The 2005 guidelines on the financing of airports and start-up aids to airlines

Practical experiences

Annabelle Lepièce8 September 2009

April 12, 2023 Slide 2 The 2005 guidelines on the financing of airports and start-up aids to airlines

Adoption by the European Commission of the Guidelines in 2005 :

Following the Ryanair decision of 12 February 2004, annulled by the CFI on 17 November 2008

Evaluation of the Guidelines in 2009

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Principles of the Guidelines

a) Financing of airports :• No aid for the managing of airports or infrastructure (private

investor principle)

Except : – Activities that normally fall under State responsibility:

safety air, traffic control, police, customs– Public financing of Services of General Economic Interest

(SGEI)– Authorized aids for the infrastructure for regional airports

(EC notification)

b) Incentives in favor of airlines :• Private investor principle• Authorized start-up aid (EC notification)

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Financing of airports

Principle : airports should be run as private companies Consequence : public interventions should conform to the private

investor principle (business plan, foreseeing and reasonable return on investment)

Examples : inquiries of the European Commission following complaints :

Tampere airport : public financing of the conversion of a freight terminal into a low cost terminal

Tortoli-Arbatax airport : fee for the additional infrastructure to be paid by the airport manager only if the passengers traffic exceeds 500.000 per year

In practice : assessment of all public financing (subsidies, capital injections, guarantees and loans, lease or sale of public land and buildings)

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SGEI (public service missions)

Guidelines : notification of public financing for airports above 1 million passengers per year

Decision of November 2005 on the financing of SGEI : no notification if the public compensation is below 30.000.000 EUR and the turnover of the airport manager is below 100.000.000 EUR

No EC decision

In practice : strict compliance to the EU conditions ensures the legality of public funding

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Public financing of airport infrastructure

Principle : Private investor principle If not : aid in favor of regional airports (below 5 millions

passengers per year) to be notified to the EC

Very broad conditions for authorization :

1. Defined objective of general interest (regional development, accessibility, etc.)

2. Infrastructure necessary and proportional to the objective

3. Satisfactory medium term prospect for use

4. Access for all potential users

5. No affection of the development of trade

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Public financing of airport infrastructure

In practice : • In-depth assessment of all conditions by the EC• Examples of subsidized Infrastructure : runway extension,

new terminal, conversion of a military airport into a civil one, safety equipments, aprons, cargo warehouse, etc.

• Authorized aid for Berlin Brandenburg Airport (category A)

Motivation of the authorization : connectivity and regional development, improvement of the safety of the infrastructure, tourism, decrease of aircraft noise

Aid intensity : 50 to 70 %

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Incentives to airlines

Principle : Private investor principle: difficult assessment in regional

airports

In practice : • Business plan showing the profitability of the routes incentives• European Commission’s inquiries on alleged aids to Ryanair,

EasyJet, DHL, etc. (Tampere airport, Leipzig, Berlin, Bratislava, Alghero, Hahn, Pau, etc.)

• Airlines and airports’ creativity : marketing agreements, general reduction of airport charges, etc.

• De minimis aid : 200.000 EUR by airline for a three years period

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Start-up aids

Compulsory notification to the European Commission 12 conditions to fulfill, some inadequate or too

constraining : Only in favor of European airlines and for EU

destinations No aids for regional airports close too major

hubs Development plan by destination

Lack of success (7 EC decisions)

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Conclusions

The 2005 Guidelines : new EC policy towards the financing of airports

Financing of airport infrastructure : flexible approach of the European Commission on notified aids (8 Member States)

Incentives to airlines :• great uncertainty for airports• in-depth inquiries of the European Commission

following complaints

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Conclusions

Revision of the Guidelines :

More precise conditions for the financing of airport infrastructure to increase legal certainty

Start-up aids :

suppression of inadequate or too constraining conditions

abolition of the notification to the European Commission

April 12, 2023 Slide 12 The 2005 guidelines on the financing of airports and start-up aids to airlines

Merci pour votre attention

Annabelle LepièceAvocat

CMS DeBackerChaussée de La Hulpe, 178

1170 - BruxellesTél. +32 2 743 69 34

Email : annabelle.lepiece@cms-db.com