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State aid: Commission finds low-cost development strategy of Tampere-Pirkkala airport and Ryanair in line with EU state aid rules

European Commission - MEMO/12/597   25/07/2012

Other available languages: none

European Commission

Memo

Brussels, 25 July 2012

State aid: Commission finds low-cost development strategy of Tampere-Pirkkala airport and Ryanair in line with EU state aid rules

The European Commission found that financial arrangements regarding the implementation of a low-cost strategy by Finavia and Airpro at Tampere-Prikkala airport and an agreement with Ryanair are in line with EU state aid rules. In particular, the Commission concluded that all agreements were concluded on terms that a private investor operating under market conditions would have accepted and thus do not constitute state aid. The agreements are based on an ex ante business plan showing profitability expectations and therefore confer no economic advantage to Ryanair. The business results of the airport further confirm these expectations.

In 2002, Finavia, the public company operating the Tampere-Pirkkala airport, decided to convert a cargo hangar at Tampere-Pirkkala airport into a low-cost passenger terminal, subsequently rented to its subsidiary Airpro. In April 2003, Airpro concluded an agreement with Ryanair regarding airport services provided at Tampere-Pirkkala airport. Ryanair is the only airlines using the low-cost terminal.

In July 2007, following a complaint from a competitor, the Commission initiated an in-depth investigation regarding alleged state aid to Finavia, Airpro and Ryanair with regard to the implementation of the low-cost strategy at Tampere-Pirkkala airport (see IP/07/1053).

Public intervention in companies that have economic activities can be considered free of state aid when it is carried out on terms that a private investor, operating under market conditions would have accepted (the market economy investor principle, MEIP).

On the basis of an ex ante business plan provided by Finland, the Commission found that Finavia and Airpro had acted like market economy investors. The business plan shows that the implementation of a low cost strategy at Tampere-Pirkkala airport increases the equity value of Airpro and Finavia. The ex-ante business plan supporting the negotiations of Airpro with Ryanair shows that the charges paid by Ryanair and the non-aviation revenue imputable to the airline cover the underlying costs. The Commission therefore concluded that, in similar circumstances, a private investor operating under normal market conditions would have entered into the same or a similar commercial arrangement as Airpro. Consequently, the agreement procures no economic advantage to Ryanair.

Based on the ex ante business plan the diversification of airlines operating from the airport, and thus the risk reduction, a better allocation of resources as well as a reduction of overcapacities positively contributed to the operational and financial situation of Finavia and Airpro at Tampere-Pirkkala airport and increased the market value for their shareholders.

Background

Tampere-Pirkkala airport is located in southern Finland. It is the third largest airport in Finland (with around 600.000 passengers served in 2010). It is owned and operated by Finavia (fully publicly owned) which manages 25 airports in Finland.

In 2002 a cargo hangar at Tampere-Pirkkala airport became vacant. As it was not possible to attract a new tenant, Finavia decided to refurbish the hangar into a low-cost passenger terminal and to rent it out to its subsidiary Airpro. In April 2003 Airpro concluded an agreement with Ryanair, which is the only airline using the low-cost terminal.

Tampere-Prikkala airport now has two passenger terminals: Terminal 1 is currently used by network carriers, such as Finnair, Flybe, SAS, Blue1 and Air Baltic; Terminal 2 is the initial cargo hangar which was converted into a low-cost terminal and is currently used by Ryanair only.

In July 2007 following a complaint from a competitor the Commission initiated a formal investigation procedure with regard to allegedly unlawful and incompatible aid to Finavia, Airpro and Ryanair with regard to the implementation of the low-cost strategy at Tampere-Pirkkala airport.

The non-confidential version of the decision will be made available under the case number SA.23324 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.


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