Speech: Introductory remarks on new guidelines for state aid to airports and airlines
European Commission - SPEECH/14/148 20/02/2014
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Vice President of the European Commission responsible for Competition Policy
Introductory remarks on new guidelines for state aid to airports and airlines
Brussels, 20 February 2014
Today the Commission has adopted the new guidelines for state aid in the aviation sector in the EU. They replace the previous guidelines adopted in 2005.
The new rules set out under what conditions Member States and local authorities may grant state aid to airports and airlines.
The European air transport industry has undergone considerable changes over the last decade. This is true of both airlines and of airports.
Twenty years ago, the market share of low cost carriers in intra-EU flights was around 1.5%; today it is around 46%.
Meanwhile, concentration has stepped up while some national flag carriers have run into difficulties.
The management of operation of airports has become a business, both for public or private owned undertakings. And the EU General Court confirmed two years ago that building and operating airport infrastructure is an economic activity. Therefore, public support for such activities may constitute State aid.
Many local and regional airports do play a very important role in meeting the transport needs of citizens. But at the same time there are problems of congestion in large hubs, and overcapacity of some regional airports.
Clearly, we needed to update our rules to fully take into account this new and complex market reality.
The objectives of these new rules are threefold.
Firstly, they will preserve a level playing field among airports and airlines irrespective of their business models – from small regional airports to large hubs, and from low cost airlines to flag carriers.
Secondly, they will contribute to a dynamic and competitive European aviation industry through a non-distortive use of public resources.
Thirdly, they will ensure that taxpayers' money goes where it can make a real difference – namely where it helps ensure the accessibility of Europe's regions and meet the transport needs of citizens.
Let's not forget that airports compete with each other. Together, airport overcapacity and an uncontrolled use of subsidies can give the opportunity to some airlines to "shop around" for the most favourable conditions, at the expense of fair competition in the marketplace and a good use of public resources.
Let me explain to you what the main provisions of the new guidelines are.
The guidelines continue to allow Member States to grant state aid for investment in airport infrastructure.
Of course, if public authorities invest in the same way as a private investor in the same situation would, there is no state aid at all in the meaning of EU rules. In such cases, the Commission does not intervene.
If there is state aid, however, then it must comply with the conditions set out in the guidelines.
In this respect our rules are simple: state aid is justified if there is a genuine transport need and public funds are needed to ensure accessibility to a region.
In other words, state aid should be used to create additional transport capacity where demand for it exists. Not to produce overlaps or to create excess capacity.
What we want to avoid is the duplication of unprofitable airports and the construction of unused airports. Unfortunately, there have been concrete and well-known examples of such misuse of taxpayers' money in several Member States. This should not happen again.
Moreover, if an area is already well connected by other modes of transport – such as high-speed trains for passengers – public money would also be wasted.
Another key principle of the guidelines is that public funding should be proportionate. This means that the levels of aid allowed are higher for small airports than for bigger airports.
Therefore, for airports up to 1 million passengers a year, aid can be granted up to 75% of the eligible costs of the project; for airports between 1 and 3 million, 50%; for airports between 3 and 5 million, 25%.
In the case of remote regions, where the need for public funding may be higher, these proportions can be increased by 20%.
For airports over 5 million passengers a year, public money is normally not needed. The existence of a market failure needs to be demonstrated case by case for the Commission to allow aid.
Let me now move to the question of operating aid to airports.
If an airport responds to genuine demand for transport, then it should become a profitable economic activity. This means that operating costs should normally be covered by the revenues of airports. These revenues may derive from air transport activities – the costs of which should be borne by airlines and, ultimately, passengers – as well as from other activities.
This is the rule enshrined in the previous aviation guidelines. It should not be for taxpayers to cover the inefficiencies of airports.
However, the experience shows that not all airports cover their operating aid with their own revenues. Regional airports will need time to adjust their business models and eventually become profitable.
That is why for airports of less than 3 million passengers per year, the guidelines foresee a transitional period of 10 years during which operating aid should gradually be phased out.
Moreover, a number of airports which play a positive role in connecting European regions are structurally too small to achieve profitability. This is why the phasing out will not apply to airports up to 700 000 passengers a year. These airports will be able to benefit from operating aid. But the Commission will reassess the situation after 5 years.
Therefore, the new Guidelines strike the right balance between the recognition of the significant contribution of regional airports to the accessibility and development of some European regions, and the need to preserve fair competition and avoid overspending.
Member States also retain the possibility to decide that airports can be considered as a public service, and therefore be financed under the conditions set out in our rules for services of general economic interest (SGEIs). This can be the case, in particular, if a region would otherwise be isolated.
Finally, the guidelines clarify the conditions that apply to aid benefitting airlines.
Public authorities are sometimes directly or indirectly involved in attracting airlines to a particular airport through marketing support, rebates or other incentives. Such measures may involve state aid.
The guidelines clarify that if the logic of these arrangements is strictly commercial and non-selective, there is no state aid. However, if a public intervention provides a selective advantage to an airline, then state aid is present.
State aid to airlines can only be compatible when it is necessary to launch a new air transport route which improves the connectivity of a region. Airlines departing from airports with fewer than 3 million passengers per year can thus receive so-called "start-up aid" for a maximum period of 3 years. These rules are more flexible for remote regions.
To conclude, I hope the new guidelines will provide clarity and transparency to the sector, create a level playing field and avoid the waste of taxpayers' money. The Commission will now start to implement the new framework.
Today we have closed 4 investigations - Aarhus, Marseille, Berlin-Schönefeld airport and Ostrava. We still have 28 pending formal investigations involving loss-making airports and their arrangements with airlines. We will adopt decisions regarding all these cases in the coming months.
Proper implementation of these rules by public authorities and market players is of the essence. However this should not generate unnecessary red tape. This is why I strongly encourage Member States to notify national schemes to the Commission rather than individual aid measures. If a scheme has been approved, then individual measures normally do not need to be notified to the Commission.