2014 Aviation Guidelines: what needs improving?

Annabelle Lepièce

Member of the Brussels Bar and Partner at CMS Belgium, Annabelle Lepièce on how the European framework on operating and investment aid to airports should change.

The 2014 Aviation Guidelines set the conditions under which the European Commission authorises operating and investment aid to airports and start-up aid for new routes following prior notification by a Member State.

Regarding operating aid, they foresee a transitional period of 10 years during which airports with less than three million passengers per year can receive operating aid of up to 50% of the average annual loss for 2009-2013. For airports with fewer than 700,000 passengers, this aid intensity is up to 80%. The maximum investment aid depends on the size of the airport, from 25% to 75% for airports between five million to one million passengers a year.

The Guidelines’ success has been limited, due to their complexity, inefficacy for the sector and the administrative constraints a notification implies.

In 2017, the General Block Exemption Regulation (“GBER”) adopted in 2014 by the Commission to allow Member States to grant aid without prior notification, was extended to include operating and investment aid to airports under much simpler conditions.

The GBER allows aid to cover operating losses up to 100% for airports with up to 200,000 passengers per year, whatever their localisation.

Investment aid is also authorised by the GBER. The aid intensity varies according to the size of the airport: up to 100% for airports with fewer than 200,000 passengers per year, up to 75% for airports between 200,000 and one million passengers and up to 50% for airports between one and three million passengers per year.

Our proposal to the Commission

In 2019, the European Commission launched a public consultation on the 2014 Aviation Guidelines. The observations sent by various players in the sector have recently been made public. Certain airlines, such as Air France, invite the Commission to stop all aid to airports.

I advised Airports Council International (ACI EUROPE) and the UAF –Union des Aéroports Français – (the French Airports’ Association) –ACI Europe represents about 500 airports and UAF 165, on the legal evaluation of the Guidelines as they were preparing their legal and economic observations for submission to the Commission.

Regarding operating aid, we concluded that the scope of the GBER should be extended to airports with fewer than 700,000 passengers per year, as opposed to the current limit of 200,000 passengers.

And contrary to current Guidelines provision allowing to cover 80% of the funding gap for airports with fewer than 700,000 passengers, the maximum amount of operating aid should permit to cover the entire funding gap. Such modifications to the current regime are justified in light of the effective challenges for airports with fewer than 700,000 passengers to become profitable.

In addition, the complexity of the Guidelines and their inadequacy to the sector explain why the Commission receives so few notifications. It should be emphasized that in most cases, operating and investment aid, whether in the context of a notification or in an investigation on illegal aids, were authorised by the European Commission. Nevertheless, in my experience, such procedures may be very long and are difficult to adapt to and to squeeze in a selection procedure to choose an airport operator. Furthermore, these few notifications contrast with the high number of notices regarding operating aid to airports under the GBER (around 95 in two years).

Therefore, extending the scope of the GBER to airports with fewer than 700,000 passengers would increase the transparency of public funding and allow targeted state aid to larger airports.

Public support of air routes: what is the status?

The current European regulatory framework on aid for the development of new air routes is inadequate. Under the private operator principle, airports may grant airlines commercial incentives on the basis of a sound and credible business plan. But such incentives are not state aid and thus escape the notification obligation. The Commission’s practice is now well established and was validated in 2018 by the General Court of the EU in the Pau, Nîmes, Angoulême and Altenburg-Nobitz airports cases.

If public support qualifies as aid because it is not profitable for the airport, it may be authorised under the Aviation Guidelines as start-up aid for new routes in the form of rebates on airport charges up to 50% for three years maximum. Prior notification by the Member State to the Commission is required. Nevertheless, such aid has had little success. Indeed, as confirmed in the Lübeck Airport case, it is possible to set up rebates on airport charges that do not constitute state aid under certain conditions and therefore do not have to be notified to the Commission.

De minimis aid may be granted to airlines, but they cannot exceed €200,000 per airline per country for a period of three fiscal years. They are therefore of limited use to boost the development of an airline at an airport, especially in large countries.

Unfortunately, this issue was not included in the consultation and thus not part of the ACI and UAF’s assignment. Nevertheless, the European Commission is invited to rethink start-up aid for new routes. My proposal is to go back to marketing support but under fewer and simpler conditions than those provided for in the 2005 Aviation Guidelines. For instance, such marketing support could be limited to a maximum amount per passenger and could be paid either by the airport or a public authority.

What next?

The European Commission will now examine the observations it has received, carry out an assessment and make proposals that will be presented to the sector.

To be continued …

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