Keywords: Commission, New Rules, Aviation Guidelines
Introduction
Public financing of airports and airlines by national and regional governments is currently assessed under the 1994 and 2005 Community Guidelines on State Aid in the aviation sector. The new state aid rules ("New Rules") are intended to take into account the changes in the aviation industry in the last ten years and provides guidance on how Member States can support airports and airlines. The consultation on the New Rules is now open and comments should be sent to the European Commission ("Commission") by 25 September 2013. Following the consultation, the Commission intends to adopt revised Aviation Guidelines in early 2014.
Need for Change
The aim of the New Rules is to avoid the creation of overcapacities and duplication of unprofitable airports. The Commission is of the view that the density of regional airports in certain regions of the EU has led to substantial overcapacity of airport infrastructure relative to passenger demand and airline needs. The Commission also considers that public funds earmarked for supporting airport operations may be channeled to airlines in order to attract more commercial traffic, thereby distorting air transport markets. Further, the Commission believes that where aid is determined on the basis of ex post calculations, airports may not have much incentive to contain costs and charge airport fees that are sufficient to cover costs. The main provisions in the New Rules are provided in the sections below.
Investment in Airport Infrastructure
The New Rules would allow for State aid for investment in
airport infrastructure on satisfaction of certain cumulative
conditions. These inter-alia include (i) the achievement of a
common object such as assisting in the combat of air traffic
congestion at major European hub airports; (ii) absence of any
other less distortive policy instrument; (iii) existing investment
incentive without aid; and (iv) proportionality of permissible
aid.
The New Rules establish maximum permissible aid intensities
depending on the size of an airport. The Commission considers that
airports with annual passenger traffic above 5 million are usually
profitable and are to cover their operating and capital costs,
hence no investment aid would be allowed. For airports with
passenger traffic between 3-5 million, 1-3 million and < 1
million investment aid up to 25%, 50% and 75% respectively is
permitted.
Operating Aid to Airports
Current rules do not permit operating aid to airports. The New
Rules provide for a transitional period of 10 years during which
such aid could be allowed. The Commission envisages that, at the
end of the transitional period airports should cease to receive
operational aid and should finance operations from own resources.
Thus, managers of regional airports should seek to improve their
finances through gradual increase of airport charges to airlines,
introduction of rationalization measures by differentiation of
business models or attracting new airlines and customers to fill
idle capacity.
It is to be noted that the New Rules do not apply to aid for the
provision of ground handling services regardless of whether they
are provided by the airport itself, by an airline or by a supplier
of ground handling services to third parties. Such aid will be
assessed on the basis of the relevant general rules. Airports are
required to keep separate accounts of its ground handling
activities and should not subsidise its ground handling activities
from the revenue it derives from its role as an airport
manager.
Start-up Aid to Airlines
Public financing for airlines launching a new route or a new
schedule, increasing the connectivity of a region would be
permitted under the New Rules if certain cumulative conditions are
fulfilled. These conditions inter-alia relate to capacity of the
airport, long-term viability of the business plan, time period of
aid and principles of non-discrimination.
The New Rules provide that public services obligation in relation
to air transport services can only be granted in accordance with
the conditions provided in the common rules for the operation of
air services in the Community (Regulation 1008/2008). Public
service obligations can only be imposed on a route to fulfill
transport needs which cannot be adequately met by an existing air
route or by other means of transport. Further, public service
obligations can be imposed on a specific route or group of routes
and not on any generic route originating from a given airport, city
or region.
Comment
We understand there are over sixty pending State aid cases
concerning regional airports with the Commission, of which
operational aid is commonly a key issue. It remains to be seen the
extent to which these cases will be able to benefit from the New
Rules. In any event, after this ten year period, further operating
aid to airports would be unlawful. The Commission is also likely to
scrutinize more strictly whether State Aid granted to airports is
being channeled to airlines.
Mayer Brown will be making a submission to the Commission and
would welcome any comments you would like to have included, which
can be done on an attributed or non-attributed basis, as you
wish.
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