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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