.
In this context, in 2009, the Commission initially approved state aid in the form of a €224 million debt-for-equity swap, a €430 million capital injection and a €2.4 billion state guarantee. In 2012, the Commission found that an additional €1.2 billion equity injection, provided by FBB’s shareholders, was carried out on market terms and thus involved no state aid.
State financing for companies carrying out economic activities such as building or operating airports can be considered free of state aid if, in similar circumstances, a private investor operating under normal market conditions would have acted in the same way. If this is the case, the public intervention does not provide the company with an undue economic advantage which could distort competition.
The non-confidential version of the decision will be made available under the case number SA.41342 in the State Aid Register on the DG Competition website once any confidentiality issues have been resolved. New publications of state aid decisions on the internet and in the Official Journal are listed in the State Aid Weekly e-News.
Some earlier news stories about the airport:
Speculation that Berlin Brandenburg might never open, as its problems are so expensive
The man in charge of planning Berlin’s Brandenburg airport, which has had a catalogue of major problems, says it now may never open. It might be pulled down. It was meant to open in 2010, but had real problems with the fire extinguisher system, which did not work. Every year, the date of possible opening is pushed further back. Now it seems the myth of German national efficiency is under threat. The airport is already £5 billion over budget and a national disgrace for a country that prides itself on technical excellence. The chief planner, until 1999, doubted if it would ever open. After the fire issue, which required the removal of hundreds of defective firewalls, there were also hundreds of miles of wiring that had to be ripped out of leaking underground conduits. The luggage relay systems did not work, and the computer system was so complex that for years nobody could work out how to turn off the lights. They blazed 24/7. Every month, the delay costs about £15 million, including cleaning costs and lighting to prevent vandalism. The Times says the airport’s PR chief “who, rather too truthfully, told journalists that claims of the project going well were “bullshit”.” If it does ever open (2018, 2019?) it will already be too small, and another runway may be added ….
Berlin Brandenburg airport problem of terminal ceiling being too heavy ….. already years late, hugely over budget
Berlin’s long-delayed Brandenburg airport has suffered another setback after structural flaws were found in the terminal roof. It appears that the ceiling in the terminal building is too heavy. The airport, which was originally due to open in 2010, is still under construction and has run billions of Euros over budget. It was expected to open in 2017 but that could be postponed even further. The local building authority said it had told the construction firm to “immediately stop building works for the area underneath the entire terminal roof of the BER airport” until security checks could be carried out by engineers. The airport’s CEO has left the company. Earlier this year Air Berlin, which is currently running at a loss, reached a settlement with the airport over the delays as it had planned on making BER its main hub airport. The first problems noted were to do with the smoke and fire detection problem. The proposed solution, (which was not surprisingly rejected) was (paraphrased) for 800 low-paid workers armed with cell phones, sitting on camping stools, armed with thermos flasks, who would take up positions throughout the terminal. If anyone smelled smoke or saw a fire, they would alert the airport fire station and direct passengers toward the exits” The airport’s cost, borne by taxpayers, has tripled to €5.4 billion.
Troubled Berlin Brandenburg airport, due to open in June 2012, could be shut down in late summer unless €1.1 billion is raised
Berlin Brandenburg (BER) airport was intended to be a huge new airport for Berlin, so Berlin-Schönefeld and Tegel airports could close. The BER was initially due to open in June 2012. It had a catalogue of problems with fire safety, smoke extraction system, and fresh air supply in the event of fire. The launch has been delayed and delayed …. last year it was hoped it might open this year. Now the airport’s CEO has announced that it is possible the construction of the airport may need to be shut down this summer, if a further €1.1 billion cannot be raised. Some €4.3 billion has already been spent, but that only lasts till this summer. Extra costs have been incurred due to the late opening, as well as the extra construction costs. A decision on how €1.1 billion can be raised is needed urgently, perhaps through bank loans, government grants or from an investor. The money has to not only be agreed by Berlin, Brandenburg and the federal government, but also needs approval from the EU Commission. Current total costs amount to €5.4 billion. Additional plans suggest additional costs amounting to an extra €2.19 billion. Although the airport has yet to open, officials are planning a possible third runway for approximately €1 billion and other new projects such as an additional terminal, expanded baggage system and another freight facility. The total additional spending would amount to €3.2 billion.
Berlin’s Schönefeld airport ‘to stay open’ as Brandenburg airport (at huge expense) not ready till 2015 at the earliest
February 25, 2014
Berlin’s old Schönefeld airport is likely to remain open as a destination for budget airlines despite a multi-billion airport being built next to it, at Berlin Brandenburg (BER), as the new international hub is too small. It is the latest in a long line of setbacks to hit the BER, which is over budget and behind time. It will have two runways. It is expected to open in 2015 at the earliest. Officially the cost of the airport is €4.3 billion, though initial cost estimates were €1.2 and it could cost up to €6 billion. Despite the huge cost, the airport will only have a capacity of 27 million passengers a year, so its ageing neighbour, Schönefeld, will need to stay open. The original plan had been for Schönefeld, which caters for budget airlines, to merge with BER. Keeping Schönefeld in operation would increase capacity by 7.5 million passengers a year and avoid further costs of building a new terminal. Earlier it had been expected that BER could be partly in use in 2014, with 10 planes per day, but that will not happen. The airport was initially intended to open in 2010 but the multiple delays have been due to difficulties concerning fire safety, the smoke exhaust systems and construction errors. Air Berlin is suing BER for damages due to the much delayed opening.
and more earlier stories here