# Official Journal L 325/2016

| | ISSN 1977-0677 |
| --- | --- |
| Official Journal
  of the European Union | L 325 |
| | |
| English edition | Legislation | Volume 5930 November 2016 |

ISSN 1977-0677

Official Journal

of the European Union

L 325

English edition

Legislation

Volume 5930 November 2016

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| Contents | | II   Non-legislative acts | page |
| --- | --- | --- | --- |
| | | DECISIONS |
| | * | Commission Decision (EU) 2016/2068 of 29 July 2013 on State aid SA.35611 (13/C) that France plans to implement in favour of the PSA Peugeot Citroën SA Group
  (notified under document C(2013) 4971)

   (
  1
  ) | 1 |
| | * | Commission Decision (EU) 2016/2069 of 1 October 2014 concerning measures SA.14093 (C76/2002) implemented by Belgium in favour of Brussels South Charleroi Airport and Ryanair
  (notified under document C(2014) 6849)

   (
  1
  ) | 63 |

Contents

II   Non-legislative acts

page

DECISIONS

*

Commission Decision (EU) 2016/2068 of 29 July 2013 on State aid SA.35611 (13/C) that France plans to implement in favour of the PSA Peugeot Citroën SA Group
  (notified under document C(2013) 4971)

   (
  1
  )

(notified under document C(2013) 4971)

1

1

*

Commission Decision (EU) 2016/2069 of 1 October 2014 concerning measures SA.14093 (C76/2002) implemented by Belgium in favour of Brussels South Charleroi Airport and Ryanair
  (notified under document C(2014) 6849)

   (
  1
  )

(notified under document C(2014) 6849)

1

63

| | |
| --- | --- |
| | (1)   Text with EEA relevance |

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(1)   Text with EEA relevance

1

| EN | Acts whose titles are printed in light type are those relating to day-to-day management of agricultural matters, and are generally valid for a limited period.
  The titles of all other Acts are printed in bold type and preceded by an asterisk. |
| --- | --- |

EN

Acts whose titles are printed in light type are those relating to day-to-day management of agricultural matters, and are generally valid for a limited period.

The titles of all other Acts are printed in bold type and preceded by an asterisk.

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II Non-legislative acts

DECISIONS

| 30.11.2016 | EN | Official Journal of the European Union | L 325/1 |
| --- | --- | --- | --- |

30.11.2016

EN

Official Journal of the European Union

L 325/1

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COMMISSION DECISION (EU) 2016/2068

of 29 July 2013

on State aid SA.35611 (13/C) that France plans to implement in favour of the PSA Peugeot Citroën SA Group

(notified under document C(2013) 4971)

(Only the French text is authentic)

(Text with EEA relevance)

THE EUROPEAN COMMISSION,

Having regard to the Treaty on the Functioning of the European Union, and in particular the first subparagraph of Article 108(2) thereof,

Having regard to the Agreement on the European Economic Area, and in particular Article 62(1)(a) thereof,

Having invited interested parties to submit their comments in accordance with the said articles (1), and having regard to those comments,

Whereas:

1.   PROCEDURE

PROCEDURE

| (1) | On 5 November 2012, the Commission received a complaint from an enterprise which wished to remain anonymous (‘the anonymous complainant’). |
| --- | --- |

(1)

On 5 November 2012, the Commission received a complaint from an enterprise which wished to remain anonymous (‘the anonymous complainant’).

| (2) | By decision of 11 February 2013 (‘the rescue decision’), the Commission temporarily approved, for reasons of financial stability, the guarantee by France of bond issues by Banque PSA Finance SA (‘BPF’) of a nominal amount of EUR 1,2 billion. In that context, the French authorities undertook to notify a restructuring plan for the PSA Peugeot Citroën SA Group (‘PSA’ or ‘the Group’ or ‘the PSA Group’) and a viability plan for BPF in the six months following the rescue decision. |
| --- | --- |

(2)

By decision of 11 February 2013 (‘the rescue decision’), the Commission temporarily approved, for reasons of financial stability, the guarantee by France of bond issues by Banque PSA Finance SA (‘BPF’) of a nominal amount of EUR 1,2 billion. In that context, the French authorities undertook to notify a restructuring plan for the PSA Peugeot Citroën SA Group (‘PSA’ or ‘the Group’ or ‘the PSA Group’) and a viability plan for BPF in the six months following the rescue decision.

| (3) | By letter dated 12 March 2013, France notified to the Commission restructuring aid in favour of the PSA Group. |
| --- | --- |

(3)

By letter dated 12 March 2013, France notified to the Commission restructuring aid in favour of the PSA Group.

| (4) | By letter dated 2 May 2013, the Commission informed France of its decision to initiate the procedure laid down in Article 108(2) of the Treaty on the Functioning of the European Union (‘TFEU’) in respect of this aid. |
| --- | --- |

(4)

By letter dated 2 May 2013, the Commission informed France of its decision to initiate the procedure laid down in Article 108(2) of the Treaty on the Functioning of the European Union (‘TFEU’) in respect of this aid.

| (5) | The Commission's decision to open the procedure (‘the opening decision’) was published in the Official Journal of the European Union on 16 May 2013 (2). The Commission invited interested parties to submit their comments on the aid at issue. On 3 June 2013, the Commission sent a questionnaire to PSA's main competitors. |
| --- | --- |

(5)

The Commission's decision to open the procedure (‘the opening decision’) was published in the Official Journal of the European Union on 16 May 2013 (2). The Commission invited interested parties to submit their comments on the aid at issue. On 3 June 2013, the Commission sent a questionnaire to PSA's main competitors.

Official Journal of the European Union

2

| (6) | The Commission received comments from five interested parties, namely:






  (i) | the PSA Group, as beneficiary of the aid, which submitted comments by letter dated 13 June 2013; |
| --- | --- | --- |

(6)

The Commission received comments from five interested parties, namely:

(i)

the PSA Group, as beneficiary of the aid, which submitted comments by letter dated 13 June 2013;

| (ii) | an enterprise which wished to remain anonymous (‘the anonymous third party’) which submitted comments by letter dated 14 June 2013; |
| --- | --- |

(ii)

an enterprise which wished to remain anonymous (‘the anonymous third party’) which submitted comments by letter dated 14 June 2013;

| (iii) | the competitors Fiat, General Motors (‘GM’) and Toyota, which submitted comments by letters dated 17, 18 and 21 June 2013. |
| --- | --- |

(iii)

the competitors Fiat, General Motors (‘GM’) and Toyota, which submitted comments by letters dated 17, 18 and 21 June 2013.

| (7) | The Commission forwarded these comments to France by letters dated 19 and 21 June 2013. |
| --- | --- |

(7)

The Commission forwarded these comments to France by letters dated 19 and 21 June 2013.

| (8) | The French authorities transmitted their comments on the opening decision by letter dated 3 June 2013 and their comments on the comments of the interested third parties by letter dated 28 June 2013. |
| --- | --- |

(8)

The French authorities transmitted their comments on the opening decision by letter dated 3 June 2013 and their comments on the comments of the interested third parties by letter dated 28 June 2013.

| (9) | At the request of the Commission, the French authorities furnished supplementary information on 1 and 2 July 2013. |
| --- | --- |

(9)

At the request of the Commission, the French authorities furnished supplementary information on 1 and 2 July 2013.

| (10) | On 4 July 2013, the Commission's departments, the French authorities and the PSA Group took part in a telephone conference. There were two further meetings between the same parties on 11 and 12 July 2013, and a telephone conference on 15 July 2013. Following these meetings, the French authorities furnished information by letter dated 16 July 2013, amended by letter dated 23 July 2013. |
| --- | --- |

(10)

On 4 July 2013, the Commission's departments, the French authorities and the PSA Group took part in a telephone conference. There were two further meetings between the same parties on 11 and 12 July 2013, and a telephone conference on 15 July 2013. Following these meetings, the French authorities furnished information by letter dated 16 July 2013, amended by letter dated 23 July 2013.

2.   DESCRIPTION

DESCRIPTION

2.1.   THE PSA GROUP

THE PSA GROUP

| (11) | The PSA Group is a company quoted on Euronext Paris. In 2011, the Group sold over 3,5 million vehicles and spare parts throughout the world (42 % outside Europe). With a commercial presence in 160 countries, the PSA Group has 11 ‘terminal’ plants (nine of which are in the European Union), in which vehicles are assembled, and 12 ‘mechanical’ plants specialising in the production of particular parts. The Group's activities also include automobile financing (BPF) and automotive equipment (Faurecia). Gefco (logistics) was also part of PSA until December 2012. The PSA Group had a turnover of EUR 55,4 billion in 2012. Table 1 below shows trends in the Group's turnover over the last five years.

  Table 1


  Turnover of the PSA Group in EUR million | 2008 | 2009 | 2010 | 2011 | 2012 |
| --- | --- | --- | --- | --- | --- | --- |
| Past turnover | 54 356 | 48 417 | 56 061 | 59 912 | 55 446 |

(11)

The PSA Group is a company quoted on Euronext Paris. In 2011, the Group sold over 3,5 million vehicles and spare parts throughout the world (42 % outside Europe). With a commercial presence in 160 countries, the PSA Group has 11 ‘terminal’ plants (nine of which are in the European Union), in which vehicles are assembled, and 12 ‘mechanical’ plants specialising in the production of particular parts. The Group's activities also include automobile financing (BPF) and automotive equipment (Faurecia). Gefco (logistics) was also part of PSA until December 2012. The PSA Group had a turnover of EUR 55,4 billion in 2012. Table 1 below shows trends in the Group's turnover over the last five years.

Table 1

Table 1

Turnover of the PSA Group in EUR million

Turnover of the PSA Group in EUR million

2008

2009

2010

2011

2012

Past turnover

54 356

48 417

56 061

59 912

55 446

| (12) | BPF is a captive bank 100 % controlled by PSA, which finances sales of Peugeot and Citroën brand vehicles, vehicle stocks and spare parts for distribution networks, and offers financing resources to the Group's customers. BPF trades in 23 countries. With an average penetration rate (3) of 29,8 % in 2012, BPF finances a large proportion of the demand for the vehicles produced by the Group and plays a crucial role in the financing of its trading activities. In 2012, its outstanding debt was approximately EUR 23 to 24 billion. In 2011, its net result was EUR 354 million. |
| --- | --- |

(12)

BPF is a captive bank 100 % controlled by PSA, which finances sales of Peugeot and Citroën brand vehicles, vehicle stocks and spare parts for distribution networks, and offers financing resources to the Group's customers. BPF trades in 23 countries. With an average penetration rate (3) of 29,8 % in 2012, BPF finances a large proportion of the demand for the vehicles produced by the Group and plays a crucial role in the financing of its trading activities. In 2012, its outstanding debt was approximately EUR 23 to 24 billion. In 2011, its net result was EUR 354 million.

3

| (13) | Faurecia is an automotive equipment supplier in which PSA had a 57,18 % holding on 31 December 2012. In essence, it produces vehicle seats, interior systems, emission control technologies and vehicle exteriors. In 2012, its turnover was approximately EUR 17,4 billion. |
| --- | --- |

(13)

Faurecia is an automotive equipment supplier in which PSA had a 57,18 % holding on 31 December 2012. In essence, it produces vehicle seats, interior systems, emission control technologies and vehicle exteriors. In 2012, its turnover was approximately EUR 17,4 billion.

2.2.   THE DIFFICULTIES EXPERIENCED BY THE PSA GROUP

THE DIFFICULTIES EXPERIENCED BY THE PSA GROUP

| (14) | In 2012, the Group's turnover fell by 5,2 %, largely because of the poor performance of its automotive division (which fell by 10,3 % to EUR 38,3 billion). In terms of ordinary operating income, the Group posted a loss of EUR 576 million, in comparison with a positive result of EUR 1,093 billion in 2011. In the automotive division alone, the operating loss was EUR 1,5 billion in 2012, in comparison with a loss of EUR 92 million in 2011. |
| --- | --- |

(14)

In 2012, the Group's turnover fell by 5,2 %, largely because of the poor performance of its automotive division (which fell by 10,3 % to EUR 38,3 billion). In terms of ordinary operating income, the Group posted a loss of EUR 576 million, in comparison with a positive result of EUR 1,093 billion in 2011. In the automotive division alone, the operating loss was EUR 1,5 billion in 2012, in comparison with a loss of EUR 92 million in 2011.

| (15) | The difficulties encountered are due to factors specific to the automotive market, the effects of the economic and financial recession in the Eurozone and the structural handicaps of the PSA Group. |
| --- | --- |

(15)

The difficulties encountered are due to factors specific to the automotive market, the effects of the economic and financial recession in the Eurozone and the structural handicaps of the PSA Group.

2.2.1.   ONGOING CONTRACTION OF THE EUROPEAN AUTOMOTIVE MARKET SINCE 2007

| (16) | The European market has continued to contract since 2007. Prior to 2007, the European automotive market represented some 18 million vehicles per year, against 14 million units sold in 2012, i.e. a decline of 15 %. |
| --- | --- |

(16)

The European market has continued to contract since 2007. Prior to 2007, the European automotive market represented some 18 million vehicles per year, against 14 million units sold in 2012, i.e. a decline of 15 %.

| (17) | Against this backdrop and in view of its European (and in particular southern European) focus, PSA's sales have fallen by 6,1 % in this market which accounts for 58 % of its sales. The PSA Group's market share has fallen to 13,3 %, in comparison with 14,2 % in 2010. |
| --- | --- |

(17)

Against this backdrop and in view of its European (and in particular southern European) focus, PSA's sales have fallen by 6,1 % in this market which accounts for 58 % of its sales. The PSA Group's market share has fallen to 13,3 %, in comparison with 14,2 % in 2010.

| (18) | The PSA Group is not offsetting the contraction of the European market by its sales outside Europe. In 2012, sales of cars and commercial vehicles in the rest of the world were not enough on their own to make up for the Group's poorer performance in the European market. |
| --- | --- |

(18)

The PSA Group is not offsetting the contraction of the European market by its sales outside Europe. In 2012, sales of cars and commercial vehicles in the rest of the world were not enough on their own to make up for the Group's poorer performance in the European market.

2.2.2.   A COMPETITION STRUCTURE THAT DOES NOT FAVOUR GENERAL MANUFACTURERS

| (19) | According to the French authorities, PSA is in competition with:






  (a) | all the other generalists: premium generalists (Renault, Nissan, Opel, Toyota, Volkswagen) and other generalists such as Ford, Fiat, Skoda, Seat and Honda; |
| --- | --- | --- |

(19)

According to the French authorities, PSA is in competition with:

(a)

all the other generalists: premium generalists (Renault, Nissan, Opel, Toyota, Volkswagen) and other generalists such as Ford, Fiat, Skoda, Seat and Honda;

| (b) | all the specialists (Audi, BMW, Mercedes, etc.), which are increasingly tending to develop premium products in all segments, thereby encroaching on the core market of the generalists; |
| --- | --- |

(b)

all the specialists (Audi, BMW, Mercedes, etc.), which are increasingly tending to develop premium products in all segments, thereby encroaching on the core market of the generalists;

| (c) | recent manufacturers, performing increasingly well in the mid-range segments in particular (Hyundai, Kia, etc.). |
| --- | --- |

(c)

recent manufacturers, performing increasingly well in the mid-range segments in particular (Hyundai, Kia, etc.).

| (20) | To summarise, according to the French authorities, the generalists' natural market is being attacked from ‘above’, i.e. by specialist high-end manufacturers targeting new segments (for instance, the Audi A1, etc.) and from ‘below’, i.e. by low/mid-range manufacturers, (in particular Korean manufacturers such as Hyundai-Kia), keen to improve their range. |
| --- | --- |

(20)

To summarise, according to the French authorities, the generalists' natural market is being attacked from ‘above’, i.e. by specialist high-end manufacturers targeting new segments (for instance, the Audi A1, etc.) and from ‘below’, i.e. by low/mid-range manufacturers, (in particular Korean manufacturers such as Hyundai-Kia), keen to improve their range.

2.2.3.   THE STRUCTURAL HANDICAPS OF THE PSA GROUP

| (21) | Over half (53 % in 2011) of the PSA Group's automotive production is located in western Europe where labour costs are higher than in the rest of the world. In total, the labour cost factor accounts for over [20-30] (*1) % of PSA's retail price. Moreover, most research and development (‘R&D’) staff and most of the Group's facilities are in France, entailing high staff costs. |
| --- | --- |

(21)

Over half (53 % in 2011) of the PSA Group's automotive production is located in western Europe where labour costs are higher than in the rest of the world. In total, the labour cost factor accounts for over [20-30] (*1) % of PSA's retail price. Moreover, most research and development (‘R&D’) staff and most of the Group's facilities are in France, entailing high staff costs.

*1

| (22) | The Group is also lagging behind its competitors in the R&D field, especially as regards component standardisation. |
| --- | --- |

(22)

The Group is also lagging behind its competitors in the R&D field, especially as regards component standardisation.

| (23) | Lastly, PSA does not have the same image and reputation as the German premium manufacturers. |
| --- | --- |

(23)

Lastly, PSA does not have the same image and reputation as the German premium manufacturers.

| (24) | The difficulties faced by the Group, especially by its automotive division, have immediate repercussions on BPF (and vice versa). The captive bank's difficulties can be largely attributed to the Group's problems because of the link between their financial ratings. If PSA's rating is downgraded, so is BPF's rating, making it difficult for BPF to access the markets to refinance itself. BPF nevertheless plays an extremely important supporting role as regards the PSA Group's automotive activities. In 2012, for instance, it financed 29,8 % of the manufacturer's sales and 100 % of its European dealers. The significant fall in BPF's financing capacities (and the resulting reduction of loan production) is therefore having a depressing effect on the automotive division's activity. The rating mechanism may therefore bring about a vicious circle, by further reducing BPF's sources of finance, which in turn affects PSA Group sales by restricting credit, and so on. |
| --- | --- |

(24)

The difficulties faced by the Group, especially by its automotive division, have immediate repercussions on BPF (and vice versa). The captive bank's difficulties can be largely attributed to the Group's problems because of the link between their financial ratings. If PSA's rating is downgraded, so is BPF's rating, making it difficult for BPF to access the markets to refinance itself. BPF nevertheless plays an extremely important supporting role as regards the PSA Group's automotive activities. In 2012, for instance, it financed 29,8 % of the manufacturer's sales and 100 % of its European dealers. The significant fall in BPF's financing capacities (and the resulting reduction of loan production) is therefore having a depressing effect on the automotive division's activity. The rating mechanism may therefore bring about a vicious circle, by further reducing BPF's sources of finance, which in turn affects PSA Group sales by restricting credit, and so on.

2.3.   THE AID MEASURES

THE AID MEASURES

2.3.1.   THE STATE GUARANTEE OF BPF'S BOND ISSUES

| (25) | To enable it to implement its restructuring plan, the French Government has decided to grant the PSA Group a guarantee covering BPF's long-term bond market issues made at the earliest on the date of the guarantee agreement or the European Commission's approval and at the latest on 31 December 2016 (‘the guarantee’). In this respect, an independent guarantee agreement is to be signed by the French State and the PSA Group, subject to approval by the European Commission pursuant to Articles 107 and 108 TFEU. After concluding an initial temporary guarantee agreement corresponding to a tranche of EUR 1,2 billion in principal pursuant to the Commission's decision of 11 February 2013 approving rescue aid, the French authorities are planning to conclude a second guarantee agreement with the PSA Group covering the remaining amount of financing capped at EUR 5,8 billion in principal. |
| --- | --- |

(25)

To enable it to implement its restructuring plan, the French Government has decided to grant the PSA Group a guarantee covering BPF's long-term bond market issues made at the earliest on the date of the guarantee agreement or the European Commission's approval and at the latest on 31 December 2016 (‘the guarantee’). In this respect, an independent guarantee agreement is to be signed by the French State and the PSA Group, subject to approval by the European Commission pursuant to Articles 107 and 108 TFEU. After concluding an initial temporary guarantee agreement corresponding to a tranche of EUR 1,2 billion in principal pursuant to the Commission's decision of 11 February 2013 approving rescue aid, the French authorities are planning to conclude a second guarantee agreement with the PSA Group covering the remaining amount of financing capped at EUR 5,8 billion in principal.

| (26) | Under Article 85 of the 2012 Amending Finance Law No 2012-1510 of 29 December 2012, the Minister for the Economy may authorise, against remuneration, a State guarantee for the securities issued by BPF between 1 January 2013 and 31 December 2016. The guarantee covers BPF's new long-term bond market issues. It will therefore benefit the unsecured debt instruments issued by BPF after the date on which the Commission approves the implementation of the guarantee and at the latest on 31 December 2016. These instruments will have a contractual term of a maximum of 36 months from their issue date. |
| --- | --- |

(26)

Under Article 85 of the 2012 Amending Finance Law No 2012-1510 of 29 December 2012, the Minister for the Economy may authorise, against remuneration, a State guarantee for the securities issued by BPF between 1 January 2013 and 31 December 2016. The guarantee covers BPF's new long-term bond market issues. It will therefore benefit the unsecured debt instruments issued by BPF after the date on which the Commission approves the implementation of the guarantee and at the latest on 31 December 2016. These instruments will have a contractual term of a maximum of 36 months from their issue date.

| (27) | The French authorities point out that the ceiling of the guarantee required by the PSA Group has been determined by analysing the current structure of BPF's balance sheet (and in particular BPF's financing structure) and 2013-16 forecasts of future financing needs which the French authorities have drawn up on the basis of the following assumptions:






  (a) | a total outstanding debt assumed to be more or less constant at some EUR 24/25 billion, making it possible to continue to finance automotive sales by the PSA Group; |
| --- | --- | --- |

(27)

The French authorities point out that the ceiling of the guarantee required by the PSA Group has been determined by analysing the current structure of BPF's balance sheet (and in particular BPF's financing structure) and 2013-16 forecasts of future financing needs which the French authorities have drawn up on the basis of the following assumptions:

(a)

a total outstanding debt assumed to be more or less constant at some EUR 24/25 billion, making it possible to continue to finance automotive sales by the PSA Group;

| (b) | increased securitisation in BPF's financing, partially offsetting the reduction of commercial paper/deposit certificates (impact rating A-3/P-3); |
| --- | --- |

(b)

increased securitisation in BPF's financing, partially offsetting the reduction of commercial paper/deposit certificates (impact rating A-3/P-3);

| (c) | the renewal of bank financing lines enabling BPF to confirm EUR 11,6 billion of medium-term bank credit in January 2013, in particular through the establishment of a new syndicated credit facility of EUR 4,1 billion maturing in five years, the renewal of most of its bilateral banking lines, the extension of a revolving credit line of EUR 1,2 billion with a maturity extended to January 2016 and the simultaneous extension of a credit line of EUR 1,8 billion to December 2015 (see the details given in recital 31 below); |
| --- | --- |

(c)

the renewal of bank financing lines enabling BPF to confirm EUR 11,6 billion of medium-term bank credit in January 2013, in particular through the establishment of a new syndicated credit facility of EUR 4,1 billion maturing in five years, the renewal of most of its bilateral banking lines, the extension of a revolving credit line of EUR 1,2 billion with a maturity extended to January 2016 and the simultaneous extension of a credit line of EUR 1,8 billion to December 2015 (see the details given in recital 31 below);

| (d) | recourse to deposits from 2013. |
| --- | --- |

(d)

recourse to deposits from 2013.

| (28) | According to the French authorities, the remuneration of the guarantee has been calculated at market price in accordance with the criteria laid down in the Community guidelines on State aid for rescuing and restructuring firms in difficulty (4) (‘the Rescue and Restructuring Guidelines’) and the Commission Notice on the application of Articles 87 and 88 of the EC Treaty (now Articles 107 and 108 TFEU) to State aid in the form of guarantees (5). The Guarantee Notice states that, if no corresponding guarantee premium benchmark can be found on the financial markets, the total financial cost of the guaranteed loan, including the interest rate of the loan and the guarantee premium, has to be compared with the market price of a similar non-guaranteed loan. |
| --- | --- |

(28)

According to the French authorities, the remuneration of the guarantee has been calculated at market price in accordance with the criteria laid down in the Community guidelines on State aid for rescuing and restructuring firms in difficulty (4) (‘the Rescue and Restructuring Guidelines’) and the Commission Notice on the application of Articles 87 and 88 of the EC Treaty (now Articles 107 and 108 TFEU) to State aid in the form of guarantees (5). The Guarantee Notice states that, if no corresponding guarantee premium benchmark can be found on the financial markets, the total financial cost of the guaranteed loan, including the interest rate of the loan and the guarantee premium, has to be compared with the market price of a similar non-guaranteed loan.

4

5

| (29) | The French authorities contend that, in order to calculate the rate of the remuneration of the State, the latter had to proceed in the same way as the banks taking part in the New Club Deal, an agreement between BPF and its creditor banks. For that purpose, the cost of the risk estimated by the banks was calculated from the total remuneration of the liquidity lines of the New Club Deal, reprocessed to take account in particular of the differences between a liquidity injection and a guarantee. The remuneration of the State guarantee has therefore been set at 260 basis points. |
| --- | --- |

(29)

The French authorities contend that, in order to calculate the rate of the remuneration of the State, the latter had to proceed in the same way as the banks taking part in the New Club Deal, an agreement between BPF and its creditor banks. For that purpose, the cost of the risk estimated by the banks was calculated from the total remuneration of the liquidity lines of the New Club Deal, reprocessed to take account in particular of the differences between a liquidity injection and a guarantee. The remuneration of the State guarantee has therefore been set at 260 basis points.

| (30) | BPF has issued bond securities in its own name, for which there is a secondary market. Table 2 below shows the median yields of BPF's existing bonds having a maturity of close to three years for a one-month period before the Group's aid measure was announced in the press (6). The yield of a hypothetical bond having a maturity of exactly three years was interpolated on the basis of the yields of BPF's bonds having the maturity closest to three years at each given date. Lastly, Table 2 also shows the yield levels of State bonds maturing in three years.

  Table 2


  Yields on the secondary market








  (%) |
| --- | --- |
| | At 16.10.2012 | Median 16.9-16.10 |
| Bond maturing on 25.9.2015 | 5,04 | 5,52 |
| Bond maturing on 24.6.2015 | 4,84 | 5,57 |
| Bond maturing on 25.2.2016 | 5,37 | 6,23 |
| Hypothetical three-year bond (interpolated yields) | 5,09 | 5,54 |
| Three-year fungible Treasury bond | 0,34 | 0,39 |

(30)

BPF has issued bond securities in its own name, for which there is a secondary market. Table 2 below shows the median yields of BPF's existing bonds having a maturity of close to three years for a one-month period before the Group's aid measure was announced in the press (6). The yield of a hypothetical bond having a maturity of exactly three years was interpolated on the basis of the yields of BPF's bonds having the maturity closest to three years at each given date. Lastly, Table 2 also shows the yield levels of State bonds maturing in three years.

6

Table 2

Table 2

Yields on the secondary market

Yields on the secondary market

(%)

At 16.10.2012

Median 16.9-16.10

Bond maturing on 25.9.2015

5,04

5,52

Bond maturing on 24.6.2015

4,84

5,57

Bond maturing on 25.2.2016

5,37

6,23

Hypothetical three-year bond (interpolated yields)

5,09

5,54

Three-year fungible Treasury bond

0,34

0,39

| (31) | In late December 2012, BPF negotiated new credit facilities with a number of banks, which agreed to grant BPF:






  (a) | liquidity through long-term loans of EUR 4 billion (‘the New Club Deal’); |
| --- | --- | --- |

(31)

In late December 2012, BPF negotiated new credit facilities with a number of banks, which agreed to grant BPF:

(a)

liquidity through long-term loans of EUR 4 billion (‘the New Club Deal’);

| (b) | bilateral credit lines of up to EUR 4,6 billion; |
| --- | --- |

(b)

bilateral credit lines of up to EUR 4,6 billion;

| (c) | an extension of two ‘back-up’ lines (not intended to be drawn down) of EUR 3 billion. |
| --- | --- |

(c)

an extension of two ‘back-up’ lines (not intended to be drawn down) of EUR 3 billion.

The total commitment of these banks was therefore EUR 11,6 billion. According to the information provided by France, drawings on the New Club Deal's credit lines would be conditional on the implementation of the State support measure (7).

7

| (32) | On 25 March 2013, BPF undertook a bond issue covered by a State guarantee for EUR 1,2 billion. This bond, bearing a coupon of 0,625 %, shows a yield of 0,664 %, i.e. an increase of 24 basis points over the three-year fungible Treasury bond (OAT). |
| --- | --- |

(32)

On 25 March 2013, BPF undertook a bond issue covered by a State guarantee for EUR 1,2 billion. This bond, bearing a coupon of 0,625 %, shows a yield of 0,664 %, i.e. an increase of 24 basis points over the three-year fungible Treasury bond (OAT).

| (33) | In recital 51 of the rescue decision, the Commission quantified the aid element as ranging between EUR 91,8 million and the nominal amount of the bonds issued of EUR 1,2 billion. The French authorities note that, on the basis of the methods used in the rescue decision, the results obtained for the aid element contained in the measure are:

  Table 3


  Calculation of the aid element in the guaranteed bonds









  Interpolated three-year data
  State spread of 24 basis points | Spot | Median of bond yields |
| --- | --- | --- | --- |
| | 16.10.2012 | 12.7-16.10 | 16.9-16.10 |
| Three-year fungible Treasury bond (OAT) | 0,34 % | 0,35 % | 0,39 % |
| Estimated State spread after guarantee | 0,24 % | 0,24 % | 0,24 % |
| BPSA interest rate after guarantee (a) | 0,58 % | 0,59 % | 0,63 % |
| Cost of the guarantee (b) | 2,60 % | 2,60 % | 2,60 % |
| Total estimated cost of the guaranteed issues (a) + (b) | 3,18 % | 3,19 % | 3,23 % |
| BPSA secondary market yield interpolated over three years | 5,09 % | 5,23 % | 5,54 % |
| Amount of State aid involved (EUR million) | 401 | 429 | 486 |
| Source: BNP Paribas Global Markets, Datastream. |

(33)

In recital 51 of the rescue decision, the Commission quantified the aid element as ranging between EUR 91,8 million and the nominal amount of the bonds issued of EUR 1,2 billion. The French authorities note that, on the basis of the methods used in the rescue decision, the results obtained for the aid element contained in the measure are:

Table 3

Table 3

Calculation of the aid element in the guaranteed bonds

Calculation of the aid element in the guaranteed bonds

Interpolated three-year data

State spread of 24 basis points

Spot

Median of bond yields

16.10.2012

12.7-16.10

16.9-16.10

Three-year fungible Treasury bond (OAT)

0,34 %

0,35 %

0,39 %

Estimated State spread after guarantee

0,24 %

0,24 %

0,24 %

BPSA interest rate after guarantee (a)

0,58 %

0,59 %

0,63 %

Cost of the guarantee (b)

2,60 %

2,60 %

2,60 %

Total estimated cost of the guaranteed issues (a) + (b)

3,18 %

3,19 %

3,23 %

BPSA secondary market yield interpolated over three years

5,09 %

5,23 %

5,54 %

Amount of State aid involved (EUR million)

401

429

486

Source: BNP Paribas Global Markets, Datastream.

Source:

| (34) | The French authorities consider that the Commission is using a particularly unfavourable reference period in the history of BPF's bond yields. The period from 12 July to 16 October 2012 (i.e. from the date on which PSA's difficulties became known through the announcement of its reorganisation plan) would, in the view of the French authorities, provide a better estimate of bond yield. |
| --- | --- |

(34)

The French authorities consider that the Commission is using a particularly unfavourable reference period in the history of BPF's bond yields. The period from 12 July to 16 October 2012 (i.e. from the date on which PSA's difficulties became known through the announcement of its reorganisation plan) would, in the view of the French authorities, provide a better estimate of bond yield.

2.3.2.   AID FOR THE ‘50CO2CARS’ PROJECT

2

| (35) | The public finance that France is planning to grant for the 50CO2Cars project is part of the ‘future investment’ programme established by the Amending Finance Law No 2010-237 of 9 March 2010. The Environment and Energy Management Agency (‘ADEME’) is one of the operators (8) commissioned by the State to manage the appropriations channelled into future investment. ADEME has a total budget of EUR 2,65 billion. |
| --- | --- |

(35)

The public finance that France is planning to grant for the 50CO2Cars project is part of the ‘future investment’ programme established by the Amending Finance Law No 2010-237 of 9 March 2010. The Environment and Energy Management Agency (‘ADEME’) is one of the operators (8) commissioned by the State to manage the appropriations channelled into future investment. ADEME has a total budget of EUR 2,65 billion.

8

| (36) | Within the future investment programme, the 50CO2Cars project comes under the ‘Future Vehicle’ measure which is intended to try out and promote technologies and configurations consuming less energy and emitting less greenhouse gas. Under this measure, various technological building bricks have been chosen within two Calls for Expressions of Interest (‘CEI’):






  (a) | the new family of highly energy-efficient diesel engines and the DCT gearbox were selected in the CEI: ‘Powertrain and auxiliaries of internal combustion engines’ (‘CEI No 1’); |
| --- | --- | --- |

(36)

Within the future investment programme, the 50CO2Cars project comes under the ‘Future Vehicle’ measure which is intended to try out and promote technologies and configurations consuming less energy and emitting less greenhouse gas. Under this measure, various technological building bricks have been chosen within two Calls for Expressions of Interest (‘CEI’):

2

(a)

the new family of highly energy-efficient diesel engines and the DCT gearbox were selected in the CEI: ‘Powertrain and auxiliaries of internal combustion engines’ (‘CEI No 1’);

| (b) | the electric hybridisation technology was selected in the CEI: ‘Powertrains, auxiliaries and reversible energy storage systems for electric and hybrid vehicles’ (‘CEI No 2’). |
| --- | --- |

(b)

the electric hybridisation technology was selected in the CEI: ‘Powertrains, auxiliaries and reversible energy storage systems for electric and hybrid vehicles’ (‘CEI No 2’).

| (37) | The Future Vehicle measure is covered in particular by the aid scheme SA.32466 (2011/X) (9) exempted from notification pursuant to the General Block Exemption Regulation (10) (‘the GBER’). |
| --- | --- |

(37)

The Future Vehicle measure is covered in particular by the aid scheme SA.32466 (2011/X) (9) exempted from notification pursuant to the General Block Exemption Regulation (10) (‘the GBER’).

9

10

| (38) | The French authorities have provided details and the form of the public finance to be received by each of the project's listed partners. With the exception of the project leader PSA, the amounts of public finance involved in the conduct of the 50CO2Cars project are below the individual notification thresholds set out in Article 6(1)(e) of the GBER for all the other partners (Delphi, Mann & Hummel, Valeo, Rhodia, CTI, IRMA, IFPEN, LACCO, IRCELYON, and IC2MP). In so far as it constitutes State aid within the meaning of Article 107 TFEU (11), this public finance is therefore already covered by the exempted scheme SA.32466 (2011/X) mentioned above. |
| --- | --- |

(38)

The French authorities have provided details and the form of the public finance to be received by each of the project's listed partners. With the exception of the project leader PSA, the amounts of public finance involved in the conduct of the 50CO2Cars project are below the individual notification thresholds set out in Article 6(1)(e) of the GBER for all the other partners (Delphi, Mann & Hummel, Valeo, Rhodia, CTI, IRMA, IFPEN, LACCO, IRCELYON, and IC2MP). In so far as it constitutes State aid within the meaning of Article 107 TFEU (11), this public finance is therefore already covered by the exempted scheme SA.32466 (2011/X) mentioned above.

2

11

| (39) | In accordance with Article 1(6)(c), however, the GBER does not apply to aid to undertakings in difficulty, a definition which the PSA Group has certainly met since at least 17 October 2012, when the French authorities announced their intention to grant a guarantee to the PSA Group. The aid that the State is planning to grant to PSA to support the 50CO2Cars project cannot then be covered by the aid scheme SA.32466 (2011/X), nor be the subject matter of an individual notification on the basis of the Community Framework for State aid for research and development and innovation (12) (‘the R&D&I Framework’) (13). |
| --- | --- |

(39)

In accordance with Article 1(6)(c), however, the GBER does not apply to aid to undertakings in difficulty, a definition which the PSA Group has certainly met since at least 17 October 2012, when the French authorities announced their intention to grant a guarantee to the PSA Group. The aid that the State is planning to grant to PSA to support the 50CO2Cars project cannot then be covered by the aid scheme SA.32466 (2011/X), nor be the subject matter of an individual notification on the basis of the Community Framework for State aid for research and development and innovation (12) (‘the R&D&I Framework’) (13).

2

12

13

| (40) | With a view to administrative simplification, the costs of PSA's 50CO2Cars project activities have been classified in the same way as for the other partners, i.e. using the categories set out in the GBER (which coincide with those of the R&D&I Framework). |
| --- | --- |

(40)

With a view to administrative simplification, the costs of PSA's 50CO2Cars project activities have been classified in the same way as for the other partners, i.e. using the categories set out in the GBER (which coincide with those of the R&D&I Framework).

2

| (41) | PSA is therefore undertaking activities characterised (14) as fundamental research (‘FR’), industrial research (‘IR’) and experimental development (‘ED’) for the eligible costs detailed in Table 4 below:

  Table 4


  Costs of the 50CO2Cars project by type of R&D activity (EUR thousand)











  Costs | Totals | Eligible (15) | FR | IR | ED |
| --- | --- | --- | --- | --- | --- | --- |
| CEI No 1 | [260 -330]* | 233 524,91 | 1 328,79 | 140 622,53 | 91 573,59 |
| CEI No 2 | [50 -110]* | 71 068,57 | | 34 945,01 | 36 123,56 |
| Total | [300 -400]* | 304 593,48 | 1 328,79 | 175 567,54 | 127 697,15 |

(41)

PSA is therefore undertaking activities characterised (14) as fundamental research (‘FR’), industrial research (‘IR’) and experimental development (‘ED’) for the eligible costs detailed in Table 4 below:

14

Table 4

Table 4

Costs of the 50CO2Cars project by type of R&D activity (EUR thousand)

Costs of the 50CO2

Costs

Totals

Eligible (15)

15

FR

IR

ED

CEI No 1

[260 -330]*

233 524,91

1 328,79

140 622,53

91 573,59

CEI No 2

[50 -110]*

71 068,57

34 945,01

36 123,56

Total

Total

[300 -400]*

[300 -400]*

304 593,48

304 593,48

1 328,79

1 328,79

175 567,54

175 567,54

127 697,15

127 697,15

| (42) | Totalling EUR 85,9 million, the aid that the State is intending to grant to the PSA Group for this strand of the restructuring plan is to take the form of grants (EUR 24,5 million) and repayable advances (EUR 61,4 million). In terms of intensity, they cover 100 % of the eligible costs of FR, 30 % of IT and 25 % of ED. |
| --- | --- |

(42)

Totalling EUR 85,9 million, the aid that the State is intending to grant to the PSA Group for this strand of the restructuring plan is to take the form of grants (EUR 24,5 million) and repayable advances (EUR 61,4 million). In terms of intensity, they cover 100 % of the eligible costs of FR, 30 % of IT and 25 % of ED.

| (43) | As regards the repayable advances in particular, they will be discounted to the reference rate in force in January 2012, when the aid grant decision was made: 3,07 % for France. They are to be repaid by PSA using different methods for each of the CEIs. |
| --- | --- |

(43)

As regards the repayable advances in particular, they will be discounted to the reference rate in force in January 2012, when the aid grant decision was made: 3,07 % for France. They are to be repaid by PSA using different methods for each of the CEIs.

| (44) | As regards the part of the project relating to CEI No 1, three hybridisation architectures are possible and are being evaluated in parallel: via the eDCT gearbox, via the engine accessory facade and via the accessory facade with freewheeling. The repayment scheme, which will ultimately depend on the architecture selected at one of the decision-making stages of the project, will take one of the following forms:






  (a) | If hybridisation via the eDCT gearbox is chosen, the repayment will be based on two work units:






  — | EUR [10-20]* per diesel engine of a power of 40/50 kW and 70 kW from the [500 000-600 000]*th unit produced, such that this part of the advance will be repaid to the nearest euro in four years, at a discounted value, on the basis of the nominal production scenario. Following this 100 % repayment of the discounted amount, the PSA Group will continue to pay a reduced amount of EUR [3-6] per engine produced for [1-3] years, |
| --- | --- | --- | --- |

(44)

As regards the part of the project relating to CEI No 1, three hybridisation architectures are possible and are being evaluated in parallel: via the eDCT gearbox, via the engine accessory facade and via the accessory facade with freewheeling. The repayment scheme, which will ultimately depend on the architecture selected at one of the decision-making stages of the project, will take one of the following forms:

(a)

If hybridisation via the eDCT gearbox is chosen, the repayment will be based on two work units:

—

EUR [10-20]* per diesel engine of a power of 40/50 kW and 70 kW from the [500 000-600 000]*th unit produced, such that this part of the advance will be repaid to the nearest euro in four years, at a discounted value, on the basis of the nominal production scenario. Following this 100 % repayment of the discounted amount, the PSA Group will continue to pay a reduced amount of EUR [3-6] per engine produced for [1-3] years,

| — | EUR [30-40]* per eDCT gearbox from the [50 000-60 000]*th unit produced, such that this part of the advance will be repaid to the nearest euro in five years, at a discounted value, on the basis of the nominal production scenario. Following this 100 % repayment of the discounted amount, the PSA Group will continue to pay a reduced amount of EUR [5-10]* per eDCT gearbox produced. |
| --- | --- |

—

EUR [30-40]* per eDCT gearbox from the [50 000-60 000]*th unit produced, such that this part of the advance will be repaid to the nearest euro in five years, at a discounted value, on the basis of the nominal production scenario. Following this 100 % repayment of the discounted amount, the PSA Group will continue to pay a reduced amount of EUR [5-10]* per eDCT gearbox produced.

| (b) | If hybridisation via the accessory facade is chosen, repayment will be based solely on the work unit of the diesel engine of a power of 40/50 kW and 70 kW, for which PSA will pay EUR [10-20]* per unit from the [500 000-600 000]*th unit produced until the discounted amount is repaid in full (some [0-5]* years in the nominal scenario), then EUR [5-10]* per unit. |
| --- | --- |

(b)

If hybridisation via the accessory facade is chosen, repayment will be based solely on the work unit of the diesel engine of a power of 40/50 kW and 70 kW, for which PSA will pay EUR [10-20]* per unit from the [500 000-600 000]*th unit produced until the discounted amount is repaid in full (some [0-5]* years in the nominal scenario), then EUR [5-10]* per unit.

| (c) | If hybridisation via the accessory facade with freewheeling is chosen, the repayment will also be calculated from the work unit of the diesel engine of a power of 40/50 kW and 70 kW: PSA will pay EUR [20-30]* per unit from the [500 000-600 000]*th unit produced until the discounted amount is repaid in full (some [0-5]* years in the nominal scenario), then EUR [5-10]* per unit. |
| --- | --- |

(c)

If hybridisation via the accessory facade with freewheeling is chosen, the repayment will also be calculated from the work unit of the diesel engine of a power of 40/50 kW and 70 kW: PSA will pay EUR [20-30]* per unit from the [500 000-600 000]*th unit produced until the discounted amount is repaid in full (some [0-5]* years in the nominal scenario), then EUR [5-10]* per unit.

| (45) | As regards the part of the project relating to CEI No 2, the repayment will be based on the work unit of the electric powertrain: PSA will repay EUR [20-30]* per unit from the [500 000-600 000]*th unit produced until the discounted amount is repaid in full (some [5-10]* years in the nominal scenario), then EUR [5-10]* per unit. |
| --- | --- |

(45)

As regards the part of the project relating to CEI No 2, the repayment will be based on the work unit of the electric powertrain: PSA will repay EUR [20-30]* per unit from the [500 000-600 000]*th unit produced until the discounted amount is repaid in full (some [5-10]* years in the nominal scenario), then EUR [5-10]* per unit.

| (46) | The French authorities consider that these methods are such that the advance will be repaid at discounted value in a scenario, based on prudent and reasonable assumptions, in which the project has a favourable outcome, and that in the case of partial failure, the repayment will be proportional to the project's degree of success. |
| --- | --- |

(46)

The French authorities consider that these methods are such that the advance will be repaid at discounted value in a scenario, based on prudent and reasonable assumptions, in which the project has a favourable outcome, and that in the case of partial failure, the repayment will be proportional to the project's degree of success.

2.4.   THE PSA GROUP RESTRUCTURING PLAN

THE PSA GROUP RESTRUCTURING PLAN

| (47) | The restructuring plan follows on from the cost reduction measures presented on 26 October 2011 (cost reduction of EUR 800 million, leading to 2 500 job cuts in Europe) and 15 February 2012 (supplementary measures totalling EUR 200 million). |
| --- | --- |

(47)

The restructuring plan follows on from the cost reduction measures presented on 26 October 2011 (cost reduction of EUR 800 million, leading to 2 500 job cuts in Europe) and 15 February 2012 (supplementary measures totalling EUR 200 million).

| (48) | The restructuring plan contains three kinds of measure: industrial restructuring, downsizing of the Group's administrative structure and conduct of the 50CO2Cars R&D project. Although the PSA Group has a presence in many countries of the world, the restructuring measures relate largely to France where most of the Group's production resources are concentrated. |
| --- | --- |

(48)

The restructuring plan contains three kinds of measure: industrial restructuring, downsizing of the Group's administrative structure and conduct of the 50CO2Cars R&D project. Although the PSA Group has a presence in many countries of the world, the restructuring measures relate largely to France where most of the Group's production resources are concentrated.

2

2.4.1.   RESTRUCTURING MEASURES IN RELATION TO THE INDUSTRIAL PRODUCTION SYSTEM

| (49) | The main measures concern the French plants: closure of the Aulnay plant and a significant reduction of capacity at the Rennes plants, leading to 4 400 job cuts. These two measures are part and parcel of the general optimisation of PSA's production plants. |
| --- | --- |

(49)

The main measures concern the French plants: closure of the Aulnay plant and a significant reduction of capacity at the Rennes plants, leading to 4 400 job cuts. These two measures are part and parcel of the general optimisation of PSA's production plants.

| (50) | As a result of its historical positioning in the small car/multi-purpose vehicle segment (‘segment B’), PSA has major production capacity in segment B: in France (Aulnay, Poissy and Mulhouse), in Spain (Madrid) and in Slovakia (Trnava). Despite ongoing streamlining measures since the early 2000s (closure of Ryton (United Kingdom) in 2006 and capacity reduction at Aulnay in 2008), it continues to have excess capacity in segment B. The closure of Aulnay will cut production of 208, C3 and DS3 models by 155 000 vehicles/year from the regime set in place in 2012, corresponding to a maximum capacity reduction of 232 000 vehicles/year, and the concentration of segment B production at the Poissy, Mulhouse and Trnava plants. According to the French authorities, this measure will sustainably reduce capacity in segment B and will bring about a substantial saving of overheads within the perimeter of the Group (estimated at EUR [100-200]* million per year). |
| --- | --- |

(50)

As a result of its historical positioning in the small car/multi-purpose vehicle segment (‘segment B’), PSA has major production capacity in segment B: in France (Aulnay, Poissy and Mulhouse), in Spain (Madrid) and in Slovakia (Trnava). Despite ongoing streamlining measures since the early 2000s (closure of Ryton (United Kingdom) in 2006 and capacity reduction at Aulnay in 2008), it continues to have excess capacity in segment B. The closure of Aulnay will cut production of 208, C3 and DS3 models by 155 000 vehicles/year from the regime set in place in 2012, corresponding to a maximum capacity reduction of 232 000 vehicles/year, and the concentration of segment B production at the Poissy, Mulhouse and Trnava plants. According to the French authorities, this measure will sustainably reduce capacity in segment B and will bring about a substantial saving of overheads within the perimeter of the Group (estimated at EUR [100-200]* million per year).

| (51) | The Rennes plant currently focuses on the production of segment D and E vehicles (16). It is facing an ongoing fall in demand, especially for segment D saloons. Transition from 2,5 shifts to 2 and the discontinuation of a night shift and a production mini-line will make it possible, in the view of the French authorities, to limit production solely to the Peugeot 508 (saloon and estate) and C5 (saloon and estate). |
| --- | --- |

(51)

The Rennes plant currently focuses on the production of segment D and E vehicles (16). It is facing an ongoing fall in demand, especially for segment D saloons. Transition from 2,5 shifts to 2 and the discontinuation of a night shift and a production mini-line will make it possible, in the view of the French authorities, to limit production solely to the Peugeot 508 (saloon and estate) and C5 (saloon and estate).

16

| (52) | R&D activity is also to be scaled down (10 %) and teams will be limited to site support alone (development tasks benefiting the Group's activity in general are to be discontinued). |
| --- | --- |

(52)

R&D activity is also to be scaled down (10 %) and teams will be limited to site support alone (development tasks benefiting the Group's activity in general are to be discontinued).

| (53) | PSA hopes that it can in this way make its European organisation more efficient, in particular by making better use of existing capacity and by the increased specialisation of plants which will produce only one or two segments. The aim of this reorganisation is to reduce the retail price of each vehicle by approximately EUR [200-300]* to [200-300]*. |
| --- | --- |

(53)

PSA hopes that it can in this way make its European organisation more efficient, in particular by making better use of existing capacity and by the increased specialisation of plants which will produce only one or two segments. The aim of this reorganisation is to reduce the retail price of each vehicle by approximately EUR [200-300]* to [200-300]*.

2.4.2.   MEASURES RELATING TO THE PSA GROUP'S ADMINISTRATIVE STRUCTURE

| (54) | The PSA Group is planning to reorganise administrative services at all levels of management. This reorganisation will entail a total of 3 586 job cuts. |
| --- | --- |

(54)

The PSA Group is planning to reorganise administrative services at all levels of management. This reorganisation will entail a total of 3 586 job cuts.

| (55) | In parallel, and as a result of the restructuring measures, PSA has announced a plan to save EUR 1 billion in respect of purchases (EUR 400 million) and overheads (EUR 600 million) and is in particular planning to implement a range of measures connected with industrial activities, R&D and general costs through its alliance with GM. |
| --- | --- |

(55)

In parallel, and as a result of the restructuring measures, PSA has announced a plan to save EUR 1 billion in respect of purchases (EUR 400 million) and overheads (EUR 600 million) and is in particular planning to implement a range of measures connected with industrial activities, R&D and general costs through its alliance with GM.

2.4.3.   THE 50CO2CARS R&D PROJECT

2

| (56) | As part of its industrial restructuring, the PSA Group is planning to develop new hybridisation technologies which will, in the view of the French authorities, help to restore the Group's viability. If successful, this R&D project should help the PSA Group to start mass production of diesel hybrid vehicles in segment B (weight of between 900 kg and 1,3 tonnes), and thus to diversify its production into a segment that promises to be profitable. Although diesel engines are preferred by European consumers, the main components of the hybridisation system (17) could subsequently be adapted to equivalent petrol-driven engines and marketed throughout the world. |
| --- | --- |

(56)

As part of its industrial restructuring, the PSA Group is planning to develop new hybridisation technologies which will, in the view of the French authorities, help to restore the Group's viability. If successful, this R&D project should help the PSA Group to start mass production of diesel hybrid vehicles in segment B (weight of between 900 kg and 1,3 tonnes), and thus to diversify its production into a segment that promises to be profitable. Although diesel engines are preferred by European consumers, the main components of the hybridisation system (17) could subsequently be adapted to equivalent petrol-driven engines and marketed throughout the world.

17

| (57) | The purpose of this R&D project, called 50CO2Cars, is to design and produce a (non-rechargeable) hybrid powertrain for segment B, which should make it possible ultimately to limit the CO2 emissions of these vehicles to 50 grams per kilometre (‘g CO2/km’) and, by extension, to position family vehicles (segment C) around 65 g CO2/km. The aim of the project is to make this technology economically available to as many people as possible. |
| --- | --- |

(57)

The purpose of this R&D project, called 50CO2Cars, is to design and produce a (non-rechargeable) hybrid powertrain for segment B, which should make it possible ultimately to limit the CO2 emissions of these vehicles to 50 grams per kilometre (‘g CO2/km’) and, by extension, to position family vehicles (segment C) around 65 g CO2/km. The aim of the project is to make this technology economically available to as many people as possible.

2

2

2

2

| (58) | In technical terms, the project will combine a new family of highly energy- efficient diesel engines with a motor-driven dual-clutch gearbox compatible with hybridisation (‘DCT’), and a low-cost electric hybridisation technology. |
| --- | --- |

(58)

In technical terms, the project will combine a new family of highly energy- efficient diesel engines with a motor-driven dual-clutch gearbox compatible with hybridisation (‘DCT’), and a low-cost electric hybridisation technology.

| (59) | PSA will lead the R&D consortium set up for the 50CO2Cars project. |
| --- | --- |

(59)

PSA will lead the R&D consortium set up for the 50CO2Cars project.

2

| (60) | This consortium will also include industrial and academic partners: five large enterprises (Delphi, Mann & Hummel, Valeo and Rhodia), an SME (CTI), an association (IRMA) and four research organisations (IFPEN, LACCO, IRCELYON and IC2MP). |
| --- | --- |

(60)

This consortium will also include industrial and academic partners: five large enterprises (Delphi, Mann & Hummel, Valeo and Rhodia), an SME (CTI), an association (IRMA) and four research organisations (IFPEN, LACCO, IRCELYON and IC2MP).

2.4.4.   THE PSA GROUP BUSINESS PLAN

| (61) | The PSA Group business plan covers the period 2013-17. The French authorities have specified that the Group's ordinary operating income, in the median scenario, will be positive from 2014, at EUR [1 200-2 000]* million, i.e. [1-5]* % of turnover. Viability will be improved largely by the internal measures contained in the restructuring plan. These include both a major reduction of production costs and improved cash flow, and assume that PSA Group activities will have a fresh geographical focus. The target is for 50 % of Group sales to be made outside the European Union in 2015, thus making it possible to capture the growth potential in these parts of the world (in particular China, Brazil, etc.). |
| --- | --- |

(61)

The PSA Group business plan covers the period 2013-17. The French authorities have specified that the Group's ordinary operating income, in the median scenario, will be positive from 2014, at EUR [1 200-2 000]* million, i.e. [1-5]* % of turnover. Viability will be improved largely by the internal measures contained in the restructuring plan. These include both a major reduction of production costs and improved cash flow, and assume that PSA Group activities will have a fresh geographical focus. The target is for 50 % of Group sales to be made outside the European Union in 2015, thus making it possible to capture the growth potential in these parts of the world (in particular China, Brazil, etc.).

| (62) | The French authorities have submitted the PSA Group business plan to 2017. The plan is based on assumptions of the size of the European market and PSA's market shares. These assumptions draw on the estimates drawn up by IHS Global Insight. |
| --- | --- |

(62)

The French authorities have submitted the PSA Group business plan to 2017. The plan is based on assumptions of the size of the European market and PSA's market shares. These assumptions draw on the estimates drawn up by IHS Global Insight.

IHS Global Insight

| (63) | As regards the size of the European market, a downturn of 2,2 % is forecast in 2013, according to the French authorities, followed by a growth of 6 % per annum in 2014 and 2015, and a growth of 3 % per annum in 2016 and 2017. PSA's market shares will reach [12-15]* % in 2013, [13-16]* % in 2014 and [11-15]* % in 2015, 2016 and 2017. |
| --- | --- |

(63)

As regards the size of the European market, a downturn of 2,2 % is forecast in 2013, according to the French authorities, followed by a growth of 6 % per annum in 2014 and 2015, and a growth of 3 % per annum in 2016 and 2017. PSA's market shares will reach [12-15]* % in 2013, [13-16]* % in 2014 and [11-15]* % in 2015, 2016 and 2017.

| (64) | The business plan looks at various scenarios. In the ‘median’ scenario, the PSA Group's ordinary operating income is positive from 2014, at EUR [1 200-2 000]* billion, i.e. [1-5]* % of the Group's turnover. It is forecast to reach EUR [3 000-3 800] billion in 2017, i.e. [2-6]* % of PSA's turnover. According to the French authorities, this level of profitability will give the PSA Group a rating which is enough for it to refinance itself independently on the markets. An improved rating for the Group will automatically have an impact on BPF's rating. |
| --- | --- |

(64)

The business plan looks at various scenarios. In the ‘median’ scenario, the PSA Group's ordinary operating income is positive from 2014, at EUR [1 200-2 000]* billion, i.e. [1-5]* % of the Group's turnover. It is forecast to reach EUR [3 000-3 800] billion in 2017, i.e. [2-6]* % of PSA's turnover. According to the French authorities, this level of profitability will give the PSA Group a rating which is enough for it to refinance itself independently on the markets. An improved rating for the Group will automatically have an impact on BPF's rating.

| (65) | Alternative scenarios are also envisaged. In an ‘unfavourable’ scenario, PSA Group sales decline (in comparison with the median scenario) by a further 100 000 vehicles per annum in Europe from 2013. In a ‘favourable’ scenario, PSA Group sales in Europe increase by some 100 000 vehicles per annum from 2013. According to the business plan notified, the ordinary operating income of the PSA Group overall, in the unfavourable scenario as well, is positive from 2014 (some [1-5]* % of the PSA Group's turnover), and reaches [2-6]* % in 2017. It should nevertheless be borne in mind that the PSA Group forecasts show a high growth of turnover outside Europe, i.e. in growth markets. This assumption explains why, despite the pessimistic forecasts for the European market, the PSA Group is expecting its sales to grow: its target is to make 50 % of its sales outside Europe in 2015. |
| --- | --- |

(65)

Alternative scenarios are also envisaged. In an ‘unfavourable’ scenario, PSA Group sales decline (in comparison with the median scenario) by a further 100 000 vehicles per annum in Europe from 2013. In a ‘favourable’ scenario, PSA Group sales in Europe increase by some 100 000 vehicles per annum from 2013. According to the business plan notified, the ordinary operating income of the PSA Group overall, in the unfavourable scenario as well, is positive from 2014 (some [1-5]* % of the PSA Group's turnover), and reaches [2-6]* % in 2017. It should nevertheless be borne in mind that the PSA Group forecasts show a high growth of turnover outside Europe, i.e. in growth markets. This assumption explains why, despite the pessimistic forecasts for the European market, the PSA Group is expecting its sales to grow: its target is to make 50 % of its sales outside Europe in 2015.

| (66) | As regards trends in the PSA Group's production capacity, the French authorities have produced two tables showing the Harbour usage rates (18) for each plant, before and after the Group's restructuring. With the exception of Poissy, these rates remain the same. The French authorities point out that the viability of each plant cannot be measured independently from that of the PSA Group. The PSA Group's automotive activity needs to be examined overall for each market segment. In the view of the French authorities, each plant has a portfolio of vehicles that it could potentially produce. If some plants have lower or higher usage rates, these are generally known variations which are managed in line with product life cycles.

  Table 5


  Forecast turnover in three scenarios for the PSA Group (EUR million)* | 2013 | 2014 | 2015 | 2016 | 2017 |
| --- | --- | --- | --- | --- | --- | --- |
| Median Scenario | [55 000 -60 000 ] | [60 000 -65 000 ] | [60 000 -65 000 ] | [60 000 -65 000 ] | [65 000 -70 000 ] |
| Unfavourable scenario (100 000 fewer vehicles per annum) | [55 000 -60 000 ] | [60 000 -65 000 ] | [60 000 -65 000 ] | [60 000 -65 000 ] | [60 000 -65 000 ] |
| Favourable Scenario (100 000 more vehicles per annum) | [57 000 -62 000 ] | [60 000 -65 000 ] | [60 000 -65 000 ] | [65 000 -70 000 ] | [65 000 -70 000 ] |

(66)

As regards trends in the PSA Group's production capacity, the French authorities have produced two tables showing the Harbour usage rates (18) for each plant, before and after the Group's restructuring. With the exception of Poissy, these rates remain the same. The French authorities point out that the viability of each plant cannot be measured independently from that of the PSA Group. The PSA Group's automotive activity needs to be examined overall for each market segment. In the view of the French authorities, each plant has a portfolio of vehicles that it could potentially produce. If some plants have lower or higher usage rates, these are generally known variations which are managed in line with product life cycles.

18

Table 5

Table 5

Forecast turnover in three scenarios for the PSA Group (EUR million)*

Forecast turnover in three scenarios for the PSA Group (EUR million)*

2013

2014

2015

2016

2017

Median Scenario

[55 000 -60 000 ]

[60 000 -65 000 ]

[60 000 -65 000 ]

[60 000 -65 000 ]

[65 000 -70 000 ]

Unfavourable scenario (100 000 fewer vehicles per annum)

[55 000 -60 000 ]

[60 000 -65 000 ]

[60 000 -65 000 ]

[60 000 -65 000 ]

[60 000 -65 000 ]

Favourable Scenario (100 000 more vehicles per annum)

[57 000 -62 000 ]

[60 000 -65 000 ]

[60 000 -65 000 ]

[65 000 -70 000 ]

[65 000 -70 000 ]

Table 6

Table 6

Forecast turnover in three scenarios for the automotive division (EUR million)*

Forecast turnover in three scenarios for the automotive division (EUR million)*

| | 2013 | 2014 | 2015 | 2016 | 2017 |
| --- | --- | --- | --- | --- | --- |
| Median scenario | [40 000 -45 000 ] | [45 000 - 50 000 ] | [45 000 - 50 000 ] | [45 000 - 50 000 ] | [45 000 - 50 000 ] |
| Unfavourable scenario (100 000 fewer vehicles per annum) | [40 000 -45 000 ] | [40 000 -45 000 ] | [40 000 -45 000 ] | [40 000 -45 000 ] | [45 000 - 50 000 ] |
| Favourable scenario (100 000 more vehicles per annum) | [40 000 -45 000 ] | [45 000 - 50 000 ] | [45 000 - 50 000 ] | [45 000 - 50 000 ] | [45 000 - 50 000 ] |

2013

2014

2015

2016

2017

Median scenario

[40 000 -45 000 ]

[45 000 - 50 000 ]

[45 000 - 50 000 ]

[45 000 - 50 000 ]

[45 000 - 50 000 ]

Unfavourable scenario (100 000 fewer vehicles per annum)

[40 000 -45 000 ]

[40 000 -45 000 ]

[40 000 -45 000 ]

[40 000 -45 000 ]

[45 000 - 50 000 ]

Favourable scenario (100 000 more vehicles per annum)

[40 000 -45 000 ]

[45 000 - 50 000 ]

[45 000 - 50 000 ]

[45 000 - 50 000 ]

[45 000 - 50 000 ]

2.4.5.   THE COMPENSATORY MEASURES INITIALLY NOTIFIED BY THE FRENCH AUTHORITIES

| (67) | The PSA Group has announced restructuring measures which will reduce its production capacity and market presence, in particular the closure of its Aulnay plant (which employs 3 000 people) and a significant capacity reduction at its Rennes plant, leading to some 1 400 job cuts. In parallel, disposals of viable assets are planned or have already taken place, in particular the opening up of GEFCO's capital, the disposal of some immovable assets and the disposal of the Citer car hire company. The PSA Group has also announced a reduction of its investment expenditure which will limit its production capacity to a level below that originally planned before the onset of its difficulties. |
| --- | --- |

(67)

The PSA Group has announced restructuring measures which will reduce its production capacity and market presence, in particular the closure of its Aulnay plant (which employs 3 000 people) and a significant capacity reduction at its Rennes plant, leading to some 1 400 job cuts. In parallel, disposals of viable assets are planned or have already taken place, in particular the opening up of GEFCO's capital, the disposal of some immovable assets and the disposal of the Citer car hire company. The PSA Group has also announced a reduction of its investment expenditure which will limit its production capacity to a level below that originally planned before the onset of its difficulties.

| (68) | The French authorities also proposed the following compensatory measures:






  — | further reductions of CAPEX (‘capital expenditures’) (2.4.5.1), |
| --- | --- | --- |

(68)

The French authorities also proposed the following compensatory measures:

—

further reductions of CAPEX (‘capital expenditures’) (2.4.5.1),

| — | transfer of capacity at the Sevelnord plant to a competitor (2.4.5.2), |
| --- | --- |

—

transfer of capacity at the Sevelnord plant to a competitor (2.4.5.2),

| — | discontinuing development and production of the hybrid plug-in technology (2.4.5.3), |
| --- | --- |

—

discontinuing development and production of the hybrid plug-in technology (2.4.5.3),

| — | setting a maximum penetration rate for BPF (2.4.5.4). |
| --- | --- |

—

setting a maximum penetration rate for BPF (2.4.5.4).

These measures are additional to the restructuring measures planned in the initial 2012 medium-term plan (‘MTP’) (19).

19

2.4.5.1.   
  Further reductions of PSA Group investment

Further reductions of PSA Group investment

| (69) | Further reductions (over and above the initial 2012 MTP) in CAPEX are planned: EUR 300 million in 2013 and EUR 500 million per year in 2014 and 2015. The 2013-2015 (CAPEX and R&D) plan has therefore been revised down from EUR 9,9 billion to EUR 8,6 billion, i.e. a reduction of 13 % from one plan to the other. This amount is 27 % down on the 2011-2012 average. |
| --- | --- |

(69)

Further reductions (over and above the initial 2012 MTP) in CAPEX are planned: EUR 300 million in 2013 and EUR 500 million per year in 2014 and 2015. The 2013-2015 (CAPEX and R&D) plan has therefore been revised down from EUR 9,9 billion to EUR 8,6 billion, i.e. a reduction of 13 % from one plan to the other. This amount is 27 % down on the 2011-2012 average.

| (70) | PSA's investment will thus be reduced by EUR 3,3 billion per year to an average of EUR 2,86 billion per year. This reduction of EUR 1,3 billion will largely (over 80 %) concern the Group's automotive activity in Europe. |
| --- | --- |

(70)

PSA's investment will thus be reduced by EUR 3,3 billion per year to an average of EUR 2,86 billion per year. This reduction of EUR 1,3 billion will largely (over 80 %) concern the Group's automotive activity in Europe.

| (71) | According to the French authorities, reducing CAPEX will significantly curtail the Group's ability to be a competitive force in the market. The further reduction of certain R&D investment and CAPEX will also have other major adverse consequences for PSA. In particular, the PSA Group will be substantially penalised in terms of its ability to:






  (a) | meet the expectations of customers who set particular store by the range effect and the technologies which will no longer be rolled out by the PSA Group; |
| --- | --- | --- |

(71)

According to the French authorities, reducing CAPEX will significantly curtail the Group's ability to be a competitive force in the market. The further reduction of certain R&D investment and CAPEX will also have other major adverse consequences for PSA. In particular, the PSA Group will be substantially penalised in terms of its ability to:

(a)

meet the expectations of customers who set particular store by the range effect and the technologies which will no longer be rolled out by the PSA Group;

| (b) | react to competitors' developments; |
| --- | --- |

(b)

react to competitors' developments;

| (c) | itself industrialise certain attractive technologies which it will have to buy in from competitors, thereby reducing its margins; |
| --- | --- |

(c)

itself industrialise certain attractive technologies which it will have to buy in from competitors, thereby reducing its margins;

| (d) | benefit from certain tax incentives, such as those connected with CO2, etc. |
| --- | --- |

(d)

benefit from certain tax incentives, such as those connected with CO2, etc.

2

| (72) | This reduction will in particular involve:






  — | discontinuation of the production of the Citroën C6 model on 31 December 2012 and the non-renewal of the Peugeot 607 model (segment E) (a), |
| --- | --- | --- |

(72)

This reduction will in particular involve:

—

discontinuation of the production of the Citroën C6 model on 31 December 2012 and the non-renewal of the Peugeot 607 model (segment E) (a),

| — | discontinuation in 2015, two years earlier than planned, of the Bipper/Nemo vehicles and the non-renewal of these vehicles (segment B LCV) (b), |
| --- | --- |

—

discontinuation in 2015, two years earlier than planned, of the Bipper/Nemo vehicles and the non-renewal of these vehicles (segment B LCV) (b),

| — | discontinuation of diesel engines above two litres (segment D) (c). |
| --- | --- |

—

discontinuation of diesel engines above two litres (segment D) (c).

(a)   Discontinuation of production of the Citroën C6 — Peugeot 607 models

Discontinuation of production of the Citroën C6 — Peugeot 607 models

| (73) | This compensatory measure includes two aspects concerning segment E overall:






  — | discontinuation of the Citroën C6, initially planned for 2016, from 2013, and |
| --- | --- | --- |

(73)

This compensatory measure includes two aspects concerning segment E overall:

—

discontinuation of the Citroën C6, initially planned for 2016, from 2013, and

| — | non-renewal of the Citroën C6/Peugeot 607. |
| --- | --- |

—

non-renewal of the Citroën C6/Peugeot 607.

| (74) | Looking at the first aspect on its own, the PSA Group estimates its impact at 3 000 vehicles (i.e. 1 000 vehicles per year), i.e. a loss of turnover of EUR 90 million over three years. The C6 is part of segment E, which is a ‘high-end’ segment. According to the PSA Group's own estimations, this segment is set to account for 5,7 % of the European automotive market in 2013. |
| --- | --- |

(74)

Looking at the first aspect on its own, the PSA Group estimates its impact at 3 000 vehicles (i.e. 1 000 vehicles per year), i.e. a loss of turnover of EUR 90 million over three years. The C6 is part of segment E, which is a ‘high-end’ segment. According to the PSA Group's own estimations, this segment is set to account for 5,7 % of the European automotive market in 2013.

| (75) | According to the French authorities, the non-renewal of the Group's high-end range will significantly reduce market coverage. Potential volumes for the latest Peugeot (607) model were in the order of 20 000 vehicles per year, representing a loss of turnover of some EUR 500 million. Potential volumes for the latest Citroën (C6) model were in the order of 7 000 vehicles per year, representing a loss of turnover of some EUR 200 million. |
| --- | --- |

(75)

According to the French authorities, the non-renewal of the Group's high-end range will significantly reduce market coverage. Potential volumes for the latest Peugeot (607) model were in the order of 20 000 vehicles per year, representing a loss of turnover of some EUR 500 million. Potential volumes for the latest Citroën (C6) model were in the order of 7 000 vehicles per year, representing a loss of turnover of some EUR 200 million.

| (76) | The non-renewal commitment in relation to the Citroën C6/Peugeot 607 models covers the period 2016-18. The PSA Group estimates the impact of this strand of the measure at 40 500 vehicles, i.e. a turnover of EUR 1,05 billion. The non-renewal of these models will also enable PSA to discontinue its allied investment from 2013 (the normal period for the development of a new vehicle is generally three years). |
| --- | --- |

(76)

The non-renewal commitment in relation to the Citroën C6/Peugeot 607 models covers the period 2016-18. The PSA Group estimates the impact of this strand of the measure at 40 500 vehicles, i.e. a turnover of EUR 1,05 billion. The non-renewal of these models will also enable PSA to discontinue its allied investment from 2013 (the normal period for the development of a new vehicle is generally three years).

| (77) | According to the French authorities, an indirect effect of this compensatory measure is its major adverse impact on the PSA Group's brand image. The lack of models in segment E (and/or powerful engines) would prevent it, for instance, from responding to certain calls for tender. Moreover, the PSA Group's exit from segment E would also mean that individuals interested in high-end models would be less likely to look to the PSA Group's network, which would do little to help the Group to move its brands upmarket, including in segment B (DS line). The PSA Group estimates that the negative impact on calls for tenders for vehicle fleets would be 2 000 vehicles per annum, representing an annual loss of turnover of EUR 30 million, i.e. a total of EUR 180 million for 12 000 vehicles. |
| --- | --- |

(77)

According to the French authorities, an indirect effect of this compensatory measure is its major adverse impact on the PSA Group's brand image. The lack of models in segment E (and/or powerful engines) would prevent it, for instance, from responding to certain calls for tender. Moreover, the PSA Group's exit from segment E would also mean that individuals interested in high-end models would be less likely to look to the PSA Group's network, which would do little to help the Group to move its brands upmarket, including in segment B (DS line). The PSA Group estimates that the negative impact on calls for tenders for vehicle fleets would be 2 000 vehicles per annum, representing an annual loss of turnover of EUR 30 million, i.e. a total of EUR 180 million for 12 000 vehicles.

| (78) | Overall, the PSA Group estimates that the impact of this compensatory measure would be a loss of turnover of EUR 1,32 billion. |
| --- | --- |

(78)

Overall, the PSA Group estimates that the impact of this compensatory measure would be a loss of turnover of EUR 1,32 billion.

(b)   Discontinuation and non-renewal of the Bipper/Nemo model

Discontinuation and non-renewal of the Bipper/Nemo model

| (79) | The Bipper/Nemo is a commercial vehicle marketed under two different names. The proposed measure has two strands:






  — | the non-renewal (i.e. no launch of a new generation) of Bipper/Nemo vehicles from 2017, whose impact in terms of turnover is estimated by PSA to be EUR 1 billion, and |
| --- | --- | --- |

(79)

The Bipper/Nemo is a commercial vehicle marketed under two different names. The proposed measure has two strands:

—

the non-renewal (i.e. no launch of a new generation) of Bipper/Nemo vehicles from 2017, whose impact in terms of turnover is estimated by PSA to be EUR 1 billion, and

| — | the early discontinuation from 2015 of current Bipper/Nemo vehicles, initially planned for 2017, whose impact in terms of turnover is estimated to be EUR 560 million. |
| --- | --- |

—

the early discontinuation from 2015 of current Bipper/Nemo vehicles, initially planned for 2017, whose impact in terms of turnover is estimated to be EUR 560 million.

| (80) | In 2012, PSA sold 35 650 Bipper/Nemo (16 678 Bipper passenger vehicles (‘PV’) and commercial vehicles (‘CV’) and 18 972 Nemo (PV and CV together) for an average unit turnover of EUR 8 950, i.e. a total annual turnover of EUR 319 million. |
| --- | --- |

(80)

In 2012, PSA sold 35 650 Bipper/Nemo (16 678 Bipper passenger vehicles (‘PV’) and commercial vehicles (‘CV’) and 18 972 Nemo (PV and CV together) for an average unit turnover of EUR 8 950, i.e. a total annual turnover of EUR 319 million.

| (81) | The Bipper/Nemo CV models are part of segment B LCV (20): in 2012, this segment accounted for 3,7 % of the European LCV market. PSA's market share was 49 %. In 2012, the PSA Group marketed 26 674 Nemo/Bipper CVs in a total market of 54 514 units. In 2012, the PSA Group sold 8 976 PVs (representing a market share of 10 %). |
| --- | --- |

(81)

The Bipper/Nemo CV models are part of segment B LCV (20): in 2012, this segment accounted for 3,7 % of the European LCV market. PSA's market share was 49 %. In 2012, the PSA Group marketed 26 674 Nemo/Bipper CVs in a total market of 54 514 units. In 2012, the PSA Group sold 8 976 PVs (representing a market share of 10 %).

20

| (82) | According to the French authorities, the marketing of these vehicles does not generate net profits during the vehicle's service life largely because models at the beginning of their lives are not immediately profitable. These vehicles therefore become profitable only after the first generation. |
| --- | --- |

(82)

According to the French authorities, the marketing of these vehicles does not generate net profits during the vehicle's service life largely because models at the beginning of their lives are not immediately profitable. These vehicles therefore become profitable only after the first generation.

| (83) | The PSA Group considers the impact of this compensatory measure to be a loss of turnover of EUR 1,56 billion. |
| --- | --- |

(83)

The PSA Group considers the impact of this compensatory measure to be a loss of turnover of EUR 1,56 billion.

(c)   diesel engines of more than two litres

diesel engines of more than two litres

| (84) | Under this proposed compensatory measure, production of engines of more than two litres is to be discontinued by the time of the EURO 6 standard. According to the French authorities, the PSA Group has the industrial resources to produce such engines, especially the EURO 6 version of the DW12 engine. In contrast to its competitors, it does not have petrol engines of more than two litres (its petrol engines are limited to 1,6 litre turbo). This measure will therefore affect segment D in particular. |
| --- | --- |

(84)

Under this proposed compensatory measure, production of engines of more than two litres is to be discontinued by the time of the EURO 6 standard. According to the French authorities, the PSA Group has the industrial resources to produce such engines, especially the EURO 6 version of the DW12 engine. In contrast to its competitors, it does not have petrol engines of more than two litres (its petrol engines are limited to 1,6 litre turbo). This measure will therefore affect segment D in particular.

| (85) | The PSA Group's sales of passenger vehicles in segment D accounted for 1 % of the European market in 2012 (i.e. 150 000 vehicles). In better years, sales of PSA Group vehicles of more than two litres peaked at 30 000 vehicles. The PSA Group has included 10 000 vehicles per year, representing approximately 20 % of segment D, in its estimations of the impact of the measure. |
| --- | --- |

(85)

The PSA Group's sales of passenger vehicles in segment D accounted for 1 % of the European market in 2012 (i.e. 150 000 vehicles). In better years, sales of PSA Group vehicles of more than two litres peaked at 30 000 vehicles. The PSA Group has included 10 000 vehicles per year, representing approximately 20 % of segment D, in its estimations of the impact of the measure.

| (86) | On the basis of the historical registration data for 2011 and 2012 for diesel PV vehicles with an engine of more than two litres, PSA considers that the development of a hybrid plug-in diesel PV range would have increased the number of vehicles with engines of a capacity of more than two litres (or equivalent power) to 30 000-40 000 units for the PSA Group. According to the French authorities, this measure represents 10 000 vehicles per year, i.e. a loss of annual turnover of EUR 200 million. |
| --- | --- |

(86)

On the basis of the historical registration data for 2011 and 2012 for diesel PV vehicles with an engine of more than two litres, PSA considers that the development of a hybrid plug-in diesel PV range would have increased the number of vehicles with engines of a capacity of more than two litres (or equivalent power) to 30 000-40 000 units for the PSA Group. According to the French authorities, this measure represents 10 000 vehicles per year, i.e. a loss of annual turnover of EUR 200 million.

2.4.5.2.   
  Transferring capacity at the Sevelnord plant to a competitor

Transferring capacity at the Sevelnord plant to a competitor

| (87) | Under this measure, the PSA Group is to transfer capacity at the Sevelnord plant to Toyota. The Sevelnord plant was built in 1988 as part of the extension of the activities of the Société Européenne de Véhicules Légers (‘Sevel’), jointly controlled (‘joint venture’ or ‘JV’) with the Fiat Group. In 2011, this plant had 2 700 employees and produced an average of 420 vehicles per day (Peugeot 807, Citroën C8, Peugeot Expert, Citroën Jumpy, Fiat Scudo). A total of 94 843 vehicles were produced there in 2011. |
| --- | --- |

(87)

Under this measure, the PSA Group is to transfer capacity at the Sevelnord plant to Toyota. The Sevelnord plant was built in 1988 as part of the extension of the activities of the Société Européenne de Véhicules Légers (‘Sevel’), jointly controlled (‘joint venture’ or ‘JV’) with the Fiat Group. In 2011, this plant had 2 700 employees and produced an average of 420 vehicles per day (Peugeot 807, Citroën C8, Peugeot Expert, Citroën Jumpy, Fiat Scudo). A total of 94 843 vehicles were produced there in 2011.

| (88) | When Fiat wanted to withdraw from the JV partnership with the PSA Group at the Sevelnord plant, PSA signed a cooperation agreement with Toyota under which the PSA Group was to manufacture light commercial vehicles which Toyota would market in Europe under its own brand name. This would enable Toyota to establish a substantial customer base at minimal cost. |
| --- | --- |

(88)

When Fiat wanted to withdraw from the JV partnership with the PSA Group at the Sevelnord plant, PSA signed a cooperation agreement with Toyota under which the PSA Group was to manufacture light commercial vehicles which Toyota would market in Europe under its own brand name. This would enable Toyota to establish a substantial customer base at minimal cost.

| (89) | Under this agreement, the PSA Group was initially (from the second half of 2013) to supply light commercial vehicles from its existing Peugeot Expert and Citroën Jumpy ranges (‘G9’ supply). The agreement also provides for cooperation in respect of the next generation of vehicles to be produced by the PSA Group (‘K0’ supply). |
| --- | --- |

(89)

Under this agreement, the PSA Group was initially (from the second half of 2013) to supply light commercial vehicles from its existing Peugeot Expert and Citroën Jumpy ranges (‘G9’ supply). The agreement also provides for cooperation in respect of the next generation of vehicles to be produced by the PSA Group (‘K0’ supply).

| (90) | According to the French authorities, without the agreement with Toyota, the PSA Group considers that it could on its own keep its light commercial vehicle activities viable. The contract with Toyota is not therefore essential for continued operation at this plant. |
| --- | --- |

(90)

According to the French authorities, without the agreement with Toyota, the PSA Group considers that it could on its own keep its light commercial vehicle activities viable. The contract with Toyota is not therefore essential for continued operation at this plant.

| (91) | The French authorities point out that this measure helps to limit the PSA Group's market presence to the direct benefit of its competitors in so far as:






  (a) | the PSA Group will transfer close on 30 % of production capacity at the Sevelnord plant to Toyota; |
| --- | --- | --- |

(91)

The French authorities point out that this measure helps to limit the PSA Group's market presence to the direct benefit of its competitors in so far as:

(a)

the PSA Group will transfer close on 30 % of production capacity at the Sevelnord plant to Toyota;

| (b) | this agreement will enable a major competitor, Toyota, to gain access to a market in which it has not so far had a presence, and to extend its commercial vehicle range; |
| --- | --- |

(b)

this agreement will enable a major competitor, Toyota, to gain access to a market in which it has not so far had a presence, and to extend its commercial vehicle range;

| (c) | this agreement offers a direct and certain competitive advantage to Toyota, in so far as it enables it to gain a large proportion of the margin on the vehicles covered by the agreement, and to sign up customers and gain their loyalty in a market in which it has no presence; |
| --- | --- |

(c)

this agreement offers a direct and certain competitive advantage to Toyota, in so far as it enables it to gain a large proportion of the margin on the vehicles covered by the agreement, and to sign up customers and gain their loyalty in a market in which it has no presence;

| (d) | this measure concerns one of the markets in which the PSA Group has a particularly large presence (21 % at European level in 2011). |
| --- | --- |

(d)

this measure concerns one of the markets in which the PSA Group has a particularly large presence (21 % at European level in 2011).

| (92) | In terms of turnover, the impact of this measure is estimated at EUR 443 million. |
| --- | --- |

(92)

In terms of turnover, the impact of this measure is estimated at EUR 443 million.

2.4.5.3.   
  Discontinuation of production and development of the hybrid plug-in technology

Discontinuation of production and development of the hybrid plug-in technology

| (93) | The PSA Group will reduce its market presence by ending the agreement signed on 25 October 2011 with BMW for the creation of a JV to develop and produce a technology for hybrid and electric vehicles. |
| --- | --- |

(93)

The PSA Group will reduce its market presence by ending the agreement signed on 25 October 2011 with BMW for the creation of a JV to develop and produce a technology for hybrid and electric vehicles.

| (94) | The JV was developing and manufacturing all the electric components needed for an electric powertrain. The PSA Group and BMW have invested over EUR 100 million in this project, on which, in late 2011, 400 workers were employed at the Munich R&D centre. The end of this JV will mean the PSA Group's withdrawal from the hybrid plug-in vehicle segment as a result of the termination of the JV agreement with BMW (segment C). |
| --- | --- |

(94)

The JV was developing and manufacturing all the electric components needed for an electric powertrain. The PSA Group and BMW have invested over EUR 100 million in this project, on which, in late 2011, 400 workers were employed at the Munich R&D centre. The end of this JV will mean the PSA Group's withdrawal from the hybrid plug-in vehicle segment as a result of the termination of the JV agreement with BMW (segment C).

| (95) | According to the French authorities, by ending the JV, the PSA Group will permanently withdraw from a segment considered to be promising and will lose access to around 6 % of the market by 2016. The PSA Group will also lose an agreement that is valuable in terms of the brand image that its status as a partner of BMW gives it. |
| --- | --- |

(95)

According to the French authorities, by ending the JV, the PSA Group will permanently withdraw from a segment considered to be promising and will lose access to around 6 % of the market by 2016. The PSA Group will also lose an agreement that is valuable in terms of the brand image that its status as a partner of BMW gives it.

| (96) | The withdrawal of the PSA Group from the JV with BMW will have two consequences:






  (a) | first, announcing that the hybrid plug-in technology is to be discontinued will harm the Group's image in this segment and will have an impact from 2013 on PSA Group sales of diesel hybrids. The PSA Group estimates this impact (based on 10 % of volumes) at 3 000 vehicles per year, i.e. an annual loss of turnover of EUR 60 million; |
| --- | --- | --- |

(96)

The withdrawal of the PSA Group from the JV with BMW will have two consequences:

(a)

first, announcing that the hybrid plug-in technology is to be discontinued will harm the Group's image in this segment and will have an impact from 2013 on PSA Group sales of diesel hybrids. The PSA Group estimates this impact (based on 10 % of volumes) at 3 000 vehicles per year, i.e. an annual loss of turnover of EUR 60 million;

| (b) | second, discontinuing the development of the hybrid plug-in technology, whose launch was scheduled for 2016, will be reflected by a reduction of an average of 20 000 vehicles over three years, i.e. an annual loss of turnover averaging EUR 400 million. |
| --- | --- |

(b)

second, discontinuing the development of the hybrid plug-in technology, whose launch was scheduled for 2016, will be reflected by a reduction of an average of 20 000 vehicles over three years, i.e. an annual loss of turnover averaging EUR 400 million.

| (97) | The PSA Group estimates the total impact of this measure to be a loss of turnover of EUR 1,56 billion. |
| --- | --- |

(97)

The PSA Group estimates the total impact of this measure to be a loss of turnover of EUR 1,56 billion.

2.4.5.4.   
  Commitment to a maximum penetration rate for BPF

Commitment to a maximum penetration rate for BPF

| (98) | The French authorities are planning to commit to a maximum penetration rate (21). According to the French authorities, this rate has risen sharply in recent years both for BPF and for its competitors, increasing, in the case of BPF, from 27,5 % in 2009 to 29,8 % in 2012; and, in the case of RCI Banque SA (22), from 30,0 % to 35,0 % over the same period, as shown in Table 7 below. |
| --- | --- |

(98)

The French authorities are planning to commit to a maximum penetration rate (21). According to the French authorities, this rate has risen sharply in recent years both for BPF and for its competitors, increasing, in the case of BPF, from 27,5 % in 2009 to 29,8 % in 2012; and, in the case of RCI Banque SA (22), from 30,0 % to 35,0 % over the same period, as shown in Table 7 below.

21

22

| (99) | The French authorities are in particular envisaging this commitment because they consider that the penetration rate can be readily monitored from public sources. |
| --- | --- |

(99)

The French authorities are in particular envisaging this commitment because they consider that the penetration rate can be readily monitored from public sources.

| (100) | The planned commitment is structured differently for 2013, and for 2014 and 2015. In 2013, it is proposed not to exceed, for each of the European countries (in the G10 perimeter (23)) in which BPF trades, the H2 2012 rate with a penetration rate flexibility of + 1. |
| --- | --- |

(100)

The planned commitment is structured differently for 2013, and for 2014 and 2015. In 2013, it is proposed not to exceed, for each of the European countries (in the G10 perimeter (23)) in which BPF trades, the H2 2012 rate with a penetration rate flexibility of + 1.

23

| (101) | In the following periods, the French authorities consider that rapid developments in the sector make it necessary to forecast how BPF's commitment is to vary on the basis of these developments. It is therefore proposed to increase the penetration rate achieved by BPF in year ‘n-1’ by setting a maximum penetration rate for year ‘n’ on the basis of the changes in this rate in year ‘n-1’ among BPF's European competitors. This should help to prevent BPF from becoming disconnected from trends in its competitive environment. |
| --- | --- |

(101)

In the following periods, the French authorities consider that rapid developments in the sector make it necessary to forecast how BPF's commitment is to vary on the basis of these developments. It is therefore proposed to increase the penetration rate achieved by BPF in year ‘n-1’ by setting a maximum penetration rate for year ‘n’ on the basis of the changes in this rate in year ‘n-1’ among BPF's European competitors. This should help to prevent BPF from becoming disconnected from trends in its competitive environment.

| (102) | From 31 December 2013, therefore, BPF's maximum penetration rate commitment in the G10 perimeter for year ‘n’ will be equal to the rate achieved by BPF in this perimeter in year ‘n-1’ adjusted by the change in the penetration rate of comparable firms in year ‘n-1’, although the effect of this adjustment cannot be to reduce BPF's penetration rate below a minimum. The comparable firms proposed here are the ‘Western Europe’ division of RCI Banque SA and the ‘Europe’ division of Volkswagen Financial Services (‘VWFS’). In order to guard against erratic developments among competitors and keep BPF's penetration rate at a level that is actually below that of its competitors, the maximum penetration rate will be capped at 32,4 %, in line with the G10 penetration rate recorded in the second half of 2012.

  Table 7


  BPF penetration rates for new vehicles by country and main geographical areas (as %) | Ceiling rate H2 2012* | Flexibility | Proposed maximum rate* |
| --- | --- | --- | --- | --- |
| Germany | [...] | + 1,0 | [...] |
| Austria | [...] | + 1,0 | [...] |
| Belgium | [...] | + 1,0 | [...] |
| Italy | [...] | + 1,0 | [...] |
| Spain | [...] | + 1,0 | [...] |
| Netherlands | [...] | + 1,0 | [...] |
| Portugal | [...] | + 1,0 | [...] |
| Switzerland | [...] | + 1,0 | [...] |
| France | [...] | + 1,0 | [...] |
| United Kingdom | [...] | + 1,0 | [...] |
| G5 aggregate (24) | 33,3 | + 1,0 | 34,3 |
| M5 aggregate (25) | 27,3 | + 1,0 | 28,3 |
| G10 aggregate (26) | 32,4 | + 1,0 | 33,4 |

(102)

From 31 December 2013, therefore, BPF's maximum penetration rate commitment in the G10 perimeter for year ‘n’ will be equal to the rate achieved by BPF in this perimeter in year ‘n-1’ adjusted by the change in the penetration rate of comparable firms in year ‘n-1’, although the effect of this adjustment cannot be to reduce BPF's penetration rate below a minimum. The comparable firms proposed here are the ‘Western Europe’ division of RCI Banque SA and the ‘Europe’ division of Volkswagen Financial Services (‘VWFS’). In order to guard against erratic developments among competitors and keep BPF's penetration rate at a level that is actually below that of its competitors, the maximum penetration rate will be capped at 32,4 %, in line with the G10 penetration rate recorded in the second half of 2012.

Table 7

Table 7

BPF penetration rates for new vehicles by country and main geographical areas (as %)

BPF penetration rates for new vehicles by country and main geographical areas (as %)

Ceiling rate H2 2012*

Flexibility

Proposed maximum rate*

Germany

[...]

- 1,0

[...]

Austria

[...]

- 1,0

[...]

Belgium

[...]

- 1,0

[...]

Italy

[...]

- 1,0

[...]

Spain

[...]

- 1,0

[...]

Netherlands

[...]

- 1,0

[...]

Portugal

[...]

- 1,0

[...]

Switzerland

[...]

- 1,0

[...]

France

[...]

- 1,0

[...]

United Kingdom

[...]

- 1,0

[...]

G5 aggregate (24)

24

33,3

- 1,0

34,3

M5 aggregate (25)

25

27,3

- 1,0

28,3

G10 aggregate (26)

26

32,4

- 1,0

33,4

2.4.6.   ESTIMATION OF RESTRUCTURING COSTS AND THEIR FINANCING

| (103) | Restructuring costs are estimated to be EUR 1 708,9 million. The following measures are planned: shutting down production at Aulnay, which has 3 000 employees, in 2014, transferring production in the Paris region to Poissy and regenerating the Aulnay site. These costs are estimated to be EUR [400-500]* million between 2012 and 2017. The costs of streamlining the industrial system at the Rennes plant, where 1 400 out of a total of 5 600 employees are to be redeployed, are estimated to be EUR [100-200]* million between 2012 and 2017. Streamlining the PSA Group's organisation, by means of the GPEC 1 and 2 plans (‘Gestion prévisionnelle de l'Emploi et des Compétences’ [Forward Management of Employment and Competences]), will generate total costs estimated to be EUR [500-600]* million in 2012 and 2013. It should be noted that there is no overlap between the GPEC 1 and 2 plans and the Aulnay and Rennes restructuring costs. The costs of other measures, in particular the restructuring of European trade and the reduction of staff at PCR (Peugeot Citroën Retail), which is the PSA's part of the dealer network, largely in southern Europe, are estimated to be EUR [100-200] million. Lastly, the costs of PSA activities in connection with the 50CO2Cars project are EUR [300-400]* million. |
| --- | --- |

(103)

Restructuring costs are estimated to be EUR 1 708,9 million. The following measures are planned: shutting down production at Aulnay, which has 3 000 employees, in 2014, transferring production in the Paris region to Poissy and regenerating the Aulnay site. These costs are estimated to be EUR [400-500]* million between 2012 and 2017. The costs of streamlining the industrial system at the Rennes plant, where 1 400 out of a total of 5 600 employees are to be redeployed, are estimated to be EUR [100-200]* million between 2012 and 2017. Streamlining the PSA Group's organisation, by means of the GPEC 1 and 2 plans (‘Gestion prévisionnelle de l'Emploi et des Compétences’ [Forward Management of Employment and Competences]), will generate total costs estimated to be EUR [500-600]* million in 2012 and 2013. It should be noted that there is no overlap between the GPEC 1 and 2 plans and the Aulnay and Rennes restructuring costs. The costs of other measures, in particular the restructuring of European trade and the reduction of staff at PCR (Peugeot Citroën Retail), which is the PSA's part of the dealer network, largely in southern Europe, are estimated to be EUR [100-200] million. Lastly, the costs of PSA activities in connection with the 50CO2Cars project are EUR [300-400]* million.

2

| (104) | In order to finance these restructuring costs, the PSA Group has, since early 2012, been implementing a programme of asset disposals, providing the PSA Group with the following resources:






  (a) | disposal of Gefco in December 2012: EUR 878 million (27); |
| --- | --- | --- |

(104)

In order to finance these restructuring costs, the PSA Group has, since early 2012, been implementing a programme of asset disposals, providing the PSA Group with the following resources:

(a)

disposal of Gefco in December 2012: EUR 878 million (27);

27

| (b) | disposal of Citer in February 2012: EUR 449 million; |
| --- | --- |

(b)

disposal of Citer in February 2012: EUR 449 million;

| (c) | disposal of immovable assets (including the head office) during 2012: EUR 628,7 million. |
| --- | --- |

(c)

disposal of immovable assets (including the head office) during 2012: EUR 628,7 million.

| (105) | According to the French authorities, the PSA Group has already released EUR 1,956 billion of free cash flow which is to be reinvested in the restructuring of the PSA Group in order to restore its viability. |
| --- | --- |

(105)

According to the French authorities, the PSA Group has already released EUR 1,956 billion of free cash flow which is to be reinvested in the restructuring of the PSA Group in order to restore its viability.

| (106) | In terms of liquidity, under the New Club Deal, private banks will inject EUR 11,6 billion into the Group's financing during the restructuring period. |
| --- | --- |

(106)

In terms of liquidity, under the New Club Deal, private banks will inject EUR 11,6 billion into the Group's financing during the restructuring period.

2.5.   BPF'S VIABILITY PLAN

BPF'S VIABILITY PLAN

| (107) | The plan submitted by the French authorities contains financial projections and a financing plan for BPF to the end of 2015. According to the French authorities, BPF's return on equity will be [5-10]* % from 2014 and [10-20]* % in 2016. They point out that, according to the Commission's decision-making practice, the return on equity considered acceptable to demonstrate the viability of a bank is in the range of 8 to 12 %. |
| --- | --- |

(107)

The plan submitted by the French authorities contains financial projections and a financing plan for BPF to the end of 2015. According to the French authorities, BPF's return on equity will be [5-10]* % from 2014 and [10-20]* % in 2016. They point out that, according to the Commission's decision-making practice, the return on equity considered acceptable to demonstrate the viability of a bank is in the range of 8 to 12 %.

2.5.1.   FINANCING PLAN

| (108) | BPF plans to increase its long-term bank financing by EUR [0-5]* billion by the end of 2012 to EUR [5-10]* billion by the end of 2015. The bank has also launched a deposit product for individuals, which will provide financing of EUR [800-900]* million in 2015 according to the financial projections (in comparison with zero at the end of 2012). Financing obtained from securitisation and EMTN issues will fall over the same period.

  Table 8


  Cash flow situation of BPF over the restructuring period*

  [...]* |
| --- | --- |

(108)

BPF plans to increase its long-term bank financing by EUR [0-5]* billion by the end of 2012 to EUR [5-10]* billion by the end of 2015. The bank has also launched a deposit product for individuals, which will provide financing of EUR [800-900]* million in 2015 according to the financial projections (in comparison with zero at the end of 2012). Financing obtained from securitisation and EMTN issues will fall over the same period.

Table 8

Table 8

Cash flow situation of BPF over the restructuring period*

Cash flow situation of BPF over the restructuring period*

[...]*

| (109) | It is forecast that the bank's total balance sheet and therefore its financing will increase gradually during the projection period, from EUR 27 186 million at the end of 2012 to EUR [>28 000] million at the end of 2015. |
| --- | --- |

(109)

It is forecast that the bank's total balance sheet and therefore its financing will increase gradually during the projection period, from EUR 27 186 million at the end of 2012 to EUR [>28 000] million at the end of 2015.

2.5.2.   PROFITABILITY AND SOLVENCY

| (110) | BPF was profitable in the past, as can be seen from Graph 1 below. At the end of 2012, the capitalisation level measured by the ‘Core Tier 1’ (28) ratio was 13 %.

  Graph 1


  History of BPF's profitability




  Consolidated equity
  EQUITY AND NET RESULT AT 31 DECEMBER 2012 (EUR million)
  2012
  2011
  2010
  2009
  3 427
  293
  3 697
  354
  Annual net consolidated result
  3 518
  394
  3 179
  353 |
| --- | --- |

(110)

BPF was profitable in the past, as can be seen from Graph 1 below. At the end of 2012, the capitalisation level measured by the ‘Core Tier 1’ (28) ratio was 13 %.

28

Graph 1

Graph 1

History of BPF's profitability

History of BPF's profitability

Consolidated equity

EQUITY AND NET RESULT AT 31 DECEMBER 2012 (EUR million)

2012

2011

2010

2009

3 427

293

3 697

354

Annual net consolidated result

3 518

394

3 179

353

| (111) | The bank considers that profits will continue to be made during the restructuring of the Group, as shown in Table 9 below.

  Table 9


  Profitability forecasts for BPF












  (%) |
| --- | --- |
| | 2012 | 2013 | 2014 | 2015 | 2016 | 2017 |
| Return on equity (RoE)* | 8,0 | [4-6] | [6-8] | [8-10] | [10-12] | [10-12] |

(111)

The bank considers that profits will continue to be made during the restructuring of the Group, as shown in Table 9 below.

Table 9

Table 9

Profitability forecasts for BPF

Profitability forecasts for BPF

(%)

2012

2013

2014

2015

2016

2017

Return on equity (RoE)*

8,0

[4-6]

[6-8]

[8-10]

[10-12]

[10-12]

| (112) | According to the information provided, creditors would not lose out if BPF were to be closed down. If placed in run-off management, there would, after three years, be a liquidity surplus ranging from EUR [1-3]* billion to EUR [2-4]* billion in a stress scenario, depending on the stress level applied. |
| --- | --- |

(112)

According to the information provided, creditors would not lose out if BPF were to be closed down. If placed in run-off management, there would, after three years, be a liquidity surplus ranging from EUR [1-3]* billion to EUR [2-4]* billion in a stress scenario, depending on the stress level applied.

| (113) | BPF's assets have a very short maturity and on average have a shorter maturity than its liabilities. |
| --- | --- |

(113)

BPF's assets have a very short maturity and on average have a shorter maturity than its liabilities.

| (114) | The bank's risk cost increased from [...]* in 2011 to [...]* in 2012. Bad debts rose progressively from 3 % at the end of 2008 to 4,2 % at the end of 2012. |
| --- | --- |

(114)

The bank's risk cost increased from [...]* in 2011 to [...]* in 2012. Bad debts rose progressively from 3 % at the end of 2008 to 4,2 % at the end of 2012.

2.5.3.   PENETRATION RATE

| (115) | According to the French authorities, BPF's penetration rate of approximately 29,8 % (in 2012) in the PSA Group's vehicle sales means that it finances a large proportion of the demand for vehicles produced by the PSA Group and is crucial to the financing of its trading activity, and the whole of the vehicle sector, including dealer networks and customers. |
| --- | --- |

(115)

According to the French authorities, BPF's penetration rate of approximately 29,8 % (in 2012) in the PSA Group's vehicle sales means that it finances a large proportion of the demand for vehicles produced by the PSA Group and is crucial to the financing of its trading activity, and the whole of the vehicle sector, including dealer networks and customers.

| (116) | They point out that the forecast plan assumes that the penetration rate will continue to increase slightly from 2011 up to 2017. This increase is based on a number of factors:






  (a) | the partial and gradual withdrawal of traditional banks from this sector, because the financing and capital constraints linked in particular to the entry into force of Basel III are forcing them selectively to manage their balance sheets; |
| --- | --- | --- |

(116)

They point out that the forecast plan assumes that the penetration rate will continue to increase slightly from 2011 up to 2017. This increase is based on a number of factors:

(a)

the partial and gradual withdrawal of traditional banks from this sector, because the financing and capital constraints linked in particular to the entry into force of Basel III are forcing them selectively to manage their balance sheets;

| (b) | the growth in consumers' financing needs in a climate of strong contraction of purchasing power in Europe; |
| --- | --- |

(b)

the growth in consumers' financing needs in a climate of strong contraction of purchasing power in Europe;

| (c) | interest rate levels, currently at a historical low, which will encourage borrowing to finance purchases of vehicles; and lastly |
| --- | --- |

(c)

interest rate levels, currently at a historical low, which will encourage borrowing to finance purchases of vehicles; and lastly

| (d) | the tendency for vehicles to become an everyday consumer good, along the lines of a commodity, which will be reflected by a growth of financing by borrowing and monthly payments. |
| --- | --- |

(d)

the tendency for vehicles to become an everyday consumer good, along the lines of a commodity, which will be reflected by a growth of financing by borrowing and monthly payments.

| (117) | The development of BPF's penetration rate by geographical area and by segment (B, C, D, H and CV) is shown in Table 10 below (PV means ‘Peugeot vehicle’ and CV means ‘Citroën vehicle’).

  Table 10


  BPF's penetration rate by geographical area, vehicle segment and brand (as %) | PV | CV |
| --- | --- | --- | --- |
| % | 2010 | 2011 | 2012 | 2010 | 2011 | 2012 |
| France |
| Segment B | [...] | [...] | [...] | [...] | [...] | [...] |
| Segment C |
| Segment D |
| Segment H |
| CV |
| Total |
| UK |
| Segment B | [...] | [...] | [...] | [...] | [...] | [...] |
| Segment C |
| Segment D |
| Segment H |
| CV |
| Total |
| Germany |
| Segment B | [...] | [...] | [...] | [...] | [...] | [...] |
| Segment C |
| Segment D |
| Segment H |
| CV |
| Total |
| Italy |
| Segment B | [...] | [...] | [...] | [...] | [...] | [...] |
| Segment C |
| Segment D |
| Segment H |
| CV |
| Total |
| Spain |
| Segment B | [...] | [...] | [...] | [...] | [...] | [...] |
| Segment C |
| Segment D |
| Segment H |
| CV |
| Total |
| Total G5 |
| Segment B | [28-33] | [31,6-36,6] | [33,1-38,1] | [26,5-31,5] | [29-34] | [34,4-39,4] |
| Segment C | [20,4-25,4] | [21,6-26,6] | [22,7-27,7] | [18,9-23,9] | [25,5-30,5] | [29,1-34,1] |
| Segment D | [20-25] | [17,8-22,8] | [18,5-23,5] | [20,6-25,6] | [20,9-25,9] | [22,2-27,2] |
| Segment H | [12,4-17,4] | [28,6-33,6] | [0,0-2,5] | [20,7-25,1] | [19,2-24] | [14,6-19,6] |
| CV | [24,6-29,6] | [25,9-30,9] | [24,9-29,9] | [26,7-31,7] | [28-33] | [29,6-34,6] |
| Total | [25,1-30,1] | [25,4-30,4] | [26,8-31,8] | [25,1-30,1] | [26,7-31,7] | [30,6-35,6] |
| Segment B | Ion, 107, 1007, 206+, 207, 208, Czero, C1, C3, DS3, C2, C3 Picasso |
| Segment C | 307, 308, 3008, 4008, 5008, RCZ, C4, C4 Picasso, C4 Aircross, DS4, Xsara Picasso |
| Segment D | 407, 4007, 508, 807, C5, DS5, C8, C Crosser |
| Segment H | 607, C6 |
| CV | Partner, Bipper, Expert, Boxer, Berlingo, Nemo, Jumper, Jumpy |

(117)

The development of BPF's penetration rate by geographical area and by segment (B, C, D, H and CV) is shown in Table 10 below (PV means ‘Peugeot vehicle’ and CV means ‘Citroën vehicle’).

Table 10

Table 10

BPF's penetration rate by geographical area, vehicle segment and brand (as %)

BPF's penetration rate by geographical area, vehicle segment and brand (as %)

PV

CV

%

2010

2011

2012

2010

2011

2012

France

France

Segment B

[...]

[...]

[...]

[...]

[...]

[...]

[...]

[...]

[...]

[...]

[...]

[...]

Segment C

Segment D

Segment H

CV

Total

Total

UK

UK

Segment B

[...]

[...]

[...]

[...]

[...]

[...]

[...]

[...]

[...]

[...]

[...]

[...]

Segment C

Segment D

Segment H

CV

Total

Total

Germany

Germany

Segment B

[...]

[...]

[...]

[...]

[...]

[...]

[...]

[...]

[...]

[...]

[...]

[...]

Segment C

Segment D

Segment H

CV

Total

Total

Italy

Italy

Segment B

[...]

[...]

[...]

[...]

[...]

[...]

[...]

[...]

[...]

[...]

[...]

[...]

Segment C

Segment D

Segment H

CV

Total

Total

Spain

Spain

Segment B

[...]

[...]

[...]

[...]

[...]

[...]

[...]

[...]

[...]

[...]

[...]

[...]

Segment C

Segment D

Segment H

CV

Total

Total

Total G5

Total G5

Segment B

[28-33]

[31,6-36,6]

[33,1-38,1]

[26,5-31,5]

[29-34]

[34,4-39,4]

Segment C

[20,4-25,4]

[21,6-26,6]

[22,7-27,7]

[18,9-23,9]

[25,5-30,5]

[29,1-34,1]

Segment D

[20-25]

[17,8-22,8]

[18,5-23,5]

[20,6-25,6]

[20,9-25,9]

[22,2-27,2]

Segment H

[12,4-17,4]

[28,6-33,6]

[0,0-2,5]

[20,7-25,1]

[19,2-24]

[14,6-19,6]

CV

[24,6-29,6]

[25,9-30,9]

[24,9-29,9]

[26,7-31,7]

[28-33]

[29,6-34,6]

Total

Total

[25,1-30,1]

[25,4-30,4]

[26,8-31,8]

[25,1-30,1]

[26,7-31,7]

[30,6-35,6]

Segment B

Segment B

Ion, 107, 1007, 206+, 207, 208, Czero, C1, C3, DS3, C2, C3 Picasso

Segment C

Segment C

307, 308, 3008, 4008, 5008, RCZ, C4, C4 Picasso, C4 Aircross, DS4, Xsara Picasso

Segment D

Segment D

407, 4007, 508, 807, C5, DS5, C8, C Crosser

Segment H

Segment H

607, C6

CV

CV

Partner, Bipper, Expert, Boxer, Berlingo, Nemo, Jumper, Jumpy

2.5.4.   THE GROUP'S DEPENDENCE

| (118) | According to the French authorities, BPF's rating is correlated with PSA's rating, as is shown by the close correlation between the bond yields of the Group and the bank. |
| --- | --- |

(118)

According to the French authorities, BPF's rating is correlated with PSA's rating, as is shown by the close correlation between the bond yields of the Group and the bank.

| (119) | The rating agencies have, in their reports, linked the ratings of the PSA Group and BPF, setting a maximum difference of two notches between the Group's rating and the captive bank's rating (29). On 14 February 2013, BPF's rating was downgraded to ‘non-investment grade’. |
| --- | --- |

(119)

The rating agencies have, in their reports, linked the ratings of the PSA Group and BPF, setting a maximum difference of two notches between the Group's rating and the captive bank's rating (29). On 14 February 2013, BPF's rating was downgraded to ‘non-investment grade’.

29

2.6.   THE COMPLAINT

THE COMPLAINT

| (120) | The anonymous complainant considers that the guarantee by the French State will make it possible for BPF to offer credit to PSA's dealers and customers on more attractive terms than those that can be offered by the captive banks of rival automotive manufacturers. |
| --- | --- |

(120)

The anonymous complainant considers that the guarantee by the French State will make it possible for BPF to offer credit to PSA's dealers and customers on more attractive terms than those that can be offered by the captive banks of rival automotive manufacturers.

3.   REASONS FOR INITIATING THE PROCEDURE

REASONS FOR INITIATING THE PROCEDURE

| (121) | In the opening decision, the Commission had the following doubts: |
| --- | --- |

(121)

In the opening decision, the Commission had the following doubts:

3.1.   VIABILITY PLAN FOR BPF

VIABILITY PLAN FOR BPF

| (122) | As regards the viability plan for BPF which has to be analysed in the light of the Banking Communication, the Commission had doubts because of the ongoing concerns about the viability of the PSA Group as a whole. |
| --- | --- |

(122)

As regards the viability plan for BPF which has to be analysed in the light of the Banking Communication, the Commission had doubts because of the ongoing concerns about the viability of the PSA Group as a whole.

3.2.   PSA GROUP RESTRUCTURING PLAN

PSA GROUP RESTRUCTURING PLAN

| (123) | As regards the restructuring plan for the industrial group, which has to be analysed in the light of the Rescue and Restructuring Guidelines, the Commission had doubts about the following aspects: |
| --- | --- |

(123)

As regards the restructuring plan for the industrial group, which has to be analysed in the light of the Rescue and Restructuring Guidelines, the Commission had doubts about the following aspects:

3.2.1.   DOUBTS ABOUT A RETURN TO VIABILITY

| (124) | The Commission asked third parties to comment on:






  (a) | the assumptions made about the development of the automotive market in Europe and the rest of the world, and in particular whether these assumptions were conservative enough; |
| --- | --- | --- |

(124)

The Commission asked third parties to comment on:

(a)

the assumptions made about the development of the automotive market in Europe and the rest of the world, and in particular whether these assumptions were conservative enough;

| (b) | the restructuring measures planned to restore the PSA Group's viability; |
| --- | --- |

(b)

the restructuring measures planned to restore the PSA Group's viability;

| (c) | the role that the 50CO2Cars project could play in restoring viability, and in particular whether this R&D investment launching a mild hybridisation research programme was consistent with the parallel announcement that a hybrid plug-in technology, which the Group was said to have successfully developed, was to be discontinued. |
| --- | --- |

(c)

the role that the 50CO2Cars project could play in restoring viability, and in particular whether this R&D investment launching a mild hybridisation research programme was consistent with the parallel announcement that a hybrid plug-in technology, which the Group was said to have successfully developed, was to be discontinued.

2

3.2.2.   DOUBTS ABOUT THE COMPENSATORY MEASURES

| (125) | The Commission asked for comments from third parties on the characterisation, within the meaning of the ‘Rescue and Restructuring Guidelines’, of the proposed measures as compensatory measures, their quantification and their ability to offset the risks of distortions of competition brought about by the aid. |
| --- | --- |

(125)

The Commission asked for comments from third parties on the characterisation, within the meaning of the ‘Rescue and Restructuring Guidelines’, of the proposed measures as compensatory measures, their quantification and their ability to offset the risks of distortions of competition brought about by the aid.

4.   COMMENTS BY FRANCE ON THE OPENING DECISION

COMMENTS BY FRANCE ON THE OPENING DECISION

4.1.   ON THE AMOUNT OF AID

ON THE AMOUNT OF AID

| (126) | The French authorities consider that the amount of aid cannot correspond to the nominal amount of the guarantee, that BPF's issues will necessarily be made with a variable liquidity and risk premium, undoubtedly higher than the 24 basis points recorded during the issue carried out as a result of the rescue aid, and that the reference period to be taken into account for BPF's historical yields should be three months. |
| --- | --- |

(126)

The French authorities consider that the amount of aid cannot correspond to the nominal amount of the guarantee, that BPF's issues will necessarily be made with a variable liquidity and risk premium, undoubtedly higher than the 24 basis points recorded during the issue carried out as a result of the rescue aid, and that the reference period to be taken into account for BPF's historical yields should be three months.

| (127) | According to the French authorities, the two cumulative conditions under which the amount of the aid can be considered to be as high as the amount of the guarantee, namely a very strong possibility that the borrower will not be able to repay the loan covered by the guarantee and the existence of exceptional circumstances, are not met in this case. The amount of the aid included in the State guarantee is therefore the difference between the total cost of financing resulting from the guarantee and the guarantee itself, and the total cost of the financing to be paid by the enterprise without the guarantee. |
| --- | --- |

(127)

According to the French authorities, the two cumulative conditions under which the amount of the aid can be considered to be as high as the amount of the guarantee, namely a very strong possibility that the borrower will not be able to repay the loan covered by the guarantee and the existence of exceptional circumstances, are not met in this case. The amount of the aid included in the State guarantee is therefore the difference between the total cost of financing resulting from the guarantee and the guarantee itself, and the total cost of the financing to be paid by the enterprise without the guarantee.

| (128) | Again according to the French authorities, the assumption of a surplus cost for BPF of some 40 basis points is founded. The issues by BPF on 25 March 2013 took place in particularly favourable market conditions. The spreads with respect to a fungible Treasury bond recorded at the time of this issue (24 basis points) are at historically low levels. The French authorities contend, for instance, that investors would normally require higher remuneration for a captive bank in the automotive sector than for public bodies such as UNEDIC (30) or CADES (31), especially as they would have lines available for subscribing to this type of CADES or UNEDIC transaction that they would not necessarily have for a transaction with BPF. |
| --- | --- |

(128)

Again according to the French authorities, the assumption of a surplus cost for BPF of some 40 basis points is founded. The issues by BPF on 25 March 2013 took place in particularly favourable market conditions. The spreads with respect to a fungible Treasury bond recorded at the time of this issue (24 basis points) are at historically low levels. The French authorities contend, for instance, that investors would normally require higher remuneration for a captive bank in the automotive sector than for public bodies such as UNEDIC (30) or CADES (31), especially as they would have lines available for subscribing to this type of CADES or UNEDIC transaction that they would not necessarily have for a transaction with BPF.

30

31

| (129) | Lastly, the reference period put forward by the French authorities (from 12 July to 16 October 2012) is best able to reflect BPF's real bond yields on the markets, as it takes account of the PSA Group's difficulties and not the announcement of the State guarantee. |
| --- | --- |

(129)

Lastly, the reference period put forward by the French authorities (from 12 July to 16 October 2012) is best able to reflect BPF's real bond yields on the markets, as it takes account of the PSA Group's difficulties and not the announcement of the State guarantee.

4.2.   ON BPF'S VIABILITY

ON BPF'S VIABILITY

| (130) | The French authorities take note of the Commission's view that BPF does not have a profitability or solvency problem and that its liquidity problem is due solely to its link with the PSA Group. |
| --- | --- |

(130)

The French authorities take note of the Commission's view that BPF does not have a profitability or solvency problem and that its liquidity problem is due solely to its link with the PSA Group.

| (131) | They comment, however, as follows:






  (a) | In the view of the French authorities, the increase in BPF's balance sheet size is moderate and in line with forecast inflation. This increase is to be attributed to the worsening macroeconomic situation and the fact that consumers are turning more often to borrowing to finance vehicle purchases. |
| --- | --- | --- |

(131)

They comment, however, as follows:

(a)

In the view of the French authorities, the increase in BPF's balance sheet size is moderate and in line with forecast inflation. This increase is to be attributed to the worsening macroeconomic situation and the fact that consumers are turning more often to borrowing to finance vehicle purchases.

| (b) | In reply to the Commission's argument that BPF should be prevented from financing poor quality loans in order artificially to boost the PSA Group's turnover, the French authorities point out that:






  — | the sole objective of the compensatory measure involving BPF is to make its competitive behaviour less intense and to limit its market share, |
| --- | --- | --- |

(b)

In reply to the Commission's argument that BPF should be prevented from financing poor quality loans in order artificially to boost the PSA Group's turnover, the French authorities point out that:

—

the sole objective of the compensatory measure involving BPF is to make its competitive behaviour less intense and to limit its market share,

| — | the rate of ‘non-performing loans’, of approximately 4 %, has undergone little change in the last three years, |
| --- | --- |

—

the rate of ‘non-performing loans’, of approximately 4 %, has undergone little change in the last three years,

| — | BPF draws up its risk policy independently under the supervision of the Prudential Control Authority. |
| --- | --- |

—

BPF draws up its risk policy independently under the supervision of the Prudential Control Authority.

In the view of the French authorities, as the bad debt level is closely monitored by the rating agencies and by the BPF audit committee, it would be impossible to change the bank's risk policy.

4.3.   ON THE PSA GROUP'S RETURN TO VIABILITY

ON THE PSA GROUP'S RETURN TO VIABILITY

4.3.1.   ON THE ASSUMPTIONS OF MARKET TRENDS

| (132) | First, the French authorities consider that the PSA Group's forecasts have not been disproven by market trends in the first quarter of 2013 or by the supposed discrepancy between the results forecast for 2012 and the results finally recorded for that year. |
| --- | --- |

(132)

First, the French authorities consider that the PSA Group's forecasts have not been disproven by market trends in the first quarter of 2013 or by the supposed discrepancy between the results forecast for 2012 and the results finally recorded for that year.

| (133) | According to the French authorities, the ongoing fall in sales in 2013 was predicted by the PSA Group, which estimated, as did IHS Global Insight, that the market would ultimately fall by 4 % between 2012 and 2013. |
| --- | --- |

(133)

According to the French authorities, the ongoing fall in sales in 2013 was predicted by the PSA Group, which estimated, as did IHS Global Insight, that the market would ultimately fall by 4 % between 2012 and 2013.

IHS Global Insight

| (134) | The French authorities have submitted updated financial projections, based on less optimistic assumptions than the projections described in recitals 54 to 58 of the opening decision. The strategic policy described in those recitals of the opening decision remains unchanged. |
| --- | --- |

(134)

The French authorities have submitted updated financial projections, based on less optimistic assumptions than the projections described in recitals 54 to 58 of the opening decision. The strategic policy described in those recitals of the opening decision remains unchanged.

| (135) | The amendments to the projections are based on the updated forecasts of trends in the ‘Europe 30’ market by IHS Global Insight and are reflected in the turnover of the automotive division which is not as high during the forecasting period. |
| --- | --- |

(135)

The amendments to the projections are based on the updated forecasts of trends in the ‘Europe 30’ market by IHS Global Insight and are reflected in the turnover of the automotive division which is not as high during the forecasting period.

IHS Global Insight

| (136) | The ‘unfavourable’ scenario in which PSA Group sales contract (in comparison with the median scenario) by a further 100 000 vehicles per annum in Europe from 2013 has also been updated.

  Table 11


  Size of the European market according to the IHS Global Insight forecasts and PSA's market share | 2013 | 2014 | 2015 | 2016 | 2017 |
| --- | --- | --- | --- | --- | --- | --- |
| Size of the European market (Europe 30), forecast by IHS Global Insight in April 2013 (thousands of vehicles) | 13 497 | 13 926 | 14 768 | 15 371 | 15 991 |
| PSA's European market share* | [10-14] % | [10-14] % | [10-14] % | [9-13] % | [9-13] % |

(136)

The ‘unfavourable’ scenario in which PSA Group sales contract (in comparison with the median scenario) by a further 100 000 vehicles per annum in Europe from 2013 has also been updated.

Table 11

Table 11

Size of the European market according to the IHS Global Insight forecasts and PSA's market share

Size of the European market according to the IHS Global Insight forecasts and PSA's market share

2013

2014

2015

2016

2017

Size of the European market (Europe 30), forecast by IHS Global Insight in April 2013 (thousands of vehicles)

IHS Global Insight

13 497

13 926

14 768

15 371

15 991

PSA's European market share*

[10-14] %

[10-14] %

[10-14] %

[9-13] %

[9-13] %

Table 12

Table 12

Forecast turnover of the PSA Group (EUR million)

Forecast turnover of the PSA Group (EUR million)

| | 2013 | 2014 | 2015 | 2016 | 2017 |
| --- | --- | --- | --- | --- | --- |
| Median scenario in the opening decision* | [55 000 -60 000 ] | [60 000 -65 000 ] | [60 000 -65 000 ] | [60 000 -65 000 ] | [65 000 -70 000 ] |
| Updated median scenario* | [55 000 -60 000 ] | [60 000 -65 000 ] | [60 000 -65 000 ] | [59 000 -64 000 ] | [60 000 -65 000 ] |
| Updated unfavourable scenario (100 000 fewer vehicles per annum)* | [55 000 -60 000 ] | [60 000 -65 000 ] | [60 000 -65 000 ] | [60 000 -70 000 ] | [60 000 -65 000 ] |

2013

2014

2015

2016

2017

Median scenario in the opening decision*

[55 000 -60 000 ]

[60 000 -65 000 ]

[60 000 -65 000 ]

[60 000 -65 000 ]

[65 000 -70 000 ]

Updated median scenario*

[55 000 -60 000 ]

[60 000 -65 000 ]

[60 000 -65 000 ]

[59 000 -64 000 ]

[60 000 -65 000 ]

Updated unfavourable scenario (100 000 fewer vehicles per annum)*

[55 000 -60 000 ]

[60 000 -65 000 ]

[60 000 -65 000 ]

[60 000 -70 000 ]

[60 000 -65 000 ]

Table 13

Table 13

Forecast turnover of the automotive division (EUR million)

Forecast turnover of the automotive division (EUR million)

| | 2013 | 2014 | 2015 | 2016 | 2017 |
| --- | --- | --- | --- | --- | --- |
| Median scenario in the opening decision* | [40 000 -45 000 ] | [45 000 - 50 000 ] | [45 000 - 50 000 ] | [45 000 - 50 000 ] | [45 000 - 50 000 ] |
| Updated median scenario* | [40 000 -45 000 ] | [40 000 -45 000 ] | [45 000 -50 000 ] | [40 000 -45 000 ] | [40 000 - 45 000 ] |
| Updated unfavourable scenario (100 000 fewer vehicles per annum)* | [35 000 -40 000 ] | [40 000 - 45 000 ] | [40 000 - 45 000 ] | [40 000 - 45 000 ] | [40 000 - 45 000 ] |

2013

2014

2015

2016

2017

Median scenario in the opening decision*

[40 000 -45 000 ]

[45 000 - 50 000 ]

[45 000 - 50 000 ]

[45 000 - 50 000 ]

[45 000 - 50 000 ]

Updated median scenario*

[40 000 -45 000 ]

[40 000 -45 000 ]

[45 000 -50 000 ]

[40 000 -45 000 ]

[40 000 - 45 000 ]

Updated unfavourable scenario (100 000 fewer vehicles per annum)*

[35 000 -40 000 ]

[40 000 - 45 000 ]

[40 000 - 45 000 ]

[40 000 - 45 000 ]

[40 000 - 45 000 ]

| (137) | Cash flows have been updated to take account of reduced operation, while cash flows from investment activities remain unchanged. The forecast level of debt [...]* is thus higher than forecast in the opening decision; the level of debt forecast in the median case is higher than the level previously forecast in the unfavourable case. |
| --- | --- |

(137)

Cash flows have been updated to take account of reduced operation, while cash flows from investment activities remain unchanged. The forecast level of debt [...]* is thus higher than forecast in the opening decision; the level of debt forecast in the median case is higher than the level previously forecast in the unfavourable case.

| (138) | PSA has also submitted projections of net indebtedness in a more stressed scenario in which PSA Group sales fall (in comparison with the median scenario) by a further 200 000 vehicles per annum in Europe from 2013. The net indebtedness levels in the various scenarios are presented in Table 14 below. According to the figures provided by PSA, a stress factor of 100 000 vehicles increases net indebtedness [...]* by EUR [200-400]* million per annum.

  Table 14


  Net indebtedness [...]* in EUR million | 2013 | 2014 | 2015 | 2016 | 2017 |
| --- | --- | --- | --- | --- | --- | --- |
| Median scenario in the opening decision | [...] | [...] | [...] | [...] | [...] |
| Updated median scenario | [...] | [...] | [...] | [...] | [...] |
| Updated unfavourable scenario (100 000 fewer vehicles per annum) | [...] | [...] | [...] | [...] | [...] |
| Updated higher stress scenario (200 000 fewer vehicles per annum) | [...] | [...] | [...] | [...] | [...] |

(138)

PSA has also submitted projections of net indebtedness in a more stressed scenario in which PSA Group sales fall (in comparison with the median scenario) by a further 200 000 vehicles per annum in Europe from 2013. The net indebtedness levels in the various scenarios are presented in Table 14 below. According to the figures provided by PSA, a stress factor of 100 000 vehicles increases net indebtedness [...]* by EUR [200-400]* million per annum.

Table 14

Table 14

Net indebtedness [...]* in EUR million

Net indebtedness [...]* in EUR million

2013

2014

2015

2016

2017

Median scenario in the opening decision

[...]

[...]

[...]

[...]

[...]

Updated median scenario

[...]

[...]

[...]

[...]

[...]

Updated unfavourable scenario (100 000 fewer vehicles per annum)

[...]

[...]

[...]

[...]

[...]

Updated higher stress scenario (200 000 fewer vehicles per annum)

[...]

[...]

[...]

[...]

[...]

| (139) | The French authorities consider, moreover, that the relevant factor to be taken into account as a basis for the assumptions of the PSA Group's return to viability in the long term is not its turnover, but its ordinary operating result. At the Supervisory Board meeting of 6 November 2012, this was assessed as a loss of EUR [1 000-2 000]* million, and the final result was a loss of EUR 1 504 million (i.e. a difference of less than [0-3] %). |
| --- | --- |

(139)

The French authorities consider, moreover, that the relevant factor to be taken into account as a basis for the assumptions of the PSA Group's return to viability in the long term is not its turnover, but its ordinary operating result. At the Supervisory Board meeting of 6 November 2012, this was assessed as a loss of EUR [1 000-2 000]* million, and the final result was a loss of EUR 1 504 million (i.e. a difference of less than [0-3] %).

| (140) | The French authorities also consider that the market growth prospects taken as a basis by the PSA Group are particularly cautious, while the analysts' figures on which the Commission's argument is based are piecemeal and open to discussion. |
| --- | --- |

(140)

The French authorities also consider that the market growth prospects taken as a basis by the PSA Group are particularly cautious, while the analysts' figures on which the Commission's argument is based are piecemeal and open to discussion.

| (141) | All the players concerned consider that the market has bottomed out and cannot but increase from now on. Generally speaking, macroeconomic conditions in Europe are set to improve in future years according to the latest analyses (32). This improvement will, in the view of the French authorities, necessarily be felt by the automotive sector. |
| --- | --- |

(141)

All the players concerned consider that the market has bottomed out and cannot but increase from now on. Generally speaking, macroeconomic conditions in Europe are set to improve in future years according to the latest analyses (32). This improvement will, in the view of the French authorities, necessarily be felt by the automotive sector.

32

| (142) | Lastly, the French authorities consider that the financial analysts' figures chosen by the Commission are not representative as they disregard those closest to the forecasts provided by the PSA Group. In any event, the French authorities dispute the use of financial analysts to evaluate a medium-term restructuring plan. They consider that the task of financial analysts is to advise on purchases or sales of securities in order to meet a particular financial target. Forecasting sales volumes or estimating turnover is not their main focus. These assessments are therefore very often unconnected with the underlying economic principles. |
| --- | --- |

(142)

Lastly, the French authorities consider that the financial analysts' figures chosen by the Commission are not representative as they disregard those closest to the forecasts provided by the PSA Group. In any event, the French authorities dispute the use of financial analysts to evaluate a medium-term restructuring plan. They consider that the task of financial analysts is to advise on purchases or sales of securities in order to meet a particular financial target. Forecasting sales volumes or estimating turnover is not their main focus. These assessments are therefore very often unconnected with the underlying economic principles.

| (143) | As a result, the French authorities consider that, in order to implement the restructuring plan, they could legitimately take the forecasts of IHS Global Insight as a basis, applying a stress factor thereto, and disregard the financial analysts' assumptions. |
| --- | --- |

(143)

As a result, the French authorities consider that, in order to implement the restructuring plan, they could legitimately take the forecasts of IHS Global Insight as a basis, applying a stress factor thereto, and disregard the financial analysts' assumptions.

IHS Global Insight

| (144) | Lastly, the French authorities stress that the private sector believes that the PSA Group will become viable again. This belief is shown first by the alliance between PSA and GM which was bolstered by the signature on 20 December 2012 of final agreements on three vehicle projects and the creation of a joint venture for purchasing. The bank financing of EUR 11,6 billion obtained by BPF is proof, moreover, of market confidence that matters will improve. Lastly, the recent securitisation operations undertaken by BPF show that the market is not averse to the risk represented by automotive activity. |
| --- | --- |

(144)

Lastly, the French authorities stress that the private sector believes that the PSA Group will become viable again. This belief is shown first by the alliance between PSA and GM which was bolstered by the signature on 20 December 2012 of final agreements on three vehicle projects and the creation of a joint venture for purchasing. The bank financing of EUR 11,6 billion obtained by BPF is proof, moreover, of market confidence that matters will improve. Lastly, the recent securitisation operations undertaken by BPF show that the market is not averse to the risk represented by automotive activity.

4.3.2.   ON THE LEVELS OF USE OF THE PSA GROUP'S CAPACITY AND THE DIVERSIFICATION OF ITS SALES

| (145) | The French authorities consider that the Commission's doubts about levels of use are unfounded as it has not taken account of the closure of the Aulnay plant which will, in their view, offset the PSA Group's competitive deficit in segment B. In so far as the PSA Group faces very strong competition in this segment, this closure will be particularly significant in terms of restoring viability. |
| --- | --- |

(145)

The French authorities consider that the Commission's doubts about levels of use are unfounded as it has not taken account of the closure of the Aulnay plant which will, in their view, offset the PSA Group's competitive deficit in segment B. In so far as the PSA Group faces very strong competition in this segment, this closure will be particularly significant in terms of restoring viability.

| (146) | The French authorities consider that the PSA Group has taken all the measures needed to achieve its target of 50 % of sales outside Europe in 2015: opening a third plant and new dealerships in China, renewing the range of vehicles marketed in Latin America, launching two models specifically to be sold outside Europe and lastly, as part of the alliance with GM, developing a joint platform for marketing segment B vehicles in Europe and jointly developing a new generation of small economical petrol engines and vehicle projects in Latin America, Russia and other growth markets. |
| --- | --- |

(146)

The French authorities consider that the PSA Group has taken all the measures needed to achieve its target of 50 % of sales outside Europe in 2015: opening a third plant and new dealerships in China, renewing the range of vehicles marketed in Latin America, launching two models specifically to be sold outside Europe and lastly, as part of the alliance with GM, developing a joint platform for marketing segment B vehicles in Europe and jointly developing a new generation of small economical petrol engines and vehicle projects in Latin America, Russia and other growth markets.

4.3.3.   ON THE ROLE PLAYED BY THE 50CO2CARS PROJECT IN RESTORING THE PSA GROUP'S VIABILITY

2

(a)   On the coherence of the 50CO2Cars project with the PSA Group restructuring plan

On the coherence of the 50CO2

| (147) | The French authorities stress that the major R&D efforts within the 50CO2Cars project are intended to get to grips with a technology that will make diesel more environmentally-friendly and energy-efficient. This R&D project will therefore help to implement a strategy to reverse the downward trend in sales of diesel vehicles. |
| --- | --- |

(147)

The French authorities stress that the major R&D efforts within the 50CO2Cars project are intended to get to grips with a technology that will make diesel more environmentally-friendly and energy-efficient. This R&D project will therefore help to implement a strategy to reverse the downward trend in sales of diesel vehicles.

2

| (148) | Diesel vehicles are at present an important source of revenue for the PSA Group: in 2012, [60-80]* % of the vehicles sold by PSA in Europe were fitted with this type of engine. PSA has an optimal industrial base, a good brand image and a substantial profit level for this type of vehicle, which is better than for its petrol engines. It is not, however, being helped by the current context: the ongoing worsening of the image of these engines in Europe, changes to the regulatory and normative framework (Euro VI) which could entail a surcharge on diesel, but not petrol, engines and thus deter people from buying diesel engines, especially as the strategy of downsizing (33) to comply with standards that has so far been implemented has gone as far as it can and some States or local authorities are planning to adopt a tax system that penalises diesel. PSA considers that the margin losses connected with the replacement of diesel sales by petrol sales in the European market would be some EUR [500-700]* million. At a time when the purchasing power of households is declining and consumers have growing ecological concerns, maintaining the competitiveness and brand image of diesel engines (in comparison with petrol engines) is a primary objective for the PSA Group. As the price levels of existing diesel hybrid vehicles are not compatible with mass marketing, major investment in R&D is needed to make this technology available as widely as possible. By making diesel fuel more competitive and providing it with a better image, the 50CO2Cars project could, in the view of the French authorities, play a positive part in restoring viability, by maintaining not just sales of diesel vehicles by the PSA Group, but also its margins. If the industrialisation plan were ultimately to be successful, the 50CO2Cars project technology would offer a major reservoir for growth in an emerging market by 2020. Grasping the opportunity to capitalise on the potential outlets for diesel mild-hybrid engines at the end of the restructuring plan would make it possible to secure turnover by diversifying into a promising segment which is part and parcel of the Group's core business (mass produced vehicles). |
| --- | --- |

(148)

Diesel vehicles are at present an important source of revenue for the PSA Group: in 2012, [60-80]* % of the vehicles sold by PSA in Europe were fitted with this type of engine. PSA has an optimal industrial base, a good brand image and a substantial profit level for this type of vehicle, which is better than for its petrol engines. It is not, however, being helped by the current context: the ongoing worsening of the image of these engines in Europe, changes to the regulatory and normative framework (Euro VI) which could entail a surcharge on diesel, but not petrol, engines and thus deter people from buying diesel engines, especially as the strategy of downsizing (33) to comply with standards that has so far been implemented has gone as far as it can and some States or local authorities are planning to adopt a tax system that penalises diesel. PSA considers that the margin losses connected with the replacement of diesel sales by petrol sales in the European market would be some EUR [500-700]* million. At a time when the purchasing power of households is declining and consumers have growing ecological concerns, maintaining the competitiveness and brand image of diesel engines (in comparison with petrol engines) is a primary objective for the PSA Group. As the price levels of existing diesel hybrid vehicles are not compatible with mass marketing, major investment in R&D is needed to make this technology available as widely as possible. By making diesel fuel more competitive and providing it with a better image, the 50CO2Cars project could, in the view of the French authorities, play a positive part in restoring viability, by maintaining not just sales of diesel vehicles by the PSA Group, but also its margins. If the industrialisation plan were ultimately to be successful, the 50CO2Cars project technology would offer a major reservoir for growth in an emerging market by 2020. Grasping the opportunity to capitalise on the potential outlets for diesel mild-hybrid engines at the end of the restructuring plan would make it possible to secure turnover by diversifying into a promising segment which is part and parcel of the Group's core business (mass produced vehicles).

33

2

2

| (149) | On the need for investment, the French authorities draw a line between the proposed reduction of investment ‘as a compensatory measure’ to limit the extent of the distortions of competition linked to the State aid, and the continuation of the R&D investment that the enterprise needs to ‘restore its viability in the long term’. The French authorities stress that, in its decision-making practice, the Commission has accepted on a number of occasions that a firm's viability could be restored by launching new products in order to increase turnover (34). |
| --- | --- |

(149)

On the need for investment, the French authorities draw a line between the proposed reduction of investment ‘as a compensatory measure’ to limit the extent of the distortions of competition linked to the State aid, and the continuation of the R&D investment that the enterprise needs to ‘restore its viability in the long term’. The French authorities stress that, in its decision-making practice, the Commission has accepted on a number of occasions that a firm's viability could be restored by launching new products in order to increase turnover (34).

34

| (150) | The authorities point out that PSA would be forced, if there were no specific State aid for the 50CO2Cars project in the restructuring plan, to implement a ‘counterfactual’ project. As it cannot on its own overcome the technological obstacles and would not be able to work on 50CO2Cars with its chosen partners, the Group would have to restrict its investment solely to the minimum necessary to ensure that its diesel engines comply with the regulatory changes. The French authorities stress in this respect that the intervention by the public authorities does not just provide the PSA Group with financial support for the successful completion of the 50CO2Cars project, but also makes it possible for the Group to rally together a consortium of partners (industrial firms, associations, research laboratories, etc.) whose coordinated efforts are needed to resolve the technological obstacles standing in the way of the development of a low-cost diesel hybrid engine. They contend that, in all likelihood, a failure to approve the State aid to the PSA Group as leader of 50CO2Cars would call this project into question not just for the Group, but also for all its partners. A counterfactual strategy of replacing diesel by petrol would entail additional costs and involve major industrial risks: expertise in diesel would have to be given up, sales would be lost during the transitional period and resources would have to be found to adapt and streamline the Group's production system for petrol engines by drawing on resources which are needed to restore viability. |
| --- | --- |

(150)

The authorities point out that PSA would be forced, if there were no specific State aid for the 50CO2Cars project in the restructuring plan, to implement a ‘counterfactual’ project. As it cannot on its own overcome the technological obstacles and would not be able to work on 50CO2Cars with its chosen partners, the Group would have to restrict its investment solely to the minimum necessary to ensure that its diesel engines comply with the regulatory changes. The French authorities stress in this respect that the intervention by the public authorities does not just provide the PSA Group with financial support for the successful completion of the 50CO2Cars project, but also makes it possible for the Group to rally together a consortium of partners (industrial firms, associations, research laboratories, etc.) whose coordinated efforts are needed to resolve the technological obstacles standing in the way of the development of a low-cost diesel hybrid engine. They contend that, in all likelihood, a failure to approve the State aid to the PSA Group as leader of 50CO2Cars would call this project into question not just for the Group, but also for all its partners. A counterfactual strategy of replacing diesel by petrol would entail additional costs and involve major industrial risks: expertise in diesel would have to be given up, sales would be lost during the transitional period and resources would have to be found to adapt and streamline the Group's production system for petrol engines by drawing on resources which are needed to restore viability.

2

2

2

2

| (151) | In short, the French authorities consider that the 50CO2Cars project is necessary both to keep the PSA Group's core industrial activity (diesel engines) profitable and to enable the PSA Group's viability to be restored by giving it the wherewithal for growth following restructuring (new range of innovative and profitable vehicles). This investment in R&D is therefore fully in line with the targets of the restructuring plan. |
| --- | --- |

(151)

In short, the French authorities consider that the 50CO2Cars project is necessary both to keep the PSA Group's core industrial activity (diesel engines) profitable and to enable the PSA Group's viability to be restored by giving it the wherewithal for growth following restructuring (new range of innovative and profitable vehicles). This investment in R&D is therefore fully in line with the targets of the restructuring plan.

2

(b)   On the Commission's doubts in its opening decision

On the Commission's doubts in its opening decision

| (152) | The French authorities understand from the opening decision that the Commission, taking the view that the PSA Group is allegedly lagging behind in the R&D field, considers that the 50CO2Cars project ‘is necessary to restore the viability of the PSA Group only in so far as it may help the Group to offset its backwardness in R&D in comparison with its competitors’. They contest the very principle of this finding.






  (a) | First, the French authorities reiterate that the 50CO2Cars project can help to restore the Group's viability: restoring the environmental image of diesel vehicles; new consumer dynamic (concept of hybrid vehicles available as widely as possible); reservoir for growth at the end of the restructuring plan. |
| --- | --- | --- |

(152)

The French authorities understand from the opening decision that the Commission, taking the view that the PSA Group is allegedly lagging behind in the R&D field, considers that the 50CO2Cars project ‘is necessary to restore the viability of the PSA Group only in so far as it may help the Group to offset its backwardness in R&D in comparison with its competitors’. They contest the very principle of this finding.

2

(a)

First, the French authorities reiterate that the 50CO2Cars project can help to restore the Group's viability: restoring the environmental image of diesel vehicles; new consumer dynamic (concept of hybrid vehicles available as widely as possible); reservoir for growth at the end of the restructuring plan.

2

| (b) | Second, the structural handicap in terms of R&D, which the notification cites as an explanation for some of the PSA Group's difficulties, lies in the fact that the Group is lagging behind in component standardisation, thereby reducing the productivity of R&D efforts in comparison with those of competitors (scale effect). The 50CO2Cars project should make it possible to remedy this situation, in so far as:






  — | first, the 50CO2Cars project will improve the standardisation of some automotive components, in particular the powertrain, |
| --- | --- | --- |

(b)

Second, the structural handicap in terms of R&D, which the notification cites as an explanation for some of the PSA Group's difficulties, lies in the fact that the Group is lagging behind in component standardisation, thereby reducing the productivity of R&D efforts in comparison with those of competitors (scale effect). The 50CO2Cars project should make it possible to remedy this situation, in so far as:

2

—

first, the 50CO2Cars project will improve the standardisation of some automotive components, in particular the powertrain,

2

| — | second, the circumstances in which the 50CO2Cars project is being run will make the PSA Group's R&D efforts more productive, in particular as a result of the synergies offered by coordinated work with various partners, and also follow-up by the public authorities awarding the aid. |
| --- | --- |

—

second, the circumstances in which the 50CO2Cars project is being run will make the PSA Group's R&D efforts more productive, in particular as a result of the synergies offered by coordinated work with various partners, and also follow-up by the public authorities awarding the aid.

2

| (c) | Third, and in particular, the French authorities object to the ‘legally new’ nature of the criterion that the Commission adduces in recital 169 of the opening decision, based on the PSA Group's backwardness in the R&D field. They consider that the arguments adduced so far are enough to prove the positive contribution that the 50CO2Cars project will make to restoring the Group's viability. It is only as a subsidiary issue that they therefore examine the question of whether such a criterion is met in the case at issue: |
| --- | --- |

(c)

Third, and in particular, the French authorities object to the ‘legally new’ nature of the criterion that the Commission adduces in recital 169 of the opening decision, based on the PSA Group's backwardness in the R&D field. They consider that the arguments adduced so far are enough to prove the positive contribution that the 50CO2Cars project will make to restoring the Group's viability. It is only as a subsidiary issue that they therefore examine the question of whether such a criterion is met in the case at issue:

2

(i)   Technological backwardness in hybridisation technologies

Technological backwardness in hybridisation technologies

| (153) | According to the French authorities, this criterion of backwardness in the R&D field is met for the following three reasons:






  (a) | first, they point out that the three technological building blocks of the 50CO2Cars project cover fields in which the PSA Group continues to lag behind:






  — | in the case of diesel vehicles, the Group is lagging behind in technologies to limit engine consumption. This is precisely the field targeted by the 50CO2Cars project, |
| --- | --- | --- | --- |

(153)

According to the French authorities, this criterion of backwardness in the R&D field is met for the following three reasons:

(a)

first, they point out that the three technological building blocks of the 50CO2Cars project cover fields in which the PSA Group continues to lag behind:

2

—

in the case of diesel vehicles, the Group is lagging behind in technologies to limit engine consumption. This is precisely the field targeted by the 50CO2Cars project,

2

| — | in the case of transmissions, the PSA Group is lagging behind in the field of dual clutch transmissions (DCT), largely because of a traditional preference for driven or automatic gearboxes (‘BVMP’), whereas this technology has proven to be less commercially successful than its rival. The 50CO2Cars project will therefore make it possible for the Group to catch up as regards both DCT and eDCT transmissions, |
| --- | --- |

—

in the case of transmissions, the PSA Group is lagging behind in the field of dual clutch transmissions (DCT), largely because of a traditional preference for driven or automatic gearboxes (‘BVMP’), whereas this technology has proven to be less commercially successful than its rival. The 50CO2Cars project will therefore make it possible for the Group to catch up as regards both DCT and eDCT transmissions,

2

| — | in the case of hybridisation systems, the PSA Group is lagging behind in the development of an affordable hybridisation technology which is generic enough to be mass produced. Rival manufacturers such as Toyota, Honda or VAG (35) have (or will soon have access to) generic hybridisation technologies which are therefore better suited to mass production. The French authorities agree in this respect with the Commission's initial comment (in recital 187 of the opening decision) that the existing Stop & Start micro-hybridisation technology (36) is not enough to place it at ‘the technological cutting-edge of CO2 gains’, which requires the successful development of a mild- or full-hybrid technology. Consequently, the aim of the 50CO2Cars project is to make up for the Group's technological backwardness in hybridisation systems; |
| --- | --- |

—

in the case of hybridisation systems, the PSA Group is lagging behind in the development of an affordable hybridisation technology which is generic enough to be mass produced. Rival manufacturers such as Toyota, Honda or VAG (35) have (or will soon have access to) generic hybridisation technologies which are therefore better suited to mass production. The French authorities agree in this respect with the Commission's initial comment (in recital 187 of the opening decision) that the existing Stop & Start micro-hybridisation technology (36) is not enough to place it at ‘the technological cutting-edge of CO2 gains’, which requires the successful development of a mild- or full-hybrid technology. Consequently, the aim of the 50CO2Cars project is to make up for the Group's technological backwardness in hybridisation systems;

35

36

2

2

| (b) | second, they consider that the 50CO2Cars project will give the PSA Group the wherewithal to make up for its backwardness, by resolving a number of the technological problems raised by hybrid technology:






  — | the diesel engines developed by the 50CO2Cars project will make it possible to achieve CO2 emissions of [50-70]* g/km in segment B (vehicles of a power of between 40 and 70 kW), even if sole use is made of the Stop & Start technology, so that PSA could have, by 2017-18, a low-consumption diesel range with an emission level comparable to that of its competitors in the European market, |
| --- | --- | --- |

(b)

second, they consider that the 50CO2Cars project will give the PSA Group the wherewithal to make up for its backwardness, by resolving a number of the technological problems raised by hybrid technology:

2

—

the diesel engines developed by the 50CO2Cars project will make it possible to achieve CO2 emissions of [50-70]* g/km in segment B (vehicles of a power of between 40 and 70 kW), even if sole use is made of the Stop & Start technology, so that PSA could have, by 2017-18, a low-consumption diesel range with an emission level comparable to that of its competitors in the European market,

2

2

| — | the dual clutch eDCT intelligent transmission will make it possible to optimise the energy performance of the hybrid powertrain and will be compatible with a wide power range of different electrical machinery. Standardisation will enable the PSA Group to remedy its technological backwardness, |
| --- | --- |

—

the dual clutch eDCT intelligent transmission will make it possible to optimise the energy performance of the hybrid powertrain and will be compatible with a wide power range of different electrical machinery. Standardisation will enable the PSA Group to remedy its technological backwardness,

| — | lastly, as regards the hybridisation system, the 50CO2Cars project will revolutionise costs because of both the minimal energy sizing (battery and power electronics) and the optimisation of the mechanical architecture (coupling between the electrical machinery and the powertrain). Similarly, the standardisation of the hybridisation system will make it possible to increase the volumes produced and thus make it more accessible in segment B; |
| --- | --- |

—

lastly, as regards the hybridisation system, the 50CO2Cars project will revolutionise costs because of both the minimal energy sizing (battery and power electronics) and the optimisation of the mechanical architecture (coupling between the electrical machinery and the powertrain). Similarly, the standardisation of the hybridisation system will make it possible to increase the volumes produced and thus make it more accessible in segment B;

2

| (c) | lastly, the French authorities address the possible about-turn in strategy consisting in continuing the 50CO2Cars project while discontinuing the hybrid plug-in. In this respect, they stress that the two technologies (‘mild-hybrid’ and ‘plug-in’) do not have the same scope or the same commercial impact. While its price would limit the latter (37) to premium vehicles (with a major spin-off in terms of brand image, especially among corporate customers), the accessibility of the former makes it possible to target a wide range of social groups (low- to middle-income) and therefore to satisfy a wider proportion of the Group's customers. The French authorities stress that these two technologies are not mutually exclusive and that the PSA Group was initially keen to develop both of them in order to combine sales of premium hybrid plug-in vehicles with sales of affordable hybrid vehicles in segments B and C. Discontinuing the hybrid plug-in technology as a compensatory measure is not therefore an ‘about-turn in strategy’ but the discontinuation of a commercially viable activity that does not compromise the Group's return to viability. The 50CO2Cars project has a full part to play in the restructuring plan and the French authorities therefore consider that the strategy on hybridisation proposed in the restructuring plan is entirely coherent. |
| --- | --- |

(c)

lastly, the French authorities address the possible about-turn in strategy consisting in continuing the 50CO2Cars project while discontinuing the hybrid plug-in. In this respect, they stress that the two technologies (‘mild-hybrid’ and ‘plug-in’) do not have the same scope or the same commercial impact. While its price would limit the latter (37) to premium vehicles (with a major spin-off in terms of brand image, especially among corporate customers), the accessibility of the former makes it possible to target a wide range of social groups (low- to middle-income) and therefore to satisfy a wider proportion of the Group's customers. The French authorities stress that these two technologies are not mutually exclusive and that the PSA Group was initially keen to develop both of them in order to combine sales of premium hybrid plug-in vehicles with sales of affordable hybrid vehicles in segments B and C. Discontinuing the hybrid plug-in technology as a compensatory measure is not therefore an ‘about-turn in strategy’ but the discontinuation of a commercially viable activity that does not compromise the Group's return to viability. The 50CO2Cars project has a full part to play in the restructuring plan and the French authorities therefore consider that the strategy on hybridisation proposed in the restructuring plan is entirely coherent.

2

37

2

(ii)   The coherence of the resources implemented for 50CO2Cars with the rest of the restructuring plan

The coherence of the resources implemented for 50CO2

| (154) | According to the French authorities, adapting the PSA Group's industrial base to implement the 50CO2Cars project is part and parcel of the restructuring plan's approach. Standardising the powertrains and transmissions of the Group's diesel vehicles should in particular make it possible to rationalise and optimise production resources:






  (a) | in the area of diesel engines, an investment of EUR [100-200]* million has been made at the Trémery and Douvrin plants, i.e. [0-5]* % of the EUR [10-20]* billion of the investment for which the restructuring plan makes provision, a proportion which the French authorities consider to be ‘particularly modest, if not insignificant’. This financial impact has also been included in the PSA Group's MTP since November 2012, and is included in the updated version of the document, and the French authorities therefore consider that this investment is part and parcel of the approach taken by the restructuring plan as notified. In terms of industrial impact, the measures are intended to modify (38) existing diesel vehicle production capacity while keeping the perimeter the same: while there will be no increase in production capacity which is considered sufficient for the [100 000-200 000] vehicles anticipated at this stage at the end of the 50CO2Cars project, part of the production apparatus of a segment with excess capacity will be given over to a segment where capacity is potentially not being fully used because it is in development (internal arbitrage in favour of attractive products); |
| --- | --- | --- |

(154)

According to the French authorities, adapting the PSA Group's industrial base to implement the 50CO2Cars project is part and parcel of the restructuring plan's approach. Standardising the powertrains and transmissions of the Group's diesel vehicles should in particular make it possible to rationalise and optimise production resources:

2

(a)

in the area of diesel engines, an investment of EUR [100-200]* million has been made at the Trémery and Douvrin plants, i.e. [0-5]* % of the EUR [10-20]* billion of the investment for which the restructuring plan makes provision, a proportion which the French authorities consider to be ‘particularly modest, if not insignificant’. This financial impact has also been included in the PSA Group's MTP since November 2012, and is included in the updated version of the document, and the French authorities therefore consider that this investment is part and parcel of the approach taken by the restructuring plan as notified. In terms of industrial impact, the measures are intended to modify (38) existing diesel vehicle production capacity while keeping the perimeter the same: while there will be no increase in production capacity which is considered sufficient for the [100 000-200 000] vehicles anticipated at this stage at the end of the 50CO2Cars project, part of the production apparatus of a segment with excess capacity will be given over to a segment where capacity is potentially not being fully used because it is in development (internal arbitrage in favour of attractive products);

modify

38

2

| (b) | as regards transmissions, the French authorities endorse the line of reasoning in recital 202 of the opening decision: if the 50CO2Cars project is successful, production which is currently outsourced will take place in-house (39). The investment needed, already included in the restructuring plan as notified, is also included in the updated MTP. The French authorities consider that this strategy of in-house production is compatible with the Group's return to viability. Financially, the operation will mean that the margin is brought in-house and will free the Group from exchange risks with Japan (40) and logistical costs/delays, without curtailing the PSA Group's ability rapidly to adapt to demand; |
| --- | --- |

(b)

as regards transmissions, the French authorities endorse the line of reasoning in recital 202 of the opening decision: if the 50CO2Cars project is successful, production which is currently outsourced will take place in-house (39). The investment needed, already included in the restructuring plan as notified, is also included in the updated MTP. The French authorities consider that this strategy of in-house production is compatible with the Group's return to viability. Financially, the operation will mean that the margin is brought in-house and will free the Group from exchange risks with Japan (40) and logistical costs/delays, without curtailing the PSA Group's ability rapidly to adapt to demand;

2

39

40

| (c) | lastly, the investment connected with the hybridisation systems is EUR [40-50] million during the term of the restructuring plan, i.e. less than [0-5] % of the planned total, a proportion that the French authorities consider to be very low. It also concerns an emerging market (for which there is therefore no excess capacity). It is therefore also part and parcel of the approach taken by the PSA Group's restructuring plan. |
| --- | --- |

(c)

lastly, the investment connected with the hybridisation systems is EUR [40-50] million during the term of the restructuring plan, i.e. less than [0-5] % of the planned total, a proportion that the French authorities consider to be very low. It also concerns an emerging market (for which there is therefore no excess capacity). It is therefore also part and parcel of the approach taken by the PSA Group's restructuring plan.

(iii)   Positive impact on the Group's sales and profitability

Positive impact on the Group's sales and profitability

| (155) | According to the French authorities, the 50CO2Cars project should help to make the PSA Group's sales and profitability more dynamic after the restructuring plan.






  (a) | In reply to the questions raised by the Commission in recitals 210 and 211 of the opening decision (on the advisability of a strategy giving priority to diesel rather than petrol engines) and in recital 216 (on the business plan for the 50CO2Cars project and the reliability of its underlying assumptions), the French authorities consider that the strategy pursued is not only legitimate industrially but will have a positive impact on the Group's sales. Rather than developing a low-cost hybridisation technology for petrol engines, it is preferable first to invest in improving the ecological and energy-efficient image of diesel in order initially to ‘overcome consumers’ misgivings' and then to adapt (41) the results of the 50CO2Cars project to petrol engines which could then be distributed by component suppliers throughout the world, thereby making the investment more profitable as a result of economies of scale. The advisability of the strategy envisaged by PSA is also borne out by market research, all of which points (42) to a growth of diesel vehicle sales in future years. |
| --- | --- | --- |

(155)

According to the French authorities, the 50CO2Cars project should help to make the PSA Group's sales and profitability more dynamic after the restructuring plan.

2

(a)

In reply to the questions raised by the Commission in recitals 210 and 211 of the opening decision (on the advisability of a strategy giving priority to diesel rather than petrol engines) and in recital 216 (on the business plan for the 50CO2Cars project and the reliability of its underlying assumptions), the French authorities consider that the strategy pursued is not only legitimate industrially but will have a positive impact on the Group's sales. Rather than developing a low-cost hybridisation technology for petrol engines, it is preferable first to invest in improving the ecological and energy-efficient image of diesel in order initially to ‘overcome consumers’ misgivings' and then to adapt (41) the results of the 50CO2Cars project to petrol engines which could then be distributed by component suppliers throughout the world, thereby making the investment more profitable as a result of economies of scale. The advisability of the strategy envisaged by PSA is also borne out by market research, all of which points (42) to a growth of diesel vehicle sales in future years.

2

41

2

42

| (b) | As regards the financial impact of the 50CO2Cars project, the French authorities have supplied a business plan based on assumptions which are largely shared by various press articles and which include forecast flows up to 2026 (which is justified from the point of view of future updates and the replacement of the EURO VI standards around that date). The R&D work of the 50CO2Cars project will take place between 2013 and 2017, so that the first engines can be marketed between mid-2016 and early 2017 followed shortly thereafter by an economic hybridisation system. Two discount rates (respectively [10-13]* % and [13-15]* %) have been used to calculate profitability, the second taking greater account of the recent rise in the cost of financing. No revenue is included for the patenting of some of the results of the 50CO2Cars project. Lastly, the volumes and sales prices of new diesel engines and hybrid powertrains have been estimated for different scenarios: a scenario ‘A’ in which the 50CO2Cars project is run with State aid, in which the sale of a hybrid vehicle would generate an additional margin estimated to be between EUR [200-300]* and EUR [300-400]* depending on the technological option (over and above the margin of EUR [2 000-3 000]* generated for the manufacturer by the sale of a segment B vehicle); a scenario ‘B’ in which the 50CO2Cars project is run without State aid, in which the margins are the same as in scenario A. The authorities point out, however, that this is a fictitious scenario that could not be achieved by the PSA Group (and is given solely for theoretical comparison purposes); a counterfactual scenario ‘C’ in which, as the 50CO2Cars project is not being implemented, an alternative project is run in which the additional margins are smaller (between EUR [100-200]* and EUR [200-300]). On the basis of these assumptions, the differential net present values (‘NPV’) (43) calculated for the ‘eDCT’ and ‘accessory facade’ products are as follows:

  Table 15


  Financial indicators for the 50CO2Cars project









  PSA Group
  (comparison with respect to ‘counterfactual’ scenario C) | Scenario A
  (50CO2Cars with aid) | Scenario B*
  (50CO2Cars without aid) |
| --- | --- | --- | --- |
| eDCT | NPV at [10-13]*% | EUR [0-10] million | – EUR [60-70] million |
| NPV at [13-15]*% | – EUR [50-60] million | – EUR [90-100] million |
| Accessory facade | NPV at [10-13]*% | + EUR [30-40] million | – EUR [20-30] million |
| NPV at [13-15]*% | – EUR [20-30] million | – EUR [60-70] million |

(b)

As regards the financial impact of the 50CO2Cars project, the French authorities have supplied a business plan based on assumptions which are largely shared by various press articles and which include forecast flows up to 2026 (which is justified from the point of view of future updates and the replacement of the EURO VI standards around that date). The R&D work of the 50CO2Cars project will take place between 2013 and 2017, so that the first engines can be marketed between mid-2016 and early 2017 followed shortly thereafter by an economic hybridisation system. Two discount rates (respectively [10-13]* % and [13-15]* %) have been used to calculate profitability, the second taking greater account of the recent rise in the cost of financing. No revenue is included for the patenting of some of the results of the 50CO2Cars project. Lastly, the volumes and sales prices of new diesel engines and hybrid powertrains have been estimated for different scenarios: a scenario ‘A’ in which the 50CO2Cars project is run with State aid, in which the sale of a hybrid vehicle would generate an additional margin estimated to be between EUR [200-300]* and EUR [300-400]* depending on the technological option (over and above the margin of EUR [2 000-3 000]* generated for the manufacturer by the sale of a segment B vehicle); a scenario ‘B’ in which the 50CO2Cars project is run without State aid, in which the margins are the same as in scenario A. The authorities point out, however, that this is a fictitious scenario that could not be achieved by the PSA Group (and is given solely for theoretical comparison purposes); a counterfactual scenario ‘C’ in which, as the 50CO2Cars project is not being implemented, an alternative project is run in which the additional margins are smaller (between EUR [100-200]* and EUR [200-300]). On the basis of these assumptions, the differential net present values (‘NPV’) (43) calculated for the ‘eDCT’ and ‘accessory facade’ products are as follows:

2

2

2

2

2

2

43

Table 15

Table 15

Financial indicators for the 50CO2Cars project

Financial indicators for the 50CO2

PSA Group

(comparison with respect to ‘counterfactual’ scenario C)

Scenario A

(50CO2Cars with aid)

2

Scenario B*

(50CO2Cars without aid)

2

eDCT

NPV at [10-13]*%

EUR [0-10] million

– EUR [60-70] million

NPV at [13-15]*%

– EUR [50-60] million

– EUR [90-100] million

Accessory facade

NPV at [10-13]*%

- EUR [30-40] million

– EUR [20-30] million

NPV at [13-15]*%

– EUR [20-30] million

– EUR [60-70] million

The French authorities conclude that, whatever the technological option chosen, the relative profitability of scenario B is always negative in comparison with scenario C, and therefore that, without public support, the 50CO2Cars project is ‘quite simply unachievable’. The very limited nature of the NPV obtained in scenario A (slightly positive in comparison with scenario C at a discount rate of [10-13]* %, negative at a discount rate of [13-15]* %) show that these levels of relative profitability are proportionate to the objective of developing a first generation of innovation.

2

| (c) | Lastly, the ‘50CO2Cars project’ entails four types of risk which should be largely offset by the planned State aid:






  — | regulatory risks connected with the new cycle of type approval of diesel vehicles, |
| --- | --- | --- |

(c)

Lastly, the ‘50CO2Cars project’ entails four types of risk which should be largely offset by the planned State aid:

2

—

regulatory risks connected with the new cycle of type approval of diesel vehicles,

| — | technological risks involved in overcoming the technological problems raised by the development of an affordable mild hybridisation technology, |
| --- | --- |

—

technological risks involved in overcoming the technological problems raised by the development of an affordable mild hybridisation technology,

| — | commercial risks connected with consumers' behaviour and their sensitivity to environmental problems, |
| --- | --- |

—

commercial risks connected with consumers' behaviour and their sensitivity to environmental problems,

| — | financial risks, especially in the light of the constraints on the PSA Group's available liquidity. |
| --- | --- |

—

financial risks, especially in the light of the constraints on the PSA Group's available liquidity.

4.4.   ON THE COMPENSATORY MEASURES

ON THE COMPENSATORY MEASURES

4.4.1.   GENERAL COMMENTS ON THE CHARACTERISATION OF THE PLANNED MEASURES AS GENERAL COMPENSATORY MEASURES AND THEIR EXTENT

| (156) | The French authorities consider that, in the opening decision, the Commission offers no precise evaluation of the alleged distortions of competition. The compensatory measures proposed by the PSA Group are therefore already more than adequate. Making them tougher would run counter to the requirement of proportionality set out in paragraph 47 of the Rescue and Restructuring Guidelines. |
| --- | --- |

(156)

The French authorities consider that, in the opening decision, the Commission offers no precise evaluation of the alleged distortions of competition. The compensatory measures proposed by the PSA Group are therefore already more than adequate. Making them tougher would run counter to the requirement of proportionality set out in paragraph 47 of the Rescue and Restructuring Guidelines.

| (157) | They also consider that the planned compensatory measures cover segments B and C, contrary to the line taken in the opening decision. This is true of the measure to limit the penetration rate of BPF financing which concerns these two segments in particular. It is also true, from the point of view of calls for tender, of the early discontinuation of the Citroën C6 and the non-renewal of the C6 and Peugeot 607 models. Lastly, the measure to discontinue vehicles of more than two litres and the discontinuation of development and production of the hybrid plug-in technology will have a major impact in segment C. |
| --- | --- |

(157)

They also consider that the planned compensatory measures cover segments B and C, contrary to the line taken in the opening decision. This is true of the measure to limit the penetration rate of BPF financing which concerns these two segments in particular. It is also true, from the point of view of calls for tender, of the early discontinuation of the Citroën C6 and the non-renewal of the C6 and Peugeot 607 models. Lastly, the measure to discontinue vehicles of more than two litres and the discontinuation of development and production of the hybrid plug-in technology will have a major impact in segment C.

| (158) | The French authorities point out that the compensatory measures proposed by PSA are substantial: they will ultimately lead to a drop in market share of [0-2]* %. |
| --- | --- |

(158)

The French authorities point out that the compensatory measures proposed by PSA are substantial: they will ultimately lead to a drop in market share of [0-2]* %.

4.4.2.   SPECIFIC COMMENTS ON THE VARIOUS COMPENSATORY MEASURES PROPOSED

(a)   On the reduction of additional investment by the PSA Group

On the reduction of additional investment by the PSA Group

(i)   The early discontinuation of the Citroën C6 model and the non-renewal of the Citroën C6 and Peugeot 607 models

The early discontinuation of the Citroën C6 model and the non-renewal of the Citroën C6 and Peugeot 607 models

| (159) | The French authorities consider that, although the volume of sales of these vehicles has fallen, the net margin obtained was greater than the margin obtained from the sale of other types of vehicle, especially the margin from sales of vehicles of segment B. While they accept that this programme was not profitable enough, the PSA Group had planned, in order to make up for this shortcoming, a partnership with DPCA in order to market the C6 and 607 in China. |
| --- | --- |

(159)

The French authorities consider that, although the volume of sales of these vehicles has fallen, the net margin obtained was greater than the margin obtained from the sale of other types of vehicle, especially the margin from sales of vehicles of segment B. While they accept that this programme was not profitable enough, the PSA Group had planned, in order to make up for this shortcoming, a partnership with DPCA in order to market the C6 and 607 in China.

| (160) | Lastly, the French authorities confirm that the PSA Group had never planned to discontinue its high-end range from 2009. PSA discontinued only the R&D project for a new vehicle which would have been added to the C6 and 607. |
| --- | --- |

(160)

Lastly, the French authorities confirm that the PSA Group had never planned to discontinue its high-end range from 2009. PSA discontinued only the R&D project for a new vehicle which would have been added to the C6 and 607.

(ii)   The early discontinuation and non-renewal of the Bipper/Nemo model

The early discontinuation and non-renewal of the Bipper/Nemo model

| (161) | The French authorities consider that this measure will prevent the PSA Group from capitalising on its prior investment and will substantially reduce its ability to compete in the light commercial vehicle segment. |
| --- | --- |

(161)

The French authorities consider that this measure will prevent the PSA Group from capitalising on its prior investment and will substantially reduce its ability to compete in the light commercial vehicle segment.

| (162) | The Bipper/Nemo models have up to now been produced in partnership with Fiat and Tofaș. The stage that this partnership has reached has given PSA a better knowledge of the market, the product and the production capacity mobilised. If the Commission decides not to make this proposed compensatory measure binding, knowledge of all this information will give PSA a much broader negotiating margin for the sale prices of a second generation of these models, assumed to be more profitable. This profitability is likely to be improved by recent and future developments in urban transport organisation where priority is being given to light commercial vehicles. |
| --- | --- |

(162)

The Bipper/Nemo models have up to now been produced in partnership with Fiat and Tofaș. The stage that this partnership has reached has given PSA a better knowledge of the market, the product and the production capacity mobilised. If the Commission decides not to make this proposed compensatory measure binding, knowledge of all this information will give PSA a much broader negotiating margin for the sale prices of a second generation of these models, assumed to be more profitable. This profitability is likely to be improved by recent and future developments in urban transport organisation where priority is being given to light commercial vehicles.

(iii)   The discontinuation of diesel vehicles of more than two litres

The discontinuation of diesel vehicles of more than two litres

| (163) | The French authorities point out that this compensatory measure is particularly significant in so far as the PSA Group is the leader in the traditional diesel vehicle market. |
| --- | --- |

(163)

The French authorities point out that this compensatory measure is particularly significant in so far as the PSA Group is the leader in the traditional diesel vehicle market.

| (164) | The French authorities consider that these vehicles are important for segments D and E, which play a key part in the manufacturer's brand image and its ability to respond to calls for tender. |
| --- | --- |

(164)

The French authorities consider that these vehicles are important for segments D and E, which play a key part in the manufacturer's brand image and its ability to respond to calls for tender.

| (165) | As regards the estimated impact of the development of a diesel hybrid plug-in range, especially on sales of its vehicles with engines of a cubic capacity of more than two litres, the PSA Group considers that this is borne out by recent trends in the hybrid plug-in market and in particular by Volvo's announcement that it has decided to double the production targets for the V60 diesel plug-in model to 10 000 units in 2014 in view of its commercial success. |
| --- | --- |

(165)

As regards the estimated impact of the development of a diesel hybrid plug-in range, especially on sales of its vehicles with engines of a cubic capacity of more than two litres, the PSA Group considers that this is borne out by recent trends in the hybrid plug-in market and in particular by Volvo's announcement that it has decided to double the production targets for the V60 diesel plug-in model to 10 000 units in 2014 in view of its commercial success.

(b)   On the transfer of capacity at the Sevelnord plant to a competitor

On the transfer of capacity at the Sevelnord plant to a competitor

| (166) | The French authorities point out first that this measure will help to limit the PSA Group's market presence to the direct benefit of its competitors as:






  — | PSA is to transfer close on 30 % of production capacity at the Sevelnord plant to Toyota, |
| --- | --- | --- |

(166)

The French authorities point out first that this measure will help to limit the PSA Group's market presence to the direct benefit of its competitors as:

—

PSA is to transfer close on 30 % of production capacity at the Sevelnord plant to Toyota,

| — | under this agreement, a major competitor, Toyota, will be able to gain a foothold in a market in which it has not up to now had a presence, and extend its commercial vehicle range, |
| --- | --- |

—

under this agreement, a major competitor, Toyota, will be able to gain a foothold in a market in which it has not up to now had a presence, and extend its commercial vehicle range,

| — | this agreement gives Toyota a direct and certain competitive advantage in so far as it enables Toyota to capture a large proportion of the margin on the vehicles covered by the agreement and to sign up customers and gain their loyalty in a market in which it does not have a presence, |
| --- | --- |

—

this agreement gives Toyota a direct and certain competitive advantage in so far as it enables Toyota to capture a large proportion of the margin on the vehicles covered by the agreement and to sign up customers and gain their loyalty in a market in which it does not have a presence,

| — | this measure concerns one of the markets in which the PSA Group has a particularly large presence (21 % in Europe 30 in 2011). |
| --- | --- |

—

this measure concerns one of the markets in which the PSA Group has a particularly large presence (21 % in Europe 30 in 2011).

| (167) | The French authorities also note that, in the light of the economic appraisal of the project (positive ordinary operating margin of [0-5] %, in line with PSA's normal expectations), the Group was intending to run the project in a reference scenario with no partner. PSA therefore considers that the Sevelnord plant could be viably and profitably run without a partner. |
| --- | --- |

(167)

The French authorities also note that, in the light of the economic appraisal of the project (positive ordinary operating margin of [0-5] %, in line with PSA's normal expectations), the Group was intending to run the project in a reference scenario with no partner. PSA therefore considers that the Sevelnord plant could be viably and profitably run without a partner.

| (168) | The French authorities point out that the press release of 31 August 2012 should be read with caution in view of the very tense social context at that time. |
| --- | --- |

(168)

The French authorities point out that the press release of 31 August 2012 should be read with caution in view of the very tense social context at that time.

(c)   On the discontinuation of development and production of the hybrid plug-in technology

On the discontinuation of development and production of the hybrid plug-in technology

| (169) | The French authorities consider first that any discussion of the time of implementation of this measure in order to characterise it as a compensatory measure or a measure needed to restore viability is irrelevant. In their view, what is important in characterising these measures is that they are actually able to limit any distortions of competition arising from the aid. |
| --- | --- |

(169)

The French authorities consider first that any discussion of the time of implementation of this measure in order to characterise it as a compensatory measure or a measure needed to restore viability is irrelevant. In their view, what is important in characterising these measures is that they are actually able to limit any distortions of competition arising from the aid.

| (170) | The French authorities do not intend to reply to the Commission's questions as to the accuracy of the estimated impact of this measure as its criticisms on this matter are not explicit enough. In any case, they consider that the assumptions from which the estimated impact of this measure was calculated are in line with the most recent developments in the hybrid plug-in market. |
| --- | --- |

(170)

The French authorities do not intend to reply to the Commission's questions as to the accuracy of the estimated impact of this measure as its criticisms on this matter are not explicit enough. In any case, they consider that the assumptions from which the estimated impact of this measure was calculated are in line with the most recent developments in the hybrid plug-in market.

| (171) | In the view of the French authorities, moreover, a manufacturer or component supplier will not be able to grant a licence to this technology, in view of the stage of development of the market and the importance of this technology as a differentiating factor in competition. Should such a situation arise, however, the PSA Group is willing to undertake not to acquire a licence from a third party during the implementation of the restructuring plan. |
| --- | --- |

(171)

In the view of the French authorities, moreover, a manufacturer or component supplier will not be able to grant a licence to this technology, in view of the stage of development of the market and the importance of this technology as a differentiating factor in competition. Should such a situation arise, however, the PSA Group is willing to undertake not to acquire a licence from a third party during the implementation of the restructuring plan.

| (172) | Lastly, the French authorities consider that the effects of this measure are not cancelled out by the 50CO2Cars project given that the latter relates to a market and customer base (high-end) other than those concerned by the compensatory measure and provides CO2 gains differing from those provided by the hybrid plug-in technology. |
| --- | --- |

(172)

Lastly, the French authorities consider that the effects of this measure are not cancelled out by the 50CO2Cars project given that the latter relates to a market and customer base (high-end) other than those concerned by the compensatory measure and provides CO2 gains differing from those provided by the hybrid plug-in technology.

2

2

(d)   On setting a maximum penetration rate for BPF

On setting a maximum penetration rate for BPF

| (173) | The French authorities point out first that this measure is the most targeted compensatory measure and the best able to remedy any distortions of competition resulting directly from the award of aid in the form of a guarantee for BPF. |
| --- | --- |

(173)

The French authorities point out first that this measure is the most targeted compensatory measure and the best able to remedy any distortions of competition resulting directly from the award of aid in the form of a guarantee for BPF.

| (174) | They contend that capping the penetration rate at the rate for the second half of 2012 with 1 % flexibility is necessary if BPF's penetration rate is to evolve in line with the Group's needs and if BPF is to be able to carry out its systemic role in relation to PSA's automotive activity. In so far as it is predicted that the upward trend in the penetration rate recorded between 2001 and 2012 will continue between 2012 and 2013, this cap will significantly limit BPF's competitive ability. |
| --- | --- |

(174)

They contend that capping the penetration rate at the rate for the second half of 2012 with 1 % flexibility is necessary if BPF's penetration rate is to evolve in line with the Group's needs and if BPF is to be able to carry out its systemic role in relation to PSA's automotive activity. In so far as it is predicted that the upward trend in the penetration rate recorded between 2001 and 2012 will continue between 2012 and 2013, this cap will significantly limit BPF's competitive ability.

| (175) | In the view of the French authorities, the planned flexibility will not dilute the effectiveness and binding nature of the proposed compensatory measure. In the light of the foreseeable market trend, BPF's penetration rate will systematically be behind by one year and thus lower than that of its most comparable competitors. |
| --- | --- |

(175)

In the view of the French authorities, the planned flexibility will not dilute the effectiveness and binding nature of the proposed compensatory measure. In the light of the foreseeable market trend, BPF's penetration rate will systematically be behind by one year and thus lower than that of its most comparable competitors.

| (176) | Moreover, in reply to a question from the Commission, the French authorities are willing to include the captive banks of the Fiat and Ford groups in the panel of banks chosen for the indexing of BPF's penetration rate. |
| --- | --- |

(176)

Moreover, in reply to a question from the Commission, the French authorities are willing to include the captive banks of the Fiat and Ford groups in the panel of banks chosen for the indexing of BPF's penetration rate.

| (177) | Lastly, in the view of the French authorities, the global nature of PSA's commitment (for the G10 countries and with no differentiation by segment) will not enable it to develop an aggressive trading policy in some countries and some segments, thereby cancelling out the effects of the compensatory measure. In addition to the fact that the PSA Group cannot force BPF to amend its risk policy, the measure to limit the penetration rate of BPF financing chiefly concerns segments B and C because of their relative weight in the weighted penetration mean (over [...]* % of the finance granted by BPF in recent years and on average [...]* % of the financing granted by BPF in 2012 in France, the United Kingdom, Germany, Spain and Italy). |
| --- | --- |

(177)

Lastly, in the view of the French authorities, the global nature of PSA's commitment (for the G10 countries and with no differentiation by segment) will not enable it to develop an aggressive trading policy in some countries and some segments, thereby cancelling out the effects of the compensatory measure. In addition to the fact that the PSA Group cannot force BPF to amend its risk policy, the measure to limit the penetration rate of BPF financing chiefly concerns segments B and C because of their relative weight in the weighted penetration mean (over [...]* % of the finance granted by BPF in recent years and on average [...]* % of the financing granted by BPF in 2012 in France, the United Kingdom, Germany, Spain and Italy).

5.   COMMENTS FROM INTERESTED PARTIES

COMMENTS FROM INTERESTED PARTIES

| (178) | Following the opening decision, the Commission received comments from five interested parties, namely the PSA Group, an enterprise which wished to remain anonymous (‘the anonymous third party’), Fiat, GM and Toyota. |
| --- | --- |

(178)

Following the opening decision, the Commission received comments from five interested parties, namely the PSA Group, an enterprise which wished to remain anonymous (‘the anonymous third party’), Fiat, GM and Toyota.

5.1.   COMMENTS FROM THE ANONYMOUS THIRD PARTY

COMMENTS FROM THE ANONYMOUS THIRD PARTY

| (179) | The anonymous third party informed the Commission of its concerns about certain of PSA's trading practices. It considers that PSA gives priority to French component suppliers to the detriment of non-French suppliers. PSA's behaviour in relation to the component supplier Agrati France is revealing, according to the anonymous third party: PSA helped it to avoid its imminent winding up by the courts by purchasing products from it at prices well above the market price. According to this anonymous third party, despite the damage that a breakdown in supplies caused it, PSA also decided not to make any claim against Agrati France, so as not to increase the financial difficulties of this already ailing firm. |
| --- | --- |

(179)

The anonymous third party informed the Commission of its concerns about certain of PSA's trading practices. It considers that PSA gives priority to French component suppliers to the detriment of non-French suppliers. PSA's behaviour in relation to the component supplier Agrati France is revealing, according to the anonymous third party: PSA helped it to avoid its imminent winding up by the courts by purchasing products from it at prices well above the market price. According to this anonymous third party, despite the damage that a breakdown in supplies caused it, PSA also decided not to make any claim against Agrati France, so as not to increase the financial difficulties of this already ailing firm.

| (180) | In its comments, the anonymous third party alleges that the relations between PSA and the French Government, and the public support forming the subject matter of these proceedings, infringe the rules of the internal market, especially those concerning the free movement of goods in Article 34 TFEU. |
| --- | --- |

(180)

In its comments, the anonymous third party alleges that the relations between PSA and the French Government, and the public support forming the subject matter of these proceedings, infringe the rules of the internal market, especially those concerning the free movement of goods in Article 34 TFEU.

| (181) | In order to assist Agrati France, it considers that PSA used its participation in the Fonds de modernisation des équipementiers automobiles (‘FMEA’ [Modernisation Fund for Automotive Component Suppliers]), and thus indirectly granted it aid of EUR 17 million. |
| --- | --- |

(181)

In order to assist Agrati France, it considers that PSA used its participation in the Fonds de modernisation des équipementiers automobiles (‘FMEA’ [Modernisation Fund for Automotive Component Suppliers]), and thus indirectly granted it aid of EUR 17 million.

| (182) | By way of compensatory measure, the anonymous third party lastly calls for PSA to withdraw from the FMEA and to give up any financial holding in suppliers or distributors of automotive components for as long as it continues to receive public aid, for the recovery of the sums that it granted to Agrati France and for the implementation of a transparent and non-discriminatory system for selecting its suppliers. |
| --- | --- |

(182)

By way of compensatory measure, the anonymous third party lastly calls for PSA to withdraw from the FMEA and to give up any financial holding in suppliers or distributors of automotive components for as long as it continues to receive public aid, for the recovery of the sums that it granted to Agrati France and for the implementation of a transparent and non-discriminatory system for selecting its suppliers.

5.2.   COMMENTS FROM OPEL (AND THE GM GROUP)

COMMENTS FROM OPEL (AND THE GM GROUP)

| (183) | As regards market forecasts, GM stresses that most automotive manufacturers use data from institutes such as Global Insight or POLK. |
| --- | --- |

(183)

As regards market forecasts, GM stresses that most automotive manufacturers use data from institutes such as Global Insight or POLK.

| (184) | As regards the 50CO2Cars R&D project, GM points out that all manufacturers are investing in technologies to reduce gas emissions. Generally speaking, it is difficult to predict how industrially successful this research will be in future. Many technical solutions can be envisaged, and that applies to hybridisation as well. This is, moreover, a field in which manufacturers could well work together in order to achieve economies of scale. In GM's view, the aid of EUR 85 million for the 50CO2Cars project is not a significant amount when compared with R&D expenditure in the sector; it is, however, a non-negligible amount for an R&D project intended to develop a mild hybridisation system. GM considers that this measure would be unlikely to deter a rival manufacturer from developing its own R&D programme in the same field, bearing in mind the current technological uncertainties. |
| --- | --- |

(184)

As regards the 50CO2Cars R&D project, GM points out that all manufacturers are investing in technologies to reduce gas emissions. Generally speaking, it is difficult to predict how industrially successful this research will be in future. Many technical solutions can be envisaged, and that applies to hybridisation as well. This is, moreover, a field in which manufacturers could well work together in order to achieve economies of scale. In GM's view, the aid of EUR 85 million for the 50CO2Cars project is not a significant amount when compared with R&D expenditure in the sector; it is, however, a non-negligible amount for an R&D project intended to develop a mild hybridisation system. GM considers that this measure would be unlikely to deter a rival manufacturer from developing its own R&D programme in the same field, bearing in mind the current technological uncertainties.

2

2

| (185) | As regards the role of automotive manufacturers' captive banks, GM considers that they undoubtedly facilitate vehicle sales by offering their customers attractive financing solutions. They offer manufacturers very flexible ways of provoking short-term reactions in the automotive market. |
| --- | --- |

(185)

As regards the role of automotive manufacturers' captive banks, GM considers that they undoubtedly facilitate vehicle sales by offering their customers attractive financing solutions. They offer manufacturers very flexible ways of provoking short-term reactions in the automotive market.

| (186) | Lastly, GM considers that PSA has embarked upon a significant reduction of capacity which it considers to be difficult and complex. |
| --- | --- |

(186)

Lastly, GM considers that PSA has embarked upon a significant reduction of capacity which it considers to be difficult and complex.

5.3.   COMMENTS FROM FIAT

COMMENTS FROM FIAT

5.3.1.   RESTORING VIABILITY

| (187) | From the point of view of restoring viability, Fiat refers to the comments by certain analysts, especially the forecasts of Global Insight, which predict a downturn in sales and then a possible upturn, albeit small and very gradual, in 2015/2016. |
| --- | --- |

(187)

From the point of view of restoring viability, Fiat refers to the comments by certain analysts, especially the forecasts of Global Insight, which predict a downturn in sales and then a possible upturn, albeit small and very gradual, in 2015/2016.

| (188) | In its view, the reasons for the current crisis in the automotive market are:






  (a) | the strong competitive pressure in the market, especially in the mass segments, generated by the arrival of new Korean, and possibly Japanese and Indian, competitors; |
| --- | --- | --- |

(188)

In its view, the reasons for the current crisis in the automotive market are:

(a)

the strong competitive pressure in the market, especially in the mass segments, generated by the arrival of new Korean, and possibly Japanese and Indian, competitors;

| (b) | the bipolarisation of the market, in which only premium vehicles offer potential profits; |
| --- | --- |

(b)

the bipolarisation of the market, in which only premium vehicles offer potential profits;

| (c) | the tendency for consumers to go increasingly for low-end products; |
| --- | --- |

(c)

the tendency for consumers to go increasingly for low-end products;

| (d) | the lack of any clear prospects of a return to pre-crisis sales levels, and lastly; |
| --- | --- |

(d)

the lack of any clear prospects of a return to pre-crisis sales levels, and lastly;

| (e) | the structural overcapacity of European manufacturers. |
| --- | --- |

(e)

the structural overcapacity of European manufacturers.

5.3.2.   THE 50CO2CARS PROJECT

2

| (189) | On the 50CO2Cars project, Fiat considers, despite the little information available, that the objective seems achievable. Fiat stresses, however that the unit cost per vehicle of this type of technology might limit its market penetration, both because sale prices would be high and because it would be difficult for the manufacturer to make any profits from sales. In Fiat's view, the CO2 emission targets set by the European Commission for 2020 are a real challenge for all manufacturers. If they are to be met, a multiple R&D approach has to be pursued, and not just one that focuses on a single R&D project to develop a single technology, which the 50CO2Cars project seems to be doing (in Fiat's view of it). |
| --- | --- |

(189)

On the 50CO2Cars project, Fiat considers, despite the little information available, that the objective seems achievable. Fiat stresses, however that the unit cost per vehicle of this type of technology might limit its market penetration, both because sale prices would be high and because it would be difficult for the manufacturer to make any profits from sales. In Fiat's view, the CO2 emission targets set by the European Commission for 2020 are a real challenge for all manufacturers. If they are to be met, a multiple R&D approach has to be pursued, and not just one that focuses on a single R&D project to develop a single technology, which the 50CO2Cars project seems to be doing (in Fiat's view of it).

2

2

2

| (190) | Fiat does not know whether other manufacturers are receiving public aid to support R&D projects. In its view, the only barriers to exit from innovation processes are costs, the necessary investment and the time needed to correct technological choices. Nor is the technological advance made by the 50CO2Cars project a barrier to entry. Fiat considers, however, that the possibility of receiving aid and therefore of reducing the final cost of the development of new technologies in comparison with competitors undoubtedly confers an advantage on the aid beneficiary. |
| --- | --- |

(190)

Fiat does not know whether other manufacturers are receiving public aid to support R&D projects. In its view, the only barriers to exit from innovation processes are costs, the necessary investment and the time needed to correct technological choices. Nor is the technological advance made by the 50CO2Cars project a barrier to entry. Fiat considers, however, that the possibility of receiving aid and therefore of reducing the final cost of the development of new technologies in comparison with competitors undoubtedly confers an advantage on the aid beneficiary.

2

5.3.3.   THE IMPACT OF THE GUARANTEE ON THE MARKET

| (191) | In Fiat's view, the public guarantee to BPF corresponds to one third of the debts of PSA's captive bank. The transaction does not, moreover, make any provision for the payment of a commitment fee. Fiat is of the view that at least 100 basis points should be added if the cost of the guarantee is to be in line with market practice. |
| --- | --- |

(191)

In Fiat's view, the public guarantee to BPF corresponds to one third of the debts of PSA's captive bank. The transaction does not, moreover, make any provision for the payment of a commitment fee. Fiat is of the view that at least 100 basis points should be added if the cost of the guarantee is to be in line with market practice.

| (192) | Lastly, the public guarantee will distort competition as regards the other captive banks in the markets. The guarantee will mean that the shares issued by BPF are rated in the same way as the French State, namely Aa1/AA, rather than being rated on their own merits. Fiat concludes from this that BPF's rating will remain the same up to 2016. |
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(192)

Lastly, the public guarantee will distort competition as regards the other captive banks in the markets. The guarantee will mean that the shares issued by BPF are rated in the same way as the French State, namely Aa1/AA, rather than being rated on their own merits. Fiat concludes from this that BPF's rating will remain the same up to 2016.

| (193) | In Fiat's view, the grant of this guarantee clearly explains the financing cost differential between the PSA Group and BPF, estimated at 40 basis points. Fiat considers that BPF could finance itself in the secondary market with a ‘new’ differential of 360/380 basis points as it would be aware that the differential of a PSA Group bond would be some 400 basis points for a 2016 maturity. At the time of the EUR 1,2 billion issue covered by the State guarantee that BPF made in March 2013, the total financing cost was approximately 270 basis points. |
| --- | --- |

(193)

In Fiat's view, the grant of this guarantee clearly explains the financing cost differential between the PSA Group and BPF, estimated at 40 basis points. Fiat considers that BPF could finance itself in the secondary market with a ‘new’ differential of 360/380 basis points as it would be aware that the differential of a PSA Group bond would be some 400 basis points for a 2016 maturity. At the time of the EUR 1,2 billion issue covered by the State guarantee that BPF made in March 2013, the total financing cost was approximately 270 basis points.

| (194) | Fiat also considers that the public guarantee helped BPF to renegotiate the terms of its loans with financial institutions and to align them with the terms demanded by the French State. |
| --- | --- |

(194)

Fiat also considers that the public guarantee helped BPF to renegotiate the terms of its loans with financial institutions and to align them with the terms demanded by the French State.

| (195) | Lastly, the public guarantee will have a positive impact on BPF's rating. Although its rating was downgraded in early 2013 by the main rating agencies, BPF continued to benefit from a higher rating, equivalent to one notch, than it might have expected without the guarantee. Fiat refers in particular to the statements made by Standard and Poor's on 28 January, 14 February and 18 April 2013. Fiat stresses, moreover, that it is widely accepted that a commitment to grant a guarantee or any financing necessarily improves the beneficiary's financial situation whatever the level of drawdown of the financing made available. |
| --- | --- |

(195)

Lastly, the public guarantee will have a positive impact on BPF's rating. Although its rating was downgraded in early 2013 by the main rating agencies, BPF continued to benefit from a higher rating, equivalent to one notch, than it might have expected without the guarantee. Fiat refers in particular to the statements made by Standard and Poor's on 28 January, 14 February and 18 April 2013. Fiat stresses, moreover, that it is widely accepted that a commitment to grant a guarantee or any financing necessarily improves the beneficiary's financial situation whatever the level of drawdown of the financing made available.

| (196) | More generally, Fiat is of the view that the captive banks of automotive manufacturers are extremely efficient marketing and sales instruments:






  (a) | for attracting new customers by offering very attractive financing terms (44); |
| --- | --- | --- |

(196)

More generally, Fiat is of the view that the captive banks of automotive manufacturers are extremely efficient marketing and sales instruments:

(a)

for attracting new customers by offering very attractive financing terms (44);

44

| (b) | for supporting sales, especially as ‘conventional’ financial establishments are withdrawing from the segment of loans to customers and dealers; and |
| --- | --- |

(b)

for supporting sales, especially as ‘conventional’ financial establishments are withdrawing from the segment of loans to customers and dealers; and

| (c) | for stepping up the loyalty of consumers who are already customers. |
| --- | --- |

(c)

for stepping up the loyalty of consumers who are already customers.

| (197) | Fiat considers that an increase of 100 basis points in BPF's financing cost would have a direct, immediate and highly adverse effect on the profits of the PSA Group in European countries. |
| --- | --- |

(197)

Fiat considers that an increase of 100 basis points in BPF's financing cost would have a direct, immediate and highly adverse effect on the profits of the PSA Group in European countries.

5.3.4.   THE COMPENSATORY MEASURES

| (198) | In Fiat's view, the capacity reduction had been decided in a previous plan under which it was planned to close unprofitable plants. The planned closures are not therefore fundamental from the point of view of restoring PSA's viability (as the usage levels remain unchanged). Their impact will be no more than a reduction of overheads. |
| --- | --- |

(198)

In Fiat's view, the capacity reduction had been decided in a previous plan under which it was planned to close unprofitable plants. The planned closures are not therefore fundamental from the point of view of restoring PSA's viability (as the usage levels remain unchanged). Their impact will be no more than a reduction of overheads.

| (199) | On the CAPEX reductions, Fiat considers that PSA will use its restructuring plan opportunistically to justify its strategic decisions to reposition in segments B and C, and to conceal other less effective measures taken beforehand. The planned discontinuation of diesel engines of more than two litres is probably connected with the current trend among manufacturers to reduce their cubic capacities (‘downsizing’). On Sevelnord, Fiat is of the view that this measure is not a real reduction of capacity but merely the temporary leasing of this capacity to a competitor which PSA could fairly easily recover if it needed to do so. |
| --- | --- |

(199)

On the CAPEX reductions, Fiat considers that PSA will use its restructuring plan opportunistically to justify its strategic decisions to reposition in segments B and C, and to conceal other less effective measures taken beforehand. The planned discontinuation of diesel engines of more than two litres is probably connected with the current trend among manufacturers to reduce their cubic capacities (‘downsizing’). On Sevelnord, Fiat is of the view that this measure is not a real reduction of capacity but merely the temporary leasing of this capacity to a competitor which PSA could fairly easily recover if it needed to do so.

| (200) | Lastly, on the final compensatory measure, Fiat points out that the scant information provided makes it difficult to analyse the consequences of discontinuing the hybrid plug-in technology. This discontinuation is in line, in its view, with PSA's repositioning on the market. It can also be seen as way of remedying a poor technological choice. Fiat considers that it is not possible to concentrate on a single technology to achieve the emission reduction targets set by the European Union. |
| --- | --- |

(200)

Lastly, on the final compensatory measure, Fiat points out that the scant information provided makes it difficult to analyse the consequences of discontinuing the hybrid plug-in technology. This discontinuation is in line, in its view, with PSA's repositioning on the market. It can also be seen as way of remedying a poor technological choice. Fiat considers that it is not possible to concentrate on a single technology to achieve the emission reduction targets set by the European Union.

| (201) | As regards the compensatory measure concerning the penetration rate, Fiat considers that no compensatory measure would be able to limit the impact of the distortions caused by the guarantee. |
| --- | --- |

(201)

As regards the compensatory measure concerning the penetration rate, Fiat considers that no compensatory measure would be able to limit the impact of the distortions caused by the guarantee.

5.4.   COMMENTS FROM TOYOTA

COMMENTS FROM TOYOTA

| (202) | Toyota considers that it is unable to comment on PSA's restructuring plan and that it is, in any case, not its place to do so. Toyota confirms that the assumptions on which the PSA plan is based are credible. In general, the many factors influencing the market make any forecasting exercise very difficult. |
| --- | --- |

(202)

Toyota considers that it is unable to comment on PSA's restructuring plan and that it is, in any case, not its place to do so. Toyota confirms that the assumptions on which the PSA plan is based are credible. In general, the many factors influencing the market make any forecasting exercise very difficult.

| (203) | On the 50CO2Cars project, Toyota considers that the development of any environmental technology will be a key factor in manufacturers' sales. In its view, sales of petrol hybrid vehicles will be higher in future than sales of diesel hybrid vehicles, although it agrees that there could be a market for diesel hybrids. Sales will remain, however, below those of petrol hybrids because of the higher cost of this technology. Toyota does not expect this R&D project to prevent PSA's competitors from penetrating the mild hybrid market. |
| --- | --- |

(203)

On the 50CO2Cars project, Toyota considers that the development of any environmental technology will be a key factor in manufacturers' sales. In its view, sales of petrol hybrid vehicles will be higher in future than sales of diesel hybrid vehicles, although it agrees that there could be a market for diesel hybrids. Sales will remain, however, below those of petrol hybrids because of the higher cost of this technology. Toyota does not expect this R&D project to prevent PSA's competitors from penetrating the mild hybrid market.

2

| (204) | As regards the role of captive banks, Toyota's perception is that, in general, they help to improve customer brand loyalty by around 15 %. Penetration rates are, moreover, higher in small vehicle segments. |
| --- | --- |

(204)

As regards the role of captive banks, Toyota's perception is that, in general, they help to improve customer brand loyalty by around 15 %. Penetration rates are, moreover, higher in small vehicle segments.

| (205) | On the compensatory measures, Toyota asks whether a measure to discontinue models for which sales are low can be legally characterised as such a measure. It considers that the cooperation between Toyota and PSA at the Sevelnord plant is not a prerequisite for the PSA Group's survival. The hybrid plug-in technology is not, in its view, mature enough yet because of the costs that it entails and the infrastructure that it requires. In Toyota's view, the full hybrid technology continues to be the only medium-term technological solution. |
| --- | --- |

(205)

On the compensatory measures, Toyota asks whether a measure to discontinue models for which sales are low can be legally characterised as such a measure. It considers that the cooperation between Toyota and PSA at the Sevelnord plant is not a prerequisite for the PSA Group's survival. The hybrid plug-in technology is not, in its view, mature enough yet because of the costs that it entails and the infrastructure that it requires. In Toyota's view, the full hybrid technology continues to be the only medium-term technological solution.

| (206) | Lastly, Toyota considers that it is unable to assess the relevance of the compensatory measures proposed by the PSA Group. |
| --- | --- |

(206)

Lastly, Toyota considers that it is unable to assess the relevance of the compensatory measures proposed by the PSA Group.

5.5.   COMMENTS FROM THE PSA GROUP

COMMENTS FROM THE PSA GROUP

| (207) | First, the PSA Group fully endorses the comments submitted by the French authorities. |
| --- | --- |

(207)

First, the PSA Group fully endorses the comments submitted by the French authorities.

| (208) | PSA then recalls its strategy to restore viability by adapting its production apparatus to new market conditions. This adaptation will in particular be reflected by a significant reduction of the Group's market presence. PSA also points out that these restructuring measures will be almost exclusively financed by its own resources from disposals of assets. These measures would, in its view, have been more than sufficient if BPF had not been unfairly penalised by the rating agencies' rules, the captive bank's difficulties arising only from its links with the PSA Group. In PSA's view, therefore, State intervention was necessary solely because of these rating agency rules. PSA concludes from this that the public guarantee will ultimately have only a limited impact, especially as no direct public subsidy will be granted to BPF. |
| --- | --- |

(208)

PSA then recalls its strategy to restore viability by adapting its production apparatus to new market conditions. This adaptation will in particular be reflected by a significant reduction of the Group's market presence. PSA also points out that these restructuring measures will be almost exclusively financed by its own resources from disposals of assets. These measures would, in its view, have been more than sufficient if BPF had not been unfairly penalised by the rating agencies' rules, the captive bank's difficulties arising only from its links with the PSA Group. In PSA's view, therefore, State intervention was necessary solely because of these rating agency rules. PSA concludes from this that the public guarantee will ultimately have only a limited impact, especially as no direct public subsidy will be granted to BPF.

| (209) | PSA also stresses that, in addition to the restructuring measures, its commercial policy is to be refocused. There is to be a fresh focus on R&D projects intended to lower the costs of technological innovations for the end consumer and on an increasing internationalisation of the Group to make it less vulnerable to fluctuations in the European market and in particular in the countries of southern Europe. |
| --- | --- |

(209)

PSA also stresses that, in addition to the restructuring measures, its commercial policy is to be refocused. There is to be a fresh focus on R&D projects intended to lower the costs of technological innovations for the end consumer and on an increasing internationalisation of the Group to make it less vulnerable to fluctuations in the European market and in particular in the countries of southern Europe.

| (210) | PSA notes that, if the European automotive market situation is worse than forecast, it will take all the measures needed to ensure its return to viability in the long term. |
| --- | --- |

(210)

PSA notes that, if the European automotive market situation is worse than forecast, it will take all the measures needed to ensure its return to viability in the long term.

| (211) | On the compensatory measures, PSA considers that they represent extremely significant efforts which will greatly penalise its competitiveness in all segments. In PSA's view, they appear to be very substantial in extent when compared with the amount of the aid and in particular the extent of the funds mobilised by PSA to finance its restructuring. Moreover, as the structure of BPF's balance sheet makes it very unlikely that the guarantee will be drawn on, the effects of the aid on the PSA Group's competitors will ultimately be extremely limited. |
| --- | --- |

(211)

On the compensatory measures, PSA considers that they represent extremely significant efforts which will greatly penalise its competitiveness in all segments. In PSA's view, they appear to be very substantial in extent when compared with the amount of the aid and in particular the extent of the funds mobilised by PSA to finance its restructuring. Moreover, as the structure of BPF's balance sheet makes it very unlikely that the guarantee will be drawn on, the effects of the aid on the PSA Group's competitors will ultimately be extremely limited.

| (212) | The planned compensatory measures will have a very major impact. From an industrial point of view, discontinuing the hybrid plug-in technology will have a significant negative impact on the European market. Moreover, by transferring production capacity to one of its direct competitors at the Sevelnord plant, PSA considers that it will help it to gain a foothold in a market. The reductions in investment will also have an impact on PSA's market image. This is particularly true of the discontinuation of two models in the light commercial vehicle segment in which PSA has a large market share. Lastly, the non-renewal of high-end vehicles and powerful engines will make it less possible to go in for calls for tender from corporate customers and will have an impact on the Group's brand image which will go well beyond the restructuring period. |
| --- | --- |

(212)

The planned compensatory measures will have a very major impact. From an industrial point of view, discontinuing the hybrid plug-in technology will have a significant negative impact on the European market. Moreover, by transferring production capacity to one of its direct competitors at the Sevelnord plant, PSA considers that it will help it to gain a foothold in a market. The reductions in investment will also have an impact on PSA's market image. This is particularly true of the discontinuation of two models in the light commercial vehicle segment in which PSA has a large market share. Lastly, the non-renewal of high-end vehicles and powerful engines will make it less possible to go in for calls for tender from corporate customers and will have an impact on the Group's brand image which will go well beyond the restructuring period.

| (213) | In PSA's view, the cap on BPF's penetration rates and their indexing to trends among the captive banks of its main competitors will largely offset the assumed effect of the aid on the market. |
| --- | --- |

(213)

In PSA's view, the cap on BPF's penetration rates and their indexing to trends among the captive banks of its main competitors will largely offset the assumed effect of the aid on the market.

| (214) | Lastly, PSA points out that the approval of the aid by the Commission will be of paramount importance for the French economy, because of the scale of the automotive sector in France (over two million direct and indirect jobs). PSA's recovery will also play a key role in the vitality and competitiveness of the automotive industry in Europe. In this respect, PSA notes that some competitors have received (or are still receiving) massive support from their respective governments through the maintenance of exchange rates particularly favourable to their exports or temporary nationalisations of their captive banks. Other manufacturers outside the European Union are benefiting from free-trade agreements concluded to their advantage, enabling them to develop an aggressive commercial policy in the European market. |
| --- | --- |

(214)

Lastly, PSA points out that the approval of the aid by the Commission will be of paramount importance for the French economy, because of the scale of the automotive sector in France (over two million direct and indirect jobs). PSA's recovery will also play a key role in the vitality and competitiveness of the automotive industry in Europe. In this respect, PSA notes that some competitors have received (or are still receiving) massive support from their respective governments through the maintenance of exchange rates particularly favourable to their exports or temporary nationalisations of their captive banks. Other manufacturers outside the European Union are benefiting from free-trade agreements concluded to their advantage, enabling them to develop an aggressive commercial policy in the European market.

6.   COMMENTS BY FRANCE ON THE INTERESTED PARTIES' COMMENTS

COMMENTS BY FRANCE ON THE INTERESTED PARTIES' COMMENTS

6.1.   COMMENTS ON THE ANONYMOUS THIRD PARTY'S COMMENTS

COMMENTS ON THE ANONYMOUS THIRD PARTY'S COMMENTS

| (215) | First, the French authorities point out that the grant of aid for the PSA Group's restructuring does not seem to be a matter of any great interest to operators in the European automotive market: only four interested parties have come forward (despite the publicity surrounding the opening decision). |
| --- | --- |

(215)

First, the French authorities point out that the grant of aid for the PSA Group's restructuring does not seem to be a matter of any great interest to operators in the European automotive market: only four interested parties have come forward (despite the publicity surrounding the opening decision).

| (216) | On the comments from the anonymous third party (summarised in recitals 179 to 182 of section 5.1 above), the French authorities stress that they are not in any way related to the present procedure to examine the aid for the PSA Group's restructuring, but concern the complaint that this anonymous third party has lodged with the European Commission. |
| --- | --- |

(216)

On the comments from the anonymous third party (summarised in recitals 179 to 182 of section 5.1 above), the French authorities stress that they are not in any way related to the present procedure to examine the aid for the PSA Group's restructuring, but concern the complaint that this anonymous third party has lodged with the European Commission.

| (217) | As an entirely secondary point, the French authorities consider that these comments provide no tangible proof of PSA's alleged stratagems with Agrati France and that PSA, as a private enterprise, is free to conduct commercial relations with its suppliers in any way that it wishes. In this respect, as part of its alliance with GM, PSA has been implementing a policy to rationalise its purchasing since 25 February 2013, in particular through systematic calls for tender to obtain the best market prices. The French authorities stress the fact that only a measure imputable to a Member State may infringe Article 34 TFEU; that does not apply to the decisions made by private enterprises such as PSA. Lastly, the alleged behaviour of the FMEA is unrelated to these proceedings. |
| --- | --- |

(217)

As an entirely secondary point, the French authorities consider that these comments provide no tangible proof of PSA's alleged stratagems with Agrati France and that PSA, as a private enterprise, is free to conduct commercial relations with its suppliers in any way that it wishes. In this respect, as part of its alliance with GM, PSA has been implementing a policy to rationalise its purchasing since 25 February 2013, in particular through systematic calls for tender to obtain the best market prices. The French authorities stress the fact that only a measure imputable to a Member State may infringe Article 34 TFEU; that does not apply to the decisions made by private enterprises such as PSA. Lastly, the alleged behaviour of the FMEA is unrelated to these proceedings.

| (218) | The French authorities conclude that the examination of the aid at issue should not be delayed by an unsupported allegation of infringement of Article 34 TFEU, which concerns, moreover, facts that have no connection with the aid at issue or with the restructuring of the PSA Group. |
| --- | --- |

(218)

The French authorities conclude that the examination of the aid at issue should not be delayed by an unsupported allegation of infringement of Article 34 TFEU, which concerns, moreover, facts that have no connection with the aid at issue or with the restructuring of the PSA Group.

6.2.   COMMENTS ON THE GM GROUP'S COMMENTS

COMMENTS ON THE GM GROUP'S COMMENTS

| (219) | The French authorities have not commented on the comments from the GM Group (summarised in recitals 183 to 186 in section 5.2 above). |
| --- | --- |

(219)

The French authorities have not commented on the comments from the GM Group (summarised in recitals 183 to 186 in section 5.2 above).

6.3.   COMMENTS ON FIAT'S COMMENTS

COMMENTS ON FIAT'S COMMENTS

6.3.1.   RESTORING THE PSA GROUP'S VIABILITY

| (220) | According to the French authorities, Fiat's comments on this point (summarised in recitals 187 to 188(e) in section 5.3.1 above) contain a forecast of market trends that is more optimistic than those forecast by the PSA Group, thereby confirming that the PSA Group's scenario is credible and conservative enough. They also note that Fiat (as well as Opel) agrees that data from IHS Global are relevant in assessing market development prospects. Lastly, Fiat considers that it is unable to comment on the return to viability on the basis of the information available. For that reason, the French authorities feel that there is little point in contesting each of the points raised by the analysts cited by Fiat. |
| --- | --- |

(220)

According to the French authorities, Fiat's comments on this point (summarised in recitals 187 to 188(e) in section 5.3.1 above) contain a forecast of market trends that is more optimistic than those forecast by the PSA Group, thereby confirming that the PSA Group's scenario is credible and conservative enough. They also note that Fiat (as well as Opel) agrees that data from IHS Global are relevant in assessing market development prospects. Lastly, Fiat considers that it is unable to comment on the return to viability on the basis of the information available. For that reason, the French authorities feel that there is little point in contesting each of the points raised by the analysts cited by Fiat.

6.3.2.   THE AID ELEMENT IN THE GUARANTEE AND ITS IMPACT ON THE MARKET

| (221) | The French authorities stress that, in its comments on this point (summarised in recitals 191 to 196(c) in section 5.3.3 above), Fiat assesses the State aid element at some 100 to 110 basis points, i.e. an amount of aid of EUR 231 million which is well below the lower end of the range cited by the Commission in the opening decision. In the view of the French authorities, Fiat's assessment proves that the amount of aid according to the Commission is in all likelihood over-estimated. |
| --- | --- |

(221)

The French authorities stress that, in its comments on this point (summarised in recitals 191 to 196(c) in section 5.3.3 above), Fiat assesses the State aid element at some 100 to 110 basis points, i.e. an amount of aid of EUR 231 million which is well below the lower end of the range cited by the Commission in the opening decision. In the view of the French authorities, Fiat's assessment proves that the amount of aid according to the Commission is in all likelihood over-estimated.

| (222) | As regards the inclusion of a commitment fee, the French authorities point out that the guarantee premium paid by the PSA Group to the State has been calculated on the basis of the ‘all-in’ cost of the banks taking part in the New Club Deal (440 basis points) less their liquidity cost (estimated to be 180 basis points by reference to the five-year iTraxx Senior Financial on a median one-month basis). This cost includes an upfront fee of 120 basis points, and a commitment fee of up to 40 % of the margin, i.e. above what Fiat considers to be market practice. Fiat's comments confirm therefore, in the view of the French authorities, that this fee is overestimated in comparison with the market standard. |
| --- | --- |

(222)

As regards the inclusion of a commitment fee, the French authorities point out that the guarantee premium paid by the PSA Group to the State has been calculated on the basis of the ‘all-in’ cost of the banks taking part in the New Club Deal (440 basis points) less their liquidity cost (estimated to be 180 basis points by reference to the five-year iTraxx Senior Financial on a median one-month basis). This cost includes an upfront fee of 120 basis points, and a commitment fee of up to 40 % of the margin, i.e. above what Fiat considers to be market practice. Fiat's comments confirm therefore, in the view of the French authorities, that this fee is overestimated in comparison with the market standard.

| (223) | Lastly, the French authorities consider that it would be logical not to take account of the upfront fee and the commitment fee as the State has no opportunity cost, i.e. the cost of mobilising capital, which would, in the case of a bank, be remunerated. |
| --- | --- |

(223)

Lastly, the French authorities consider that it would be logical not to take account of the upfront fee and the commitment fee as the State has no opportunity cost, i.e. the cost of mobilising capital, which would, in the case of a bank, be remunerated.

| (224) | The French authorities stress that Fiat comments that the guarantee will have particularly significant effects on the market without explaining what these effects are. In France's view, Fiat considers in particular that the guarantee will give BPF an advantage not analysed by the Commission, consisting in maintaining its financing cost at a given level irrespective of market trends. The French authorities are surprised by this argument as the alleged effect is obviously connected to the very existence of the guarantee, whose purpose is precisely to stabilise the bank's refinancing costs up to a ceiling of EUR 7 billion. Moreover, the advantage obtained by BPF and the PSA Group obviously needs to be examined at the moment at which the guarantee was announced. |
| --- | --- |

(224)

The French authorities stress that Fiat comments that the guarantee will have particularly significant effects on the market without explaining what these effects are. In France's view, Fiat considers in particular that the guarantee will give BPF an advantage not analysed by the Commission, consisting in maintaining its financing cost at a given level irrespective of market trends. The French authorities are surprised by this argument as the alleged effect is obviously connected to the very existence of the guarantee, whose purpose is precisely to stabilise the bank's refinancing costs up to a ceiling of EUR 7 billion. Moreover, the advantage obtained by BPF and the PSA Group obviously needs to be examined at the moment at which the guarantee was announced.

6.3.3.   THE COMPENSATORY MEASURES

| (225) | First, the French authorities feel that Fiat's comments on this point (summarised in recitals 198 to 200 of section 5.3.4 above) are particularly insubstantial and unfounded. |
| --- | --- |

(225)

First, the French authorities feel that Fiat's comments on this point (summarised in recitals 198 to 200 of section 5.3.4 above) are particularly insubstantial and unfounded.

| (226) | On the reductions of CAPEX, Fiat provides no concrete and substantiated evidence calling into question the particularly constraining nature of the discontinuation of high-end vehicles. |
| --- | --- |

(226)

On the reductions of CAPEX, Fiat provides no concrete and substantiated evidence calling into question the particularly constraining nature of the discontinuation of high-end vehicles.

| (227) | As regards the measure concerning Sevelnord, Fiat perceives this as no more than a leasing of capacity that PSA could at its own discretion take back at any time. The French authorities consider this criticism to be entirely irrelevant as Fiat's argument disregards the binding nature of the measures imposed by the Commission's decisions. France takes the opposite view that this measure is likely to be irreversible as it enables Toyota to gain a foothold in a market in optimum conditions. |
| --- | --- |

(227)

As regards the measure concerning Sevelnord, Fiat perceives this as no more than a leasing of capacity that PSA could at its own discretion take back at any time. The French authorities consider this criticism to be entirely irrelevant as Fiat's argument disregards the binding nature of the measures imposed by the Commission's decisions. France takes the opposite view that this measure is likely to be irreversible as it enables Toyota to gain a foothold in a market in optimum conditions.

| (228) | Fiat also criticises the discontinuation of the hybrid plug-in on the ground that the most pertinent strategy would be to extend the various methods of reducing pollutant emissions. The French authorities point out that this was precisely PSA's initial strategy. By discontinuing the hybrid plug-in, the PSA Group is also significantly cutting its capacity to compete on the market with manufacturers able to extend pollutant emission reduction technologies. Fiat's criticisms as to PSA's ‘poor choice of technology’ in its investment in the hybrid plug-in should, moreover, in France's view, be seen in the light of Fiat's own choices of technology. Unlike all the manufacturers, including those performing best, which have decided to invest in this technology, Fiat is one of the few not to have done so. |
| --- | --- |

(228)

Fiat also criticises the discontinuation of the hybrid plug-in on the ground that the most pertinent strategy would be to extend the various methods of reducing pollutant emissions. The French authorities point out that this was precisely PSA's initial strategy. By discontinuing the hybrid plug-in, the PSA Group is also significantly cutting its capacity to compete on the market with manufacturers able to extend pollutant emission reduction technologies. Fiat's criticisms as to PSA's ‘poor choice of technology’ in its investment in the hybrid plug-in should, moreover, in France's view, be seen in the light of Fiat's own choices of technology. Unlike all the manufacturers, including those performing best, which have decided to invest in this technology, Fiat is one of the few not to have done so.

| (229) | Lastly, the French authorities note that Fiat does not comment directly on the compensatory measure limiting BPF's penetration rate. They assume from this that it is very difficult to establish a commitment by country and by segment. In their view, the market developments reported by Fiat confirm that traditional banks are withdrawing from the market and therefore that the penetration rates of captive banks are increasing. Lastly, the new commercial policy set in place by Fiat in the first quarter of 2013, enabling it to achieve a penetration rate of 39,6 %, is a good illustration, in their view, of the particularly constraining nature of the proposed compensatory measure. By capping any increase in its penetration rate, BPF's capacity to offer competitive terms, and therefore the potential impact of the guarantee on the market, is substantially reduced. |
| --- | --- |

(229)

Lastly, the French authorities note that Fiat does not comment directly on the compensatory measure limiting BPF's penetration rate. They assume from this that it is very difficult to establish a commitment by country and by segment. In their view, the market developments reported by Fiat confirm that traditional banks are withdrawing from the market and therefore that the penetration rates of captive banks are increasing. Lastly, the new commercial policy set in place by Fiat in the first quarter of 2013, enabling it to achieve a penetration rate of 39,6 %, is a good illustration, in their view, of the particularly constraining nature of the proposed compensatory measure. By capping any increase in its penetration rate, BPF's capacity to offer competitive terms, and therefore the potential impact of the guarantee on the market, is substantially reduced.

6.3.4.   THE 50CO2CARS PROJECT

2

| (230) | In France's view, Fiat's comments (summarised in recitals 189 to 190 in section 5.3.2 above) relate both to this project's contribution to restoring viability and to its effect on the market. |
| --- | --- |

(230)

In France's view, Fiat's comments (summarised in recitals 189 to 190 in section 5.3.2 above) relate both to this project's contribution to restoring viability and to its effect on the market.

| (231) | The French authorities consider that Fiat's criticisms are entirely irrelevant and misunderstand the purpose of the project which is precisely to rally together various competences and technologies, with the support of the public authorities, so that the partners can develop a low-cost hybridisation technology. |
| --- | --- |

(231)

The French authorities consider that Fiat's criticisms are entirely irrelevant and misunderstand the purpose of the project which is precisely to rally together various competences and technologies, with the support of the public authorities, so that the partners can develop a low-cost hybridisation technology.

| (232) | In the view of the French authorities, by confirming that all manufacturers are investing significantly in projects to reduce pollutant emissions, Fiat acknowledges the lack of any contraction effect. |
| --- | --- |

(232)

In the view of the French authorities, by confirming that all manufacturers are investing significantly in projects to reduce pollutant emissions, Fiat acknowledges the lack of any contraction effect.

| (233) | Lastly, as regards market impact, the French authorities consider that Fiat's comments are contradictory. The project in practice satisfies Fiat's objections: the major technological advance that is envisaged will make it possible significantly to reduce the cost of hybrid technologies so that they can be distributed widely enough to make them profitable. In their view, therefore, Fiat's criticisms as to the limited chance of commercial success of 50CO2Cars are irrelevant. The French authorities lastly consider that Fiat fails to explain how aid of EUR 86 million could have an effect on the final price of the vehicles developed, when it also considers that manufacturers are channelling huge investment into achieving the pollutant emission reduction targets set by the European regulations. |
| --- | --- |

(233)

Lastly, as regards market impact, the French authorities consider that Fiat's comments are contradictory. The project in practice satisfies Fiat's objections: the major technological advance that is envisaged will make it possible significantly to reduce the cost of hybrid technologies so that they can be distributed widely enough to make them profitable. In their view, therefore, Fiat's criticisms as to the limited chance of commercial success of 50CO2Cars are irrelevant. The French authorities lastly consider that Fiat fails to explain how aid of EUR 86 million could have an effect on the final price of the vehicles developed, when it also considers that manufacturers are channelling huge investment into achieving the pollutant emission reduction targets set by the European regulations.

2

6.4.   COMMENTS ON TOYOTA'S COMMENTS

COMMENTS ON TOYOTA'S COMMENTS

| (234) | In general, Toyota's comments (summarised in recitals 202 to 206 of section 5.4 above) confirm overall, in France's view, the credibility of the assumptions and the relevance of the choices on which the PSA's restructuring plan is based. As regards the 50CO2Cars project, Toyota confirms that environmentally friendly technologies are the main driver of the future market. In the view of the French authorities, Toyota's comments show that the State aid for the 50CO2Cars project will not have an impact on the ability to compete or the competitiveness of competitors in the mild-hybrid segment. |
| --- | --- |

(234)

In general, Toyota's comments (summarised in recitals 202 to 206 of section 5.4 above) confirm overall, in France's view, the credibility of the assumptions and the relevance of the choices on which the PSA's restructuring plan is based. As regards the 50CO2Cars project, Toyota confirms that environmentally friendly technologies are the main driver of the future market. In the view of the French authorities, Toyota's comments show that the State aid for the 50CO2Cars project will not have an impact on the ability to compete or the competitiveness of competitors in the mild-hybrid segment.

2

2

| (235) | On the compensatory measures and in particular in reply to Toyota's questions about the genuinely compensatory nature of a measure to end the production of vehicles whose sales have fallen to small volumes, the French authorities reiterate that the marketing of high-end models has a spin-off effect for all vehicles marketed under the brand. |
| --- | --- |

(235)

On the compensatory measures and in particular in reply to Toyota's questions about the genuinely compensatory nature of a measure to end the production of vehicles whose sales have fallen to small volumes, the French authorities reiterate that the marketing of high-end models has a spin-off effect for all vehicles marketed under the brand.

| (236) | On the Sevelnord plant, Toyota has said that its agreement with PSA will enable it to maintain a presence in the light commercial vehicle segment. The French authorities reiterate that its presence at Sevelnord will have a significant impact on Toyota's competitive ability as it will enable it to develop a genuine and substantial presence in this segment. |
| --- | --- |

(236)

On the Sevelnord plant, Toyota has said that its agreement with PSA will enable it to maintain a presence in the light commercial vehicle segment. The French authorities reiterate that its presence at Sevelnord will have a significant impact on Toyota's competitive ability as it will enable it to develop a genuine and substantial presence in this segment.

| (237) | Lastly, in the view of the French authorities, Toyota's comments run counter to its market behaviour. The marketing of a hybrid plug-in version of the Prius, which Toyota sees as the ‘spearhead’ of its hybrid models, runs counter to its negative assessment of the market prospects for this type of vehicle. |
| --- | --- |

(237)

Lastly, in the view of the French authorities, Toyota's comments run counter to its market behaviour. The marketing of a hybrid plug-in version of the Prius, which Toyota sees as the ‘spearhead’ of its hybrid models, runs counter to its negative assessment of the market prospects for this type of vehicle.

6.5.   COMMENTS ON PSA'S COMMENTS

COMMENTS ON PSA'S COMMENTS

| (238) | The French authorities have not commented on the PSA Group's comments (summarised in recitals 207 to 214 in section 5.5 above). |
| --- | --- |

(238)

The French authorities have not commented on the PSA Group's comments (summarised in recitals 207 to 214 in section 5.5 above).

7.   AMENDMENTS TO THE NOTIFICATION BY THE FRENCH AUTHORITIES

AMENDMENTS TO THE NOTIFICATION BY THE FRENCH AUTHORITIES

| (239) | In its memorandum of 16 July 2013, as amended by letter dated 23 July 2013 (‘the letter of commitments of 23 July 2013’ or ‘the letter of 23 July 2013’), the French authorities made amendments to the notification of the restructuring plan of 12 March 2013 and made the following commitments. These commitments replace the compensatory measures initially proposed by the French authorities. |
| --- | --- |

(239)

In its memorandum of 16 July 2013, as amended by letter dated 23 July 2013 (‘the letter of commitments of 23 July 2013’ or ‘the letter of 23 July 2013’), the French authorities made amendments to the notification of the restructuring plan of 12 March 2013 and made the following commitments. These commitments replace the compensatory measures initially proposed by the French authorities.

| (240) | The French authorities note that, unless otherwise provided, the commitments set out in this section 7 will apply until the PSA Group restructuring plan has been fully implemented, i.e. until 31 December 2015. |
| --- | --- |

(240)

The French authorities note that, unless otherwise provided, the commitments set out in this section 7 will apply until the PSA Group restructuring plan has been fully implemented, i.e. until 31 December 2015.

7.1.   COMMITMENT TO RESTORE THE PSA GROUP'S LEVEL OF INDEBTEDNESS

COMMITMENT TO RESTORE THE PSA GROUP'S LEVEL OF INDEBTEDNESS

| (241) | In each year in which the restructuring plan is being implemented, the consolidated net debt of the PSA Group's industrial and commercial activities recorded in the annual accounts, audited against constant accounting standards, as at 31 December of each year (‘Net Debt’) is not to exceed ceiling ‘A’ shown in Table 16 below.

  Table 16


  PSA Group Net Debt ceilings










  (EUR million) |
| --- | --- |
| | 2013 | 2014 | 2015 | 2016 |
| Maximum Net Debt A | [...]* | [...]* | [...]* | [...]* |
| Maximum Net Debt B | [...]* | [...]* | [...]* | [...]* |

(241)

In each year in which the restructuring plan is being implemented, the consolidated net debt of the PSA Group's industrial and commercial activities recorded in the annual accounts, audited against constant accounting standards, as at 31 December of each year (‘Net Debt’) is not to exceed ceiling ‘A’ shown in Table 16 below.

Table 16

Table 16

PSA Group Net Debt ceilings

PSA Group Net Debt ceilings

(EUR million)

2013

2014

2015

2016

Maximum Net Debt A

[...]*

[...]*

[...]*

[...]*

Maximum Net Debt B

[...]*

[...]*

[...]*

[...]*

| (242) | If Net Debt exceeds ceiling ‘A’ at the end of a given year (N), the PSA Group must take all the financial and/or industrial restructuring measures of any kind necessary to ensure that the PSA Group's Net Debt does not exceed ceiling ‘A’ at the end of the following year (N+1), excluding costs connected with the implementation of these measures by PSA (‘the Corrective Measures’). |
| --- | --- |

(242)

If Net Debt exceeds ceiling ‘A’ at the end of a given year (N), the PSA Group must take all the financial and/or industrial restructuring measures of any kind necessary to ensure that the PSA Group's Net Debt does not exceed ceiling ‘A’ at the end of the following year (N+1), excluding costs connected with the implementation of these measures by PSA (‘the Corrective Measures’).

| (243) | The Corrective Measures and their anticipated financial effects are to be detailed and quantified individually and are to be accompanied by a precise and binding implementation timetable. The measures implemented in advance may be wholly or partly included in the measures subsequent to 31 July 2013 provided that they are separately identified and described and their anticipated financial effects on the remaining term of the restructuring plan are quantified. The Corrective Measures, including updated cash flows for the PSA Group, are to be notified to the European Commission together with the opinion of an Independent Expert, as defined in section 7.6 below, within one month of publication of the audited consolidated annual accounts, showing that the Net Debt of the PSA Group has exceeded ceiling ‘A’ for the corresponding year. It is the Commission's task to check that the anticipated financial effects of these Corrective Measures have been appropriately quantified and do not jeopardise the PSA Group's viability. If not, other Corrective Measures are to be proposed and approved by the Commission. |
| --- | --- |

(243)

The Corrective Measures and their anticipated financial effects are to be detailed and quantified individually and are to be accompanied by a precise and binding implementation timetable. The measures implemented in advance may be wholly or partly included in the measures subsequent to 31 July 2013 provided that they are separately identified and described and their anticipated financial effects on the remaining term of the restructuring plan are quantified. The Corrective Measures, including updated cash flows for the PSA Group, are to be notified to the European Commission together with the opinion of an Independent Expert, as defined in section 7.6 below, within one month of publication of the audited consolidated annual accounts, showing that the Net Debt of the PSA Group has exceeded ceiling ‘A’ for the corresponding year. It is the Commission's task to check that the anticipated financial effects of these Corrective Measures have been appropriately quantified and do not jeopardise the PSA Group's viability. If not, other Corrective Measures are to be proposed and approved by the Commission.

| (244) | The restructuring plan will be deemed to have been correctly implemented and the commitments made by the French authorities will be deemed to have been met if, at the end of year N+1, the Corrective Measures, or any other financial and/or industrial restructuring measure taken by the PSA Group after 31 July 2013, have had the anticipated financial effects on Net Debt or if Net Debt does not exceed ceiling ‘A’ in year N+1. If this is not the case, the French authorities are, where appropriate, to notify the Commission of an amended restructuring plan for the PSA Group, within the limits of the ‘one time, last time’ principle, so that the Commission may amend this decision declaring the State aid for the restructuring of the PSA Group to be compatible with the internal market. |
| --- | --- |

(244)

The restructuring plan will be deemed to have been correctly implemented and the commitments made by the French authorities will be deemed to have been met if, at the end of year N+1, the Corrective Measures, or any other financial and/or industrial restructuring measure taken by the PSA Group after 31 July 2013, have had the anticipated financial effects on Net Debt or if Net Debt does not exceed ceiling ‘A’ in year N+1. If this is not the case, the French authorities are, where appropriate, to notify the Commission of an amended restructuring plan for the PSA Group, within the limits of the ‘one time, last time’ principle, so that the Commission may amend this decision declaring the State aid for the restructuring of the PSA Group to be compatible with the internal market.

| (245) | The same applies if the PSA Group's Net Debt exceeds ceiling ‘B’ for two consecutive years during the restructuring plan. In this case as well and in the same way, the French authorities are, where appropriate, to notify an amended restructuring plan to the European Commission so that it can again analyse the compatibility of the State aid for the restructuring of the PSA Group. |
| --- | --- |

(245)

The same applies if the PSA Group's Net Debt exceeds ceiling ‘B’ for two consecutive years during the restructuring plan. In this case as well and in the same way, the French authorities are, where appropriate, to notify an amended restructuring plan to the European Commission so that it can again analyse the compatibility of the State aid for the restructuring of the PSA Group.

| (246) | In any event, this commitment will be deemed to have been satisfied for the whole of the restructuring period when the Corrective Measures implemented by the PSA Group, as notified to the Commission in the manner set out in recital 243 above, have had cumulative financial effects on Net Debt of EUR [0-5] billion. |
| --- | --- |

(246)

In any event, this commitment will be deemed to have been satisfied for the whole of the restructuring period when the Corrective Measures implemented by the PSA Group, as notified to the Commission in the manner set out in recital 243 above, have had cumulative financial effects on Net Debt of EUR [0-5] billion.

7.2.   COMMITMENT IN RELATION TO BPF'S PENETRATION RATE

COMMITMENT IN RELATION TO BPF'S PENETRATION RATE

| (247) | The French authorities undertake to make the amendments described in recitals 248 to 250 below to the guarantee fee set out in Article 3.3 of the Protocol concluded between Peugeot SA, Banque PSA and the State on 5 March 2013 (‘the Protocol’) for the remuneration of the first demand guarantee scheme (‘the Guarantee’) which is to be concluded between the State and Banque PSA, in the presence of Peugeot SA and the Banque de France (‘the Guarantee Fee’). |
| --- | --- |

(247)

The French authorities undertake to make the amendments described in recitals 248 to 250 below to the guarantee fee set out in Article 3.3 of the Protocol concluded between Peugeot SA, Banque PSA and the State on 5 March 2013 (‘the Protocol’) for the remuneration of the first demand guarantee scheme (‘the Guarantee’) which is to be concluded between the State and Banque PSA, in the presence of Peugeot SA and the Banque de France (‘the Guarantee Fee’).

| (248) | As long as there are outstanding ‘Guaranteed Securities’ (as defined in the Protocol) issued and benefiting from the Guarantee, the Guarantee Fee of 260 basis points set out in Article 3.3 of the Protocol will be increased in the manner set out in recitals 249 and 250 below, when the penetration rate of Banque PSA in the G10 perimeter (Germany, Austria, Belgium, Italy, Spain, the Netherlands, Portugal, Switzerland, France and the United Kingdom) exceeds [26-29]* %. |
| --- | --- |

(248)

As long as there are outstanding ‘Guaranteed Securities’ (as defined in the Protocol) issued and benefiting from the Guarantee, the Guarantee Fee of 260 basis points set out in Article 3.3 of the Protocol will be increased in the manner set out in recitals 249 and 250 below, when the penetration rate of Banque PSA in the G10 perimeter (Germany, Austria, Belgium, Italy, Spain, the Netherlands, Portugal, Switzerland, France and the United Kingdom) exceeds [26-29]* %.

| (249) | The increase in the Guarantee Fee will:






  (a) | depend on Banque PSA's penetration rate in the G10 perimeter as shown in Table 17 in recital 250 below; if the penetration rate for a given period includes one or more decimals after the decimal point the increase in the Guarantee Fee will be calculated by linear interpolation between the Guarantee Fee payable for the lower penetration rate with no decimal and that payable for the higher penetration rate with no decimal as shown in Table 17 in recital 250 below; |
| --- | --- | --- |

(249)

The increase in the Guarantee Fee will:

(a)

depend on Banque PSA's penetration rate in the G10 perimeter as shown in Table 17 in recital 250 below; if the penetration rate for a given period includes one or more decimals after the decimal point the increase in the Guarantee Fee will be calculated by linear interpolation between the Guarantee Fee payable for the lower penetration rate with no decimal and that payable for the higher penetration rate with no decimal as shown in Table 17 in recital 250 below;

| (b) | be a maximum of 231 basis points so that the Guarantee Fee cannot exceed 491 basis points, corresponding to the market value of the Guarantee as assessed by the European Commission. |
| --- | --- |

(b)

be a maximum of 231 basis points so that the Guarantee Fee cannot exceed 491 basis points, corresponding to the market value of the Guarantee as assessed by the European Commission.

| (250) | The penetration rate will be measured annually on 30 June. The increase in the Guarantee Fee will be calculated on 30 June of each year from the 12 previous months in respect of the sum in principal of the mean amounts outstanding over this period of the various lines of ‘Guaranteed Securities’ (as defined in the Protocol) issued and benefiting from the Guarantee. The first increase in the Guarantee Fee will be calculated on 30 June 2013 from the penetration rate for the period from 1 July 2012 to 30 June 2013.

  Table 17


  Increase in the Guarantee Fee
















  Penetration rate (%) | [...]* | [...]* | [...]* | [...]* | [...]* | [...]* | [...]* | [...]* | [...]* | [...]* |
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| Increase in the Guarantee Fee (basis points)* | [10-20] | [20-30] | [40-50] | [70-80] | [90-120] | [120-150] | [150-180] | [180-210] | [200-230] | 231 |

(250)

The penetration rate will be measured annually on 30 June. The increase in the Guarantee Fee will be calculated on 30 June of each year from the 12 previous months in respect of the sum in principal of the mean amounts outstanding over this period of the various lines of ‘Guaranteed Securities’ (as defined in the Protocol) issued and benefiting from the Guarantee. The first increase in the Guarantee Fee will be calculated on 30 June 2013 from the penetration rate for the period from 1 July 2012 to 30 June 2013.

Table 17

Table 17

Increase in the Guarantee Fee

Increase in the Guarantee Fee

Penetration rate (%)

[...]*

[...]*

[...]*

[...]*

[...]*

[...]*

[...]*

[...]*

[...]*

[...]*

Increase in the Guarantee Fee (basis points)*

[10-20]

[20-30]

[40-50]

[70-80]

[90-120]

[120-150]

[150-180]

[180-210]

[200-230]

231

7.3.   COMMITMENT TO REFRAIN FROM ACQUISITIONS

COMMITMENT TO REFRAIN FROM ACQUISITIONS

| (251) | The PSA Group will refrain from acquiring any holding in other enterprises or acquiring any business assets throughout the term of its restructuring plan, i.e. up to 31 December 2015. This commitment does not cover: (i) the acquisition of holdings or business assets when the monetary amount paid by the PSA Group for the planned acquisition is less than EUR 100 million per annum; and (ii) the acquisition of a holding in an enterprise or business assets, following approval by the European Commission, if such acquisition is necessary to ensure the PSA Group's viability and to enable it to achieve the objectives of its restructuring plan. The Commission must be notified of any intention to make an acquisition covered by (ii) of this recital in good time for it to be able to assess the planned acquisition from detailed financial data on the planned acquisition, and to assess its value and its impact on the PSA Group's equity. |
| --- | --- |

(251)

The PSA Group will refrain from acquiring any holding in other enterprises or acquiring any business assets throughout the term of its restructuring plan, i.e. up to 31 December 2015. This commitment does not cover: (i) the acquisition of holdings or business assets when the monetary amount paid by the PSA Group for the planned acquisition is less than EUR 100 million per annum; and (ii) the acquisition of a holding in an enterprise or business assets, following approval by the European Commission, if such acquisition is necessary to ensure the PSA Group's viability and to enable it to achieve the objectives of its restructuring plan. The Commission must be notified of any intention to make an acquisition covered by (ii) of this recital in good time for it to be able to assess the planned acquisition from detailed financial data on the planned acquisition, and to assess its value and its impact on the PSA Group's equity.

| (252) | The PSA Group may, moreover, following approval by the European Commission, acquire (i) a holding in return for an injection of holdings or activities carried out as part of an operation to pool (by merger or injection) assets or activities; (ii) securities or asset or liability elements with a view to their resale in conditions which do not increase the PSA Group's Net Debt. These acquisitions will not be included in the amount of EUR 100 million mentioned in the preceding recital. The Commission must be notified of any intention to make an acquisition covered by (i) and (ii) of this recital in a good time for it to be able to assess the nature of the operations planned. |
| --- | --- |

(252)

The PSA Group may, moreover, following approval by the European Commission, acquire (i) a holding in return for an injection of holdings or activities carried out as part of an operation to pool (by merger or injection) assets or activities; (ii) securities or asset or liability elements with a view to their resale in conditions which do not increase the PSA Group's Net Debt. These acquisitions will not be included in the amount of EUR 100 million mentioned in the preceding recital. The Commission must be notified of any intention to make an acquisition covered by (i) and (ii) of this recital in a good time for it to be able to assess the nature of the operations planned.

| (253) | Acquisitions of holdings or business assets by Faurecia or any of its subsidiaries during the term of the PSA Group restructuring plan, i.e. up to 31 December 2015, above the ceiling of EUR 100 million per annum set out above will be subject to prior approval by the European Commission which will positively view acquisitions which (i) help, directly or indirectly to restore the PSA Group's viability because they have a positive impact on the PSA Group's forecast profitability and (ii) do not circumvent the obligation to limit the effects of the aid to the minimum necessary to achieve the targets of the PSA Group restructuring plan. The Commission must be notified of any intention to make an acquisition covered by this recital in good time for it to be able to assess the planned acquisition against the two criteria mentioned above. |
| --- | --- |

(253)

Acquisitions of holdings or business assets by Faurecia or any of its subsidiaries during the term of the PSA Group restructuring plan, i.e. up to 31 December 2015, above the ceiling of EUR 100 million per annum set out above will be subject to prior approval by the European Commission which will positively view acquisitions which (i) help, directly or indirectly to restore the PSA Group's viability because they have a positive impact on the PSA Group's forecast profitability and (ii) do not circumvent the obligation to limit the effects of the aid to the minimum necessary to achieve the targets of the PSA Group restructuring plan. The Commission must be notified of any intention to make an acquisition covered by this recital in good time for it to be able to assess the planned acquisition against the two criteria mentioned above.

| (254) | If the PSA Group's Net Debt (as defined above) is brought, in a given year (N), to a level below that forecast for that year by the MTP 2013 v1 dated 31 May 2013 as notified by the French authorities on 3 June 2013, the ceilings of EUR 100 million per annum laid down in this commitment will automatically be increased, for the following year (N + 1), in line with the difference, expressed in EUR million, between the level of the PSA Group's Net Debt achieved in year (N) and that forecast for that same year in the MTP 2013 v1 dated 31 May 2013 as notified by the French authorities on 3 June 2013. |
| --- | --- |

(254)

If the PSA Group's Net Debt (as defined above) is brought, in a given year (N), to a level below that forecast for that year by the MTP 2013 v1 dated 31 May 2013 as notified by the French authorities on 3 June 2013, the ceilings of EUR 100 million per annum laid down in this commitment will automatically be increased, for the following year (N + 1), in line with the difference, expressed in EUR million, between the level of the PSA Group's Net Debt achieved in year (N) and that forecast for that same year in the MTP 2013 v1 dated 31 May 2013 as notified by the French authorities on 3 June 2013.

7.4.   COMMITMENT IN RELATION TO THE FINANCING MARGIN GRANTED TO DEALERS

COMMITMENT IN RELATION TO THE FINANCING MARGIN GRANTED TO DEALERS

| (255) | The PSA Group will not decrease the mean annual commercial margin of the financing granted to dealers in the network (corporate network debts as presented in the Banque PSA's annual report) below the mean annual commercial margin recorded for the 12 months preceding 30 June 2013 for the whole term of implementation of the restructuring plan. |
| --- | --- |

(255)

The PSA Group will not decrease the mean annual commercial margin of the financing granted to dealers in the network (corporate network debts as presented in the Banque PSA's annual report) below the mean annual commercial margin recorded for the 12 months preceding 30 June 2013 for the whole term of implementation of the restructuring plan.

7.5.   COMMITMENT IN RELATION TO THE 50CO2CARS PROJECT

COMMITMENT IN RELATION TO THE 50CO2

| (256) | The French authorities undertake, as regards the 50CO2Cars project, as defined in part 1.2 of the notification by the French authorities dated 12 March 2013, that the grant of EUR 24,5 million initially planned for the PSA Group will take the form of repayable advances, with repayment terms, conditions and methods similar, mutatis mutandis, to those of the EUR 61,4 million of repayable advances already planned for the 50CO2Cars project. The repayment timetable initially planned will be retained. The amounts to be repaid at each deadline will be increased pro rata to the increase in the amount of the advances. |
| --- | --- |

(256)

The French authorities undertake, as regards the 50CO2Cars project, as defined in part 1.2 of the notification by the French authorities dated 12 March 2013, that the grant of EUR 24,5 million initially planned for the PSA Group will take the form of repayable advances, with repayment terms, conditions and methods similar, mutatis mutandis, to those of the EUR 61,4 million of repayable advances already planned for the 50CO2Cars project. The repayment timetable initially planned will be retained. The amounts to be repaid at each deadline will be increased pro rata to the increase in the amount of the advances.

2

mutatis mutandis

2

7.6.   IMPLEMENTATION AND INDEPENDENT EXPERT

IMPLEMENTATION AND INDEPENDENT EXPERT

| (257) | The French authorities undertake that the PSA Group will appoint an Independent Expert responsible for examining in detail the application of the commitments made in the letter of commitments of 23 July 2013 (‘the Independent Expert’) for the term of the restructuring plan, i.e. up to 31 December 2015, under the conditions set out in the Annex. |
| --- | --- |

(257)

The French authorities undertake that the PSA Group will appoint an Independent Expert responsible for examining in detail the application of the commitments made in the letter of commitments of 23 July 2013 (‘the Independent Expert’) for the term of the restructuring plan, i.e. up to 31 December 2015, under the conditions set out in the Annex.

8.   ASSESSMENT OF AID

ASSESSMENT OF AID

8.1.   EXISTENCE OF AID WITHIN THE MEANING OF ARTICLE 107(1) TFEU

EXISTENCE OF AID WITHIN THE MEANING OF ARTICLE 107(1) TFEU

| (258) | According to Article 107(1) TFEU, ‘any aid granted by a Member State or through State resources in any form whatsoever which distorts or threatens to distort competition by favouring certain undertakings or the production of certain goods shall, in so far as it affects trade between Member States, be incompatible with the internal market’. |
| --- | --- |

(258)

According to Article 107(1) TFEU, ‘any aid granted by a Member State or through State resources in any form whatsoever which distorts or threatens to distort competition by favouring certain undertakings or the production of certain goods shall, in so far as it affects trade between Member States, be incompatible with the internal market’.

| (259) | On the basis of this provision, the Commission considers that the characterisation of a national measure as State aid requires the following cumulative conditions to be met, namely: (i) that the measure in question confers an economic advantage on its beneficiary, (ii) that this advantage originates from the State, (iii) that this advantage is selective and (iv) that the measure in question distorts or threatens to distort competition and is likely to affect trade between the Member States. |
| --- | --- |

(259)

On the basis of this provision, the Commission considers that the characterisation of a national measure as State aid requires the following cumulative conditions to be met, namely: (i) that the measure in question confers an economic advantage on its beneficiary, (ii) that this advantage originates from the State, (iii) that this advantage is selective and (iv) that the measure in question distorts or threatens to distort competition and is likely to affect trade between the Member States.

| (260) | The Commission considers that the State guarantee to BPF and the repayable advances to the PSA Group for the conduct of the 50CO2Cars R&D project constitutes State aid within the meaning of Article 107(1) TFEU, for the following reasons. |
| --- | --- |

(260)

The Commission considers that the State guarantee to BPF and the repayable advances to the PSA Group for the conduct of the 50CO2Cars R&D project constitutes State aid within the meaning of Article 107(1) TFEU, for the following reasons.

2

8.1.1.   STATE GUARANTEE TO THE BANKING SUBSIDIARY OF THE PSA GROUP

| (261) | The Commission notes first that in its decision of 11 February 2013 temporarily approving a first tranche of the guarantee as rescue aid, it concluded that the measure constituted aid within the meaning of Article 107(1) TFEU. France has not contested that decision and has notified the present measure as restructuring aid. |
| --- | --- |

(261)

The Commission notes first that in its decision of 11 February 2013 temporarily approving a first tranche of the guarantee as rescue aid, it concluded that the measure constituted aid within the meaning of Article 107(1) TFEU. France has not contested that decision and has notified the present measure as restructuring aid.

8.1.1.1.   
  On the use of State resources

On the use of State resources

| (262) | On the transfer of State resources, it should be noted that the guarantee is to be granted by France pursuant to Article 85 of the Amending Finance Law No 2012-1510 of 29 December 2012. |
| --- | --- |

(262)

On the transfer of State resources, it should be noted that the guarantee is to be granted by France pursuant to Article 85 of the Amending Finance Law No 2012-1510 of 29 December 2012.

| (263) | This fact is enough on its own to prove that the measure originates from the State. |
| --- | --- |

(263)

This fact is enough on its own to prove that the measure originates from the State.

8.1.1.2.   
  On the existence of an economic advantage

On the existence of an economic advantage

| (264) | As regards the existence of an advantage, it is settled case-law that, in order to assess whether a State measure constitutes aid, it is necessary to determine whether the beneficiary undertaking receives an economic advantage which it would not have obtained under normal market conditions. The Commission has therefore to assess the extent to which the guarantee granted to BPF entails market remuneration. |
| --- | --- |

(264)

As regards the existence of an advantage, it is settled case-law that, in order to assess whether a State measure constitutes aid, it is necessary to determine whether the beneficiary undertaking receives an economic advantage which it would not have obtained under normal market conditions. The Commission has therefore to assess the extent to which the guarantee granted to BPF entails market remuneration.

| (265) | In the notification of 12 March 2013, the French authorities quantified the aid element at between EUR 453 and 480 million for a maximum guarantee amount of EUR 7 billion in principal. These figures were based on an interpolation of BPF's bond yields for a three-year maturity. In the comments by France on the opening decision, summarised in recital 128 above, the French authorities consider that the amount of aid resulting from the guarantee is EUR 396 million, with a risk premium of 40 basis points and a reference period of three months. If the risk premium were to be 24 basis points (as recorded for the issues made pursuant to the rescue aid), the amount of the aid would then be EUR 429 million. |
| --- | --- |

(265)

In the notification of 12 March 2013, the French authorities quantified the aid element at between EUR 453 and 480 million for a maximum guarantee amount of EUR 7 billion in principal. These figures were based on an interpolation of BPF's bond yields for a three-year maturity. In the comments by France on the opening decision, summarised in recital 128 above, the French authorities consider that the amount of aid resulting from the guarantee is EUR 396 million, with a risk premium of 40 basis points and a reference period of three months. If the risk premium were to be 24 basis points (as recorded for the issues made pursuant to the rescue aid), the amount of the aid would then be EUR 429 million.

| (266) | The French authorities have also stressed that the issues made by BPF on 25 March 2013 took place in particularly favourable market conditions; the spreads with respect to fungible Treasury bonds recorded would appear to be at very low levels (24 basis points). They therefore consider that a potential surcharge for BPF of some 40 basis points is fully founded. |
| --- | --- |

(266)

The French authorities have also stressed that the issues made by BPF on 25 March 2013 took place in particularly favourable market conditions; the spreads with respect to fungible Treasury bonds recorded would appear to be at very low levels (24 basis points). They therefore consider that a potential surcharge for BPF of some 40 basis points is fully founded.

| (267) | Lastly, the French authorities' reference period runs from 12 July to 16 October 2013 as, in their view, this period makes it possible to take account of the disclosure of the Group's difficulties on 12 July with the announcement of the reorganisation plan, and to smooth the effects of the initial rumours of the grant of the guarantee on 16 October 2012. |
| --- | --- |

(267)

Lastly, the French authorities' reference period runs from 12 July to 16 October 2013 as, in their view, this period makes it possible to take account of the disclosure of the Group's difficulties on 12 July with the announcement of the reorganisation plan, and to smooth the effects of the initial rumours of the grant of the guarantee on 16 October 2012.

| (268) | First, the Commission points out that, on the basis of the facts presented in recital 30, the amount of aid contained in the guarantee of EUR 1,2 billion temporarily approved on 11 February 2013 had been initially estimated in the rescue decision, according to which the aid element was between EUR 91,8 million and the nominal amount of the guarantee, namely EUR 1,2 billion. Applying the same estimation method to the lower level of the aid (spread of 24 basis points and reference period of one month), the aid element contained in the guarantee of EUR 7 billion notified by France is therefore EUR 486 million, as shown in Table 18 below:

  Table 18


  Calculation of the aid element in the guaranteed bonds | 16.10.2012 | 12.7-16.10 | 16.9-16.10 |
| --- | --- | --- | --- | --- |
| Three-year fungible Treasury bond (OAT) | 0,34 % | 0,35 % | 0,39 % |
| Estimated State spread after guarantee | 0,24 % | 0,24 % | 0,24 % |
| BPSA interest rate after guarantee (a) | 0,58 % | 0,59 % | 0,63 % |
| Cost of the guarantee (b) | 2,60 % | 2,60 % | 2,60 % |
| Total estimated cost of the guaranteed issues (a) + (b) | 3,18 % | 3,19 % | 3,23 % |
| BPSA secondary market yield interpolated over three years | 5,09 % | 5,23 % | 5,54 % |
| Amount of State aid involved (EUR million) | 401 | 429 | 486 |

(268)

First, the Commission points out that, on the basis of the facts presented in recital 30, the amount of aid contained in the guarantee of EUR 1,2 billion temporarily approved on 11 February 2013 had been initially estimated in the rescue decision, according to which the aid element was between EUR 91,8 million and the nominal amount of the guarantee, namely EUR 1,2 billion. Applying the same estimation method to the lower level of the aid (spread of 24 basis points and reference period of one month), the aid element contained in the guarantee of EUR 7 billion notified by France is therefore EUR 486 million, as shown in Table 18 below:

Table 18

Table 18

Calculation of the aid element in the guaranteed bonds

Calculation of the aid element in the guaranteed bonds

16.10.2012

12.7-16.10

16.9-16.10

Three-year fungible Treasury bond (OAT)

0,34 %

0,35 %

0,39 %

Estimated State spread after guarantee

0,24 %

0,24 %

0,24 %

BPSA interest rate after guarantee (a)

0,58 %

0,59 %

0,63 %

Cost of the guarantee (b)

2,60 %

2,60 %

2,60 %

Total estimated cost of the guaranteed issues (a) + (b)

3,18 %

3,19 %

3,23 %

BPSA secondary market yield interpolated over three years

5,09 %

5,23 %

5,54 %

Amount of State aid involved (EUR million)

401

429

486

| (269) | As regards the assumptions on which these figures are based, the Commission would like to add the following details. |
| --- | --- |

(269)

As regards the assumptions on which these figures are based, the Commission would like to add the following details.

| (270) | In recital 51 of the rescue decision, the Commission quantified the aid element for the issue amounts of EUR 1,2 billion as being at least EUR 91,8 million. For the issue amount of EUR 7 billion, the corresponding amount is EUR 535 million. |
| --- | --- |

(270)

In recital 51 of the rescue decision, the Commission quantified the aid element for the issue amounts of EUR 1,2 billion as being at least EUR 91,8 million. For the issue amount of EUR 7 billion, the corresponding amount is EUR 535 million.

| (271) | As described in recital 26 of the opening decision, a yield difference of 24 basis points in comparison with fungible Treasury bonds was recorded when the bonds of EUR 1,2 billion were issued. The Commission confirms, in accordance with recitals 119 and 120 of the opening decision, that this recorded difference which is due, in France's view, to a lower liquidity of the guaranteed bonds in comparison with fungible Treasury bonds, has to be taken into account in calculating the aid element and to lower it. |
| --- | --- |

(271)

As described in recital 26 of the opening decision, a yield difference of 24 basis points in comparison with fungible Treasury bonds was recorded when the bonds of EUR 1,2 billion were issued. The Commission confirms, in accordance with recitals 119 and 120 of the opening decision, that this recorded difference which is due, in France's view, to a lower liquidity of the guaranteed bonds in comparison with fungible Treasury bonds, has to be taken into account in calculating the aid element and to lower it.

| (272) | As regards the reference period, the Commission considers that the period of one month (16 September-16 October) adopted is long enough to smooth any volatility brought about by the announcement. In order accurately to estimate the aid element, the reference period has in practice to be close to the time of the announcement so that the information on the Group's difficulties is reflected as well as possible in the market yields. The secondary market adopted is, lastly, a liquid market and it cannot be concluded that a longer period is necessary as the market was fully aware of the announcement of the PSA restructuring plan in July 2012 and the latest information on vehicle sales. Moreover, the Commission considers that on this basis the aid element is correctly quantified and does not have to be recalculated on the basis of the bank's bond yield levels in the secondary market at the time of the individual drawdowns. This is the case because France considers that the aid is limited to the minimum necessary to restore viability and therefore that the guarantee will be drawn down in full, and because the representative market price is the level of the secondary bonds prior to the announcement of the aid measure. This aid gives PSA the option to draw down the guarantee at any time after it has been set up. |
| --- | --- |

(272)

As regards the reference period, the Commission considers that the period of one month (16 September-16 October) adopted is long enough to smooth any volatility brought about by the announcement. In order accurately to estimate the aid element, the reference period has in practice to be close to the time of the announcement so that the information on the Group's difficulties is reflected as well as possible in the market yields. The secondary market adopted is, lastly, a liquid market and it cannot be concluded that a longer period is necessary as the market was fully aware of the announcement of the PSA restructuring plan in July 2012 and the latest information on vehicle sales. Moreover, the Commission considers that on this basis the aid element is correctly quantified and does not have to be recalculated on the basis of the bank's bond yield levels in the secondary market at the time of the individual drawdowns. This is the case because France considers that the aid is limited to the minimum necessary to restore viability and therefore that the guarantee will be drawn down in full, and because the representative market price is the level of the secondary bonds prior to the announcement of the aid measure. This aid gives PSA the option to draw down the guarantee at any time after it has been set up.

reference period

| (273) | In recital 51 of the rescue decision, the Commission considered that the amount of aid could be as much as the nominal amount of the bond issues. In the light of the facts presented in recitals 105 and 106 of the opening decision as to the existence of a liquidity surplus ranging from EUR [1-3]* billion to EUR [2-4]* billion in a stressed scenario in run-off management, the Commission considers that the amount of aid does not exceed the advantage in terms of bond issue price quantified as EUR 486 million in the State guarantee of EUR 7 billion in principal in recital 33. This is the advantage that the Group receives if its activity is continued. If the aid had not been granted and the bank had been placed in run-off management, no further advantage would have been obtained by creditors or shareholders (the PSA Group). |
| --- | --- |

(273)

In recital 51 of the rescue decision, the Commission considered that the amount of aid could be as much as the nominal amount of the bond issues. In the light of the facts presented in recitals 105 and 106 of the opening decision as to the existence of a liquidity surplus ranging from EUR [1-3]* billion to EUR [2-4]* billion in a stressed scenario in run-off management, the Commission considers that the amount of aid does not exceed the advantage in terms of bond issue price quantified as EUR 486 million in the State guarantee of EUR 7 billion in principal in recital 33. This is the advantage that the Group receives if its activity is continued. If the aid had not been granted and the bank had been placed in run-off management, no further advantage would have been obtained by creditors or shareholders (the PSA Group).

| (274) | The Commission notes that, among the interested parties, only Fiat has commented on the quantification of the aid, estimating, in recital 191 above, that at least 100 basis points should be added to the cost of the guarantee if it is to be in line with market conditions. One of Fiat's comments relates to the payment of a commitment fee. On this point, the Commission points out that, as explained in recital 272, the aid element is quantified on the basis of the assumption that the guarantee will be drawn down in full, given that the aid is limited to the minimum necessary to restore the Group's viability. Moreover, the aid element estimated by the Commission is greater than the aid element estimated by Fiat, even when a commitment fee is taken into account, since the Commission estimates that the price paid is 231 basis points lower than the market price and Fiat estimates that the price is 100 basis points lower than the market price. |
| --- | --- |

(274)

The Commission notes that, among the interested parties, only Fiat has commented on the quantification of the aid, estimating, in recital 191 above, that at least 100 basis points should be added to the cost of the guarantee if it is to be in line with market conditions. One of Fiat's comments relates to the payment of a commitment fee. On this point, the Commission points out that, as explained in recital 272, the aid element is quantified on the basis of the assumption that the guarantee will be drawn down in full, given that the aid is limited to the minimum necessary to restore the Group's viability. Moreover, the aid element estimated by the Commission is greater than the aid element estimated by Fiat, even when a commitment fee is taken into account, since the Commission estimates that the price paid is 231 basis points lower than the market price and Fiat estimates that the price is 100 basis points lower than the market price.

| (275) | On the basis of the above, the Commission may therefore conclude that the aid element contained in the State guarantee of EUR 7 billion in principal is EUR 486 million. |
| --- | --- |

(275)

On the basis of the above, the Commission may therefore conclude that the aid element contained in the State guarantee of EUR 7 billion in principal is EUR 486 million.

8.1.1.3.   
  On the selective nature of the advantage

On the selective nature of the advantage

| (276) | The fact that BPF, and therefore the PSA Group, are the sole beneficiaries of the guarantee proves the selective nature of the advantage. |
| --- | --- |

(276)

The fact that BPF, and therefore the PSA Group, are the sole beneficiaries of the guarantee proves the selective nature of the advantage.

8.1.1.4.   
  On the conditions under which trade between Member States is affected and competition is distorted

On the conditions under which trade between Member States is affected and competition is distorted

| (277) | As regards the effect on competition and trade, it should be borne in mind that, in accordance with settled case-law, when an undertaking operates in a sector in which producers from various Member States compete, any aid which it may receive from the public authorities is liable to affect trade between the Member States and impair competition, inasmuch as its continuing presence on the market prevents competitors from increasing their market share and reduces their chances of increasing their exports (45). |
| --- | --- |

(277)

As regards the effect on competition and trade, it should be borne in mind that, in accordance with settled case-law, when an undertaking operates in a sector in which producers from various Member States compete, any aid which it may receive from the public authorities is liable to affect trade between the Member States and impair competition, inasmuch as its continuing presence on the market prevents competitors from increasing their market share and reduces their chances of increasing their exports (45).

45

| (278) | In practice, the mechanism by which competition will be distorted has been confirmed by the Commission's analysis, the comments from third parties and the publications of analysts. The direct effect of the State guarantee is to reduce BPF's financing cost (in comparison with a counterfactual scenario in which the bank receives no aid). If its financing cost is reduced, BPF is able to improve its financing offers and thus stimulate sales of Peugeot and Citroën brand vehicles. The PSA Group and the third parties unanimously acknowledge and stress the important role that captive banks play in supporting and developing vehicle sales. |
| --- | --- |

(278)

In practice, the mechanism by which competition will be distorted has been confirmed by the Commission's analysis, the comments from third parties and the publications of analysts. The direct effect of the State guarantee is to reduce BPF's financing cost (in comparison with a counterfactual scenario in which the bank receives no aid). If its financing cost is reduced, BPF is able to improve its financing offers and thus stimulate sales of Peugeot and Citroën brand vehicles. The PSA Group and the third parties unanimously acknowledge and stress the important role that captive banks play in supporting and developing vehicle sales.

| (279) | In their comments, the interested third parties stress the direct relationship between the captive bank's activity and vehicle sales. For instance, GM states that financing by captive banks is ‘vital’ and gives automotive manufacturers the ‘flexibility’ to react in the short term to market conditions. The Fiat Group describes the impact of captive bank financing of automotive group sales at some length. In its view, this financing has three main effects: attracting new customers, supporting the sales process and making customers more loyal. Fiat cites a study that it carried out in-house on the attractiveness of its ‘Punto’ model, which is shaped chiefly by financing conditions (such as low rates of interest). Competitors not offering attractive financing conditions (Peugeot for instance) were less represented in customer preferences. According to another in-house survey of the ‘Eco’ series, most of the customers contacted said that they would not have bought their car (or would have delayed doing so) without a 0 % financing offer. Fiat concludes from this that a grant intended to support the activity of a captive bank has an ‘immediate and direct’ effect on vehicle sales performance. According to a further in-house survey cited by Fiat, the use of a captive bank also has an impact on existing customers of the brand wishing to replace their vehicle. The proportion of customers deciding to buy a car of Fiat brand is higher among customers who obtained financing from the captive bank when making their previous purchase. |
| --- | --- |

(279)

In their comments, the interested third parties stress the direct relationship between the captive bank's activity and vehicle sales. For instance, GM states that financing by captive banks is ‘vital’ and gives automotive manufacturers the ‘flexibility’ to react in the short term to market conditions. The Fiat Group describes the impact of captive bank financing of automotive group sales at some length. In its view, this financing has three main effects: attracting new customers, supporting the sales process and making customers more loyal. Fiat cites a study that it carried out in-house on the attractiveness of its ‘Punto’ model, which is shaped chiefly by financing conditions (such as low rates of interest). Competitors not offering attractive financing conditions (Peugeot for instance) were less represented in customer preferences. According to another in-house survey of the ‘Eco’ series, most of the customers contacted said that they would not have bought their car (or would have delayed doing so) without a 0 % financing offer. Fiat concludes from this that a grant intended to support the activity of a captive bank has an ‘immediate and direct’ effect on vehicle sales performance. According to a further in-house survey cited by Fiat, the use of a captive bank also has an impact on existing customers of the brand wishing to replace their vehicle. The proportion of customers deciding to buy a car of Fiat brand is higher among customers who obtained financing from the captive bank when making their previous purchase.

| (280) | On the impact of a change to the financing cost of a captive bank, Fiat added some quantitative information by stating that an increase of 100 basis points in the financing cost could reduce the penetration rate by 5 % to 10 %. Fiat's experience in the European market, through FGA Capital, would thus appear to confirm a direct and negative relationship between the financing cost of the captive bank and its penetration rate. The reduction of BPF's financing cost by the State guarantee is therefore likely to lead to a rise in its penetration rate. |
| --- | --- |

(280)

On the impact of a change to the financing cost of a captive bank, Fiat added some quantitative information by stating that an increase of 100 basis points in the financing cost could reduce the penetration rate by 5 % to 10 %. Fiat's experience in the European market, through FGA Capital, would thus appear to confirm a direct and negative relationship between the financing cost of the captive bank and its penetration rate. The reduction of BPF's financing cost by the State guarantee is therefore likely to lead to a rise in its penetration rate.

| (281) | Toyota, for its part, confirms that captive banks play an important part in stepping up customer brand loyalty and thus increasing sales: Toyota considers that captive banks increase loyalty by 15 %, but says that it is unable to quantify the impact of an increase of 100 basis points in financing costs (although it does say that there would be such an impact). |
| --- | --- |

(281)

Toyota, for its part, confirms that captive banks play an important part in stepping up customer brand loyalty and thus increasing sales: Toyota considers that captive banks increase loyalty by 15 %, but says that it is unable to quantify the impact of an increase of 100 basis points in financing costs (although it does say that there would be such an impact).

| (282) | It follows from the comments by the interested third parties that if a captive bank's financing costs are reduced, it can offer its potential customers more attractive financing conditions. These competitive loan offers have a direct impact on vehicle sales and are at present one of the main factors in the growth of these sales. |
| --- | --- |

(282)

It follows from the comments by the interested third parties that if a captive bank's financing costs are reduced, it can offer its potential customers more attractive financing conditions. These competitive loan offers have a direct impact on vehicle sales and are at present one of the main factors in the growth of these sales.

| (283) | Similarly, a publication by Morgan Stanley of 21 August 2012 explains that if the financial arm of an automotive manufacturer benefits from low financing costs, the brand may be able to offer vehicles whose Total Cost of Ownership (‘TCO’) is lower than that of competitors. Generally speaking, this study shows that the main factor in determining the TCO of a vehicle is the financing cost of the automotive producer's captive bank (46). Through attractive financing offers, a captive bank thus directly helps to reduce the TCO of vehicles of the brand. Financing needs are particularly high in segments B and C, in which most of the PSA Group's sales are concentrated. |
| --- | --- |

(283)

Similarly, a publication by Morgan Stanley of 21 August 2012 explains that if the financial arm of an automotive manufacturer benefits from low financing costs, the brand may be able to offer vehicles whose Total Cost of Ownership (‘TCO’) is lower than that of competitors. Generally speaking, this study shows that the main factor in determining the TCO of a vehicle is the financing cost of the automotive producer's captive bank (46). Through attractive financing offers, a captive bank thus directly helps to reduce the TCO of vehicles of the brand. Financing needs are particularly high in segments B and C, in which most of the PSA Group's sales are concentrated.

46

| (284) | A recent study by Moody's (47) of 5 February 2013 bears out the important role of captive banks which are characterised as ‘key components of automotive group strategy’. The study also points out that, in a context of recession and falling sales, automotive groups are more inclined to use captive banks to stimulate their sales. This particular context also has to be taken into account when analysing the risk of distortion by the State aid. |
| --- | --- |

(284)

A recent study by Moody's (47) of 5 February 2013 bears out the important role of captive banks which are characterised as ‘key components of automotive group strategy’. The study also points out that, in a context of recession and falling sales, automotive groups are more inclined to use captive banks to stimulate their sales. This particular context also has to be taken into account when analysing the risk of distortion by the State aid.

47

| (285) | According to the BPF Viability Plan notified by the French authorities, the role of captive banks is set to increase in future for four main reasons (see recital 116). |
| --- | --- |

(285)

According to the BPF Viability Plan notified by the French authorities, the role of captive banks is set to increase in future for four main reasons (see recital 116).

| (286) | The State guarantee will therefore have a direct impact on the competitive behaviour of BPF, whose already important role is likely to become more important because of the market trends described in the Viability Plan mentioned in recital 285 above. |
| --- | --- |

(286)

The State guarantee will therefore have a direct impact on the competitive behaviour of BPF, whose already important role is likely to become more important because of the market trends described in the Viability Plan mentioned in recital 285 above.

| (287) | In this respect, the Commission observes that there are many financing houses in the territory of the Union and that capital moves between Member States. |
| --- | --- |

(287)

In this respect, the Commission observes that there are many financing houses in the territory of the Union and that capital moves between Member States.

| (288) | The Commission concludes from this that the measure at issue is like to place BPF in a stronger position than its competitors in trade between the Member States. |
| --- | --- |

(288)

The Commission concludes from this that the measure at issue is like to place BPF in a stronger position than its competitors in trade between the Member States.

| (289) | The Commission therefore concludes that this State guarantee constitutes State aid whose gross grant equivalent is EUR 486 million. While the direct beneficiary of this guarantee is BPF, the Group as a whole will ultimately benefit in so far as BPF's activity is to finance sales of the Group's main activity, namely sales of vehicles. |
| --- | --- |

(289)

The Commission therefore concludes that this State guarantee constitutes State aid whose gross grant equivalent is EUR 486 million. While the direct beneficiary of this guarantee is BPF, the Group as a whole will ultimately benefit in so far as BPF's activity is to finance sales of the Group's main activity, namely sales of vehicles.

8.1.2.   PUBLIC SUPPORT FOR THE PSA GROUP FOR THE CONDUCT OF THE 50CO2CARS R&D PROJECT

2

| (290) | The public financing (48) for the PSA Group for the conduct of the 50CO2Cars R&D project satisfies the definition of State aid within the meaning of Article 107 TFEU. The French authorities have notified this measure as restructuring aid. |
| --- | --- |

(290)

The public financing (48) for the PSA Group for the conduct of the 50CO2Cars R&D project satisfies the definition of State aid within the meaning of Article 107 TFEU. The French authorities have notified this measure as restructuring aid.

48

2

8.1.2.1.   
  On the use of State resources

On the use of State resources

| (291) | This public financing comes from the budget appropriation paid by the State to ADEME under the ‘Vehicle of the Future’ strand of the future investment programme. In practice, the public financing granted by France to the 50CO2Cars project is part of the ‘future investment’ programme established by the Amending Finance Law No 2010-237 of 9 March 2010. This proves that this measure derives from State resources. |
| --- | --- |

(291)

This public financing comes from the budget appropriation paid by the State to ADEME under the ‘Vehicle of the Future’ strand of the future investment programme. In practice, the public financing granted by France to the 50CO2Cars project is part of the ‘future investment’ programme established by the Amending Finance Law No 2010-237 of 9 March 2010. This proves that this measure derives from State resources.

2

8.1.2.2.   
  On the presence of an economic advantage

On the presence of an economic advantage

| (292) | By contributing to its R&D expenses, the grant provides the PSA Group with an economic advantage. |
| --- | --- |

(292)

By contributing to its R&D expenses, the grant provides the PSA Group with an economic advantage.

8.1.2.3.   
  On the selective nature of the advantage

On the selective nature of the advantage

| (293) | The measure is specifically for the promoters of the 50CO2Cars R&D project, of which the PSA Group is part, and cannot therefore be deemed to be general in scope. |
| --- | --- |

(293)

The measure is specifically for the promoters of the 50CO2Cars R&D project, of which the PSA Group is part, and cannot therefore be deemed to be general in scope.

2

8.1.2.4.   
  On the conditions affecting trade between Member States and distorting competition

On the conditions affecting trade between Member States and distorting competition

| (294) | As the PSA group operates in the automotive construction sector, which is a sector open to intra-European trade, the measure may affect trade between the Member States, change the PSA Group's position in the markets in question with respect to its competitors, and distort competition in the internal market. |
| --- | --- |

(294)

As the PSA group operates in the automotive construction sector, which is a sector open to intra-European trade, the measure may affect trade between the Member States, change the PSA Group's position in the markets in question with respect to its competitors, and distort competition in the internal market.

| (295) | The Commission is thus able to conclude that the financial support granted by France in the form of repayable advances to the PSA Group for the conduct of the 50CO2Cars project is State aid within the meaning of Article 107(1) TFEU. |
| --- | --- |

(295)

The Commission is thus able to conclude that the financial support granted by France in the form of repayable advances to the PSA Group for the conduct of the 50CO2Cars project is State aid within the meaning of Article 107(1) TFEU.

2

| (296) | Lastly, the Commission acknowledges the particular nature of repayable advances as an instrument of State aid. Although they take the form of a ‘loan’ to the PSA Group for the conduct of the 50CO2Cars project, the repayment of this loan continues to be conditional upon the outcome of this R&D project. As the chances of success or failure are not known in advance, the Commission is unable to calculate a gross grant equivalent for this aid in the form of repayable advances. Therefore, on the basis of the most negative prospect in which there is no repayment, the Commission considers it prudent to consider the whole of the repayable advance to be the upper level of the amount of State aid at issue. |
| --- | --- |

(296)

Lastly, the Commission acknowledges the particular nature of repayable advances as an instrument of State aid. Although they take the form of a ‘loan’ to the PSA Group for the conduct of the 50CO2Cars project, the repayment of this loan continues to be conditional upon the outcome of this R&D project. As the chances of success or failure are not known in advance, the Commission is unable to calculate a gross grant equivalent for this aid in the form of repayable advances. Therefore, on the basis of the most negative prospect in which there is no repayment, the Commission considers it prudent to consider the whole of the repayable advance to be the upper level of the amount of State aid at issue.

2

8.2.   LEGAL BASIS OF THE ASSESSMENT

LEGAL BASIS OF THE ASSESSMENT

| (297) | Article 107(2) and (3) TFEU sets out derogations to the general incompatibility laid down in Article 107(1). The derogations set out in Article 107(2) TFEU are manifestly not applicable to the case at issue. |
| --- | --- |

(297)

Article 107(2) and (3) TFEU sets out derogations to the general incompatibility laid down in Article 107(1). The derogations set out in Article 107(2) TFEU are manifestly not applicable to the case at issue.

| (298) | In its rescue decision, the Commission temporarily ruled that the aid was compatible on the basis of Article 107(3)(b) TFEU. The Commission nevertheless considered that the public guarantee, whose immediate purpose was to address BPF's liquidity problems, also conferred an advantage on the PSA Group. This view is not contested by the French authorities. The Commission also stressed that the banking subsidiary's liquidity problems were a result of the Group's structural difficulties. In this context, the French authorities undertook to submit a restructuring plan for the PSA Group as a whole, in accordance with the Rescue and Restructuring Guidelines, which also ensured BPF's viability. In accordance with their commitment, the French authorities notified a viability plan for BPF and a restructuring plan for the PSA Group. |
| --- | --- |

(298)

In its rescue decision, the Commission temporarily ruled that the aid was compatible on the basis of Article 107(3)(b) TFEU. The Commission nevertheless considered that the public guarantee, whose immediate purpose was to address BPF's liquidity problems, also conferred an advantage on the PSA Group. This view is not contested by the French authorities. The Commission also stressed that the banking subsidiary's liquidity problems were a result of the Group's structural difficulties. In this context, the French authorities undertook to submit a restructuring plan for the PSA Group as a whole, in accordance with the Rescue and Restructuring Guidelines, which also ensured BPF's viability. In accordance with their commitment, the French authorities notified a viability plan for BPF and a restructuring plan for the PSA Group.

| (299) | The viability plan for BPF has to be assessed in the light of section 2 of the Commission communication on the return to viability and the assessment of restructuring measures in the financial sector in the current crisis under the State aid rules (49). |
| --- | --- |

(299)

The viability plan for BPF has to be assessed in the light of section 2 of the Commission communication on the return to viability and the assessment of restructuring measures in the financial sector in the current crisis under the State aid rules (49).

49

| (300) | The Commission has already taken the view in recital 84 of its rescue decision that the restructuring plan has to be examined in the light of Article 107(3)(c) TFEU and in particular the Rescue and Restructuring Guidelines. It is common ground that the aid has been granted with a view to restoring the long-term viability of an enterprise and therefore has to comply with the Rescue and Restructuring Guidelines which provide a legal basis for the assessment. The Commission also notes that this conclusion is not affected by the fact that part of the aid envisaged under the restructuring plan takes the form of aid for an R&D project. Including an R&D dimension in a restructuring plan is acceptable provided that the planned activities are genuinely necessary for restoring the firm's viability and that all the elements of the restructuring plan (including the R&D effort) satisfy the conditions laid down in the Rescue and Restructuring Guidelines. |
| --- | --- |

(300)

The Commission has already taken the view in recital 84 of its rescue decision that the restructuring plan has to be examined in the light of Article 107(3)(c) TFEU and in particular the Rescue and Restructuring Guidelines. It is common ground that the aid has been granted with a view to restoring the long-term viability of an enterprise and therefore has to comply with the Rescue and Restructuring Guidelines which provide a legal basis for the assessment. The Commission also notes that this conclusion is not affected by the fact that part of the aid envisaged under the restructuring plan takes the form of aid for an R&D project. Including an R&D dimension in a restructuring plan is acceptable provided that the planned activities are genuinely necessary for restoring the firm's viability and that all the elements of the restructuring plan (including the R&D effort) satisfy the conditions laid down in the Rescue and Restructuring Guidelines.

| (301) | Moreover, in accordance with point 21 of the Rescue and Restructuring Guidelines, the conditions under which public support for the R&D efforts of a firm in difficulty are compatible should not circumvent the principles of the ordinary law rules for a firm in sound financial health. |
| --- | --- |

(301)

Moreover, in accordance with point 21 of the Rescue and Restructuring Guidelines, the conditions under which public support for the R&D efforts of a firm in difficulty are compatible should not circumvent the principles of the ordinary law rules for a firm in sound financial health.

| (302) | The Commission notes that the choice of legal basis has not been criticised by any of the interested parties. |
| --- | --- |

(302)

The Commission notes that the choice of legal basis has not been criticised by any of the interested parties.

8.3.   ELIGIBILITY OF THE ENTERPRISE FOR RESTRUCTURING AID

ELIGIBILITY OF THE ENTERPRISE FOR RESTRUCTURING AID

| (303) | In order to be eligible for restructuring aid, it must first be possible to consider the firm to be a firm in difficulty as defined in section 2.1 of the Rescue and Restructuring Guidelines. |
| --- | --- |

(303)

In order to be eligible for restructuring aid, it must first be possible to consider the firm to be a firm in difficulty as defined in section 2.1 of the Rescue and Restructuring Guidelines.

| (304) | In recital 150 of the opening decision, the Commission observed that the PSA Group was in difficulty within the meaning of point 11 of the Rescue and Restructuring Guidelines. The normal signs of a firm in difficulty were evident in the case in question, in particular: growing losses, falling turnover, excess capacity, reduction of the gross self-financing margin and drop in market shares. Moreover, the fact that BPF was unable to finalise its financing plan for 2013-16 without the State guarantee is sufficient to show the Group's inability to recover using its own resources or funds obtained from its proprietors/shareholders or market sources. |
| --- | --- |

(304)

In recital 150 of the opening decision, the Commission observed that the PSA Group was in difficulty within the meaning of point 11 of the Rescue and Restructuring Guidelines. The normal signs of a firm in difficulty were evident in the case in question, in particular: growing losses, falling turnover, excess capacity, reduction of the gross self-financing margin and drop in market shares. Moreover, the fact that BPF was unable to finalise its financing plan for 2013-16 without the State guarantee is sufficient to show the Group's inability to recover using its own resources or funds obtained from its proprietors/shareholders or market sources.

| (305) | In recital 151 of the opening decision, the Commission therefore concluded that the PSA Group, and indirectly and consequently, BPF, were firms in difficulty within the meaning of section 2.1 of the Rescue and Restructuring Guidelines. |
| --- | --- |

(305)

In recital 151 of the opening decision, the Commission therefore concluded that the PSA Group, and indirectly and consequently, BPF, were firms in difficulty within the meaning of section 2.1 of the Rescue and Restructuring Guidelines.

| (306) | In recital 152 of that decision, the Commission also noted that neither the PSA Group nor BPF were newly created firms and that as the beneficiary was a group, it could not be considered that the firm's difficulties were the result of an arbitrary allocation of costs within the group. As pointed out by the French authorities, the Group's difficulties were essentially due to reasons specific to the Group and the downturn in the automotive market in Europe. |
| --- | --- |

(306)

In recital 152 of that decision, the Commission also noted that neither the PSA Group nor BPF were newly created firms and that as the beneficiary was a group, it could not be considered that the firm's difficulties were the result of an arbitrary allocation of costs within the group. As pointed out by the French authorities, the Group's difficulties were essentially due to reasons specific to the Group and the downturn in the automotive market in Europe.

| (307) | The Commission therefore considers that it does not need to review its assessment in the opening decision in relation to the eligibility of the firm on the basis of points 11 and 13 of the Rescue and Restructuring Guidelines. The Commission notes that none of the interested parties has disputed this point. |
| --- | --- |

(307)

The Commission therefore considers that it does not need to review its assessment in the opening decision in relation to the eligibility of the firm on the basis of points 11 and 13 of the Rescue and Restructuring Guidelines. The Commission notes that none of the interested parties has disputed this point.

| (308) | In conclusion, the Commission considers that the conditions laid down in section 2.1 of the Rescue and Restructuring Guidelines are met. |
| --- | --- |

(308)

In conclusion, the Commission considers that the conditions laid down in section 2.1 of the Rescue and Restructuring Guidelines are met.

8.4.   RESTORING LONG-TERM VIABILITY

RESTORING LONG-TERM VIABILITY

8.4.1.   THE PSA GROUP RESTRUCTURING PLAN

| (309) | As its situation was continuing to deteriorate, the PSA Group took measures from 2012 to help to restore the Group's long-term viability under the ‘Rebond 2015’ [Rebound 2015] plan. These in particular include the measures to reduce the Group's excess capacity in segment B and the planned savings measures. Under Rebond 2015 it is planned to:






  (a) | reorganise the industrial base in France and reduce structural costs with an estimated impact of EUR 600 million, as announced on 12 July 2012. It is planned to cease production at Aulnay in 2014, to adapt the industrial base at the Rennes plant, to take regeneration measures at the Aulnay and Rennes plants and to modify the Group's structures; |
| --- | --- | --- |

(309)

As its situation was continuing to deteriorate, the PSA Group took measures from 2012 to help to restore the Group's long-term viability under the ‘Rebond 2015’ [Rebound 2015] plan. These in particular include the measures to reduce the Group's excess capacity in segment B and the planned savings measures. Under Rebond 2015 it is planned to:

(a)

reorganise the industrial base in France and reduce structural costs with an estimated impact of EUR 600 million, as announced on 12 July 2012. It is planned to cease production at Aulnay in 2014, to adapt the industrial base at the Rennes plant, to take regeneration measures at the Aulnay and Rennes plants and to modify the Group's structures;

| (b) | reduce CAPEX by EUR 550 million starting from 2013, after the increases in investment in capacity in Russia, Latin America and China have come to an end; |
| --- | --- |

(b)

reduce CAPEX by EUR 550 million starting from 2013, after the increases in investment in capacity in Russia, Latin America and China have come to an end;

| (c) | optimise production costs by EUR 350 million, in particular through the alliance with GM, half of these gains coming from the initial synergies provided by the alliance's purchasing system and the other half from action plans in respect of unit design and production costs. |
| --- | --- |

(c)

optimise production costs by EUR 350 million, in particular through the alliance with GM, half of these gains coming from the initial synergies provided by the alliance's purchasing system and the other half from action plans in respect of unit design and production costs.

| (310) | In its opening decision, the Commission had doubts of two kinds about the return to viability.






  (a) | First, the Commission considered that the assumptions about market growth could prove to be overly optimistic. |
| --- | --- | --- |

(310)

In its opening decision, the Commission had doubts of two kinds about the return to viability.

(a)

First, the Commission considered that the assumptions about market growth could prove to be overly optimistic.

| (b) | Second, the Commission wished to verify to what extent the 50CO2Cars project could help to restore viability. |
| --- | --- |

(b)

Second, the Commission wished to verify to what extent the 50CO2Cars project could help to restore viability.

2

8.4.1.1.   
  On the assumptions of market growth

On the assumptions of market growth

| (311) | The interested third parties agree in their comments that it is relevant to use the market trend projections of IHS Global Insight. Fiat's comments in particular confirm that it is the main source of financial projections for automotive manufacturers. |
| --- | --- |

(311)

The interested third parties agree in their comments that it is relevant to use the market trend projections of IHS Global Insight. Fiat's comments in particular confirm that it is the main source of financial projections for automotive manufacturers.

IHS Global Insight

| (312) | The Commission observes, however, that these projections are more optimistic than those of other market sources, such as Standard & Poor's' projections (50). |
| --- | --- |

(312)

The Commission observes, however, that these projections are more optimistic than those of other market sources, such as Standard & Poor's' projections (50).

50

| (313) | The Commission considers that the turnover projections have been updated from the opening decision partly because of its doubts about the credibility of the forecasts presented by France during the preliminary investigation phase. Even though turnover is smaller, expenditure on capital investment has not been reduced in the updated projections, and that will not therefore have an adverse impact on future sales. |
| --- | --- |

(313)

The Commission considers that the turnover projections have been updated from the opening decision partly because of its doubts about the credibility of the forecasts presented by France during the preliminary investigation phase. Even though turnover is smaller, expenditure on capital investment has not been reduced in the updated projections, and that will not therefore have an adverse impact on future sales.

| (314) | The possible differences in the median projections have to be analysed in terms of the consequences they could have on PSA's ability to pursue its activity in an unfavourable scenario. The Group's difficulties, which led to the State intervention, can be attributed to BPF's ability to refinance itself adequately on the markets in order to be able to finance the Group's vehicle sales. Even after recording a depreciation of the global value of the automotive division's assets, shown as EUR 3 888 million in the accounts as at 31 December 2012, France did not inform the Commission that the Group's equity was inadequate. The Commission considers that the level of the Group's net industrial debt in the unfavourable scenarios should be the focus of its examination. |
| --- | --- |

(314)

The possible differences in the median projections have to be analysed in terms of the consequences they could have on PSA's ability to pursue its activity in an unfavourable scenario. The Group's difficulties, which led to the State intervention, can be attributed to BPF's ability to refinance itself adequately on the markets in order to be able to finance the Group's vehicle sales. Even after recording a depreciation of the global value of the automotive division's assets, shown as EUR 3 888 million in the accounts as at 31 December 2012, France did not inform the Commission that the Group's equity was inadequate. The Commission considers that the level of the Group's net industrial debt in the unfavourable scenarios should be the focus of its examination.

| (315) | The Commission's doubts as to the Group's viability have been resolved in the light of France's commitment, described in section 7.1 above, to require PSA to set in place adequate measures to offset any cash flow shortfall resulting from an unfavourable sales trend which might run the risk of deflecting PSA's Net Debt from its path. The debt level [...]* will then be brought below EUR [...]* billion, which is in line with the analysts' current projections. This commitment leaves it to the Group to choose the most appropriate way of stabilising its Net Debt, for instance by reducing capacity or selling holdings. The Commission also notes that France has undertaken to re-notify the plan if the corrective measures fail or a Net Debt target is exceeded in two consecutive years. |
| --- | --- |

(315)

The Commission's doubts as to the Group's viability have been resolved in the light of France's commitment, described in section 7.1 above, to require PSA to set in place adequate measures to offset any cash flow shortfall resulting from an unfavourable sales trend which might run the risk of deflecting PSA's Net Debt from its path. The debt level [...]* will then be brought below EUR [...]* billion, which is in line with the analysts' current projections. This commitment leaves it to the Group to choose the most appropriate way of stabilising its Net Debt, for instance by reducing capacity or selling holdings. The Commission also notes that France has undertaken to re-notify the plan if the corrective measures fail or a Net Debt target is exceeded in two consecutive years.

| (316) | On the basis of these considerations, the Commission concludes that its doubts about a return to viability in the opening decision are resolved. |
| --- | --- |

(316)

On the basis of these considerations, the Commission concludes that its doubts about a return to viability in the opening decision are resolved.

8.4.1.2.   
  On the role played by the 50CO2Cars project in restoring the PSA Group's viability

On the role played by the 50CO2

| (317) | In recital 167 of the opening decision, the Commission questioned what role the 50CO2Cars project would play in the PSA Group's restructuring and return to viability. |
| --- | --- |

(317)

In recital 167 of the opening decision, the Commission questioned what role the 50CO2Cars project would play in the PSA Group's restructuring and return to viability.

2

(a)   Preliminary comment on the analysis method proposed in the opening decision and challenged by France

Preliminary comment on the analysis method proposed in the opening decision and challenged by France

| (318) | It emerges from recital 152 above that the French authorities challenge the method proposed by the Commission in the opening decision to verify whether, and where appropriate to what extent, the 50CO2Cars project has a role to play in restoring PSA's viability. In France's view, following its preliminary investigation, the Commission's doubts were based on the premise that the 50CO2Cars project ‘could be necessary to restore the PSA Group's viability only in so far as it could enable it to make up for its backwardness in R&D in comparison with its competitors’. The method used by the Commission is also based on a ‘legally new’ criterion, the need for which is challenged by the French authorities, as the other arguments adduced appear to them to be sufficient to prove that the 50CO2Cars project will play a positive role in restoring the Group's viability. |
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(318)

It emerges from recital 152 above that the French authorities challenge the method proposed by the Commission in the opening decision to verify whether, and where appropriate to what extent, the 50CO2Cars project has a role to play in restoring PSA's viability. In France's view, following its preliminary investigation, the Commission's doubts were based on the premise that the 50CO2Cars project ‘could be necessary to restore the PSA Group's viability only in so far as it could enable it to make up for its backwardness in R&D in comparison with its competitors’. The method used by the Commission is also based on a ‘legally new’ criterion, the need for which is challenged by the French authorities, as the other arguments adduced appear to them to be sufficient to prove that the 50CO2Cars project will play a positive role in restoring the Group's viability.

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| (319) | The Commission disputes that the method that it proposed in the opening decision can be summarised in such a way and wishes to make the following comments. |
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(319)

The Commission disputes that the method that it proposed in the opening decision can be summarised in such a way and wishes to make the following comments.

| (320) | Point 17 of the Rescue and Restructuring Guidelines states that ‘Restructuring ... will be based on a feasible, coherent and far-reaching plan to restore a firm's long-term viability’. Achieving this objective of ‘reorganisation and rationalisation of the firm's activities on to a more efficient basis’ may involve measures of several types:






  — | ‘withdrawal from loss-making activities’, |
| --- | --- | --- |

(320)

Point 17 of the Rescue and Restructuring Guidelines states that ‘Restructuring ... will be based on a feasible, coherent and far-reaching plan to restore a firm's long-term viability’. Achieving this objective of ‘reorganisation and rationalisation of the firm's activities on to a more efficient basis’ may involve measures of several types:

—

‘withdrawal from loss-making activities’,

| — | ‘restructuring of those existing activities that can be made competitive again’, |
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—

‘restructuring of those existing activities that can be made competitive again’,

| — | ‘diversification in the direction of new and viable activities’. |
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—

‘diversification in the direction of new and viable activities’.

| (321) | The Commission is of the view that this third pillar of ‘diversification’ is best able to justify the inclusion of R&D activities in a restructuring plan. The justification lies in the need to help the firm in difficulty to find new and viable outlets by using innovation to refocus its production. |
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(321)

The Commission is of the view that this third pillar of ‘diversification’ is best able to justify the inclusion of R&D activities in a restructuring plan. The justification lies in the need to help the firm in difficulty to find new and viable outlets by using innovation to refocus its production.

| (322) | It follows from their comments (summarised in recital 149 above) that the French authorities would appear to share this view and consider that ongoing investment in R&D may help a firm in difficulty to ‘restore its viability in the long term’. The Commission considers, however, that the precedents cited by France in footnote 30 to recital 149 above are not relevant. They do not in practice concern cases in which, as in the case at issue, the implementation of an R&D project as part of a restructuring plan is likely to play a positive role in restoring the viability of a firm in difficulty, but are cases in which the Commission considered that viability could be restored by launching new products deriving from ‘existing’ knowledge (and not knowledge obtained from R&D). It follows therefore from recital 51 of the Commission Decision of 1 December 2004 (State aid — France — Société Bull, Case C-504/03) that the new line of servers, whose role was deemed to be ‘very important’ in terms of turnover and operating margin, relied on a technology owned by Intel and not developed by the aid beneficiary. Similarly, recital 98 of the Commission Decision of 3 July 2001 (State aid — Spain — Babcock Wilcox Espana SA, Case C-33/98) states that the technology enabling NewCo to cover a new Spanish market segment already existed. Lastly, the Commission does not see the relevance of recital 236 of its Decision of 18 February 2004 (State aid — Germany — Bankgesellschaft Berlin AG, Case C-28/02), from which it emerges that the Commission was unable conclusively to assess the role of ‘new products and new marketing channels’ in the context of restoring the viability of the bank in difficulty. |
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(322)

It follows from their comments (summarised in recital 149 above) that the French authorities would appear to share this view and consider that ongoing investment in R&D may help a firm in difficulty to ‘restore its viability in the long term’. The Commission considers, however, that the precedents cited by France in footnote 30 to recital 149 above are not relevant. They do not in practice concern cases in which, as in the case at issue, the implementation of an R&D project as part of a restructuring plan is likely to play a positive role in restoring the viability of a firm in difficulty, but are cases in which the Commission considered that viability could be restored by launching new products deriving from ‘existing’ knowledge (and not knowledge obtained from R&D). It follows therefore from recital 51 of the Commission Decision of 1 December 2004 (State aid — France — Société Bull, Case C-504/03) that the new line of servers, whose role was deemed to be ‘very important’ in terms of turnover and operating margin, relied on a technology owned by Intel and not developed by the aid beneficiary. Similarly, recital 98 of the Commission Decision of 3 July 2001 (State aid — Spain — Babcock Wilcox Espana SA, Case C-33/98) states that the technology enabling NewCo to cover a new Spanish market segment already existed. Lastly, the Commission does not see the relevance of recital 236 of its Decision of 18 February 2004 (State aid — Germany — Bankgesellschaft Berlin AG, Case C-28/02), from which it emerges that the Commission was unable conclusively to assess the role of ‘new products and new marketing channels’ in the context of restoring the viability of the bank in difficulty.

| (323) | The Commission also wishes to stress that this objective should not be confused with the very different objective of promoting R&D and innovation (51) pursued by other types of public funding for firms which are not in difficulty. In this respect, point 20 of the Rescue and Restructuring Guidelines very clearly states:

  ‘Given that its very existence is in danger, a firm in difficulty cannot be considered an appropriate vehicle for promoting other public policy objectives until such time as its viability is assured. Consequently, the Commission considers that aid to firms in difficulty may contribute to the development of economic activities without adversely affecting trade to an extent contrary to the Community interest only if the conditions set out in these Guidelines are met ...’. |
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(323)

The Commission also wishes to stress that this objective should not be confused with the very different objective of promoting R&D and innovation (51) pursued by other types of public funding for firms which are not in difficulty. In this respect, point 20 of the Rescue and Restructuring Guidelines very clearly states:

51

‘Given that its very existence is in danger, a firm in difficulty cannot be considered an appropriate vehicle for promoting other public policy objectives until such time as its viability is assured. Consequently, the Commission considers that aid to firms in difficulty may contribute to the development of economic activities without adversely affecting trade to an extent contrary to the Community interest only if the conditions set out in these Guidelines are met ...’.

| (324) | The Commission is of the view that the same aid cannot effectively pursue two different objectives and therefore that the objective of any aid paid by a Member State as part of a restructuring plan, even if that State says that it is likely to have a positive effect in terms of promoting R&D, must be to restore the beneficiary's viability. Its compatibility has to be examined in the light of that priority objective. |
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(324)

The Commission is of the view that the same aid cannot effectively pursue two different objectives and therefore that the objective of any aid paid by a Member State as part of a restructuring plan, even if that State says that it is likely to have a positive effect in terms of promoting R&D, must be to restore the beneficiary's viability. Its compatibility has to be examined in the light of that priority objective.

| (325) | Moreover, in so far as it is an ‘investment’ in R&D, the Member State must prove that the activities supported are in keeping with the remainder of the restructuring plan (and are necessary for its success). According to point 45 of the Rescue and Restructuring Guidelines:

  ‘None of the aid should go to finance new investment that is not essential for restoring the firm's viability’. |
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(325)

Moreover, in so far as it is an ‘investment’ in R&D, the Member State must prove that the activities supported are in keeping with the remainder of the restructuring plan (and are necessary for its success). According to point 45 of the Rescue and Restructuring Guidelines:

‘None of the aid should go to finance new investment that is not essential for restoring the firm's viability’.

| (326) | In order to assess whether (or not) the R&D effort represented by the 50CO2Cars project is an internal measure to improve the viability of the firm in difficulty which could, where appropriate, be included in the restructuring plan (point 35 of the Rescue and Restructuring Guidelines), the Commission's reasoning in recitals 168 to 217 of the opening decision is fully in line with point 36 of the Rescue and Restructuring Guidelines which clearly states that ‘the circumstances that led to the company's difficulties’ have to be the basis for assessing whether the proposed measures are appropriate. In the opening decision, the Commission therefore successively examined:






  (a) | in recitals 168 to 192, whether the 50CO2Cars project was likely to make up for the PSA Group's backwardness in R&D, a factor which the French authorities had cited as one of the structural difficulties faced by the Group in recital 16; |
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(326)

In order to assess whether (or not) the R&D effort represented by the 50CO2Cars project is an internal measure to improve the viability of the firm in difficulty which could, where appropriate, be included in the restructuring plan (point 35 of the Rescue and Restructuring Guidelines), the Commission's reasoning in recitals 168 to 217 of the opening decision is fully in line with point 36 of the Rescue and Restructuring Guidelines which clearly states that ‘the circumstances that led to the company's difficulties’ have to be the basis for assessing whether the proposed measures are appropriate. In the opening decision, the Commission therefore successively examined:

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(a)

in recitals 168 to 192, whether the 50CO2Cars project was likely to make up for the PSA Group's backwardness in R&D, a factor which the French authorities had cited as one of the structural difficulties faced by the Group in recital 16;

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| (b) | in recitals 193 and 194, whether the 50CO2Cars project was likely to help the PSA Group to rationalise its industrial base and its cost structure, in particular its labour costs, as these factors had been presented as further structural handicaps of the PSA Group in recital 15; |
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(b)

in recitals 193 and 194, whether the 50CO2Cars project was likely to help the PSA Group to rationalise its industrial base and its cost structure, in particular its labour costs, as these factors had been presented as further structural handicaps of the PSA Group in recital 15;

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| (c) | in recitals 208 to 217, whether the new mild hybridisation technologies covered by the 50CO2Cars project were likely to offer PSA a solution to its difficulties, not just in the short term (contraction of the European market referred to in recital 11 of the opening decision) but also in the long term (‘scissor’ effect referred to in recital 14 of the opening decision). |
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(c)

in recitals 208 to 217, whether the new mild hybridisation technologies covered by the 50CO2Cars project were likely to offer PSA a solution to its difficulties, not just in the short term (contraction of the European market referred to in recital 11 of the opening decision) but also in the long term (‘scissor’ effect referred to in recital 14 of the opening decision).

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| (327) | The opening decision was therefore based on the factors cited by the French authorities during the preliminary investigation phase as circumstances leading to the firm's difficulties. The Commission has in no way presented a catalogue of cumulative and/or exclusive criteria making it possible to verify whether (or not) the 50CO2Cars project was ‘appropriate’ for the restructuring of the Group. |
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(327)

The opening decision was therefore based on the factors cited by the French authorities during the preliminary investigation phase as circumstances leading to the firm's difficulties. The Commission has in no way presented a catalogue of cumulative and/or exclusive criteria making it possible to verify whether (or not) the 50CO2Cars project was ‘appropriate’ for the restructuring of the Group.

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| (328) | The fact remains that during the preliminary investigation phase, the French authorities did not mention the trend in the market to replace sales of diesel vehicles by petrol vehicles (mentioned in recital 210 of the opening decision and reiterated in recital 147 above) as one of the obstacles in the way of the PSA Group's return to viability, but simply as a background factor, even though, according to recital 214 of the opening decision, there is ‘according to the market research carried out by PSA, ... a market opening for economic diesel hybrid systems’. |
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(328)

The fact remains that during the preliminary investigation phase, the French authorities did not mention the trend in the market to replace sales of diesel vehicles by petrol vehicles (mentioned in recital 210 of the opening decision and reiterated in recital 147 above) as one of the obstacles in the way of the PSA Group's return to viability, but simply as a background factor, even though, according to recital 214 of the opening decision, there is ‘according to the market research carried out by PSA, ... a market opening for economic diesel hybrid systems’.

| (329) | In any case, the purpose of this formal procedure is to offer the Member State the opportunity to adduce all the evidence that it considers necessary to prove the validity of the aid being examined, and in particular to flesh out the circumstances that led to the firm's difficulties by adding details that it may have failed to include during the preliminary phase. This is precisely what the French authorities have done in this case. |
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(329)

In any case, the purpose of this formal procedure is to offer the Member State the opportunity to adduce all the evidence that it considers necessary to prove the validity of the aid being examined, and in particular to flesh out the circumstances that led to the firm's difficulties by adding details that it may have failed to include during the preliminary phase. This is precisely what the French authorities have done in this case.

(b)   Examination of the contribution of the 50CO2Cars project to the restructuring of the PSA Group

Examination of the contribution of the 50CO2

| (330) | According to the comments by the French authorities (summarised in recitals 147 to 151 above), the 50CO2Cars project is designed to get to grips with a technology to reduce the consumption and CO2 emissions of diesel engines at an ‘affordable’ cost. |
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(330)

According to the comments by the French authorities (summarised in recitals 147 to 151 above), the 50CO2Cars project is designed to get to grips with a technology to reduce the consumption and CO2 emissions of diesel engines at an ‘affordable’ cost.

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(i)   Contribution to resolving the structural handicaps of the PSA Group

Contribution to resolving the structural handicaps of the PSA Group

| (331) | Reversing the downward trend in sales of diesel engines: in the opening decision, the Commission asked in recital 211 whether an R&D investment in a diesel hybrid technology was consistent with the restructuring plan when the recent market trend (expected to continue in future years) was rather for sales of diesel engines to be replaced by petrol engines. |
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(331)

Reversing the downward trend in sales of diesel engines: in the opening decision, the Commission asked in recital 211 whether an R&D investment in a diesel hybrid technology was consistent with the restructuring plan when the recent market trend (expected to continue in future years) was rather for sales of diesel engines to be replaced by petrol engines.

| (332) | On this point, it would appear from the justifications adduced by France in recital 148 above that, bearing in mind the current structure of PSA's production base (focusing chiefly on diesel vehicles which represented [60-80]* % of sales in Europe in 2012), a strategy of ‘reacting’ to the trend for diesel to be replaced by petrol might be less pertinent in the short/medium term than a ‘proactive’ strategy in terms of restoring the Group's viability. The Commission notes in this respect that, in its comments in recital 203 above, Toyota acknowledges that there could be a market for diesel hybrids, but considers that it will be smaller than the market for petrol hybrids because of the additional cost of diesel technology. In this respect, the ‘affordable’ diesel hybrid solution targeted by the 50CO2Cars project could help, if the project succeeds, to counter the decline in diesel sales that the PSA Group is currently experiencing. In the longer term, if the underlying trends recorded up to now were to continue (with the result that sales of petrol hybrids continue to be higher than sales of diesel hybrids), as predicted by Toyota, the components of 50CO2Cars could be adapted to petrol engines (see recital 50 of the opening decision). |
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(332)

On this point, it would appear from the justifications adduced by France in recital 148 above that, bearing in mind the current structure of PSA's production base (focusing chiefly on diesel vehicles which represented [60-80]* % of sales in Europe in 2012), a strategy of ‘reacting’ to the trend for diesel to be replaced by petrol might be less pertinent in the short/medium term than a ‘proactive’ strategy in terms of restoring the Group's viability. The Commission notes in this respect that, in its comments in recital 203 above, Toyota acknowledges that there could be a market for diesel hybrids, but considers that it will be smaller than the market for petrol hybrids because of the additional cost of diesel technology. In this respect, the ‘affordable’ diesel hybrid solution targeted by the 50CO2Cars project could help, if the project succeeds, to counter the decline in diesel sales that the PSA Group is currently experiencing. In the longer term, if the underlying trends recorded up to now were to continue (with the result that sales of petrol hybrids continue to be higher than sales of diesel hybrids), as predicted by Toyota, the components of 50CO2Cars could be adapted to petrol engines (see recital 50 of the opening decision).

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| (333) | The Commission therefore agrees with the French authorities that PSA's strategy to develop a technology able to restore the environmental image of diesel engines and keep them economically attractive to consumers, especially in Europe, could improve the short/medium-term profitability of the PSA Group's industrial base, and therefore help to restore its viability as the restructuring plan is implemented. |
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(333)

The Commission therefore agrees with the French authorities that PSA's strategy to develop a technology able to restore the environmental image of diesel engines and keep them economically attractive to consumers, especially in Europe, could improve the short/medium-term profitability of the PSA Group's industrial base, and therefore help to restore its viability as the restructuring plan is implemented.

| (334) | Making up for its backwardness in R&D: although the French authorities do not consider this criterion to be relevant, it would appear from recital 152(c) above that the 50CO2Cars project could make up for the Group's backwardness in R&D, especially from the point of view of the productivity of the technological innovation activities undertaken (pooling of resources in a research consortium sponsored by ADEME), the standardisation of certain automotive components (in particular the powertrain), technologies to reduce diesel engine consumption/emissions and DCT transmissions. The purpose of these efforts is to make hybridisation systems more ‘affordable’ for consumers as the architecture of the hybrid powertrain will be largely standardised and optimised in terms of energy performance and production cost. |
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(334)

Making up for its backwardness in R&D: although the French authorities do not consider this criterion to be relevant, it would appear from recital 152(c) above that the 50CO2Cars project could make up for the Group's backwardness in R&D, especially from the point of view of the productivity of the technological innovation activities undertaken (pooling of resources in a research consortium sponsored by ADEME), the standardisation of certain automotive components (in particular the powertrain), technologies to reduce diesel engine consumption/emissions and DCT transmissions. The purpose of these efforts is to make hybridisation systems more ‘affordable’ for consumers as the architecture of the hybrid powertrain will be largely standardised and optimised in terms of energy performance and production cost.

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| (335) | In recital 184 above, GM stresses that technological projects to reduce gas emissions are being widely implemented by manufacturers and, in recital 189 above, Fiat confirms that the CO2 emission standards set by European regulations are a challenge that every manufacturer will have to take up. Toyota, for its part, is also of the view that the development of environmental technologies will be a key factor in manufacturers' sales (see recital 203 above). Against such a backdrop of ‘technological proliferation’ in consumption/CO2 emission reduction, and bearing in mind how difficult it is to predict the future commercial outlets of the research currently taking place, the Commission nevertheless considers that a gauge of the success of a restructuring plan may well lie in an automotive manufacturer in difficulty maintaining a certain level of technological ambition. Backwardness in R&D could, moreover, weigh heavily on the prospects of an upturn in its sales in the short/medium term, and therefore on its chances of restoring viability. |
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(335)

In recital 184 above, GM stresses that technological projects to reduce gas emissions are being widely implemented by manufacturers and, in recital 189 above, Fiat confirms that the CO2 emission standards set by European regulations are a challenge that every manufacturer will have to take up. Toyota, for its part, is also of the view that the development of environmental technologies will be a key factor in manufacturers' sales (see recital 203 above). Against such a backdrop of ‘technological proliferation’ in consumption/CO2 emission reduction, and bearing in mind how difficult it is to predict the future commercial outlets of the research currently taking place, the Commission nevertheless considers that a gauge of the success of a restructuring plan may well lie in an automotive manufacturer in difficulty maintaining a certain level of technological ambition. Backwardness in R&D could, moreover, weigh heavily on the prospects of an upturn in its sales in the short/medium term, and therefore on its chances of restoring viability.

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| (336) | In the light of the above comments, the Commission concludes that the 50CO2Cars project may well help to resolve some of the PSA Group's structural handicaps. |
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(336)

In the light of the above comments, the Commission concludes that the 50CO2Cars project may well help to resolve some of the PSA Group's structural handicaps.

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(ii)   Adapting the industrial base to the issues raised by mild hybridisation

Adapting the industrial base to the issues raised by mild hybridisation

| (337) | In the opening decision, the Commission asked whether the resources planned for the development of a mild hybridisation technology were consistent with the rationalisation of capacity envisaged in the restructuring plan. |
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(337)

In the opening decision, the Commission asked whether the resources planned for the development of a mild hybridisation technology were consistent with the rationalisation of capacity envisaged in the restructuring plan.

| (338) | According to recital 154 above, the industrial investment required by the 50CO2Cars project, and in particular the adaptation of production capacity to the new diesel engines and hybrid systems, will account for a limited proportion of the total investment planned during the term of the restructuring plan. Its financial impact has also been included in the figures supplied by the French authorities. Lastly, in the field of transmissions, the Commission agrees with the French authorities that the return in-house of production which is currently outsourced to Japanese suppliers will help, if the 50CO2Cars project is successful, to restore PSA's viability by restoring its margins and freeing it from both logistical costs and exchange risks. |
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(338)

According to recital 154 above, the industrial investment required by the 50CO2Cars project, and in particular the adaptation of production capacity to the new diesel engines and hybrid systems, will account for a limited proportion of the total investment planned during the term of the restructuring plan. Its financial impact has also been included in the figures supplied by the French authorities. Lastly, in the field of transmissions, the Commission agrees with the French authorities that the return in-house of production which is currently outsourced to Japanese suppliers will help, if the 50CO2Cars project is successful, to restore PSA's viability by restoring its margins and freeing it from both logistical costs and exchange risks.

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| (339) | On the basis of these factors, the Commission concludes that adapting PSA's industrial base to the issues raised by mild hybridisation is part and parcel of the Group's restructuring approach and return to viability. |
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(339)

On the basis of these factors, the Commission concludes that adapting PSA's industrial base to the issues raised by mild hybridisation is part and parcel of the Group's restructuring approach and return to viability.

(iii)   Shifting the firm towards new and viable activities

Shifting the firm towards new and viable activities

| (340) | In its comments (summarised in recital 189 above), Fiat notes in essence that the engine targeted by 50CO2Cars would appear to be technically ‘achievable’ but would run the risk of increasing the unit cost of the vehicles in which it is fitted, with the result that the mass distribution of the technology developed would be economically impossible. |
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(340)

In its comments (summarised in recital 189 above), Fiat notes in essence that the engine targeted by 50CO2Cars would appear to be technically ‘achievable’ but would run the risk of increasing the unit cost of the vehicles in which it is fitted, with the result that the mass distribution of the technology developed would be economically impossible.

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| (341) | On this point, the Commission notes that the current high price of full hybrid technologies explains why they have been rolled out only in the high-end segments of the market (‘premium’ vehicles). The strategy envisaged by PSA and its R&D efforts is precisely to find a hybridisation technology with a better cost/performance compromise than the solutions currently available: reducing CO2 emissions by [10-20]* % with respect to an equivalent non-hybrid vehicle for a cost [70-80]* % lower than the HY425 solution. |
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(341)

On this point, the Commission notes that the current high price of full hybrid technologies explains why they have been rolled out only in the high-end segments of the market (‘premium’ vehicles). The strategy envisaged by PSA and its R&D efforts is precisely to find a hybridisation technology with a better cost/performance compromise than the solutions currently available: reducing CO2 emissions by [10-20]* % with respect to an equivalent non-hybrid vehicle for a cost [70-80]* % lower than the HY425 solution.

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| (342) | In recital 216 of the opening decision, the Commission nevertheless complained that it was unable to assess the impact of the new mild hybridisation technologies on the PSA Group's sales and profitability, and said that it would like to be provided with the normal financial indicators that are used to analyse the pertinence of this type of investment in R&D and an analysis of the risks that could affect the profitability of this project. |
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(342)

In recital 216 of the opening decision, the Commission nevertheless complained that it was unable to assess the impact of the new mild hybridisation technologies on the PSA Group's sales and profitability, and said that it would like to be provided with the normal financial indicators that are used to analyse the pertinence of this type of investment in R&D and an analysis of the risks that could affect the profitability of this project.

| (343) | According to recital 150 above, in the context of the restructuring plan, the lack of specific State aid for the 50CO2Cars project would force PSA to implement a ‘counterfactual’ project consisting in reducing its R&D investment to the minimum necessary to be able to comply with the changes in the regulations on CO2 emissions. The financial indicator provided by the French authorities in Table 15 of recital 155(b) above is a ‘differential’ net present value (‘NPV’) which, unlike the ‘standard’ NPV (which corresponds to the present value of the cash flows — positive and negative — generated by an investment), does not make it possible to assess the intrinsic profitability of the investment, but rather the profitability difference between two investments, in this case the 50CO2Cars project (with or without State aid) and the ‘counterfactual’ project. |
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(343)

According to recital 150 above, in the context of the restructuring plan, the lack of specific State aid for the 50CO2Cars project would force PSA to implement a ‘counterfactual’ project consisting in reducing its R&D investment to the minimum necessary to be able to comply with the changes in the regulations on CO2 emissions. The financial indicator provided by the French authorities in Table 15 of recital 155(b) above is a ‘differential’ net present value (‘NPV’) which, unlike the ‘standard’ NPV (which corresponds to the present value of the cash flows — positive and negative — generated by an investment), does not make it possible to assess the intrinsic profitability of the investment, but rather the profitability difference between two investments, in this case the 50CO2Cars project (with or without State aid) and the ‘counterfactual’ project.

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| (344) | In view of the fact that, whatever the discount rate used (respectively [10-13]* % or [13-15]* %), the counterfactual project always has a higher NPV than the 50CO2Cars project without aid (between EUR [60-100]* million for the eDCT, between EUR [20-70]* million for the accessory facade), the French authorities conclude that, in the absence of aid, the firm would naturally be ‘encouraged’ to run the alternative project rather than 50CO2Cars. The Commission is not, however, convinced by this reasoning, and points out that it would be no more than logical to consider that at a discount rate of [13-15]* %, inferred by the French authorities after including the current ‘bases’ of the firms' financing conditions in the best possible way, even though the rate of [10-13]* % appears to be the rate generally used to assess the profitability of its investments, PSA would also be more likely to opt for the counterfactual project rather than 50CO2Cars, as the relative profitability of two of its components would be higher: EUR [50-60]* million for the eDCT and EUR [20-30]* million for the accessory facade. |
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(344)

In view of the fact that, whatever the discount rate used (respectively [10-13]* % or [13-15]* %), the counterfactual project always has a higher NPV than the 50CO2Cars project without aid (between EUR [60-100]* million for the eDCT, between EUR [20-70]* million for the accessory facade), the French authorities conclude that, in the absence of aid, the firm would naturally be ‘encouraged’ to run the alternative project rather than 50CO2Cars. The Commission is not, however, convinced by this reasoning, and points out that it would be no more than logical to consider that at a discount rate of [13-15]* %, inferred by the French authorities after including the current ‘bases’ of the firms' financing conditions in the best possible way, even though the rate of [10-13]* % appears to be the rate generally used to assess the profitability of its investments, PSA would also be more likely to opt for the counterfactual project rather than 50CO2Cars, as the relative profitability of two of its components would be higher: EUR [50-60]* million for the eDCT and EUR [20-30]* million for the accessory facade.

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| (345) | In short, the Commission considers:






  (a) | first, that the conclusions that may be drawn from the proposed ‘differential’ indicator are overly dependent on ad hoc assumptions in relation to the discount rate used to calculate the ‘differential’ NPV; |
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(345)

In short, the Commission considers:

(a)

first, that the conclusions that may be drawn from the proposed ‘differential’ indicator are overly dependent on ad hoc assumptions in relation to the discount rate used to calculate the ‘differential’ NPV;

ad hoc

| (b) | second, that the structure of this indicator does not make it possible economically to assess the global impact of 50CO2Cars on the Group's sales and financial prospects, but only to compare, in an incremental way, the profit achieved (and the costs incurred) by carrying out 50CO2Cars with what could be achieved, for two components alone, by the counterfactual project. |
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(b)

second, that the structure of this indicator does not make it possible economically to assess the global impact of 50CO2Cars on the Group's sales and financial prospects, but only to compare, in an incremental way, the profit achieved (and the costs incurred) by carrying out 50CO2Cars with what could be achieved, for two components alone, by the counterfactual project.

2

2

| (346) | The financial indicators supplied by France do not therefore make it possible to assess the effects of the mild hybridisation ‘system’ targeted by 50CO2Cars. The Commission observes that, unlike the counterfactual project, the 50CO2Cars project makes it possible for PSA to get to grips with several of its current structural handicaps: the project will help it to improve component standardisation and make up for the Group's backwardness in R&D. The reduced scope of the counterfactual project cannot have such an ambition. Moreover, the incremental developments envisaged in the counterfactual project, whose stated aim is only to be able to comply with the regulations on CO2 emissions, are in all likelihood not enough effectively to combat the decline in sales of diesel vehicles that the Group is currently experiencing. Lastly, in order to assess the coherence of the resources needed for each of these projects with the rest of the restructuring plan, the Commission has compared the overall costs of the 50CO2Cars project (namely EUR [300-400]* million according to Table 4 in recital 41 above), with the additional costs and industrial risks that the counterfactual project would entail: the possible loss of margin from this development is non-negligible and is estimated to be EUR [500-700]* million in recital 148 above. |
| --- | --- |

(346)

The financial indicators supplied by France do not therefore make it possible to assess the effects of the mild hybridisation ‘system’ targeted by 50CO2Cars. The Commission observes that, unlike the counterfactual project, the 50CO2Cars project makes it possible for PSA to get to grips with several of its current structural handicaps: the project will help it to improve component standardisation and make up for the Group's backwardness in R&D. The reduced scope of the counterfactual project cannot have such an ambition. Moreover, the incremental developments envisaged in the counterfactual project, whose stated aim is only to be able to comply with the regulations on CO2 emissions, are in all likelihood not enough effectively to combat the decline in sales of diesel vehicles that the Group is currently experiencing. Lastly, in order to assess the coherence of the resources needed for each of these projects with the rest of the restructuring plan, the Commission has compared the overall costs of the 50CO2Cars project (namely EUR [300-400]* million according to Table 4 in recital 41 above), with the additional costs and industrial risks that the counterfactual project would entail: the possible loss of margin from this development is non-negligible and is estimated to be EUR [500-700]* million in recital 148 above.

2

2

2

2

| (347) | In short, the Commission considers that, in contrast to the incremental improvements envisaged in the counterfactual project, the technological advance represented by the 50CO2Cars project may, if successful, provide PSA with a reservoir for growth between now and 2020 as it will enable the PSA Group to ‘diversify in the direction of new and viable activities’. The 50CO2Cars project is therefore likely to play more of a part in restoring the Group's viability than the counterfactual project. |
| --- | --- |

(347)

In short, the Commission considers that, in contrast to the incremental improvements envisaged in the counterfactual project, the technological advance represented by the 50CO2Cars project may, if successful, provide PSA with a reservoir for growth between now and 2020 as it will enable the PSA Group to ‘diversify in the direction of new and viable activities’. The 50CO2Cars project is therefore likely to play more of a part in restoring the Group's viability than the counterfactual project.

2

2

(iv)   Partial conclusion on the contribution of the 50CO2Cars project to the PSA Group's restructuring

Partial conclusion on the contribution of the 50CO2

| (348) | The preceding examination shows that, as a component of the restructuring plan, the 50CO2Cars project makes a positive contribution to restoring the PSA Group's viability: the adaptation of its industrial base needed for its implementation is in keeping with the restructuring strategy and the resources available and, if successful, the project will not just correct the effects of the firm's structural difficulties (major sensitivity to changes in diesel sales in Europe and backwardness in some R&D fields), but will also make it possible to diversify the Group's production in the direction of ‘new and viable’ activities able to offer it a reservoir for growth between now and 2020. |
| --- | --- |

(348)

The preceding examination shows that, as a component of the restructuring plan, the 50CO2Cars project makes a positive contribution to restoring the PSA Group's viability: the adaptation of its industrial base needed for its implementation is in keeping with the restructuring strategy and the resources available and, if successful, the project will not just correct the effects of the firm's structural difficulties (major sensitivity to changes in diesel sales in Europe and backwardness in some R&D fields), but will also make it possible to diversify the Group's production in the direction of ‘new and viable’ activities able to offer it a reservoir for growth between now and 2020.

2

8.4.2.   BPF'S VIABILITY PLAN

| (349) | In the opening decision, the Commission observed that BPF's difficulties were due to its interdependence with the PSA Group, which led the bank's financial rating to be downgraded by S&P on 14 February 2013 to BB+ (non-investment grade), even though the rescue aid had been approved. |
| --- | --- |

(349)

In the opening decision, the Commission observed that BPF's difficulties were due to its interdependence with the PSA Group, which led the bank's financial rating to be downgraded by S&P on 14 February 2013 to BB+ (non-investment grade), even though the rescue aid had been approved.

| (350) | In their comments on the opening decision, the Commission considers that the French authorities have resolved its doubts as to the increase in BPF's balance sheet size and bad debt level. |
| --- | --- |

(350)

In their comments on the opening decision, the Commission considers that the French authorities have resolved its doubts as to the increase in BPF's balance sheet size and bad debt level.

| (351) | The Commission therefore reiterates the conclusion that it reached in the opening decision and that has not been contested by any of the interested parties, namely that the problem facing BPF is a problem of liquidity resulting solely from its link with the PSA Group. Consequently, in so far as the doubts as to the restoration of the Group's viability have been resolved, the same is considered to apply to BPF's viability plan. |
| --- | --- |

(351)

The Commission therefore reiterates the conclusion that it reached in the opening decision and that has not been contested by any of the interested parties, namely that the problem facing BPF is a problem of liquidity resulting solely from its link with the PSA Group. Consequently, in so far as the doubts as to the restoration of the Group's viability have been resolved, the same is considered to apply to BPF's viability plan.

8.5.   PREVENTION OF ANY UNDUE DISTORTION OF COMPETITION

PREVENTION OF ANY UNDUE DISTORTION OF COMPETITION

8.5.1.   EXAMINATION OF THE NEED FOR COMPENSATORY MEASURES

| (352) | Point 38 of the Rescue and Restructuring Guidelines states that, if restructuring aid is to be approved by the Commission, compensatory measures must be taken to minimise the adverse effects of the aid on trading conditions. Failing that, the aid is to be regarded as ‘contrary to the common interest’ and therefore incompatible with the internal market. To meet this criterion, the presence that a firm may retain in its market(s) at the end of the restructuring period is often limited. |
| --- | --- |

(352)

Point 38 of the Rescue and Restructuring Guidelines states that, if restructuring aid is to be approved by the Commission, compensatory measures must be taken to minimise the adverse effects of the aid on trading conditions. Failing that, the aid is to be regarded as ‘contrary to the common interest’ and therefore incompatible with the internal market. To meet this criterion, the presence that a firm may retain in its market(s) at the end of the restructuring period is often limited.

| (353) | By way of reminder, the French authorities initially proposed the following compensatory measures: further reductions of CAPEX (‘capital expenditures’), transferring capacity at the Sevelnord plant to a competitor, discontinuing the development and production of the hybrid plug-in technology and a measure setting a maximum penetration rate for BPF. |
| --- | --- |

(353)

By way of reminder, the French authorities initially proposed the following compensatory measures: further reductions of CAPEX (‘capital expenditures’), transferring capacity at the Sevelnord plant to a competitor, discontinuing the development and production of the hybrid plug-in technology and a measure setting a maximum penetration rate for BPF.

| (354) | In the opening decision, the Commission was doubtful as to the characterisation of some of these measures as compensatory measures and their adequate nature in the light of their implementation conditions. |
| --- | --- |

(354)

In the opening decision, the Commission was doubtful as to the characterisation of some of these measures as compensatory measures and their adequate nature in the light of their implementation conditions.

| (355) | At the end of this formal investigation procedure, the Commission takes the view that, at least as regards those measures already decided and implemented by PSA prior to the notification of the restructuring plan, the measures described in section 2.4.5 above cannot be characterised as ‘compensatory’ within the meaning of points 38 et seq. of the Rescue and Restructuring Guidelines, but are rather strategic choices ‘necessary in any case to restore the viability’ of the Group. |
| --- | --- |

(355)

At the end of this formal investigation procedure, the Commission takes the view that, at least as regards those measures already decided and implemented by PSA prior to the notification of the restructuring plan, the measures described in section 2.4.5 above cannot be characterised as ‘compensatory’ within the meaning of points 38 et seq. of the Rescue and Restructuring Guidelines, but are rather strategic choices ‘necessary in any case to restore the viability’ of the Group.

et seq.

| (356) | In their memorandum of 23 July 2013, however, the French authorities decided to withdraw all the compensatory measures notified on 12 March 2013, apart from the measure setting a maximum penetration rate for BPF, which is amended in the manner described in section 8.5.2 below. |
| --- | --- |

(356)

In their memorandum of 23 July 2013, however, the French authorities decided to withdraw all the compensatory measures notified on 12 March 2013, apart from the measure setting a maximum penetration rate for BPF, which is amended in the manner described in section 8.5.2 below.

| (357) | The Commission therefore takes note of this withdrawal and considers that it does not have to examine the following measures:






  (a) | further reductions of CAPEX (‘capital expenditures’), in particular the discontinuation of production of the Citroën 6 — Peugeot 607 models, the discontinuation and non-renewal of the Bipper/Nemo model and the discontinuation of production of diesel engines of more than two litres; |
| --- | --- | --- |

(357)

The Commission therefore takes note of this withdrawal and considers that it does not have to examine the following measures:

(a)

further reductions of CAPEX (‘capital expenditures’), in particular the discontinuation of production of the Citroën 6 — Peugeot 607 models, the discontinuation and non-renewal of the Bipper/Nemo model and the discontinuation of production of diesel engines of more than two litres;

| (b) | the transfer of capacity at the Sevelnord plant to a competitor; and |
| --- | --- |

(b)

the transfer of capacity at the Sevelnord plant to a competitor; and

| (c) | the discontinuation of the development and production of the hybrid plug-in technology. |
| --- | --- |

(c)

the discontinuation of the development and production of the hybrid plug-in technology.

| (358) | By way of ‘compensatory measures’, the Commission will therefore examine only the proposal by the French authorities to establish, from a threshold of [26-29]* %, a mechanism for increasing the cost of the guarantee in line with BPF's penetration rate. |
| --- | --- |

(358)

By way of ‘compensatory measures’, the Commission will therefore examine only the proposal by the French authorities to establish, from a threshold of [26-29]* %, a mechanism for increasing the cost of the guarantee in line with BPF's penetration rate.

compensatory measures

8.5.2.   MECHANISM FOR INCREASING THE COST OF THE GUARANTEE IN LINE WITH BPF'S PENETRATION RATE

| (359) | In the opening decision, the Commission observed that limiting the penetration rate appeared to be an appropriate way of limiting the impact on PSA's vehicle sales of financing support from BPF. The Commission was doubtful, however, as to the real impact of this measure in the light of its implementation conditions. PSA was in practice proposing a commitment not to exceed the 2012 H2 rate with a flexibility of + 1, i.e. a maximum rate of 33,4 %, in 2013 in each European country. This cap already appeared to include the rise that could be predicted for 2013, as the rate was 29,8 % in 2012. In 2014 and 2015, moreover, the French authorities were proposing that the penetration rate be aggregated for BPF's G10 perimeter in the previous year, adjusted by the change in the penetration rate of the comparable banks cited by PSA (captive banks of Renault, Ford, BMW, VW and Daimler) while making provision for a ‘threshold’ rate. The flexibility that this change would give PSA could lessen the constraining nature and therefore the effectiveness of this measure. |
| --- | --- |

(359)

In the opening decision, the Commission observed that limiting the penetration rate appeared to be an appropriate way of limiting the impact on PSA's vehicle sales of financing support from BPF. The Commission was doubtful, however, as to the real impact of this measure in the light of its implementation conditions. PSA was in practice proposing a commitment not to exceed the 2012 H2 rate with a flexibility of + 1, i.e. a maximum rate of 33,4 %, in 2013 in each European country. This cap already appeared to include the rise that could be predicted for 2013, as the rate was 29,8 % in 2012. In 2014 and 2015, moreover, the French authorities were proposing that the penetration rate be aggregated for BPF's G10 perimeter in the previous year, adjusted by the change in the penetration rate of the comparable banks cited by PSA (captive banks of Renault, Ford, BMW, VW and Daimler) while making provision for a ‘threshold’ rate. The flexibility that this change would give PSA could lessen the constraining nature and therefore the effectiveness of this measure.

| (360) | Questions remained as to the comparable banks proposed by PSA (as matters stood only the penetration rates of the captive banks of Renault and Volkswagen, whereas other producers such as Ford or Fiat were also close competitors). As penetration rates vary greatly among countries, BPF could concentrate its loan capacity in those segments in which it had the largest presence and thus develop an aggressive commercial strategy vis-à-vis its competitors. |
| --- | --- |

(360)

Questions remained as to the comparable banks proposed by PSA (as matters stood only the penetration rates of the captive banks of Renault and Volkswagen, whereas other producers such as Ford or Fiat were also close competitors). As penetration rates vary greatly among countries, BPF could concentrate its loan capacity in those segments in which it had the largest presence and thus develop an aggressive commercial strategy vis-à-vis its competitors.

| (361) | The French authorities replied to the Commission's arguments in their comments on the opening decision (see recital 173). They agreed in particular to broaden the scope of the comparable banks to include the captive banks of Fiat and Ford. However, they stood by the principles of the mechanism proposed in the notification. In their view, as regards the level of detail of penetration rates, no manufacturer gives details of its penetration rate by segment. They considered that the mechanism had to be flexible if BPF was to be able to adapt to market trends and did not entail any lessening of the effectiveness and constraining nature of this measure. The Commission takes note of the comment by the French authorities as to the potential flexibility introduced by the use of a global penetration rate for the compensatory measure imposed on BPF: as recital 177 above shows, [...]* % of the financing granted by BPF concerns segments B and C and the following five countries: France, the United Kingdom, Germany, Spain and Italy. In the light of these statistics, the Commission considers that the compensatory measure is unlikely to be ineffective because the use of a global penetration rate allows too much flexibility. |
| --- | --- |

(361)

The French authorities replied to the Commission's arguments in their comments on the opening decision (see recital 173). They agreed in particular to broaden the scope of the comparable banks to include the captive banks of Fiat and Ford. However, they stood by the principles of the mechanism proposed in the notification. In their view, as regards the level of detail of penetration rates, no manufacturer gives details of its penetration rate by segment. They considered that the mechanism had to be flexible if BPF was to be able to adapt to market trends and did not entail any lessening of the effectiveness and constraining nature of this measure. The Commission takes note of the comment by the French authorities as to the potential flexibility introduced by the use of a global penetration rate for the compensatory measure imposed on BPF: as recital 177 above shows, [...]* % of the financing granted by BPF concerns segments B and C and the following five countries: France, the United Kingdom, Germany, Spain and Italy. In the light of these statistics, the Commission considers that the compensatory measure is unlikely to be ineffective because the use of a global penetration rate allows too much flexibility.

| (362) | First, the Commission notes that, according to the French authorities, the compensatory measure in relation to the penetration rate is the ‘most targeted measure best able to remedy any distortions of competition resulting directly from the aid in the form of a guarantee to Banque PSA. Such a measure in practice makes it possible to take appropriate account of the link between the consequences of the grant of the State guarantee on the activity of Banque PSA and vehicle sales’ (52). |
| --- | --- |

(362)

First, the Commission notes that, according to the French authorities, the compensatory measure in relation to the penetration rate is the ‘most targeted measure best able to remedy any distortions of competition resulting directly from the aid in the form of a guarantee to Banque PSA. Such a measure in practice makes it possible to take appropriate account of the link between the consequences of the grant of the State guarantee on the activity of Banque PSA and vehicle sales’ (52).

52

| (363) | The Commission also observes that all the manufacturers confirm in their comments that captive banks play a significant role in the financing of vehicle sales. Toyota stresses that a captive bank may improve customer brand loyalty by some 15 % and that the penetration rate is higher in the segments involving smaller models. Fiat considers that manufacturers' captive banks are extremely effective sales and marketing tools. Fiat reiterates Toyota's comments as to their role in customer loyalty and adds that they also play an important role in supporting the sales process in particular by replacing the ‘traditional’ financing institutions which are withdrawing from this kind of loan. Fiat considers that the public guarantee granted to BPF will therefore have a direct, immediate and extremely negative impact on the PSA Group's competitors. |
| --- | --- |

(363)

The Commission also observes that all the manufacturers confirm in their comments that captive banks play a significant role in the financing of vehicle sales. Toyota stresses that a captive bank may improve customer brand loyalty by some 15 % and that the penetration rate is higher in the segments involving smaller models. Fiat considers that manufacturers' captive banks are extremely effective sales and marketing tools. Fiat reiterates Toyota's comments as to their role in customer loyalty and adds that they also play an important role in supporting the sales process in particular by replacing the ‘traditional’ financing institutions which are withdrawing from this kind of loan. Fiat considers that the public guarantee granted to BPF will therefore have a direct, immediate and extremely negative impact on the PSA Group's competitors.

| (364) | As the interested parties unanimously agree that captive banks play a central role in the financing of automotive manufacturers' sales and that the grant of the guarantee to BPF will have a particularly adverse direct effect on competition, the Commission considers that the measure to limit BPF's ability to use the public guarantee in order unduly to increase its financing capacity to the detriment of its competitors' captive banks not in receipt of public support is appropriate. |
| --- | --- |

(364)

As the interested parties unanimously agree that captive banks play a central role in the financing of automotive manufacturers' sales and that the grant of the guarantee to BPF will have a particularly adverse direct effect on competition, the Commission considers that the measure to limit BPF's ability to use the public guarantee in order unduly to increase its financing capacity to the detriment of its competitors' captive banks not in receipt of public support is appropriate.

| (365) | In the letter of commitments of 23 July 2013, the French authorities undertook to make the changes, described in section 7.2 above, to compensate for the distortion of competition created by the State guarantee to BPF. |
| --- | --- |

(365)

In the letter of commitments of 23 July 2013, the French authorities undertook to make the changes, described in section 7.2 above, to compensate for the distortion of competition created by the State guarantee to BPF.

| (366) | In order to limit the distortive effects on competition that the guarantee entails, and in order to provide BPF with a degree of flexibility allowing it react to potential market changes, the proposed commitment takes the form of additional remuneration of the guarantee in line with BPF's penetration rate. The principle of the commitment is as follows: the remuneration of the guarantee will be increased when BPF exceeds a threshold penetration rate of [26-29]* % in the G10 aggregate. The Commission notes that the perimeter of this aggregate (Germany, Austria, Belgium, Italy, Spain, the Netherlands, Portugal, Switzerland, France and the United Kingdom) appears to be the most representative of the European market indicators available (53). Moreover, this mechanism seems to be an appropriate way of complying with the principle of compensatory measures (which are intended to minimise any distortion of competition) while ensuring that viability can be restored. By combining an increase in the penetration rate with an increase in the guarantee remuneration, BPF's ability to offer particularly attractive financing terms as a result of the guarantee will be limited to what is needed to ensure its viability, while minimising distortions of competition. The Group will not pay remuneration above what its capital situation allows it to finance, since it will be able to keep the penetration rate at a level corresponding to a certain level of remuneration. The remuneration will increase with the penetration rate up to 491 basis points (estimated market rate). Graph 2 below shows the link between PSA's remuneration of the guarantee and penetration rate (for more detailed figures, see Table 17 in recital 250 above).

  Graph 2


  Link between the remuneration of the guarantee (in basis points) and the G10 penetration rate (%)

  [...]* |
| --- | --- |

(366)

In order to limit the distortive effects on competition that the guarantee entails, and in order to provide BPF with a degree of flexibility allowing it react to potential market changes, the proposed commitment takes the form of additional remuneration of the guarantee in line with BPF's penetration rate. The principle of the commitment is as follows: the remuneration of the guarantee will be increased when BPF exceeds a threshold penetration rate of [26-29]* % in the G10 aggregate. The Commission notes that the perimeter of this aggregate (Germany, Austria, Belgium, Italy, Spain, the Netherlands, Portugal, Switzerland, France and the United Kingdom) appears to be the most representative of the European market indicators available (53). Moreover, this mechanism seems to be an appropriate way of complying with the principle of compensatory measures (which are intended to minimise any distortion of competition) while ensuring that viability can be restored. By combining an increase in the penetration rate with an increase in the guarantee remuneration, BPF's ability to offer particularly attractive financing terms as a result of the guarantee will be limited to what is needed to ensure its viability, while minimising distortions of competition. The Group will not pay remuneration above what its capital situation allows it to finance, since it will be able to keep the penetration rate at a level corresponding to a certain level of remuneration. The remuneration will increase with the penetration rate up to 491 basis points (estimated market rate). Graph 2 below shows the link between PSA's remuneration of the guarantee and penetration rate (for more detailed figures, see Table 17 in recital 250 above).

53

Graph 2

Graph 2

Link between the remuneration of the guarantee (in basis points) and the G10 penetration rate (%)

Link between the remuneration of the guarantee (in basis points) and the G10 penetration rate (%)

[...]*

| (367) | Any examination of the impact of this measure has, inter alia, to include the theoretical penetration rate that PSA could achieve without aid (the ‘counterfactual penetration rate’). The Commission observes that without the State guarantee, the downgrading of BPF's rating and the reduction of its financing capacity would in turn reduce loan production and reduce automotive sales by [5-20]* % (54). The turnover of PSA's automobile division achieved from financing by the captive bank is therefore, according to the French authorities, EUR [6 000-7 000]* million without aid and EUR [35 000-40 000]* million with aid (assuming an estimated fall of some [10-20] % in sales). These figures therefore show that BPF's theoretical penetration rate is some [15-20]* %. In other words, without the State guarantee, BPF's financing capacity would decrease to an extent that would significantly reduce its penetration rate. Moreover, there would also be a parallel decline in sales volumes, bearing in mind the central role played by captive banks in vehicle sales. According to the French authorities, such a decline would not enable viability to be restored, and would drag PSA into a vicious circle in which its own and BPF's ratings are repeatedly downgraded, thereby generating further losses for the Group. |
| --- | --- |

(367)

Any examination of the impact of this measure has, inter alia, to include the theoretical penetration rate that PSA could achieve without aid (the ‘counterfactual penetration rate’). The Commission observes that without the State guarantee, the downgrading of BPF's rating and the reduction of its financing capacity would in turn reduce loan production and reduce automotive sales by [5-20]* % (54). The turnover of PSA's automobile division achieved from financing by the captive bank is therefore, according to the French authorities, EUR [6 000-7 000]* million without aid and EUR [35 000-40 000]* million with aid (assuming an estimated fall of some [10-20] % in sales). These figures therefore show that BPF's theoretical penetration rate is some [15-20]* %. In other words, without the State guarantee, BPF's financing capacity would decrease to an extent that would significantly reduce its penetration rate. Moreover, there would also be a parallel decline in sales volumes, bearing in mind the central role played by captive banks in vehicle sales. According to the French authorities, such a decline would not enable viability to be restored, and would drag PSA into a vicious circle in which its own and BPF's ratings are repeatedly downgraded, thereby generating further losses for the Group.

54

| (368) | This counterfactual penetration rate makes it possible indicatively to quantify the lower level to be used to calibrate the compensatory measure. This minimum has to be higher than the theoretical rate estimated at [15-20]* %. The lower penetration rate also has to be lower than the current penetration rate ([29-31]* % for the G10 in 2012). In practice, any compensatory measure is intended to minimise the impact of State aid on the beneficiary firm's competitors. The State guarantee is already enabling BPF to maintain its current penetration rate (as is borne out by the counterfactual penetration rate). Any compensatory measure taking the form of additional remuneration should therefore already apply to the current penetration rate. |
| --- | --- |

(368)

This counterfactual penetration rate makes it possible indicatively to quantify the lower level to be used to calibrate the compensatory measure. This minimum has to be higher than the theoretical rate estimated at [15-20]* %. The lower penetration rate also has to be lower than the current penetration rate ([29-31]* % for the G10 in 2012). In practice, any compensatory measure is intended to minimise the impact of State aid on the beneficiary firm's competitors. The State guarantee is already enabling BPF to maintain its current penetration rate (as is borne out by the counterfactual penetration rate). Any compensatory measure taking the form of additional remuneration should therefore already apply to the current penetration rate.

| (369) | Thus, taking account of the penetration rate of [29-31]* %, the lower threshold of [15-20]* % described above, the probable upward trends described by the French authorities and the important role that captive bank financing plays in vehicle sales, the commitment to increase the remuneration of the State guarantee from [26-29]* % (55) is considered to be an adequate measure to minimise distortions of competition. Bearing in mind the current penetration rate, the commitment means that BPF will already have to increase the remuneration of the guarantee by some [40-50]* basis points (with the result that the State guarantee will be remunerated at some [300-310]* basis points rather than the 260 basis points set out in the initial Protocol concluded with the State). If BPF wishes to increase this penetration rate, the remuneration will rise to the extent set out in Table 17 in recital 250 above (56). If the penetration rate falls, the additional remuneration will also fall (57). The commitment thus entails an immediate increase in the cost of the guarantee for BPF which will increase if PSA increases the proportion of vehicles financed by BPF in its total sales. |
| --- | --- |

(369)

Thus, taking account of the penetration rate of [29-31]* %, the lower threshold of [15-20]* % described above, the probable upward trends described by the French authorities and the important role that captive bank financing plays in vehicle sales, the commitment to increase the remuneration of the State guarantee from [26-29]* % (55) is considered to be an adequate measure to minimise distortions of competition. Bearing in mind the current penetration rate, the commitment means that BPF will already have to increase the remuneration of the guarantee by some [40-50]* basis points (with the result that the State guarantee will be remunerated at some [300-310]* basis points rather than the 260 basis points set out in the initial Protocol concluded with the State). If BPF wishes to increase this penetration rate, the remuneration will rise to the extent set out in Table 17 in recital 250 above (56). If the penetration rate falls, the additional remuneration will also fall (57). The commitment thus entails an immediate increase in the cost of the guarantee for BPF which will increase if PSA increases the proportion of vehicles financed by BPF in its total sales.

55

56

57

| (370) | The Commission therefore considers that this measure makes it possible to compensate for undue distortions of competition within the meaning of points 38 to 40 of the Rescue and Restructuring Guidelines. |
| --- | --- |

(370)

The Commission therefore considers that this measure makes it possible to compensate for undue distortions of competition within the meaning of points 38 to 40 of the Rescue and Restructuring Guidelines.

| (371) | Lastly, even though the European automotive sector appears to have structural excess capacity, the Commission is of the view that a further reduction of the PSA Group's production capacity is not the most appropriate solution in this particular case:






  (a) | as mentioned in recital 49 above, the firm has already made significant structural efforts at its Aulnay and Rennes plants; |
| --- | --- | --- |

(371)

Lastly, even though the European automotive sector appears to have structural excess capacity, the Commission is of the view that a further reduction of the PSA Group's production capacity is not the most appropriate solution in this particular case:

(a)

as mentioned in recital 49 above, the firm has already made significant structural efforts at its Aulnay and Rennes plants;

| (b) | as explained in recital 315 above, if further restructuring efforts were necessary in future, it would seem preferable to leave PSA a strategic margin of manoeuvre in the choice of the resources to be implemented to stabilise its economic situation, a further capacity reduction being only one of the potential ways of doing so. |
| --- | --- |

(b)

as explained in recital 315 above, if further restructuring efforts were necessary in future, it would seem preferable to leave PSA a strategic margin of manoeuvre in the choice of the resources to be implemented to stabilise its economic situation, a further capacity reduction being only one of the potential ways of doing so.

8.5.3.   COMMITMENT IN RESPECT OF THE FINANCING MARGIN GRANTED TO DEALERS

| (372) | The Commission also notes that the French authorities have undertaken that PSA will not decrease the mean annual commercial margin of financing granted to the dealers in its network below the mean annual commercial margin recorded in the twelve months prior to 30 June 2013 for the whole term of implementation of the restructuring plan. |
| --- | --- |

(372)

The Commission also notes that the French authorities have undertaken that PSA will not decrease the mean annual commercial margin of financing granted to the dealers in its network below the mean annual commercial margin recorded in the twelve months prior to 30 June 2013 for the whole term of implementation of the restructuring plan.

| (373) | The Commission considers that this commitment makes it possible not to diminish the constraining effect of the cap on BPF's penetration rate. In practice, by maintaining the mean commercial margin in respect of dealers at the level that it had without aid, BPF will not be able to use the guarantee to pursue an aggressive commercial policy with these dealers. |
| --- | --- |

(373)

The Commission considers that this commitment makes it possible not to diminish the constraining effect of the cap on BPF's penetration rate. In practice, by maintaining the mean commercial margin in respect of dealers at the level that it had without aid, BPF will not be able to use the guarantee to pursue an aggressive commercial policy with these dealers.

8.5.4.   CONVERSION OF THE GRANTS INITIALLY ENVISAGED FOR THE 50CO2CARS PROJECT INTO REPAYABLE ADVANCES

2

| (374) | If the resources made available by the public authorities to preserve the technological competences of the manufacturer in difficulty are to remain proportionate, the Commission considers that it is necessary:






  (a) | for the R&D activities carried out as part of the restructuring plan not to be on a scale that could give rise to a risk of ‘contraction’ as mentioned by the Commission in recital 243 of the opening decision; |
| --- | --- | --- |

(374)

If the resources made available by the public authorities to preserve the technological competences of the manufacturer in difficulty are to remain proportionate, the Commission considers that it is necessary:

(a)

for the R&D activities carried out as part of the restructuring plan not to be on a scale that could give rise to a risk of ‘contraction’ as mentioned by the Commission in recital 243 of the opening decision;

| (b) | if matters improve, for a significant proportion of the public funds made available to the manufacturer to preserve its level of competence at the cutting edge of technology to be repaid to the authority providing the aid if the R&D project is successful and viability is restored. |
| --- | --- |

(b)

if matters improve, for a significant proportion of the public funds made available to the manufacturer to preserve its level of competence at the cutting edge of technology to be repaid to the authority providing the aid if the R&D project is successful and viability is restored.

| (375) | On the first point, the Commission has to establish whether, if the 50CO2Cars project is run, the dynamic incentives for other automotive manufacturers to continue their R&D efforts in the hybridisation field will be substantially reduced or cancelled out. GM's comments show that, while the amounts of the public funding for the 50CO2Cars project are ‘non-negligible’ for an R&D project to develop a mild hybridisation system, they are not ‘significant’ when compared with the R&D expenditure of the sector as a whole and are not, in any case, enough to ‘prevent a competitor from developing its own R&D programme in this same field’ (see recital 184 above). Fiat also confirms that the technological advance targeted by the 50CO2Cars project is not a barrier to entry that is likely to deter other manufacturers (see recitals 190 and 232 above). On the basis of these comments by third parties, the Commission can therefore conclude that there is no risk of a contraction effect as a result of the 50CO2Cars project. |
| --- | --- |

(375)

On the first point, the Commission has to establish whether, if the 50CO2Cars project is run, the dynamic incentives for other automotive manufacturers to continue their R&D efforts in the hybridisation field will be substantially reduced or cancelled out. GM's comments show that, while the amounts of the public funding for the 50CO2Cars project are ‘non-negligible’ for an R&D project to develop a mild hybridisation system, they are not ‘significant’ when compared with the R&D expenditure of the sector as a whole and are not, in any case, enough to ‘prevent a competitor from developing its own R&D programme in this same field’ (see recital 184 above). Fiat also confirms that the technological advance targeted by the 50CO2Cars project is not a barrier to entry that is likely to deter other manufacturers (see recitals 190 and 232 above). On the basis of these comments by third parties, the Commission can therefore conclude that there is no risk of a contraction effect as a result of the 50CO2Cars project.

2

2

2

2

| (376) | On the second point, the Commission refers to the compensatory measure proposed by the French authorities in section 7.5 above, under which the grants of EUR 24,5 million initially planned are converted into advances repayable to ADEME, so that if the PSA Group prospers, all the amounts paid by the State so that the R&D activities can be carried out will be repaid to ADEME. |
| --- | --- |

(376)

On the second point, the Commission refers to the compensatory measure proposed by the French authorities in section 7.5 above, under which the grants of EUR 24,5 million initially planned are converted into advances repayable to ADEME, so that if the PSA Group prospers, all the amounts paid by the State so that the R&D activities can be carried out will be repaid to ADEME.

| (377) | In short, the Commission is of the view that the public support for the 50CO2Cars project under the restructuring plan is not only unlikely to pose a major threat to the incentives to other manufacturers to continue their R&D efforts (no contraction effect) but is also proportionate to the target of restoring the PSA Group's viability in so far as the French authorities have undertaken that, if the Group prospers, all the discounted amounts paid by the public authorities to support the conduct of this R&D project are to be repaid to the authority granting the aid (see recital 256 above). |
| --- | --- |

(377)

In short, the Commission is of the view that the public support for the 50CO2Cars project under the restructuring plan is not only unlikely to pose a major threat to the incentives to other manufacturers to continue their R&D efforts (no contraction effect) but is also proportionate to the target of restoring the PSA Group's viability in so far as the French authorities have undertaken that, if the Group prospers, all the discounted amounts paid by the public authorities to support the conduct of this R&D project are to be repaid to the authority granting the aid (see recital 256 above).

2

8.5.5.   COMMITMENT TO REFRAIN FROM ACQUISITIONS

| (378) | The Commission notes lastly that the French authorities have undertaken that PSA will refrain from acquiring holdings in other undertakings or from acquiring any business assets throughout the term of its restructuring plan, under the conditions described in recitals 251 et seq., for amounts of more than EUR 100 million per annum. By way of derogation from the general principle laid down in recitals 251 and 252 above, Faurecia and its subsidiaries may make acquisitions subject to the Commission's prior approval, as laid down in recital 253 above. In its assessment, the Commission will take a positive view of acquisitions, (i) which directly or indirectly help to restore the PSA Group's viability as they have a positive impact on the PSA Group's forecast profitability and (ii) which do not circumvent the obligation to limit the effects of the aid to the minimum necessary to achieve the objectives of the PSA Group's restructuring plan. |
| --- | --- |

(378)

The Commission notes lastly that the French authorities have undertaken that PSA will refrain from acquiring holdings in other undertakings or from acquiring any business assets throughout the term of its restructuring plan, under the conditions described in recitals 251 et seq., for amounts of more than EUR 100 million per annum. By way of derogation from the general principle laid down in recitals 251 and 252 above, Faurecia and its subsidiaries may make acquisitions subject to the Commission's prior approval, as laid down in recital 253 above. In its assessment, the Commission will take a positive view of acquisitions, (i) which directly or indirectly help to restore the PSA Group's viability as they have a positive impact on the PSA Group's forecast profitability and (ii) which do not circumvent the obligation to limit the effects of the aid to the minimum necessary to achieve the objectives of the PSA Group's restructuring plan.

et seq.

| (379) | The Commission considers this measure to be necessary and likely to compensate for the distortive effects on competition created by the grant of the aid. |
| --- | --- |

(379)

The Commission considers this measure to be necessary and likely to compensate for the distortive effects on competition created by the grant of the aid.

8.5.6.   NEED FOR A COMPENSATORY MEASURE CONCERNING THE FMEA

| (380) | An anonymous third party considers that PSA should sell its holding in the FMEA. The Commission notes that the comments by this third party relate to a complaint being investigated by the Commission and do not relate to the subject matter of these proceedings. There is therefore no need to reply to these comments in this Decision. |
| --- | --- |

(380)

An anonymous third party considers that PSA should sell its holding in the FMEA. The Commission notes that the comments by this third party relate to a complaint being investigated by the Commission and do not relate to the subject matter of these proceedings. There is therefore no need to reply to these comments in this Decision.

8.6.   AID LIMITED TO THE MINIMUM: REAL CONTRIBUTION, FREE OF AID

AID LIMITED TO THE MINIMUM: REAL CONTRIBUTION, FREE OF AID

| (381) | If the aid is to be approved, pursuant to points 43 to 45 of the Rescue and Restructuring Guidelines the amount and the intensity of the aid must be limited to the strict minimum of the restructuring costs necessary to enable restructuring to be undertaken in the light of the existing financial resources of the company, its shareholders or the business group to which it belongs. Aid beneficiaries are expected to make a significant contribution to the restructuring plan from their own resources, including the sale of assets that are not essential to the firm's survival, or from external financing at market conditions. |
| --- | --- |

(381)

If the aid is to be approved, pursuant to points 43 to 45 of the Rescue and Restructuring Guidelines the amount and the intensity of the aid must be limited to the strict minimum of the restructuring costs necessary to enable restructuring to be undertaken in the light of the existing financial resources of the company, its shareholders or the business group to which it belongs. Aid beneficiaries are expected to make a significant contribution to the restructuring plan from their own resources, including the sale of assets that are not essential to the firm's survival, or from external financing at market conditions.

| (382) | As mentioned in recitals 246 and 247 of the opening decision, the Commission did not have particular doubts about this compatibility criterion. The costs of restructuring, as described in the notification from the French authorities, are EUR [1,3-1,8]* billion. In order to finance its restructuring, the PSA Group has implemented a programme of asset disposals which has provided the Group with EUR 1,956 billion of free cash flow (EUR 2,050 billion in terms of net financial position). By way of reminder, the amount of aid is EUR 571,9 million. |
| --- | --- |

(382)

As mentioned in recitals 246 and 247 of the opening decision, the Commission did not have particular doubts about this compatibility criterion. The costs of restructuring, as described in the notification from the French authorities, are EUR [1,3-1,8]* billion. In order to finance its restructuring, the PSA Group has implemented a programme of asset disposals which has provided the Group with EUR 1,956 billion of free cash flow (EUR 2,050 billion in terms of net financial position). By way of reminder, the amount of aid is EUR 571,9 million.

| (383) | The Commission also considers that the requirement that the aid be limited to the strict minimum necessary to enable restructuring to be undertaken is also met by the commitment by the French authorities to refrain from acquisitions, under the conditions described in recitals 251 et seq. The Commission considers that this commitment makes it possible to prevent the PSA Group from using any available financial resources for a purpose other than restoring the Group's viability in the long term. |
| --- | --- |

(383)

The Commission also considers that the requirement that the aid be limited to the strict minimum necessary to enable restructuring to be undertaken is also met by the commitment by the French authorities to refrain from acquisitions, under the conditions described in recitals 251 et seq. The Commission considers that this commitment makes it possible to prevent the PSA Group from using any available financial resources for a purpose other than restoring the Group's viability in the long term.

et seq.

| (384) | The Commission therefore considers that it does not have to review the assessment given in the opening decision as to compliance with the criteria listed in points 43 to 45 of the Rescue and Restructuring Guidelines. |
| --- | --- |

(384)

The Commission therefore considers that it does not have to review the assessment given in the opening decision as to compliance with the criteria listed in points 43 to 45 of the Rescue and Restructuring Guidelines.

8.7.   
  ‘ONE TIME, LAST TIME’ PRINCIPLE

‘ONE TIME, LAST TIME’ PRINCIPLE

| (385) | In accordance with points 72 et seq. of the Rescue and Restructuring Guidelines, restructuring aid should be granted only once over a ten-year period. |
| --- | --- |

(385)

In accordance with points 72 et seq. of the Rescue and Restructuring Guidelines, restructuring aid should be granted only once over a ten-year period.

et seq.

| (386) | The French authorities stated in their notification of 12 March 2013 that the PSA Group had not received restructuring aid during the last 10 years. |
| --- | --- |

(386)

The French authorities stated in their notification of 12 March 2013 that the PSA Group had not received restructuring aid during the last 10 years.

| (387) | The ‘one time, last time’ principle required by the Rescue and Restructuring Guidelines is therefore satisfied. |
| --- | --- |

(387)

The ‘one time, last time’ principle required by the Rescue and Restructuring Guidelines is therefore satisfied.

9.   CONCLUSION

CONCLUSION

| (388) | Having regard to the commitments entered into by the French authorities, the aid may be deemed to be compatible with the internal market, |
| --- | --- |

(388)

Having regard to the commitments entered into by the French authorities, the aid may be deemed to be compatible with the internal market,

HAS ADOPTED THIS DECISION:

Article 1

The State aid that France is planning to implement in favour of the PSA Peugeot Citroën SA Group, in the form of a State guarantee covering the bond issues of Banque PSA Finances up to 31 December 2016 and capped at EUR 7 billion (with a gross grant equivalent of EUR 486 million), and in the form of repayable advances of EUR 85,9 million for the conduct of the 50CO2Cars R&D project, namely a total amount of aid of EUR 571,9 million, is compatible with the internal market.

The implementation of this State aid is therefore approved.

Article 2

This Decision is addressed to the French Republic.

Done at Brussels, 29 July 2013.

For the Commission

Joaquín ALMUNIA

Vice-President

---

(1)  
  OJ C 275, 16.11.2007, p. 18.

1

(2)  
  OJ C 137, 16.5.2013, p. 10.

2

(3)  The average penetration rate of 29,8 % masks differences between the penetration rates in the various segments. In particular, the penetration rate is higher in segments B and C with rates of above 30 % and even 40 % in some countries. Vehicle purchase financing activities are therefore concentrated in these segments.

3

(*1)  Confidential information.

*1

(4)  
  OJ C 244, 1.10.2004, p. 2.

4

(5)  
  OJ C 155, 20.6. 2008, p. 10.

5

(6)  The press reported the State's plans to implement the measure on 17 October 2012.

6

(7)  According to the termsheet examples provided by France on 7 January 2013: ‘
  Drawings to be subject to the favourable vote by the French Parliament of the French State supporting plan (adoption of the plan in the Finance Law)
  ’.

7

Drawings to be subject to the favourable vote by the French Parliament of the French State supporting plan (adoption of the plan in the Finance Law)

(8)  See the list of operators, as laid down by Article 8 of Law No 2010-237 mentioned above, and Decree No 2010-442 of 3 May 2010.

8

(9)  
  OJ C 78, 11.3.2011, p. 33.

9

(10)  Commission Regulation (EC) No 800/2008 of 6 August 2008 declaring certain categories of aid compatible with the common market in application of Articles 87 and 88 of the Treaty (General Block Exemption Regulation) (OJ L 214, 9.8.2008, p. 3).

10

(11)  In this respect, the Commission notes in particular that the public financing of (non-economic) research work outside research organisations does not contain a State aid element.

11

(12)  
  OJ C 323, 30.12.2006, p. 1.

12

(13)  See in particular point 2.1, final paragraph of the R&D&I Framework: ‘Aid for research and development and innovation for undertakings in difficulty within the meaning of the Community Guidelines on State aid for rescue and restructuring undertakings in difficulty is excluded from the scope of this framework’.

13

(14)  Within the meaning of the definitions of Articles 30(1), 30(2) and 30(3) of the GBER (which coincide with the definitions of Articles 2(2)(e), (f) and (g) of the R&D&I Framework).

14

(15)  The costs of the 50CO2Cars project have been allocated to the R&D categories defined in Article 31(5) of the GBER (corresponding to the categories of point 5.1.4 of the R&D&I Framework).

15

2

(16)  Segments D and E include vehicles of the ‘family’, ‘road’, ‘monospace’ and ‘all-terrain’ types whose dimensions vary on average in Europe from 4,40 to 5 metres. The Peugeot 508 Saloon, 508 SW, 807, 4007 and the Citroën C5 Saloon, C5 Estate, DS5, C8, C-Crosser and C6 are part of this segment.

16

(17)  The storage unit, the electrical power machinery and its control electronics and the voltage converter enabling a dual-voltage network.

17

(18)  The ‘Harbour’ capacity is the industry standard. It assumes that, for each plant, two shifts work eight hours a day, 235 days a year. The Harbour usage rate shows the volume of vehicles actually produced in each plant in comparison with the Harbour capacity.

18

(19)  The medium-term plan is the document used by the PSA Group's financial management to present forecasts of the Group's results in future years.

19

(20)  LCV: light commercial vehicle.

20

(21)  This is the ratio calculated by relating sales of vehicles financed by loans from the BPF bank to total PSA Group sales.

21

(22)  RCI Banque SA is a wholly-owned subsidiary of Renault SAS. RCI Banque finances sales of Renault Group and Nissan Group brands.

22

(23)  Germany, Austria, Belgium, Italy, Spain, Netherlands, Portugal, Switzerland, France, United Kingdom.

23

(24)  The G5 aggregate includes the following countries: France, Germany, Italy, Spain and the United Kingdom.

24

(25)  The M5 aggregate includes the following countries: Belgium, Netherlands, Switzerland, Austria and Portugal.

25

(26)  The G10 aggregate includes the ten countries included in this table.

26

(27)  Disposal net of costs of EUR 797 million, to which an exceptional dividend of EUR 100 million is added, and from which EUR 19 million, corresponding to the cancellation of the gross self-financing margin, is deducted.

27

(28)  The ‘Core Tier 1’ ratio is a solvency ratio from which the solvency of banks can be assessed. It relates equity to assets held (risk-weighted).

28

(29)  Moody's has currently set this difference at three notches as a result of the guarantee from which BPF is benefiting.

29

(30)  Union nationale interprofessionnelle pour l'emploi dans l'industrie et le commerce [National Professional Union for Employment in Industry and Trade].

30

(31)  Caisse d'amortissement de la dette sociale [Social Debt Amortisation Fund].

31

(32)  World Economic Outlook, Chapters 1 and 2, April 2013.

32

(33)  The aim is to reduce CO2 emissions by limiting the size of engines and providing an appropriate supercharger.

33

2

(34)  Commission Decision of 1 December 2004, Case C-504/03, Bull, recital 51, Commission Decision of 18 February 2004, Case C-28/02, Bankgesellschaft Berlin AG, recital 236, Decision of 3 July 2001, Case C-33/98, Babcock Wilcox Espana SA, recital 98.

34

(35)  At the most recent congress in Vienna the VAG Group presented its hybrid technology ‘assembly kit’ by means of which a hybridisation system can be adapted to all the various shapes of the Group's vehicles at minimal cost. Cited source: VAG Group presentation report at the 34th Vienna Symposium, 26 April 2013, p. 28.

35

(36)  
  ‘Micro-hybridisation’ corresponding to powers of 2 to 4 kW; ‘mild-hybridisation’ to powers of 8 to 15 kW; ‘full-hybridisation’ to powers of more than 20 kW.

36

(37)  The French authorities confirm that, as long as it can be industrialised in an economically acceptable way, the PSA Group has already mastered the plug-in technology.

37

(38)  The word ‘modify’ is underlined in the original text notified by the French authorities.

38

(39)  The French authorities point out that this in-house production may well be no more than partial and will depend on the results of the 50CO2Cars project'.

39

2

(40)  The French authorities stress that there was an adverse change of 30 % in the exchange rate between the euro and the yen between 2009 and 2012, which returned to its 2009 parity between late 2012 and May 2013. This volatility makes the procurement costs of automatic gearboxes very uncertain. On top of this, there are also customs duties which France considers to be high.

40

(41)  The main components of the 50CO2Cars system are specific to diesel. In the view of the French authorities, however, adapting this technology to petrol engines of equivalent power would involve only ‘moderate R&D investment over a very short period’.

41

2

(42)  Cited source: http://www.pikeresearch.com/research/clean-diesel-vehicles

42

(43)  In a memorandum dated 11 July 2013, the French authorities explained that, while the development costs and the manufacturing cost price of the vehicle components can be calculated in proportional terms, the proportion of the sale price of a vehicle represented by the engine cannot be calculated as an absolute value. They therefore proposed a ‘margin-based’ approach in which scenarios A and C (and B and C) were compared from the point of view of the differences in outgoing flows for the different projects (R&D costs and industrial investment) and the differences in incoming flows (revenue generated by sales of vehicles or the development of additional services). The indicator provided makes it possible to compare the relative profitability of the scenarios for the components in question.

43

(44)  Fiat cites the example of its own captive bank, whose penetration rate increased from 23,3 % in 2012 to 39,6 % in 2013 following a change in its commercial strategy to offer customers more competitive financing terms.

44

(45)  See in particular the judgment of the Court of Justice of 21 March 1991 in Case C-305/89 Italy v Commission [1991] ECR I-1603.

45

Italy

Commission

(46)  See Morgan Stanley, 21 August 2012, ‘Volkswagen — It's Cheaper to Own a VW’.

46

(47)  See Moody's, 5 February 2013, ‘Key rating drivers for European car financiers’.

47

(48)  This finance was initially notified as taking the form of grants (of EUR 24,5 million) and repayable advances (of EUR 61,4 million). Bearing in mind the compensatory measure proposed by the French authorities (described in recital 256 above), it will ultimately take the form of repayable advances of EUR 85,9 million.

48

(49)  
  OJ C 195, 19.8.2009, p. 9.

49

(50)  The report ‘For Global Automakers, The Road Ahead Varies From Region To Region’ of 24 April 2013, predicts that the European market will not return, in terms of volumes, to the 2011 level before 2018, while the IHS projections predict such a return from 2014.

50

(51)  As noted in recital 39 above, the R&D&I Framework does not apply to firms in difficulty which are, moreover, excluded throughout the term of the restructuring plan, as specified in point 16 of the Rescue and Restructuring Guidelines: ‘Once a restructuring or liquidation plan for which aid has been requested has been established and is being implemented, all further aid will be considered as restructuring aid’.

51

(52)  Paragraph 234 of the comments.

52

(53)  The G5 indicator, included in the G10 indicator, already accounts, as noted in recital 361 above, for [...]* % of the financing granted by BPF.

53

(54)  Memorandum from the French authorities of 7 December 2012: counterfactual scenario — preliminary impact on the PSA Group.

54

(55)  It should also be noted that this penetration rate of [26-29]* % is substantially below the rate initially proposed by the French authorities in the first version of the compensatory measure: namely 33,4 %, as shown in Table 7 in recital 102.

55

(56)  For instance, if the penetration rate is [30-40]* % (in comparison with the current [29-31]* %), the increase in the cost of the guarantee will be [70-80]* basis points.

56

(57)  For instance, if the penetration rate is [20-30]* % (in comparison with the current [29-31]* %), the increase in the cost of the guarantee will be no more than [20-30]* basis points.

57

---

ANNEX

IMPLEMENTATION AND INDEPENDENT EXPERT

1.   APPOINTMENT OF AN INDEPENDENT EXPERT

| (1) | The French authorities undertake that the PSA Group will appoint an Independent Expert responsible for detailed monitoring of the implementation of the commitments made in the letter of commitments of 23 July 2013 (‘the Independent Expert’) for the term of the restructuring plan, namely until 31 December 2015. |
| --- | --- |

(1)

| (2) | The Independent Expert is to be independent of the PSA Group. In view of his investment banking, consultancy or accountancy background, the Independent Expert will possess all the expertise and knowledge needed to perform his mandate and may not at any time be subject to a conflict of interests. The remuneration paid to the Independent Expert by the PSA Group will be such that it does not in any way prejudice the effective and independent performance of his tasks. |
| --- | --- |

(2)

| (3) | The French authorities will submit the names of at least two persons or institutions for appointment as Independent Expert for prior approval by the European Commission, no later than four weeks after the date of notification to the French authorities of the Commission's future decision in Case SA.35611. |
| --- | --- |

(3)

| (4) | The proposals by the French authorities must be detailed enough for the European Commission to verify that the Independent Expert satisfies the conditions set out in this commitment. The proposals should contain the following information in particular:






  (a) | a draft mandate, detailing all the terms under which the Independent Expert is to perform his tasks; |
| --- | --- | --- |

(4)

(a)

a draft mandate, detailing all the terms under which the Independent Expert is to perform his tasks;

| (b) | a draft work plan detailing the way in which the Independent Expert proposes to carry out his tasks. |
| --- | --- |

(b)

a draft work plan detailing the way in which the Independent Expert proposes to carry out his tasks.

| (5) | The European Commission may approve or reject the proposed Independent Expert(s) and may approve the draft mandate subject to any changes that it considers necessary for the Independent Expert to be able to perform his tasks. If the European Commission approves only one of the PSA Group's proposals, the Group will appoint that person or institution as Independent Expert or will take the necessary steps for that person or institution to be appointed pursuant to the draft mandate approved by the European Commission. If more than one name is approved, the PSA Group will be free to decide which of the persons or institutions it wishes to appoint as Independent Expert. The Independent Expert will be appointed within one week of approval by the Commission and pursuant to the draft mandate approved by the Commission. |
| --- | --- |

(5)

| (6) | If all the proposals by the French authorities are rejected, the French authorities undertake that the PSA Group will propose at least two further persons or institutions in accordance with the conditions and the procedure set out in this commitment, within two weeks of notification by the European Commission of its rejection of the first proposal. |
| --- | --- |

(6)

| (7) | If the European Commission rejects the French authorities' new proposals, the Commission will appoint an Independent Expert who must be appointed by the PSA Group under the draft mandate approved by the Commission. |
| --- | --- |

(7)

2.   MISSIONS AND OBLIGATIONS OF THE INDEPENDENT EXPERT

| (8) | The Independent Expert will (i) assist the European Commission in verifying that the PSA Group is complying with the obligations incumbent upon it under the letter of commitments of 23 July 2013; and (ii) carry out his tasks as defined in the letter of commitments of 23 July 2013. The Independent Expert will perform his tasks pursuant to the work plan approved by the European Commission, which may be amended with the Commission's approval. The European Commission may, on its own initiative or at the request of the Independent Expert or the PSA Group, give instructions to the Independent Expert. The PSA Group may not give instructions to the Independent Expert. |
| --- | --- |

(8)

| (9) | The Independent Expert's mission is to ensure that all the obligations set out in the letter of commitments of 23 July 2013 are complied with and fully implemented and to ensure that the PSA Group implements the restructuring plan notified on 12 March 2013 to the European Commission. |
| --- | --- |

(9)

| (10) | The Independent Expert:






  (a) | will, in his first report, propose to the European Commission a detailed work plan describing the way in which he will verify compliance with the letter of commitments of 23 July 2013; |
| --- | --- | --- |

(10)

(a)

will, in his first report, propose to the European Commission a detailed work plan describing the way in which he will verify compliance with the letter of commitments of 23 July 2013;

| (b) | will verify that the PSA Group is fully and properly implementing its restructuring plan and in particular:






  — | that it is implementing the commitments set out in the letter of 23 July 2013 and the compensatory measures described in the letter of commitments of 23 July 2013; |
| --- | --- | --- |

(b)

will verify that the PSA Group is fully and properly implementing its restructuring plan and in particular:

—

that it is implementing the commitments set out in the letter of 23 July 2013 and the compensatory measures described in the letter of commitments of 23 July 2013;

| — | that it is implementing the viability measures described in point 6 of the letter of commitments of 23 July 2013; |
| --- | --- |

—

that it is implementing the viability measures described in point 6 of the letter of commitments of 23 July 2013;

| (c) | will ensure compliance with all the other commitments set out in the letter of 23 July 2013; |
| --- | --- |

(c)

will ensure compliance with all the other commitments set out in the letter of 23 July 2013;

| (d) | will perform all the other functions assigned to him in the letter of commitments of 23 July 2013; |
| --- | --- |

(d)

will perform all the other functions assigned to him in the letter of commitments of 23 July 2013;

| (e) | will propose to the PSA Group any measures that he considers useful for compliance with the commitments set out in the letter of 23 July 2013; |
| --- | --- |

(e)

will propose to the PSA Group any measures that he considers useful for compliance with the commitments set out in the letter of 23 July 2013;

| (f) | will take account of changes in regulations that may have an impact on liquidity and solvency in order to monitor trends in the main financial indicators relevant to the projections of the PSA Group's restructuring plan; |
| --- | --- |

(f)

will take account of changes in regulations that may have an impact on liquidity and solvency in order to monitor trends in the main financial indicators relevant to the projections of the PSA Group's restructuring plan;

| (g) | will furnish the European Commission, the French authorities and the PSA Group with a draft report within 30 days of each six-month period. The European Commission, the French authorities and the PSA Group may propose amendments within five working days. Within five working days of receipt of the comments, the Independent Expert will prepare a final report, taking account, as far as possible and at his discretion, of the comments received. The Independent Expert will then send his report to the European Commission and the French authorities. He may then send his report to the PSA Group. In no case may he send his report to the French authorities or to the PSA Group before sending it to the European Commission. If the Independent Expert's final report contains confidential information on the PSA Group, the Independent Expert may send it a non-confidential version.
  The report will in particular describe the steps taken by the Independent Expert to carry out his mission and the PSA Group's compliance with the obligations incumbent upon it under the letter of commitments. It will enable the European Commission to verify that the PSA Group is being managed in accordance with the obligations set out in the letter of commitments of 23 July 2013. If necessary, the European Commission may specify in further detail what it wishes to be included in the report.
  In addition to these reports, the Independent Expert will inform the European Commission with due diligence of any failure to comply with the commitments set out in the letter of 23 July 2013 that he may have cause to suspect, at the same time sending a non-confidential version of his letter to the PSA Group. |
| --- | --- |

(g)

will furnish the European Commission, the French authorities and the PSA Group with a draft report within 30 days of each six-month period. The European Commission, the French authorities and the PSA Group may propose amendments within five working days. Within five working days of receipt of the comments, the Independent Expert will prepare a final report, taking account, as far as possible and at his discretion, of the comments received. The Independent Expert will then send his report to the European Commission and the French authorities. He may then send his report to the PSA Group. In no case may he send his report to the French authorities or to the PSA Group before sending it to the European Commission. If the Independent Expert's final report contains confidential information on the PSA Group, the Independent Expert may send it a non-confidential version.

The report will in particular describe the steps taken by the Independent Expert to carry out his mission and the PSA Group's compliance with the obligations incumbent upon it under the letter of commitments. It will enable the European Commission to verify that the PSA Group is being managed in accordance with the obligations set out in the letter of commitments of 23 July 2013. If necessary, the European Commission may specify in further detail what it wishes to be included in the report.

In addition to these reports, the Independent Expert will inform the European Commission with due diligence of any failure to comply with the commitments set out in the letter of 23 July 2013 that he may have cause to suspect, at the same time sending a non-confidential version of his letter to the PSA Group.

3.   OBLIGATIONS INCUMBENT UPON THE PSA GROUP

| (11) | The PSA Group will provide, and ensure that its directors provide, subject to the rules of professional confidentiality, any cooperation, assistance and information that the Independent Expert may reasonably require from them in order to carry out his tasks under his mandate. The Independent Expert will have unrestricted access to all information, documents and archives and to all directors or employees of the PSA Group necessary for the performance of his tasks. The PSA Group will provide an office at its premises for the Independent Expert and any PSA Group employee must be willing to meet the Independent Expert and provide him with the information that he needs to carry out his tasks. |
| --- | --- |

(11)

| (12) | Subject to agreement by the PSA Group (which may not be refused or delayed without cause) and at its cost, the Independent Expert may call on any consultants that he wishes, especially for legal or business financing advice, if he considers this necessary for the performance of his tasks pursuant to the letter of commitments of 23 July 2013 and provided that the costs and other fees resulting therefrom are reasonable. If the PSA Group refuses to allow the Independent Expert to call on such consultants, the Commission may approve their appointment after hearing the PSA Group. Only the Independent Expert may issue instructions to these consultants. |
| --- | --- |

(12)

4.   REPLACEMENT, DISCHARGE AND APPOINTMENT OF A NEW INDEPENDENT EXPERT

| (13) | If the Independent Expert terminates his functions as described in the commitments set out in the letter of 23 July 2013 or for any other reason, for instance a conflict of interest concerning the Independent Expert:






  (a) | the Commission may, after hearing the Independent Expert, require the PSA Group to replace him; |
| --- | --- | --- |

(13)

(a)

the Commission may, after hearing the Independent Expert, require the PSA Group to replace him;

| (b) | the PSA Group may, with the Commission's approval, replace the Independent Expert. |
| --- | --- |

(b)

the PSA Group may, with the Commission's approval, replace the Independent Expert.

| (14) | If the Independent Expert is discharged from his duties pursuant to section 4 of this Annex, he may be required to continue to perform his duties until a new Independent Expert is appointed and he has passed on to him all the relevant information he has available. The new Independent Expert will be appointed in accordance with the procedure described in section 1 of this Annex. |
| --- | --- |

(14)

| (15) | Subject to point (13) of this Annex, the Independent Expert may end his duties only after he has been discharged from them by the Commission, once he has fulfilled all the obligations incumbent upon him. However, the Commission may at any time require a new Independent Expert to be appointed if it were subsequently to emerge that the commitments set out in the letter of 23 July 2013 have not been fully and properly complied with. |
| --- | --- |

(15)

---

| 30.11.2016 | EN | Official Journal of the European Union | L 325/63 |
| --- | --- | --- | --- |

30.11.2016

EN

Official Journal of the European Union

L 325/63

---

COMMISSION DECISION (EU) 2016/2069

of 1 October 2014

concerning measures SA.14093 (C76/2002) implemented by Belgium in favour of Brussels South Charleroi Airport and Ryanair

(notified under document C(2014) 6849)

(Only the French text is authentic)

(Text with EEA relevance)

THE EUROPEAN COMMISSION,

Having regard to the Treaty on the Functioning of the European Union, and in particular the first subparagraph of Article 108(2) thereof (1),

Having regard to the Agreement on the European Economic Area, and in particular Article 62(1)(a) thereof,

Having called on interested parties to submit their comments pursuant to the above Articles (2), and having regard to these comments,

Whereas:

1.   PROCEDURE

PROCEDURE

| (1) | Following information published in the Belgian press in July 2001 and the receipt of a complaint in January 2002, the Commission was informed that Belgium had granted aid measures to the airline Ryanair Ltd (hereinafter ‘Ryanair’) for the operation of air services at Charleroi Airport. In letters dated 21 November 2001, 13 June 2002 and 4 July 2002, and in a meeting held on 9 October 2002, Belgium provided information on this subject to the Commission. |
| --- | --- |

(1)

Following information published in the Belgian press in July 2001 and the receipt of a complaint in January 2002, the Commission was informed that Belgium had granted aid measures to the airline Ryanair Ltd (hereinafter ‘Ryanair’) for the operation of air services at Charleroi Airport. In letters dated 21 November 2001, 13 June 2002 and 4 July 2002, and in a meeting held on 9 October 2002, Belgium provided information on this subject to the Commission.

| (2) | In a letter dated 11 December 2002 (3) (hereinafter ‘opening decision’), the Commission informed Belgium of its decision to initiate the procedure provided for in Article 108(2) TFEU (hereinafter ‘formal investigation procedure’) in respect of these measures. Belgium submitted its comments on 14 February 2003. |
| --- | --- |

(2)

In a letter dated 11 December 2002 (3) (hereinafter ‘opening decision’), the Commission informed Belgium of its decision to initiate the procedure provided for in Article 108(2) TFEU (hereinafter ‘formal investigation procedure’) in respect of these measures. Belgium submitted its comments on 14 February 2003.

3

| (3) | The opening decision was published in the Official Journal of the European Union (4). The Commission invited interested parties to submit their comments on the measures in question within one month of the publication date. |
| --- | --- |

(3)

The opening decision was published in the Official Journal of the European Union (4). The Commission invited interested parties to submit their comments on the measures in question within one month of the publication date.

4

| (4) | The Commission received comments from interested parties. It forwarded the comments to Belgium by letters dated 19 March and 22 April 2003. Belgium was given the opportunity to respond to them. The Commission received Belgium's observations by letters dated 16 and 27 May 2003. |
| --- | --- |

(4)

The Commission received comments from interested parties. It forwarded the comments to Belgium by letters dated 19 March and 22 April 2003. Belgium was given the opportunity to respond to them. The Commission received Belgium's observations by letters dated 16 and 27 May 2003.

| (5) | At the request of the Commission, three meetings were held with the Belgian authorities on 24 June 2003, 23 July 2003 and 25 July 2003. These meetings were followed by the dispatch of additional information on 27 August 2003, as requested by the Commission. |
| --- | --- |

(5)

At the request of the Commission, three meetings were held with the Belgian authorities on 24 June 2003, 23 July 2003 and 25 July 2003. These meetings were followed by the dispatch of additional information on 27 August 2003, as requested by the Commission.

| (6) | On 19 December 2003 Belgium sent a letter containing additional information to the Commission. In this letter, the Belgian authorities requested another meeting with the Commission; this meeting was held on 16 January 2004. |
| --- | --- |

(6)

On 19 December 2003 Belgium sent a letter containing additional information to the Commission. In this letter, the Belgian authorities requested another meeting with the Commission; this meeting was held on 16 January 2004.

| (7) | On 12 February 2004 the Commission adopted a partly negative final decision (5) (hereinafter ‘2004 decision’). |
| --- | --- |

(7)

On 12 February 2004 the Commission adopted a partly negative final decision (5) (hereinafter ‘2004 decision’).

5

| (8) | This decision was annulled by judgment of the General Court of 17 December 2008 (6) (hereinafter ‘2008 judgment’), obliging the Commission to take a new final decision on the measures in question. The General Court found that the Commission's failure to examine together the measures granted to Ryanair by the Walloon Region (hereinafter ‘Region’) and by the Charleroi airport manager, the public sector company Brussels South Charleroi Airport (hereinafter ‘BSCA’), and to check whether, taken together, these two entities had acted as rational operators in a market economy, was vitiated by an error in law. The 2008 judgment had the effect of reopening the formal investigation procedure, which had been closed by the 2004 decision. |
| --- | --- |

(8)

This decision was annulled by judgment of the General Court of 17 December 2008 (6) (hereinafter ‘2008 judgment’), obliging the Commission to take a new final decision on the measures in question. The General Court found that the Commission's failure to examine together the measures granted to Ryanair by the Walloon Region (hereinafter ‘Region’) and by the Charleroi airport manager, the public sector company Brussels South Charleroi Airport (hereinafter ‘BSCA’), and to check whether, taken together, these two entities had acted as rational operators in a market economy, was vitiated by an error in law. The 2008 judgment had the effect of reopening the formal investigation procedure, which had been closed by the 2004 decision.

6

| (9) | In a letter dated 23 July 2010, the Commission gave Belgium, and the parties having submitted comments in the formal investigation procedure initiated on 11 December 2002, the opportunity to submit further comments in the formal investigation procedure reopened following the 2008 judgment. At the request of the Commission made on 20 April 2011, the Belgian authorities sent further information in letters dated 14 July and 21 September 2011. |
| --- | --- |

(9)

In a letter dated 23 July 2010, the Commission gave Belgium, and the parties having submitted comments in the formal investigation procedure initiated on 11 December 2002, the opportunity to submit further comments in the formal investigation procedure reopened following the 2008 judgment. At the request of the Commission made on 20 April 2011, the Belgian authorities sent further information in letters dated 14 July and 21 September 2011.

| (10) | In a letter dated 21 March 2012, the Commission informed Belgium of its decision to extend the formal investigation procedure to other measures (hereinafter ‘2012 extension decision’). |
| --- | --- |

(10)

In a letter dated 21 March 2012, the Commission informed Belgium of its decision to extend the formal investigation procedure to other measures (hereinafter ‘2012 extension decision’).

| (11) | The 2012 extension decision was published in the Official Journal of the European Union (7). The Commission invited interested parties to submit their comments on the measures in question. |
| --- | --- |

(11)

The 2012 extension decision was published in the Official Journal of the European Union (7). The Commission invited interested parties to submit their comments on the measures in question.

7

| (12) | Belgium submitted its comments on 22 May 2012. The comments of 22 May 2012 did not contain the summary table in Annex I to the 2012 extension decision. This was submitted on 5 June 2012. |
| --- | --- |

(12)

Belgium submitted its comments on 22 May 2012. The comments of 22 May 2012 did not contain the summary table in Annex I to the 2012 extension decision. This was submitted on 5 June 2012.

| (13) | On 9 August 2012 the Commission requested further information on, inter alia, the costs incurred by the Société Wallonne des Aéroports (hereinafter ‘SOWAER’) due to its investments in Charleroi airport and its work for BSCA. On 3 September 2012 the Belgian authorities submitted SOWAER's annual accounts for the years 2001 to 2004. They provided further information on 9 October and 18 October 2012. |
| --- | --- |

(13)

On 9 August 2012 the Commission requested further information on, inter alia, the costs incurred by the Société Wallonne des Aéroports (hereinafter ‘SOWAER’) due to its investments in Charleroi airport and its work for BSCA. On 3 September 2012 the Belgian authorities submitted SOWAER's annual accounts for the years 2001 to 2004. They provided further information on 9 October and 18 October 2012.

| (14) | On 26 October 2012, following a meeting, the Commission requested further information. Belgium provided this information on 9 November 2012. |
| --- | --- |

(14)

On 26 October 2012, following a meeting, the Commission requested further information. Belgium provided this information on 9 November 2012.

| (15) | The Commission received comments from the following interested parties:






  — | comments were received from Interested Party C on 14 September 2012, |
| --- | --- | --- |

(15)

The Commission received comments from the following interested parties:

—

comments were received from Interested Party C on 14 September 2012,

| — | comments were received from the Board of Airline Representatives on 17 September 2012, as also comments from Air France, the Association of European Airlines and the Brussels Airport Company, |
| --- | --- |

—

comments were received from the Board of Airline Representatives on 17 September 2012, as also comments from Air France, the Association of European Airlines and the Brussels Airport Company,

| — | comments were received from Brussels Airlines on 18 September 2012, |
| --- | --- |

—

comments were received from Brussels Airlines on 18 September 2012,

| — | comments were received from BSCA on 4 October 2012, |
| --- | --- |

—

comments were received from BSCA on 4 October 2012,

| — | Ryanair submitted its comments on 3 October 2012, making reference to the comments provided on 30 September 2011, 13 April 2012 and 4 July 2012. Ryanair submitted further comments on 10 April 2013, 20 December 2013, and 17 and 31 January 2014. |
| --- | --- |

—

Ryanair submitted its comments on 3 October 2012, making reference to the comments provided on 30 September 2011, 13 April 2012 and 4 July 2012. Ryanair submitted further comments on 10 April 2013, 20 December 2013, and 17 and 31 January 2014.

| (16) | The Commission forwarded these comments to Belgium on 2 July and 29 October 2012, 3 May 2013, 22 January and 24 February 2014. Belgium was given the opportunity to respond to them. The Commission received Belgium's observations by letters dated 17 July 2012, 14 December 2012 and 5 June 2013. |
| --- | --- |

(16)

The Commission forwarded these comments to Belgium on 2 July and 29 October 2012, 3 May 2013, 22 January and 24 February 2014. Belgium was given the opportunity to respond to them. The Commission received Belgium's observations by letters dated 17 July 2012, 14 December 2012 and 5 June 2013.

| (17) | On 14 January 2014 the Commission requested further information from Belgium, particularly with regard to applying the market economy operator test to the measures granted to BSCA. Belgium responded in letters sent on 7 and 24 February 2014. However, as these responses were incomplete, the Commission sent a reminder to Belgium on 10 March 2014, indicating the missing responses and asking Belgium to answer accordingly. Further information was submitted by Belgium on 24 March 2014. |
| --- | --- |

(17)

On 14 January 2014 the Commission requested further information from Belgium, particularly with regard to applying the market economy operator test to the measures granted to BSCA. Belgium responded in letters sent on 7 and 24 February 2014. However, as these responses were incomplete, the Commission sent a reminder to Belgium on 10 March 2014, indicating the missing responses and asking Belgium to answer accordingly. Further information was submitted by Belgium on 24 March 2014.

| (18) | On 7 February 2014 the Commission requested further information from Belgium, particularly with regard to the measures granted to Ryanair. On 18 and 24 March 2014 Belgium provided some answers to the questions asked. |
| --- | --- |

(18)

On 7 February 2014 the Commission requested further information from Belgium, particularly with regard to the measures granted to Ryanair. On 18 and 24 March 2014 Belgium provided some answers to the questions asked.

| (19) | Also on 7 February 2014, a meeting was held at Charleroi airport between representatives of the Walloon Region, SOWAER and BSCA, on the one hand, and the Commission services on the other. |
| --- | --- |

(19)

Also on 7 February 2014, a meeting was held at Charleroi airport between representatives of the Walloon Region, SOWAER and BSCA, on the one hand, and the Commission services on the other.

| (20) | On 25 February and 11 March 2014, the Commission asked Belgium for further information, including clarifications on the information provided by Belgium on 7 and 24 February 2014 concerning the measures granted by the Region and SOWAER to BSCA. Belgium responded in letters sent on 25 March and 4 April 2014 (annexes sent on 9 April 2014). |
| --- | --- |

(20)

On 25 February and 11 March 2014, the Commission asked Belgium for further information, including clarifications on the information provided by Belgium on 7 and 24 February 2014 concerning the measures granted by the Region and SOWAER to BSCA. Belgium responded in letters sent on 25 March and 4 April 2014 (annexes sent on 9 April 2014).

| (21) | On 17 and 19 March 2014, following the adoption of the Guidelines on State aid to airports and airlines (hereinafter ‘aviation guidelines’ (8)), the Commission called on Belgium and the interested parties to submit their comments on the application of the aviation guidelines to this case. In addition, on 15 April 2014 a notice was published inviting Member States and interested parties to submit their comments, including in this case, on the entry into force of the EU Guidelines on State aid to airports and airlines. The Commission received comments from the Brussels Airport Company, Brussels Airlines, the Board of Airline Representatives, Air France, and the Association for Transport and Environment. It forwarded these comments to Belgium on 26 May 2014. The latter submitted its comments on 26 June 2014. |
| --- | --- |

(21)

On 17 and 19 March 2014, following the adoption of the Guidelines on State aid to airports and airlines (hereinafter ‘aviation guidelines’ (8)), the Commission called on Belgium and the interested parties to submit their comments on the application of the aviation guidelines to this case. In addition, on 15 April 2014 a notice was published inviting Member States and interested parties to submit their comments, including in this case, on the entry into force of the EU Guidelines on State aid to airports and airlines. The Commission received comments from the Brussels Airport Company, Brussels Airlines, the Board of Airline Representatives, Air France, and the Association for Transport and Environment. It forwarded these comments to Belgium on 26 May 2014. The latter submitted its comments on 26 June 2014.

8

| (22) | A further meeting was held on 11 April 2014 between the Commission services on the one hand and Belgium, BSCA and SOWAER on the other hand. Following this meeting, Belgium submitted documents together with a note dated 5 May 2014 on the public service tasks entrusted to BSCA. |
| --- | --- |

(22)

A further meeting was held on 11 April 2014 between the Commission services on the one hand and Belgium, BSCA and SOWAER on the other hand. Following this meeting, Belgium submitted documents together with a note dated 5 May 2014 on the public service tasks entrusted to BSCA.

| (23) | On 5 May 2014 the Commission sent a further request for information to Belgium, to which the latter responded on 13 May 2014. |
| --- | --- |

(23)

On 5 May 2014 the Commission sent a further request for information to Belgium, to which the latter responded on 13 May 2014.

| (24) | In a letter of 7 May 2014, Belgium accepted that, in this case and given the undertaking made by the Commission services to provide it as soon as possible with a Dutch translation of the decision, the Commission could exceptionally notify the decision in French under Article 297 TFEU. Belgium accepted that only the French version of the decision would be authentic and that the decision would take effect on its notification in French. |
| --- | --- |

(24)

In a letter of 7 May 2014, Belgium accepted that, in this case and given the undertaking made by the Commission services to provide it as soon as possible with a Dutch translation of the decision, the Commission could exceptionally notify the decision in French under Article 297 TFEU. Belgium accepted that only the French version of the decision would be authentic and that the decision would take effect on its notification in French.

| (25) | On 2 July 2014 Brussels Airlines submitted an updated version of the comments that it had submitted on 25 September 2013 following the publication of the draft guidelines on State aid to airports and airlines. These comments were forwarded to Belgium on 4 July 2014 and the latter submitted its comments on 18 July 2014. |
| --- | --- |

(25)

On 2 July 2014 Brussels Airlines submitted an updated version of the comments that it had submitted on 25 September 2013 following the publication of the draft guidelines on State aid to airports and airlines. These comments were forwarded to Belgium on 4 July 2014 and the latter submitted its comments on 18 July 2014.

2.   BACKGROUND TO THE MEASURES INVESTIGATED

BACKGROUND TO THE MEASURES INVESTIGATED

2.1.   Creation of BSCA and SOWAER — Background to the commitments made by the Walloon Region and SOWAER concerning Brussels South Charleroi Airport

Creation of BSCA and SOWAER — Background to the commitments made by the Walloon Region and SOWAER concerning Brussels South Charleroi Airport

2.1.1.   Institutional reform of 1980

Institutional reform of 1980

| (26) | Following the institutional reform law of 8 August 1980, the Belgian regions were given the necessary powers to equip and operate public airports and aerodromes situated within their territory, except for Brussels National Airport, over which the Belgian Federal State retained such powers. |
| --- | --- |

(26)

Following the institutional reform law of 8 August 1980, the Belgian regions were given the necessary powers to equip and operate public airports and aerodromes situated within their territory, except for Brussels National Airport, over which the Belgian Federal State retained such powers.

| (27) | According to Belgium (9), the Walloon Government therefore decided to take advantage of the economic potential offered by such transport infrastructure and gradually make the necessary investments. On 2 May 1989 the Walloon Government ratified a Ministry of Transport note according to which ‘The main aim of the Executive is therefore to do everything to ensure that Walloon airports and aerodromes reach their breakeven point quickly. To achieve this goal, several actions have to be carried out together, especially in relation to infrastructure.’ |
| --- | --- |

(27)

According to Belgium (9), the Walloon Government therefore decided to take advantage of the economic potential offered by such transport infrastructure and gradually make the necessary investments. On 2 May 1989 the Walloon Government ratified a Ministry of Transport note according to which ‘The main aim of the Executive is therefore to do everything to ensure that Walloon airports and aerodromes reach their breakeven point quickly. To achieve this goal, several actions have to be carried out together, especially in relation to infrastructure.’

9

2.1.2.   Creation of BSCA and Region/BSCA agreement of 1991

Creation of BSCA and Region/BSCA agreement of 1991

| (28) | In 1991 the Region set up BSCA to manage Brussels South Charleroi Airport (hereinafter ‘Charleroi airport’). |
| --- | --- |

(28)

In 1991 the Region set up BSCA to manage Brussels South Charleroi Airport (hereinafter ‘Charleroi airport’).

| (29) | Under an agreement dated 9 July 1991 (hereinafter ‘Region/BSCA agreement’), the Region granted BSCA for a period of 50 years:






  — | a service concession for the commercial management of the public property of Charleroi airport, |
| --- | --- | --- |

(29)

Under an agreement dated 9 July 1991 (hereinafter ‘Region/BSCA agreement’), the Region granted BSCA for a period of 50 years:

—

a service concession for the commercial management of the public property of Charleroi airport,

| — | a property concession covering the permanent and exclusive use of the airport zone. |
| --- | --- |

—

a property concession covering the permanent and exclusive use of the airport zone.

| (30) | The Region/BSCA agreement — including the schedule of conditions annexed to the agreement (hereinafter ‘schedule of conditions’) — determines how the costs are shared between the Region and BSCA:






  (a) | With regard to the service concession, the Region/BSCA agreement (10) provides that BSCA ‘shall be responsible for the cost’ arising from the obligations associated with the technical and commercial management of the airport zone. However, under Article 25 of the schedule of conditions, the Region will cover ‘the cost of fire (11) and maintenance (12) services’ until 1 January 1997. |
| --- | --- | --- |

(30)

The Region/BSCA agreement — including the schedule of conditions annexed to the agreement (hereinafter ‘schedule of conditions’) — determines how the costs are shared between the Region and BSCA:

(a)

With regard to the service concession, the Region/BSCA agreement (10) provides that BSCA ‘shall be responsible for the cost’ arising from the obligations associated with the technical and commercial management of the airport zone. However, under Article 25 of the schedule of conditions, the Region will cover ‘the cost of fire (11) and maintenance (12) services’ until 1 January 1997.

10

11

12

| (b) | With regard to the property concession, the agreement provides that the Region is responsible for preparing the concession area, as well as for any development, installation and equipment work in this area (13), whilst BSCA is responsible for cleaning and maintaining the concession area ... (14). The schedule of conditions (15) also provides for an annual or multiannual equipment programme, proposed by BSCA and decided in agreement with the Region, that will be financed by the concession authority. |
| --- | --- |

(b)

With regard to the property concession, the agreement provides that the Region is responsible for preparing the concession area, as well as for any development, installation and equipment work in this area (13), whilst BSCA is responsible for cleaning and maintaining the concession area ... (14). The schedule of conditions (15) also provides for an annual or multiannual equipment programme, proposed by BSCA and decided in agreement with the Region, that will be financed by the concession authority.

13

14

15

| (31) | As regards fees, the agreement (16) provides that:






  — | BSCA is authorised to collect air traffic fees as well as fees corresponding to any services provided, |
| --- | --- | --- |

(31)

As regards fees, the agreement (16) provides that:

16

—

BSCA is authorised to collect air traffic fees as well as fees corresponding to any services provided,

| — | as consideration for the concession, BSCA pays the Region an annual fee of 35 % of the airport charges collected by BSCA in the previous year. This fee is allocated to a fund for the financial resolution of any environmental problems caused by the airport's operation. |
| --- | --- |

—

as consideration for the concession, BSCA pays the Region an annual fee of 35 % of the airport charges collected by BSCA in the previous year. This fee is allocated to a fund for the financial resolution of any environmental problems caused by the airport's operation.

2.1.3.   Measures relating to payment of the ‘fire-maintenance’ subsidy by the Region to BSCA from 1997 to 2002

Measures relating to payment of the ‘fire-maintenance’ subsidy by the Region to BSCA from 1997 to 2002

| (32) | Under Amendment No 2 to the schedule of conditions, payment of the ‘fire and maintenance services cost’ by the Region was extended until 1 January 2000. |
| --- | --- |

(32)

Under Amendment No 2 to the schedule of conditions, payment of the ‘fire and maintenance services cost’ by the Region was extended until 1 January 2000.

| (33) | The Region also paid the fire and maintenance services cost for the years 2000 (17) and 2001 (18). |
| --- | --- |

(33)

The Region also paid the fire and maintenance services cost for the years 2000 (17) and 2001 (18).

17

18

| (34) | As regards the year 2002, Belgium states that, although the Region had always planned to continue granting compensation for these costs, the creation of SOWAER and the introduction of a new legal framework led to a delay in formalising the extension of this compensation. According to Belgium, the continuation of this payment was confirmed in a letter of 5 July 2001 sent by BSCA to the Walloon transport and facilities administration, detailing the main lines of BSCA's 2002 budget covering the costs of these services, following a telephone conversation during which the payment of these services by the Region for 2002 had apparently been confirmed. |
| --- | --- |

(34)

As regards the year 2002, Belgium states that, although the Region had always planned to continue granting compensation for these costs, the creation of SOWAER and the introduction of a new legal framework led to a delay in formalising the extension of this compensation. According to Belgium, the continuation of this payment was confirmed in a letter of 5 July 2001 sent by BSCA to the Walloon transport and facilities administration, detailing the main lines of BSCA's 2002 budget covering the costs of these services, following a telephone conversation during which the payment of these services by the Region for 2002 had apparently been confirmed.

2.1.4.   Formulation of the investment plan for Charleroi airport in 1999-2000

Formulation of the investment plan for Charleroi airport in 1999-2000

| (35) | At the end of the 1990s, a number of studies on the options for developing Charleroi airport were carried out by external consultants. Thus the Region asked Tractebel to conduct a strategic development study on Charleroi airport. This study was completed in April 2000 (19). At the same time, a study carried out by Roland Berger International Management Consultant in July 2000 examined the development of an airport strategy for Wallonia (20). Finally, as part of the negotiations with the Region at the beginning of 2001 with a view to possibly participating in the capital of BSCA, Grands Travaux de Marseille ordered a study into the airport's development potential (21). |
| --- | --- |

(35)

At the end of the 1990s, a number of studies on the options for developing Charleroi airport were carried out by external consultants. Thus the Region asked Tractebel to conduct a strategic development study on Charleroi airport. This study was completed in April 2000 (19). At the same time, a study carried out by Roland Berger International Management Consultant in July 2000 examined the development of an airport strategy for Wallonia (20). Finally, as part of the negotiations with the Region at the beginning of 2001 with a view to possibly participating in the capital of BSCA, Grands Travaux de Marseille ordered a study into the airport's development potential (21).

19

20

21

| (36) | According to Belgium, even before these studies and due to technical constraints associated with the existing infrastructure (22), it was clear that a new terminal needed to be built in the northern part of the site. Land had already been compulsorily purchased by the intercommunal body Igretec, which was responsible for creating the ‘Aéropôle’ airport business park. The Region itself compulsorily purchased further land during the 1990s, and in 1999 Igretec transferred to the Region the land that it had purchased. It was on this land that the new passenger terminal, which is now operational, was built. |
| --- | --- |

(36)

According to Belgium, even before these studies and due to technical constraints associated with the existing infrastructure (22), it was clear that a new terminal needed to be built in the northern part of the site. Land had already been compulsorily purchased by the intercommunal body Igretec, which was responsible for creating the ‘Aéropôle’ airport business park. The Region itself compulsorily purchased further land during the 1990s, and in 1999 Igretec transferred to the Region the land that it had purchased. It was on this land that the new passenger terminal, which is now operational, was built.

22

| (37) | During a session on 20 July 2000, the Region approved the outlines of a framework agreement on a multiannual investment programme for Charleroi airport, referring in particular to the ‘concept of a new passenger terminal’, with a total budget of EUR 113,74 million.

  Table 1


  Infrastructure investment planned by the framework agreement of 20 July 2000
















  (million) |
| --- | --- |
| | 2000 | 2001 | 2002 | 2003 | 2004 | 2005 | 2006 | 2007 | Total BEF | Total EUR |
| Land | 145 | | | | | 38 | | | 183 | 4,54 |
| Infrastructure | 340 | 613 | 601 | 1 044 | 412 | 100 | 923 | 372 | 4 405 | 109,20 |

(37)

During a session on 20 July 2000, the Region approved the outlines of a framework agreement on a multiannual investment programme for Charleroi airport, referring in particular to the ‘concept of a new passenger terminal’, with a total budget of EUR 113,74 million.

Table 1

Table 1

Infrastructure investment planned by the framework agreement of 20 July 2000

Infrastructure investment planned by the framework agreement of 20 July 2000

(million)

2000

2001

2002

2003

2004

2005

2006

2007

Total BEF

Total EUR

Land

145

38

183

4,54

Infrastructure

340

613

601

1 044

412

100

923

372

4 405

109,20

| (38) | On 8 November 2000 the Region adopted a decision implementing its decision of 20 July 2000, amending the assumptions of the multiannual investment programme and increasing the total investment cost to EUR 121 million. However, according to the note attached to this decision, ‘investments in the new terminal and its associated infrastructure will only be made as and when specific needs arise. The funding of these investments must be examined as the work is carried out’. The note sets out the calculation, at this stage, of the costs of a new terminal: ‘if actually required by the airport ..., the construction of the new terminal and its associated infrastructure could result in an investment in the order of MBEF 1 514’, i.e. approximately EUR 37,5 million, without, however, the implementation timetable of this sum being detailed (see Table 9). The arrangements for financing the Charleroi airport investment programme were also not detailed at this stage (23).

  Table 2


  Infrastructure investment planned by the note attached to the decision of 8 November 2000














  (million) |
| --- | --- |
| | 2000 | 2001 | 2002 | 2003 | 2004 | Post-2004 | Total BEF | Total EUR |
| Total A | 93 | 160 | 15 | | 38 | | 306 | 7,59 |
| Total B | 12 | 729 | 709 | 548 | 319 | 743 | 3 060 | 75,86 |
| Terminal | 0 | 0 | 1 514 | 1 514 | 37,53 |
| | | | | | | | | |
| Total | 105 | 889 | 2 238 | 548 | 357 | 743 | 4 880 | 120,97 |
| A: Direct financing by the Region; B: Investment grants. |

(38)

On 8 November 2000 the Region adopted a decision implementing its decision of 20 July 2000, amending the assumptions of the multiannual investment programme and increasing the total investment cost to EUR 121 million. However, according to the note attached to this decision, ‘investments in the new terminal and its associated infrastructure will only be made as and when specific needs arise. The funding of these investments must be examined as the work is carried out’. The note sets out the calculation, at this stage, of the costs of a new terminal: ‘if actually required by the airport ..., the construction of the new terminal and its associated infrastructure could result in an investment in the order of MBEF 1 514’, i.e. approximately EUR 37,5 million, without, however, the implementation timetable of this sum being detailed (see Table 9). The arrangements for financing the Charleroi airport investment programme were also not detailed at this stage (23).

23

Table 2

Table 2

Infrastructure investment planned by the note attached to the decision of 8 November 2000

Infrastructure investment planned by the note attached to the decision of 8 November 2000

(million)

2000

2001

2002

2003

2004

Post-2004

Total BEF

Total EUR

Total A

93

160

15

38

306

7,59

Total B

12

729

709

548

319

743

3 060

75,86

Terminal

0

0

1 514

1 514

37,53

Total

105

889

2 238

548

357

743

4 880

120,97

A: Direct financing by the Region; B: Investment grants.

A: Direct financing by the Region; B: Investment grants.

2.1.5.   Creation of SOWAER on 1 July 2001

Creation of SOWAER on 1 July 2001

| (39) | On 1 July 2001 the Region formed a company under its exclusive control, the Société Wallonne des Aéroports (hereinafter ‘SOWAER’), to develop the Region's airport infrastructure, place this infrastructure at the disposal of the airport management companies in question, and keep it operational by covering the costs of major repairs and maintenance. |
| --- | --- |

(39)

On 1 July 2001 the Region formed a company under its exclusive control, the Société Wallonne des Aéroports (hereinafter ‘SOWAER’), to develop the Region's airport infrastructure, place this infrastructure at the disposal of the airport management companies in question, and keep it operational by covering the costs of major repairs and maintenance.

| (40) | Beforehand, in a decision of 23 May 2001 concerning the ‘establishment of a financial mechanism and [the] creation of a specialised company’, the Region had approved the articles of association and financial plan of SOWAER for the years 2001 to 2004 (24), including a total investment amount for Charleroi airport of MBEF 3 753, i.e. approximately EUR 93 million, of which EUR 28 million was intended for the new terminal (see Table 3).

  Table 3


  Infrastructure investment planned by the SOWAER financial plan approved by the Region on 23 May 2001












  (million) |
| --- | --- |
| | 2001 | 2002 | 2003 | 2004 | Total BEF | Total EUR |
| Land | 253 | 15 | 0 | 38 | 306 | 7,59 |
| Infrastructure | 741 | 709 | 548 | 319 | 2 317 | 57,44 |
| Terminal | 10 | 500 | 500 | 120 | 1 130 | 28,01 |
| Total | 1 004 | 1 224 | 1 048 | 477 | 3 753 | 93,03 |

(40)

Beforehand, in a decision of 23 May 2001 concerning the ‘establishment of a financial mechanism and [the] creation of a specialised company’, the Region had approved the articles of association and financial plan of SOWAER for the years 2001 to 2004 (24), including a total investment amount for Charleroi airport of MBEF 3 753, i.e. approximately EUR 93 million, of which EUR 28 million was intended for the new terminal (see Table 3).

24

Table 3

Table 3

Infrastructure investment planned by the SOWAER financial plan approved by the Region on 23 May 2001

Infrastructure investment planned by the SOWAER financial plan approved by the Region on 23 May 2001

(million)

2001

2002

2003

2004

Total BEF

Total EUR

Land

253

15

0

38

306

7,59

Infrastructure

741

709

548

319

2 317

57,44

Terminal

10

500

500

120

1 130

28,01

Total

1 004

1 224

1 048

477

3 753

93,03

| (41) | A more detailed financial plan containing the latest versions of the Liège and Charleroi investment programmes was presented to SOWAER's board of directors in March 2002 (25). This plan was subsequently updated at regular intervals (around once a year). |
| --- | --- |

(41)

A more detailed financial plan containing the latest versions of the Liège and Charleroi investment programmes was presented to SOWAER's board of directors in March 2002 (25). This plan was subsequently updated at regular intervals (around once a year).

25

| (42) | The SOWAER financial plan approved on 23 May 2001 also capped the contribution to the environment fund at BEF 75 million (EUR 1,86 million) for the year 2002. This financial plan also included the balance of the environment fund within SOWAER's revenue, given its delegated tasks. |
| --- | --- |

(42)

The SOWAER financial plan approved on 23 May 2001 also capped the contribution to the environment fund at BEF 75 million (EUR 1,86 million) for the year 2002. This financial plan also included the balance of the environment fund within SOWAER's revenue, given its delegated tasks.

2.1.6.   SOWAER/BSCA agreement of 15 April 2002 and Amendment No 3 of 29 March 2002 to the Region/BSCA agreement

SOWAER/BSCA agreement of 15 April 2002 and Amendment No 3 of 29 March 2002 to the Region/BSCA agreement

| (43) | On 15 April 2002 SOWAER, which on 29 March 2002 had taken over the property concession granted to BSCA in 1991, concluded a property sub-concession agreement with BSCA (hereinafter ‘2002 SOWAER/BSCA agreement’) under which:






  (a) | BSCA can exclusively use the airport zone for operating purposes until 2040. Within this airport zone, SOWAER undertakes to conduct an investment programme (hereinafter ‘investment programme’), as detailed in the SOWAER/BSCA agreement, that is identical to the programme mentioned in recital 40 above. SOWAER also undertakes to carry out any major repairs and maintenance on the land, buildings and infrastructure. |
| --- | --- | --- |

(43)

On 15 April 2002 SOWAER, which on 29 March 2002 had taken over the property concession granted to BSCA in 1991, concluded a property sub-concession agreement with BSCA (hereinafter ‘2002 SOWAER/BSCA agreement’) under which:

(a)

BSCA can exclusively use the airport zone for operating purposes until 2040. Within this airport zone, SOWAER undertakes to conduct an investment programme (hereinafter ‘investment programme’), as detailed in the SOWAER/BSCA agreement, that is identical to the programme mentioned in recital 40 above. SOWAER also undertakes to carry out any major repairs and maintenance on the land, buildings and infrastructure.

| (b) | In return for the airport zone being placed at its disposal and for the investment programme and major repairs and maintenance, BSCA must pay a concession fee consisting of:






  — | an annual variable part equal to 35 % of the airport charges, subject to a cap that will change over time (hereinafter ‘capped variable fee’), |
| --- | --- | --- |

(b)

In return for the airport zone being placed at its disposal and for the investment programme and major repairs and maintenance, BSCA must pay a concession fee consisting of:

—

an annual variable part equal to 35 % of the airport charges, subject to a cap that will change over time (hereinafter ‘capped variable fee’),

| — | an annual fixed fee, which will also change over time (hereinafter ‘fixed fee’). |
| --- | --- |

—

an annual fixed fee, which will also change over time (hereinafter ‘fixed fee’).

| (44) | Almost at the same time (29 March 2002), the Region and BSCA concluded an amendment to the Region/BSCA agreement. Under this Amendment No 3 to the Region/BSCA agreement (26), the Region undertook to pay BSCA:






  — | a subsidy enabling the Region to assume the costs of the airport land, buildings and infrastructure being placed at the disposal of BSCA by SOWAER. This subsidy corresponded to the fixed fee mentioned in recital 43, meaning that BSCA ultimately bore only the capped variable fee, |
| --- | --- | --- |

(44)

Almost at the same time (29 March 2002), the Region and BSCA concluded an amendment to the Region/BSCA agreement. Under this Amendment No 3 to the Region/BSCA agreement (26), the Region undertook to pay BSCA:

26

—

a subsidy enabling the Region to assume the costs of the airport land, buildings and infrastructure being placed at the disposal of BSCA by SOWAER. This subsidy corresponded to the fixed fee mentioned in recital 43, meaning that BSCA ultimately bore only the capped variable fee,

| — | a subsidy reimbursing the costs (expenses and investments) incurred by BSCA for the ‘fire and maintenance’ services. Amendment No 3 also amended Article 25 of the schedule of conditions, in particular providing for the inclusion of investment costs and/or investment depreciation costs in the operating account for the fire and maintenance services cost. |
| --- | --- |

—

a subsidy reimbursing the costs (expenses and investments) incurred by BSCA for the ‘fire and maintenance’ services. Amendment No 3 also amended Article 25 of the schedule of conditions, in particular providing for the inclusion of investment costs and/or investment depreciation costs in the operating account for the fire and maintenance services cost.

2.1.7.   Revision of the investment programme on 3 April 2003

Revision of the investment programme on 3 April 2003

| (45) | On 3 April 2003 the Walloon Government officially noted a revision to the investment programme. This revision specifically amended the capacity of the new terminal in line with the level decided in the initial version of the investment programme. Instead of a capacity of two million passengers, it was now planned to build a terminal with a capacity of three million passengers, together with a larger car park than the one originally planned. This revision involved an additional investment of EUR 33 million. |
| --- | --- |

(45)

On 3 April 2003 the Walloon Government officially noted a revision to the investment programme. This revision specifically amended the capacity of the new terminal in line with the level decided in the initial version of the investment programme. Instead of a capacity of two million passengers, it was now planned to build a terminal with a capacity of three million passengers, together with a larger car park than the one originally planned. This revision involved an additional investment of EUR 33 million.

2.1.8.   SOWAER/BSCA agreement of 4 April 2006 and Amendment No 5 of 10 March 2006 to the Region/BSCA agreement

SOWAER/BSCA agreement of 4 April 2006 and Amendment No 5 of 10 March 2006 to the Region/BSCA agreement

| (46) | The 2002 SOWAER/BSCA agreement was replaced on 4 April 2006 by a new agreement (hereinafter ‘2006 SOWAER/BSCA agreement’). The latter still contained most of the provisions of the 2002 SOWAER/BSCA agreement, but clarified the content of certain services provided by SOWAER to BSCA in addition to the services defined by the 2002 SOWAER/BSCA agreement. It also amended the terms for calculating the concession fees payable by BSCA to SOWAER. |
| --- | --- |

(46)

The 2002 SOWAER/BSCA agreement was replaced on 4 April 2006 by a new agreement (hereinafter ‘2006 SOWAER/BSCA agreement’). The latter still contained most of the provisions of the 2002 SOWAER/BSCA agreement, but clarified the content of certain services provided by SOWAER to BSCA in addition to the services defined by the 2002 SOWAER/BSCA agreement. It also amended the terms for calculating the concession fees payable by BSCA to SOWAER.

| (47) | The Region/BSCA agreement was amended at the same time through Amendment No 5 of 10 March 2006. Article 3.2.2 of the Region/BSCA agreement subsequently provided that:






  — | the costs incurred by BSCA for the fire protection and ground traffic and airport site safety services would be compensated by the Region, |
| --- | --- | --- |

(47)

The Region/BSCA agreement was amended at the same time through Amendment No 5 of 10 March 2006. Article 3.2.2 of the Region/BSCA agreement subsequently provided that:

—

the costs incurred by BSCA for the fire protection and ground traffic and airport site safety services would be compensated by the Region,

| — | this compensation would be capped. The cap, set at EUR 5 774 000 for 2006, would be annually adjusted. |
| --- | --- |

—

this compensation would be capped. The cap, set at EUR 5 774 000 for 2006, would be annually adjusted.

| (48) | The Amendment also stipulated that the amount of the financial compensation had to be revised before July 2009. |
| --- | --- |

(48)

The Amendment also stipulated that the amount of the financial compensation had to be revised before July 2009.

2.1.9.   Amendment No 6 of 15 January 2008 to the Region/BSCA agreement

Amendment No 6 of 15 January 2008 to the Region/BSCA agreement

| (49) | The Region/BSCA agreement was amended again on 15 January 2008 (Amendment No 6). Under this amendment:






  — | the Region entrusts BSCA with, in addition to the fire protection and ground traffic and airport site safety services, the flight tracking and recording, provisional flight planning (27), marshalling (28) and security (29) services (these tasks were previously carried out directly by the Region (30)), |
| --- | --- | --- |

(49)

The Region/BSCA agreement was amended again on 15 January 2008 (Amendment No 6). Under this amendment:

—

the Region entrusts BSCA with, in addition to the fire protection and ground traffic and airport site safety services, the flight tracking and recording, provisional flight planning (27), marshalling (28) and security (29) services (these tasks were previously carried out directly by the Region (30)),

27

28

29

30

| — | the Region's subsidy now covers not only BSCA's costs for the fire protection and ground traffic and airport site safety services (with the cap being maintained), but also for those services associated with security, flight tracking and recording, provisional flight planning and marshalling. |
| --- | --- |

—

the Region's subsidy now covers not only BSCA's costs for the fire protection and ground traffic and airport site safety services (with the cap being maintained), but also for those services associated with security, flight tracking and recording, provisional flight planning and marshalling.

2.2.   Development of Charleroi airport

Development of Charleroi airport

| (50) | Having previously had very few regular users, on 1 May 1997 Charleroi airport welcomed Ryanair, which initially operated one route between Dublin and Charleroi. In April 2001 Ryanair opened its first continental base at Charleroi, initially with two aircraft and some new destinations (Shannon, Glasgow, Pisa, Venice and Carcassonne). |
| --- | --- |

(50)

Having previously had very few regular users, on 1 May 1997 Charleroi airport welcomed Ryanair, which initially operated one route between Dublin and Charleroi. In April 2001 Ryanair opened its first continental base at Charleroi, initially with two aircraft and some new destinations (Shannon, Glasgow, Pisa, Venice and Carcassonne).

| (51) | From 2000 to 2013, traffic at Charleroi increased from around 200 000 passengers to nearly 7 million.

  Table 4


  Annual traffic statistics for Charleroi airport









  Year | Passengers | Year | Passengers |
| --- | --- | --- | --- | --- |
| 2000 | 255 317 | 2007 | 2 458 980 |
| 2001 | 773 431 | 2008 | 2 957 026 |
| 2002 | 1 271 596 | 2009 | 3 937 187 |
| 2003 | 1 804 287 | 2010 | 5 195 372 |
| 2004 | 2 034 140 | 2011 | 5 901 007 |
| 2005 | 1 873 651 | 2012 | 6 156 427 |
| 2006 | 2 166 915 | 2013 | 6 786 979 |

(51)

From 2000 to 2013, traffic at Charleroi increased from around 200 000 passengers to nearly 7 million.

Table 4

Table 4

Annual traffic statistics for Charleroi airport

Annual traffic statistics for Charleroi airport

Year

Passengers

Year

Passengers

2000

255 317

2007

2 458 980

2001

773 431

2008

2 957 026

2002

1 271 596

2009

3 937 187

2003

1 804 287

2010

5 195 372

2004

2 034 140

2011

5 901 007

2005

1 873 651

2012

6 156 427

2006

2 166 915

2013

6 786 979

| (52) | Ryanair has always accounted for over [70-80] (*1) % of the traffic at Charleroi airport. |
| --- | --- |

(52)

Ryanair has always accounted for over [70-80] (*1) % of the traffic at Charleroi airport.

*1

2.3.   Status and share ownership of BSCA

Status and share ownership of BSCA

| (53) | The share ownership of BSCA has been remodelled on numerous occasions since 2001. At the end of 2000, BSCA was over 80 % owned by Sambrinvest (31) and, to a lesser extent, by Cockerill Sambre, Igretec (32) and a few other shareholders. |
| --- | --- |

(53)

The share ownership of BSCA has been remodelled on numerous occasions since 2001. At the end of 2000, BSCA was over 80 % owned by Sambrinvest (31) and, to a lesser extent, by Cockerill Sambre, Igretec (32) and a few other shareholders.

31

32

| (54) | The first alteration stemmed from a decision of the Walloon Government of 8 February 2001. Through this decision, the government ordered Sogepa (33), a company controlled by the Region, to purchase 2 680 shares in BSCA (i.e. 43,79 % of the capital) held by Sambrinvest, the own shares held by BSCA, and the shares that the ‘private shareholders’ wanted to sell. In the same decision, the government also ordered the minister responsible for airport management to ‘prepare a shareholder agreement binding SOWAER, Sambrinvest and possibly Igretec, which will arrange between them the coordination of powers within BSCA, both in the general meeting and on the board of directors and the executive committee.’ |
| --- | --- |

(54)

The first alteration stemmed from a decision of the Walloon Government of 8 February 2001. Through this decision, the government ordered Sogepa (33), a company controlled by the Region, to purchase 2 680 shares in BSCA (i.e. 43,79 % of the capital) held by Sambrinvest, the own shares held by BSCA, and the shares that the ‘private shareholders’ wanted to sell. In the same decision, the government also ordered the minister responsible for airport management to ‘prepare a shareholder agreement binding SOWAER, Sambrinvest and possibly Igretec, which will arrange between them the coordination of powers within BSCA, both in the general meeting and on the board of directors and the executive committee.’

33

| (55) | The Region also decided to increase the capital of BSCA at the same time: the principle of such a recapitalisation appeared in May 2001 in a Walloon Government decision (34). This capital increase, totalling EUR 3 941 300, was carried out on 3 December 2002. SOWAER contributed the cash sum of EUR 3 808 660 in return for 49,23 % of the shares in BSCA.

  Table 5


  Change in the composition of the BSCA share ownership
   (35)













  (%) |
| --- | --- |
| Year | BSCA | SOWAER | Sogepa | Sambrinvest | Igretec | Belgian airport | Other |
| 2000 | 6,21 | — | 0,00 | 82,84 | 2,29 | 0,00 | 8,66 |
| 2001 | 0,00 | — | 55,07 | 39,05 | 2,29 | 0,00 | 3,59 |
| 2002 | 0,00 | 49,23 | 27,01 | 19,16 | 2,32 | 0,00 | 2,28 |
| 2003 | 0,00 | 48,89 | 27,65 | 19,16 | 2,32 | 0,00 | 1,99 |
| 2004 | 0,00 | 48,89 | 27,65 | 19,16 | 2,32 | 0,00 | 1,99 |
| 2005 | 0,00 | 48,89 | 27,65 | 19,16 | 2,32 | 0,00 | 1,99 |
| 2006 | 0,00 | 48,89 | 27,65 | 19,16 | 2,32 | 0,00 | 1,99 |
| 2007 | 0,00 | 48,89 | 27,65 | 19,16 | 2,32 | 0,00 | 1,99 |
| 2008 | 0,00 | 48,89 | 27,65 | 19,16 | 2,32 | 0,00 | 1,99 |
| 2009 | 0,00 | 22,56 | 27,65 | 19,16 | 2,32 | 27,65 | 0,67 |
| 2010 | 0,00 | 22,56 | 27,65 | 19,16 | 2,32 | 27,65 | 0,67 |
| 2011 | 0,00 | 22,56 | 27,65 | 19,16 | 2,32 | 27,65 | 0,67 |
| 2012 | 0,00 | 22,56 | 27,65 | 19,16 | 2,32 | 27,65 | 0,67 |
| 2013 | 0,00 | 22,56 | 27,65 | 19,16 | 2,32 | 27,65 | 0,67 |
| These figures are valid as at 31 December of the year indicated. |

(55)

The Region also decided to increase the capital of BSCA at the same time: the principle of such a recapitalisation appeared in May 2001 in a Walloon Government decision (34). This capital increase, totalling EUR 3 941 300, was carried out on 3 December 2002. SOWAER contributed the cash sum of EUR 3 808 660 in return for 49,23 % of the shares in BSCA.

34

Table 5

Table 5

Change in the composition of the BSCA share ownership
   (35)

Change in the composition of the BSCA share ownership

35

(%)

Year

BSCA

SOWAER

Sogepa

Sambrinvest

Igretec

Belgian airport

Other

2000

6,21

—

0,00

82,84

2,29

0,00

8,66

2001

0,00

—

55,07

39,05

2,29

0,00

3,59

2002

0,00

49,23

27,01

19,16

2,32

0,00

2,28

2003

0,00

48,89

27,65

19,16

2,32

0,00

1,99

2004

0,00

48,89

27,65

19,16

2,32

0,00

1,99

2005

0,00

48,89

27,65

19,16

2,32

0,00

1,99

2006

0,00

48,89

27,65

19,16

2,32

0,00

1,99

2007

0,00

48,89

27,65

19,16

2,32

0,00

1,99

2008

0,00

48,89

27,65

19,16

2,32

0,00

1,99

2009

0,00

22,56

27,65

19,16

2,32

27,65

0,67

2010

0,00

22,56

27,65

19,16

2,32

27,65

0,67

2011

0,00

22,56

27,65

19,16

2,32

27,65

0,67

2012

0,00

22,56

27,65

19,16

2,32

27,65

0,67

2013

0,00

22,56

27,65

19,16

2,32

27,65

0,67

These figures are valid as at 31 December of the year indicated.

| (56) | From 2002 to 2008, SOWAER managed around 49 % of BSCA's capital. According to the Belgian authorities, this management was carried out on behalf of the Walloon Government. |
| --- | --- |

(56)

From 2002 to 2008, SOWAER managed around 49 % of BSCA's capital. According to the Belgian authorities, this management was carried out on behalf of the Walloon Government.

| (57) | In 2009 BSCA opened its capital to a private partner. The consortium Belgian Airports (hereinafter ‘Belgian Airports’), consisting of the Italian group SAVE and the Belgian company Holding Communal S.A. (36), purchased 27,65 % of the shares in the airport manager. Belgian Airports has a right of veto over certain important decisions, including commercial agreements with Ryanair. |
| --- | --- |

(57)

In 2009 BSCA opened its capital to a private partner. The consortium Belgian Airports (hereinafter ‘Belgian Airports’), consisting of the Italian group SAVE and the Belgian company Holding Communal S.A. (36), purchased 27,65 % of the shares in the airport manager. Belgian Airports has a right of veto over certain important decisions, including commercial agreements with Ryanair.

36

3.   DESCRIPTION OF THE MEASURES

DESCRIPTION OF THE MEASURES

| (58) | Two types of measure are covered by this decision:






  — | the measures granted by the Region and SOWAER to BSCA (Section 3.1), |
| --- | --- | --- |

(58)

Two types of measure are covered by this decision:

—

the measures granted by the Region and SOWAER to BSCA (Section 3.1),

| — | the measures granted by the Region, SOWAER and BSCA to Ryanair (Section 3.2). |
| --- | --- |

—

the measures granted by the Region, SOWAER and BSCA to Ryanair (Section 3.2).

3.1.   Measures granted by the Region and SOWAER to BSCA

Measures granted by the Region and SOWAER to BSCA

| (59) | The measures granted to BSCA that are covered by the procedure are as follows:






  — | under the SOWAER/BSCA agreement and investment decisions, the land and infrastructure of Charleroi airport placed at the disposal of BSCA and the implementation of an investment programme intended to modernise and extend said infrastructure, and also the provision of certain services by SOWAER, including major repairs to the infrastructure, in return for a fee paid by BSCA (Section 3.1.1); |
| --- | --- | --- |

(59)

The measures granted to BSCA that are covered by the procedure are as follows:

—

under the SOWAER/BSCA agreement and investment decisions, the land and infrastructure of Charleroi airport placed at the disposal of BSCA and the implementation of an investment programme intended to modernise and extend said infrastructure, and also the provision of certain services by SOWAER, including major repairs to the infrastructure, in return for a fee paid by BSCA (Section 3.1.1);

| — | under the Region/BSCA agreement, the granting by the Region of a subsidy for certain services associated with the airport activities (Section 3.1.2); |
| --- | --- |

—

under the Region/BSCA agreement, the granting by the Region of a subsidy for certain services associated with the airport activities (Section 3.1.2);

| — | the subscription by SOWAER on 3 December 2002 of a capital increase in BSCA (Section 3.1.3). |
| --- | --- |

—

the subscription by SOWAER on 3 December 2002 of a capital increase in BSCA (Section 3.1.3).

3.1.1.   Land and infrastructure of Charleroi airport placed at the disposal of BSCA, including infrastructure constructed under the investment programme, and provision of certain services, particularly major repairs, in return for a concession fee

Land and infrastructure of Charleroi airport placed at the disposal of BSCA, including infrastructure constructed under the investment programme, and provision of certain services, particularly major repairs, in return for a concession fee

3.1.1.1.   
  Land and infrastructure of Charleroi airport placed at the disposal of BSCA, including infrastructure constructed under the investment programme, and provision of certain services, particularly major repairs

Land and infrastructure of Charleroi airport placed at the disposal of BSCA, including infrastructure constructed under the investment programme, and provision of certain services, particularly major repairs

| (60) | Under the 2002 SOWAER/BSCA agreement, SOWAER:






  — | grants BSCA a property sub-concession covering the permanent and exclusive use of the airport zone for operating purposes until 2040, |
| --- | --- | --- |

(60)

Under the 2002 SOWAER/BSCA agreement, SOWAER:

—

grants BSCA a property sub-concession covering the permanent and exclusive use of the airport zone for operating purposes until 2040,

| — | provides BSCA with new investment. The investment programme, which particularly includes the construction of a new terminal, lengthening of the runway, and construction of a taxiway and parking stand for additional aircraft and navigational aid equipment, totals EUR 93 million (37),

  Table 6


  Investment programme annexed to the 2002 SOWAER/BSCA agreement












  (million) |
| --- | --- |
| | 2001 | 2002 | 2003 | 2004 | Total BEF | Total EUR |
| Land | 253 | 15 | 0 | 38 | 306 | 7,59 |
| Infrastructure | 741 | 709 | 548 | 319 | 2 317 | 57,44 |
| Terminal | 10 | 500 | 500 | 120 | 1 130 | 28,01 |
| Total | 1 004 | 1 224 | 1 048 | 477 | 3 753 | 93,03 |

—

provides BSCA with new investment. The investment programme, which particularly includes the construction of a new terminal, lengthening of the runway, and construction of a taxiway and parking stand for additional aircraft and navigational aid equipment, totals EUR 93 million (37),

37

Table 6

Table 6

Investment programme annexed to the 2002 SOWAER/BSCA agreement

Investment programme annexed to the 2002 SOWAER/BSCA agreement

(million)

2001

2002

2003

2004

Total BEF

Total EUR

Land

253

15

0

38

306

7,59

Infrastructure

741

709

548

319

2 317

57,44

Terminal

10

500

500

120

1 130

28,01

Total

1 004

1 224

1 048

477

3 753

93,03

| — | carries out any major repairs and maintenance on the airport land, buildings and infrastructure within the concession area. |
| --- | --- |

—

carries out any major repairs and maintenance on the airport land, buildings and infrastructure within the concession area.

| (61) | The investment programme has been annually revised. These revisions have included both updates connected with additional costs not anticipated in April 2002 and decisions on new investments. In particular, on 3 April 2003 the Walloon Government officially noted a revision to the investment programme approved by SOWAER's board of directors. This revision (38) specifically provided for a new terminal with a larger capacity than that originally envisaged (3 million passengers instead of 2 million) and a larger car park than originally planned. It involved an additional investment of EUR 33 million. |
| --- | --- |

(61)

The investment programme has been annually revised. These revisions have included both updates connected with additional costs not anticipated in April 2002 and decisions on new investments. In particular, on 3 April 2003 the Walloon Government officially noted a revision to the investment programme approved by SOWAER's board of directors. This revision (38) specifically provided for a new terminal with a larger capacity than that originally envisaged (3 million passengers instead of 2 million) and a larger car park than originally planned. It involved an additional investment of EUR 33 million.

38

| (62) | The investment programme was annually revised until 2009 (39). The total cost of SOWAER's investment programme for Charleroi for 2002-2010, as revised during its last update by SOWAER's board of directors in 2009, is EUR 219 103 435 (40). Although this investment programme has been referred to as the ‘investment programme for 2002-2010’, the expenditure was planned until 2017.

  Table 7


  Total cost of SOWAER's investment programme for Charleroi, as revised by SOWAER's board of directors in 2009







  (EUR) |
| --- | --- |
| Type of investment | |
| | |
| Traditional investments | [180 000 000 - 210 000 000 ] |
| Of which land | [4 000 000 - 5 000 000 ] |
| Of which aircraft parking stand | [36 000 000 - 40 000 000 ] |
| Of which new terminal | [80 000 000 - 100 000 000 ] |
| Of which control tower | [10 000 000 - 13 000 000 ] |
| Previous commitments | [1 000 000 - 2 000 000 ] |
| Income generating investments | [3 000 000 - 4 000 000 ] |
| Safety - Security - Environment | [8 000 000 - 11 000 000 ] |
| Extraordinary maintenance | [4 000 000 - 6 000 000 ] |
| | |
| Total | 219 103 435 |
| Source: Annex 7 to the letter from the Belgian authorities of 21 September 2011. |

(62)

The investment programme was annually revised until 2009 (39). The total cost of SOWAER's investment programme for Charleroi for 2002-2010, as revised during its last update by SOWAER's board of directors in 2009, is EUR 219 103 435 (40). Although this investment programme has been referred to as the ‘investment programme for 2002-2010’, the expenditure was planned until 2017.

39

40

Table 7

Table 7

Total cost of SOWAER's investment programme for Charleroi, as revised by SOWAER's board of directors in 2009

Total cost of SOWAER's investment programme for Charleroi, as revised by SOWAER's board of directors in 2009

(EUR)

Type of investment

Traditional investments

[180 000 000 - 210 000 000 ]

Of which land

[4 000 000 - 5 000 000 ]

Of which aircraft parking stand

[36 000 000 - 40 000 000 ]

Of which new terminal

[80 000 000 - 100 000 000 ]

Of which control tower

[10 000 000 - 13 000 000 ]

Previous commitments

[1 000 000 - 2 000 000 ]

Income generating investments

[3 000 000 - 4 000 000 ]

Safety - Security - Environment

[8 000 000 - 11 000 000 ]

Extraordinary maintenance

[4 000 000 - 6 000 000 ]

Total

219 103 435

Source: Annex 7 to the letter from the Belgian authorities of 21 September 2011.

Source:

| (63) | In addition to the major repairs and maintenance, under the 2006 SOWAER/BSCA agreement, SOWAER undertook to provide additional services on behalf of BSCA, including consultancy services of all kinds (legal, environmental, financial, administrative, etc.), analysis and recommendations on noise pollution associated with the airport, and creation and update of a Geographical Information System (GIS). |
| --- | --- |

(63)

In addition to the major repairs and maintenance, under the 2006 SOWAER/BSCA agreement, SOWAER undertook to provide additional services on behalf of BSCA, including consultancy services of all kinds (legal, environmental, financial, administrative, etc.), analysis and recommendations on noise pollution associated with the airport, and creation and update of a Geographical Information System (GIS).

3.1.1.2.   
  Concession fee payable by BSCA to SOWAER

Concession fee payable by BSCA to SOWAER

| (64) | In return for the items described in section 3.1.1.1, BSCA pays SOWAER a concession fee. |
| --- | --- |

(64)

In return for the items described in section 3.1.1.1, BSCA pays SOWAER a concession fee.

(i)   Contractual provisions

(a)   Period from 15 April 2002 to 31 December 2005

| (65) | Under the 2002 SOWAER/BSCA agreement, BSCA was to pay the Region a concession fee consisting of:






  — | a variable annual amount (hereinafter ‘capped variable fee’), equal to 35 % of the airport charges collected during the current year, with a cap set at EUR 883 689 in 2002, which was increased by 2 % per year from 2003 to 2006. This cap was increased to EUR 2 650 000 in 2007, with a 2 % per year increase thereafter and a review in 2015 (41). This fee is allocated to a fund for the financial resolution of any environmental problems caused by the airport's operation, |
| --- | --- | --- |

(65)

Under the 2002 SOWAER/BSCA agreement, BSCA was to pay the Region a concession fee consisting of:

—

a variable annual amount (hereinafter ‘capped variable fee’), equal to 35 % of the airport charges collected during the current year, with a cap set at EUR 883 689 in 2002, which was increased by 2 % per year from 2003 to 2006. This cap was increased to EUR 2 650 000 in 2007, with a 2 % per year increase thereafter and a review in 2015 (41). This fee is allocated to a fund for the financial resolution of any environmental problems caused by the airport's operation,

41

| — | a fixed annual amount (hereinafter ‘fixed fee’), set at EUR 9 371 000 for 2002 and indexed thereafter. This amount was increased to EUR 13 525 000 from 2010 and indexed thereafter (42). |
| --- | --- |

—

a fixed annual amount (hereinafter ‘fixed fee’), set at EUR 9 371 000 for 2002 and indexed thereafter. This amount was increased to EUR 13 525 000 from 2010 and indexed thereafter (42).

42

| (66) | However, under the Region/BSCA concession agreement, as amended on 29 March 2002, BSCA benefited from a subsidy from the Region allowing it to ‘perform the public service tasks forming part of the operation of Charleroi airport, namely the costs associated with using the airport land, buildings and infrastructure placed at its disposal by SOWAER’. This subsidy was equal to the fixed fee, so that only the capped variable fee was actually paid by BSCA. Moreover, under the 2002 SOWAER/BSCA agreement, BSCA was exempt from paying the fixed fee if the subsidy from the Region was not received (43). |
| --- | --- |

(66)

However, under the Region/BSCA concession agreement, as amended on 29 March 2002, BSCA benefited from a subsidy from the Region allowing it to ‘perform the public service tasks forming part of the operation of Charleroi airport, namely the costs associated with using the airport land, buildings and infrastructure placed at its disposal by SOWAER’. This subsidy was equal to the fixed fee, so that only the capped variable fee was actually paid by BSCA. Moreover, under the 2002 SOWAER/BSCA agreement, BSCA was exempt from paying the fixed fee if the subsidy from the Region was not received (43).

43

(b)   Period from 1 January 2006

| (67) | The 2002 SOWAER/BSCA agreement was revised by the 2006 SOWAER/BSCA agreement, applicable from 1 January 2006. Under this agreement (44), BSCA pays SOWAER:






  — | a variable annual amount, set at EUR 1.5 per passenger and EUR 8 per tonne of freight, indexed to the Belgian consumer price index (45). This variable amount was contractually capped at EUR 956 533
   (46) for 2006, and then at EUR 2 651 067 from 2007. Since 2008 it has been increased by 2 % per year, compounded annually, |
| --- | --- | --- |

(67)

The 2002 SOWAER/BSCA agreement was revised by the 2006 SOWAER/BSCA agreement, applicable from 1 January 2006. Under this agreement (44), BSCA pays SOWAER:

44

—

a variable annual amount, set at EUR 1.5 per passenger and EUR 8 per tonne of freight, indexed to the Belgian consumer price index (45). This variable amount was contractually capped at EUR 956 533
   (46) for 2006, and then at EUR 2 651 067 from 2007. Since 2008 it has been increased by 2 % per year, compounded annually,

45

46

| — | an annual fixed amount of EUR 10 094 000, plus 2 % per year. |
| --- | --- |

—

an annual fixed amount of EUR 10 094 000, plus 2 % per year.

| (68) | At the same time, the service concession agreement between the Region and BSCA of 10 March 2006 amends the terms of the Region's subsidy intended to cover the fixed part of the fees payable by BSCA to SOWAER (47) and includes the exemption clause referred to in recital 66 above (48). |
| --- | --- |

(68)

At the same time, the service concession agreement between the Region and BSCA of 10 March 2006 amends the terms of the Region's subsidy intended to cover the fixed part of the fees payable by BSCA to SOWAER (47) and includes the exemption clause referred to in recital 66 above (48).

47

48

| (69) | Lastly, through Amendment No 1 of 27 May 2009 to the 2006 SOWAER/BSCA agreement, BSCA and SOWAER agreed that an additional annual amount of EUR [...] per additional square metre (49) would be paid by BSCA to SOWAER from 2009 with a view to the acquisition of new land by SOWAER and the correlative extension of the scope of the service agreement. These additional sums amounted to EUR 1 206 in 2010, EUR 1 230 in 2011, EUR 1 255 in 2012 and EUR 1 280 in 2013 (50). |
| --- | --- |

(69)

Lastly, through Amendment No 1 of 27 May 2009 to the 2006 SOWAER/BSCA agreement, BSCA and SOWAER agreed that an additional annual amount of EUR [...] per additional square metre (49) would be paid by BSCA to SOWAER from 2009 with a view to the acquisition of new land by SOWAER and the correlative extension of the scope of the service agreement. These additional sums amounted to EUR 1 206 in 2010, EUR 1 230 in 2011, EUR 1 255 in 2012 and EUR 1 280 in 2013 (50).

49

50

(ii)   Amounts of the fees paid by BSCA to SOWAER

| (70) | In the light of these elements, the amounts of the fees actually paid by BSCA to SOWAER are summarised in Table 8, taking into account the compensation paid by the Region to BSCA for transfer to SOWAER.

  Table 8


  Fees paid by BSCA to SOWAER
   (51)










  (EUR) |
| --- | --- |
| Year | Fixed part | Variable part | Total fees | Net fees |
| 2002 | 9 371 000 | 883 689 | 10 254 689 | 883 689 |
| 2003 | 9 558 420 | 901 363 | 10 459 783 | 901 363 |
| 2004 | 9 749 588 | 919 390 | 10 668 978 | 919 390 |
| 2005 | 9 944 580 | 937 778 | 10 882 358 | 937 778 |
| 2006 | 10 094 000 | 956 532 | 11 050 532 | 956 532 |
| 2007 | 10 262 000 | 2 651 067 | 12 913 067 | 2 651 067 |
| 2008 | 10 478 000 | 2 704 088 | 13 182 088 | 2 704 088 |
| 2009 | 10 150 000 | 2 758 170 | 12 908 761 | 2 758 761 |
| 2010 | 10 150 000 | 2 813 333 | 12 964 539 | 2 814 539 |
| 2011 | 10 353 000 | 2 869 600 | 13 223 830 | 2 870 830 |
| 2012 | 10 353 000 | 2 926 992 | 13 281 247 | 2 928 247 |
| 2013 | 10 353 000 | 2 985 532 | 13 339 812 | 2 986 812 |
| In addition to the fixed and variable parts, the total fees include the additional amount associated with the extension of the scope of the service agreement from 2009, as referred to in recital 69. The net fees take into account the subsidy from the Region to BSCA. |

(70)

In the light of these elements, the amounts of the fees actually paid by BSCA to SOWAER are summarised in Table 8, taking into account the compensation paid by the Region to BSCA for transfer to SOWAER.

Table 8

Table 8

Fees paid by BSCA to SOWAER
   (51)

Fees paid by BSCA to SOWAER

51

(EUR)

Year

Fixed part

Variable part

Total fees

Net fees

2002

9 371 000

883 689

10 254 689

883 689

2003

9 558 420

901 363

10 459 783

901 363

2004

9 749 588

919 390

10 668 978

919 390

2005

9 944 580

937 778

10 882 358

937 778

2006

10 094 000

956 532

11 050 532

956 532

2007

10 262 000

2 651 067

12 913 067

2 651 067

2008

10 478 000

2 704 088

13 182 088

2 704 088

2009

10 150 000

2 758 170

12 908 761

2 758 761

2010

10 150 000

2 813 333

12 964 539

2 814 539

2011

10 353 000

2 869 600

13 223 830

2 870 830

2012

10 353 000

2 926 992

13 281 247

2 928 247

2013

10 353 000

2 985 532

13 339 812

2 986 812

In addition to the fixed and variable parts, the total fees include the additional amount associated with the extension of the scope of the service agreement from 2009, as referred to in recital 69. The net fees take into account the subsidy from the Region to BSCA.

3.1.2.   Subsidy paid by the Region for certain services associated with airport activities

Subsidy paid by the Region for certain services associated with airport activities

3.1.2.1.   
  Contractual provisions

Contractual provisions

(a)   Period from 29 March 2002 to 31 December 2005

| (71) | Amendment No 3 of 29 March 2002 to the Region/BSCA agreement amended Article 3.2 of this agreement and provided that the Walloon Region would reimburse the costs inherent in the fire and maintenance services:






  — | the fire service is defined by reference to the standards of the International Civil Aviation Organisation (52), |
| --- | --- | --- |

(71)

Amendment No 3 of 29 March 2002 to the Region/BSCA agreement amended Article 3.2 of this agreement and provided that the Walloon Region would reimburse the costs inherent in the fire and maintenance services:

—

the fire service is defined by reference to the standards of the International Civil Aviation Organisation (52),

52

| — | the maintenance service is defined as ‘technical maintenance services for buildings, runways, surrounding areas, vehicle fleet, etc.’
   (53), and as ‘maintenance of land, buildings and building facilities, and equipment forming part of the concession or placed at the disposal of the concession, such that they are always fit for their intended purpose’
   (54). |
| --- | --- |

—

the maintenance service is defined as ‘technical maintenance services for buildings, runways, surrounding areas, vehicle fleet, etc.’
   (53), and as ‘maintenance of land, buildings and building facilities, and equipment forming part of the concession or placed at the disposal of the concession, such that they are always fit for their intended purpose’
   (54).

53

54

| (72) | Amendment No 3 of 29 March 2002 also amended Article 25 of the schedule of conditions and provided that the concession-holder would present the concession authority with the budget for the fire and maintenance services and that it would keep a separate operating account that could at any time be analysed and checked by the concession authority.

  ‘This operating account shall particularly include:






  — | the full cost of the staff responsible for fire protection and maintenance of the airport site and of training for these staff, including employer costs and associated provisions (new activities), |
| --- | --- | --- |

(72)

Amendment No 3 of 29 March 2002 also amended Article 25 of the schedule of conditions and provided that the concession-holder would present the concession authority with the budget for the fire and maintenance services and that it would keep a separate operating account that could at any time be analysed and checked by the concession authority.

‘This operating account shall particularly include:

—

the full cost of the staff responsible for fire protection and maintenance of the airport site and of training for these staff, including employer costs and associated provisions (new activities),

| — | the costs of various goods and services (including any subcontracting), |
| --- | --- |

—

the costs of various goods and services (including any subcontracting),

| — | the investment costs and/or investment depreciation costs (55), |
| --- | --- |

—

the investment costs and/or investment depreciation costs (55),

55

| — | any costs of subcontracting the fire protection and maintenance’. |
| --- | --- |

—

any costs of subcontracting the fire protection and maintenance’.

(b)   Period from 10 March 2006 to 31 December 2007

| (73) | Amendment No 5 of 10 March 2006 to the Region/BSCA agreement amended Article 3.2.2 of this agreement as follows: ‘The following shall be annually included in the Walloon Region's budget: ... the financial compensation granted by the Walloon Region to BSCA for the costs of providing the fire protection and ground traffic and airport site safety services, in accordance with the conditions laid down by Article 25 of the schedule of conditions annexed to this agreement’. |
| --- | --- |

(73)

Amendment No 5 of 10 March 2006 to the Region/BSCA agreement amended Article 3.2.2 of this agreement as follows: ‘The following shall be annually included in the Walloon Region's budget: ... the financial compensation granted by the Walloon Region to BSCA for the costs of providing the fire protection and ground traffic and airport site safety services, in accordance with the conditions laid down by Article 25 of the schedule of conditions annexed to this agreement’.

| (74) | Amendment No 5 also amended Article 25 of the schedule of conditions. The amended Article 25 provides that: ‘the ground traffic and airport site safety services include routine maintenance of the airport site, technical maintenance services for buildings, runways, surrounding areas and vehicle fleet, minor surfacing work, routine maintenance and repair of the runway and accesses, operational maintenance and servicing of the general lighting and runway lighting, mowing services, rubber removal from the runway and its markings, snow clearance and any other services ensuring the safety of ground traffic, airport site and infrastructures, except for commercial areas of the airport zone’. |
| --- | --- |

(74)

Amendment No 5 also amended Article 25 of the schedule of conditions. The amended Article 25 provides that: ‘the ground traffic and airport site safety services include routine maintenance of the airport site, technical maintenance services for buildings, runways, surrounding areas and vehicle fleet, minor surfacing work, routine maintenance and repair of the runway and accesses, operational maintenance and servicing of the general lighting and runway lighting, mowing services, rubber removal from the runway and its markings, snow clearance and any other services ensuring the safety of ground traffic, airport site and infrastructures, except for commercial areas of the airport zone’.

| (75) | Under Article 25 of the schedule of conditions, the financial compensation was capped at EUR 5 774 000 for 2006. This cap was annually indexed until 31 December 2009. The amount of the financial compensation was to be revised no later than the second half of 2009. |
| --- | --- |

(75)

Under Article 25 of the schedule of conditions, the financial compensation was capped at EUR 5 774 000 for 2006. This cap was annually indexed until 31 December 2009. The amount of the financial compensation was to be revised no later than the second half of 2009.

| (76) | Moreover, Article 25.7 of the schedule of conditions, introduced by Amendment No 5 of 10 March 2006, provides that the amount of the compensation may not exceed the actual costs incurred by BSCA and that any overcompensation of the costs will result in budgetary compensation through the budget entry for the following year. |
| --- | --- |

(76)

Moreover, Article 25.7 of the schedule of conditions, introduced by Amendment No 5 of 10 March 2006, provides that the amount of the compensation may not exceed the actual costs incurred by BSCA and that any overcompensation of the costs will result in budgetary compensation through the budget entry for the following year.

(c)   Period from 1 January 2008

| (77) | Amendment No 6 of 15 January 2008 to the Region/BSCA agreement amended Article 25.1 of the schedule of conditions and added flight tracking and recording, provisional flight planning, marshalling and security to the services already being provided by BSCA (56). |
| --- | --- |

(77)

Amendment No 6 of 15 January 2008 to the Region/BSCA agreement amended Article 25.1 of the schedule of conditions and added flight tracking and recording, provisional flight planning, marshalling and security to the services already being provided by BSCA (56).

56

| (78) | Flight tracking and recording involve adding information on flights (number of passengers, aircraft registration, name of pilot, type of aircraft, nature of flight, origin, weight of aircraft, etc.) to the database of the Walloon administration. Flight planning involves communications, flight plans, slots, radio announcements and management of aircraft parking stands. Flight tracking and recording and flight planning are provided by the ‘navigation office’. |
| --- | --- |

(78)

Flight tracking and recording involve adding information on flights (number of passengers, aircraft registration, name of pilot, type of aircraft, nature of flight, origin, weight of aircraft, etc.) to the database of the Walloon administration. Flight planning involves communications, flight plans, slots, radio announcements and management of aircraft parking stands. Flight tracking and recording and flight planning are provided by the ‘navigation office’.

| (79) | Marshalling consists of two tasks, namely marshalling on stand, which is carried out by the area coordinator when an aircraft arrives, and follow me marshalling, which involves guiding the aircraft with a vehicle. This service is used only for pilots who are unfamiliar with the airport (business aviation) or for Category D large aircraft. At Charleroi airport, the number of such operations is very limited (maximum of 100 per year). |
| --- | --- |

(79)

Marshalling consists of two tasks, namely marshalling on stand, which is carried out by the area coordinator when an aircraft arrives, and follow me marshalling, which involves guiding the aircraft with a vehicle. This service is used only for pilots who are unfamiliar with the airport (business aviation) or for Category D large aircraft. At Charleroi airport, the number of such operations is very limited (maximum of 100 per year).

| (80) | The security services are defined by Article 25.2 of the schedule of conditions, as amended by Amendment No 6 of 15 January 2008, as: ‘screening, remote surveillance, security rounds and patrols, access control and issue of visitor badges’. BSCA delegates the security services to the public limited company BSCA Security. BSCA Security's tasks are defined by reference to the Decree of 23 June 1997 on the creation of airports in the Walloon region (57). BSCA Security is 51 % owned by the Region and 49 % by BSCA. |
| --- | --- |

(80)

The security services are defined by Article 25.2 of the schedule of conditions, as amended by Amendment No 6 of 15 January 2008, as: ‘screening, remote surveillance, security rounds and patrols, access control and issue of visitor badges’. BSCA delegates the security services to the public limited company BSCA Security. BSCA Security's tasks are defined by reference to the Decree of 23 June 1997 on the creation of airports in the Walloon region (57). BSCA Security is 51 % owned by the Region and 49 % by BSCA.

57

| (81) | The terms of the financial compensation are set out as follows by Article 25.1 of the amended schedule of conditions:






  — | with regard to the fire protection and ground traffic and airport site safety services, the Region assumed the costs of their provision under the same terms as those defined by Amendment No 5 (see recital 75) up to 31 December 2009; the parties were to reassess the amount of the compensation no later than during the second half of 2009, |
| --- | --- | --- |

(81)

The terms of the financial compensation are set out as follows by Article 25.1 of the amended schedule of conditions:

—

with regard to the fire protection and ground traffic and airport site safety services, the Region assumed the costs of their provision under the same terms as those defined by Amendment No 5 (see recital 75) up to 31 December 2009; the parties were to reassess the amount of the compensation no later than during the second half of 2009,

| — | with regard to the flight tracking and recording, provisional flight planning, marshalling and security services (58), the Region assumed the costs of these services for the years 2008 and 2009. Since 1 January 2010, this assumption of costs has been capped at the indexed amount of the compensation paid for the previous year. |
| --- | --- |

—

with regard to the flight tracking and recording, provisional flight planning, marshalling and security services (58), the Region assumed the costs of these services for the years 2008 and 2009. Since 1 January 2010, this assumption of costs has been capped at the indexed amount of the compensation paid for the previous year.

58

| (82) | Article 25.7 of the schedule of conditions has been amended and provides that the amount of the compensation may not exceed the actual costs incurred by BSCA, after deducting any fees collected from users to cover these services. |
| --- | --- |

(82)

Article 25.7 of the schedule of conditions has been amended and provides that the amount of the compensation may not exceed the actual costs incurred by BSCA, after deducting any fees collected from users to cover these services.

3.1.2.2.   
  Amount of the subsidy paid by the Region

Amount of the subsidy paid by the Region

| (83) | Table 9 summarises the subsidies paid by the Region to BSCA and BSCA Security, excluding the ‘public task’ subsidy compensating the annual fixed fee.

  Table 9


  Subsidies paid by the Region to BSCA or BSCA Security
   (59)
  from 2001 to 2013 (excluding the ‘public task’ subsidy compensating the annual fixed fee) | Fire, safety, maintenance | Security | Navigation office, including marshalling | Total |
| --- | --- | --- | --- | --- | --- |
| 2001 | 2 892 612 | — | — | 2 892 612 |
| 2002 | 3 201 000 | — | — | 3 201 000 |
| 2003 | 4 184 964 | — | — | 4 184 964 |
| 2004 | 5 182 000 | — | — | 5 182 000 |
| 2005 | 5 525 000 | — | — | 5 525 000 |
| 2006 | 5 774 000 | — | — | 5 774 000 |
| 2007 | 5 774 000 | — | — | 5 774 000 |
| 2008 | 5 993 000 | 9 233 984 | 317 000 | 15 544 054 |
| 2009 | 6 148 000 | 13 512 788 | 417 324 | 20 078 112 |
| 2010 | 6 148 000 | 13 596 515 | 419 909 | 20 164 424 |
| 2011 | 6 148 000 | 13 703 323 | 533 323 | 20 384 646 |
| 2012 | 6 148 000 | 14 013 621 | 454 381 | 20 616 002 |
| 2013 | 6 148 000 | 14 013 621 | 454 381 | 20 616 002 |
| Total | 69 266 576 | 78 073 852 | 2 596 388 | 149 936 816 |
| Source: Annex 9 to the letter from Belgium sent on 6 February 2014, amended for the Giro subsidy by the response from Belgium sent on 25 March 2014. |

(83)

Table 9 summarises the subsidies paid by the Region to BSCA and BSCA Security, excluding the ‘public task’ subsidy compensating the annual fixed fee.

Table 9

Table 9

Subsidies paid by the Region to BSCA or BSCA Security
   (59)
  from 2001 to 2013 (excluding the ‘public task’ subsidy compensating the annual fixed fee)

Subsidies paid by the Region to BSCA or BSCA Security

59

from 2001 to 2013 (excluding the ‘public task’ subsidy compensating the annual fixed fee)

Fire, safety, maintenance

Security

Navigation office, including marshalling

Total

2001

2 892 612

—

—

2 892 612

2002

3 201 000

—

—

3 201 000

2003

4 184 964

—

—

4 184 964

2004

5 182 000

—

—

5 182 000

2005

5 525 000

—

—

5 525 000

2006

5 774 000

—

—

5 774 000

2007

5 774 000

—

—

5 774 000

2008

5 993 000

9 233 984

317 000

15 544 054

2009

6 148 000

13 512 788

417 324

20 078 112

2010

6 148 000

13 596 515

419 909

20 164 424

2011

6 148 000

13 703 323

533 323

20 384 646

2012

6 148 000

14 013 621

454 381

20 616 002

2013

6 148 000

14 013 621

454 381

20 616 002

Total

69 266 576

78 073 852

2 596 388

149 936 816

Source: Annex 9 to the letter from Belgium sent on 6 February 2014, amended for the Giro subsidy by the response from Belgium sent on 25 March 2014.

Source:

3.1.3.   Capital increase subscribed by SOWAER

Capital increase subscribed by SOWAER

| (84) | In the context of its development projects, and particularly the negotiation of the 2001 agreements with Ryanair, a strategy note submitted to the BSCA's board of directors on 31 July 2001 indicated that ‘over the next three years, BSCA is expected to accumulate 164 million in losses. Its capital as at 31 December 2003 is therefore expected to fall to 23 million francs, i.e. less than 20 % of the current capital of 153 million [Belgian] francs. That is why a capital increase of EUR 5 million should be planned in order to avoid the company finding itself in a precarious situation.’ |
| --- | --- |

(84)

In the context of its development projects, and particularly the negotiation of the 2001 agreements with Ryanair, a strategy note submitted to the BSCA's board of directors on 31 July 2001 indicated that ‘over the next three years, BSCA is expected to accumulate 164 million in losses. Its capital as at 31 December 2003 is therefore expected to fall to 23 million francs, i.e. less than 20 % of the current capital of 153 million [Belgian] francs. That is why a capital increase of EUR 5 million should be planned in order to avoid the company finding itself in a precarious situation.’

| (85) | In fact, in its decision of 23 May 2001 on the SOWAER financial plan, the Region had already confirmed the principle of successive capital injections in the companies managing the Walloon airports (60). At that time the SOWAER financial plan suggested ‘a capital investment in BSCA in the amount of +/– BEF 60 million ... followed by, spread over three years, three times 30 million (capital of 600 million with SOWAER holding 25 %, i.e. 150 million)’, i.e. a capital injection of EUR 3,718 million spread over three years. |
| --- | --- |

(85)

In fact, in its decision of 23 May 2001 on the SOWAER financial plan, the Region had already confirmed the principle of successive capital injections in the companies managing the Walloon airports (60). At that time the SOWAER financial plan suggested ‘a capital investment in BSCA in the amount of +/– BEF 60 million ... followed by, spread over three years, three times 30 million (capital of 600 million with SOWAER holding 25 %, i.e. 150 million)’, i.e. a capital injection of EUR 3,718 million spread over three years.

60

| (86) | In the end, the capital increase was implemented in one go on 3 December 2002. The subscribed capital was fully paid up: SOWAER therefore contributed the cash sum of EUR 3,809 million in return for 49,23 % of the shares in BSCA (61). |
| --- | --- |

(86)

In the end, the capital increase was implemented in one go on 3 December 2002. The subscribed capital was fully paid up: SOWAER therefore contributed the cash sum of EUR 3,809 million in return for 49,23 % of the shares in BSCA (61).

61

3.2.   Measures granted by the Region and BSCA to Ryanair (62)

Measures granted by the Region and BSCA to Ryanair

62

3.2.1.   The 2001 agreements

The 2001 agreements

| (87) | The term ‘2001 agreements’ shall mean all the following:






  — | the commitment of the Walloon Government of 6 November 2001, |
| --- | --- | --- |

(87)

The term ‘2001 agreements’ shall mean all the following:

—

the commitment of the Walloon Government of 6 November 2001,

| — | the contract between BSCA and Ryanair of 2 December 2001 (hereinafter ‘2001 contract’), |
| --- | --- |

—

the contract between BSCA and Ryanair of 2 December 2001 (hereinafter ‘2001 contract’),

| — | the Promocy agreement of 12 December 2001 and the contract between Promocy and Leading Verge of 31 January 2002, on which the decision was taken by the BSCA's board of directors on 31 July 2001
   (63). |
| --- | --- |

—

the Promocy agreement of 12 December 2001 and the contract between Promocy and Leading Verge of 31 January 2002, on which the decision was taken by the BSCA's board of directors on 31 July 2001
   (63).

63

3.2.1.1.   
  The commitment of the Walloon Government of 6 November 2001

The commitment of the Walloon Government of 6 November 2001

| (88) | On 6 November 2001 the Region concluded an agreement with Ryanair. This agreement provided for a landing fee of EUR 1 per departing passenger for Ryanair, i.e. a reduction in the order of 50 % in the landing fee compared with the amount set and published by the Walloon Government, which involved a different calculation method (64) (at the time, the airport charges payable by airlines were determined using a fee structure decided and published by the Walloon Government and not BSCA). In addition, the Region undertook to compensate Ryanair for the losses that the airline might directly incur due to a possible change in the level of airport charges or opening hours during the years 2001 to 2016, except where these changes were dictated by the European Union, the Federal State, the International Civil Aviation Organisation or other requirements of international law. |
| --- | --- |

(88)

On 6 November 2001 the Region concluded an agreement with Ryanair. This agreement provided for a landing fee of EUR 1 per departing passenger for Ryanair, i.e. a reduction in the order of 50 % in the landing fee compared with the amount set and published by the Walloon Government, which involved a different calculation method (64) (at the time, the airport charges payable by airlines were determined using a fee structure decided and published by the Walloon Government and not BSCA). In addition, the Region undertook to compensate Ryanair for the losses that the airline might directly incur due to a possible change in the level of airport charges or opening hours during the years 2001 to 2016, except where these changes were dictated by the European Union, the Federal State, the International Civil Aviation Organisation or other requirements of international law.

64

3.2.1.2.   
  The 2001 contract, including the provisions relating to Promocy

The 2001 contract, including the provisions relating to Promocy

| (89) | Under the 2001 contract between BSCA and Ryanair, BSCA set a price for ground handling services for Ryanair of EUR 1 per passenger (65), i.e. 10 % of the price published in 2001 by BSCA for other users. |
| --- | --- |

(89)

Under the 2001 contract between BSCA and Ryanair, BSCA set a price for ground handling services for Ryanair of EUR 1 per passenger (65), i.e. 10 % of the price published in 2001 by BSCA for other users.

65

| (90) | BSCA also undertook to contribute, both financially and by providing various services, to the costs associated with opening the Ryanair base at Charleroi (66). This contribution amounted to:






  — | EUR 250 000 for the hotel and living expenses of Ryanair staff, |
| --- | --- | --- |

(90)

BSCA also undertook to contribute, both financially and by providing various services, to the costs associated with opening the Ryanair base at Charleroi (66). This contribution amounted to:

66

—

EUR 250 000 for the hotel and living expenses of Ryanair staff,

| — | EUR 160 000 per new route opened, up to a maximum of three routes per aircraft based at the airport, i.e. a maximum of EUR 1 920 000, |
| --- | --- |

—

EUR 160 000 per new route opened, up to a maximum of three routes per aircraft based at the airport, i.e. a maximum of EUR 1 920 000,

| — | EUR 768 000 towards the recruitment and training costs of pilots and crews assigned to the new destinations served by the airport, |
| --- | --- |

—

EUR 768 000 towards the recruitment and training costs of pilots and crews assigned to the new destinations served by the airport,

| — | EUR 4 000 for the purchase of office equipment. |
| --- | --- |

—

EUR 4 000 for the purchase of office equipment.

| (91) | At the same time BSCA had to place at Ryanair's disposal, free of charge, 100 square metres of office space and 100 square metres of engineering store, and also guarantee a non-exclusive right of access to a training room. BSCA also had to use its good offices to ensure that Ryanair paid nothing or very little for the use of an aircraft maintenance hangar. |
| --- | --- |

(91)

At the same time BSCA had to place at Ryanair's disposal, free of charge, 100 square metres of office space and 100 square metres of engineering store, and also guarantee a non-exclusive right of access to a training room. BSCA also had to use its good offices to ensure that Ryanair paid nothing or very little for the use of an aircraft maintenance hangar.

| (92) | In addition, under the 2001 contract, Ryanair and BSCA formed a joint business promotion company called Société de Promotion de Brussels South Charleroi Airport (hereinafter ‘Promocy’). Promocy's company object was to develop Charleroi and its region through the commercial operation of the airport (67) (for example, Promocy financed part of the cost of Ryanair's promotional tickets). BSCA and Ryanair were to contribute in equal proportions to Promocy's operation (68). As a result, BSCA and Ryanair took equal shares in Promocy's capital, which totalled EUR 62 500. In addition, BSCA and Ryanair each paid a contribution of EUR 4 per departing passenger from Charleroi airport carried by Ryanair. |
| --- | --- |

(92)

In addition, under the 2001 contract, Ryanair and BSCA formed a joint business promotion company called Société de Promotion de Brussels South Charleroi Airport (hereinafter ‘Promocy’). Promocy's company object was to develop Charleroi and its region through the commercial operation of the airport (67) (for example, Promocy financed part of the cost of Ryanair's promotional tickets). BSCA and Ryanair were to contribute in equal proportions to Promocy's operation (68). As a result, BSCA and Ryanair took equal shares in Promocy's capital, which totalled EUR 62 500. In addition, BSCA and Ryanair each paid a contribution of EUR 4 per departing passenger from Charleroi airport carried by Ryanair.

67

68

| (93) | The fees per departing passenger applicable to Ryanair's operations under the 2001 contract and the contributions to the financing of Promocy are summarised in Table 10.

  Table 10


  Fees applicable to Ryanair under the 2001 contract
   (69) | 2004 | 2005 | 2006 | 2007 | 2008 | 2009 | 2010 | 2011 | 2012 | 2013 | 2014 | 2015 |
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| Landing fee | 1 | 1 | 1,1 | 1,13 | 1,13 | 1,13 | 1,26 | 1,3 | 1,3 | 1,3 | 1,3 | 1,3 |
| Fee per passenger | 7 | 7 | 7,38 | 7,5 | 7,88 | 8 | 8 | 8 | 8 | 8 | 8 | 8 |
| Ground handling services | 1 | 1 | 1,1 | 1,13 | 1,13 | 1,13 | 1,26 | 1,3 | 1,3 | 1,3 | 1,3 | 1,3 |
| Promocy | – 4 | – 4 | – 4 | – 4 | – 4 | – 4 | – 4 | – 4 | – 4 | – 4 | – 4 | – 4 |
| | | | | | | | | | | | | |
| Net total paid by Ryanair | 5 | 5 | 5,58 | 5,76 | 6,14 | 6,26 | 6,52 | 6,6 | 6,6 | 6,6 | 6,6 | 6,6 |
| Given that the fees under the 2001 contract were revised on 1 April, they have been applied on a pro rata basis so that they are comparable on an annual basis (1 January-31 December). |

(93)

The fees per departing passenger applicable to Ryanair's operations under the 2001 contract and the contributions to the financing of Promocy are summarised in Table 10.

Table 10

Table 10

Fees applicable to Ryanair under the 2001 contract
   (69)

Fees applicable to Ryanair under the 2001 contract

69

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

Landing fee

1

1

1,1

1,13

1,13

1,13

1,26

1,3

1,3

1,3

1,3

1,3

Fee per passenger

7

7

7,38

7,5

7,88

8

8

8

8

8

8

8

Ground handling services

1

1

1,1

1,13

1,13

1,13

1,26

1,3

1,3

1,3

1,3

1,3

Promocy

– 4

– 4

– 4

– 4

– 4

– 4

– 4

– 4

– 4

– 4

– 4

– 4

Net total paid by Ryanair

5

5

5,58

5,76

6,14

6,26

6,52

6,6

6,6

6,6

6,6

6,6

Given that the fees under the 2001 contract were revised on 1 April, they have been applied on a pro rata basis so that they are comparable on an annual basis (1 January-31 December).

| (94) | In return, Ryanair undertook vis-à-vis BSCA to base a number of aircraft at Charleroi (between two and four) and to operate at least three rotations per day and per aircraft departing Charleroi over the 15-year period (2001-2016) covered by the contract. The Irish company thus assured the airport manager of passenger traffic allowing it to anticipate income, either through airport charges or through non-aviation activities. Under the contract, if Ryanair ceased its operations at Charleroi in the first five years of the contract, the company would be required to reimburse to BSCA the contribution to the costs associated with opening Ryanair's base and the marketing contribution. Beyond the fifth year of the contract, the reimbursement would be calculated on a sliding scale (70). |
| --- | --- |

(94)

In return, Ryanair undertook vis-à-vis BSCA to base a number of aircraft at Charleroi (between two and four) and to operate at least three rotations per day and per aircraft departing Charleroi over the 15-year period (2001-2016) covered by the contract. The Irish company thus assured the airport manager of passenger traffic allowing it to anticipate income, either through airport charges or through non-aviation activities. Under the contract, if Ryanair ceased its operations at Charleroi in the first five years of the contract, the company would be required to reimburse to BSCA the contribution to the costs associated with opening Ryanair's base and the marketing contribution. Beyond the fifth year of the contract, the reimbursement would be calculated on a sliding scale (70).

70

3.2.2.   The Ministerial Order of 11 June 2004 and the BSCA letter of 24 June 2004

The Ministerial Order of 11 June 2004 and the BSCA letter of 24 June 2004

| (95) | According to Belgium, under its national law, the 2004 decision effectively rendered the 2001 agreements null and void. The Region therefore decided to adopt a ministerial order on 11 June 2004 that reduced, on a promotional basis, the landing fees for aircraft at Charleroi airport. This order entered into retroactive force on 13 February 2004. It stipulated that, on a promotional basis and for all airlines, the landing fee for an aircraft on a scheduled route was EUR 1 per passenger (i.e. the fee paid by Ryanair under the 2001 agreements). This general reduction was valid only for a period of 36 months from the entry into force of the ministerial order. |
| --- | --- |

(95)

According to Belgium, under its national law, the 2004 decision effectively rendered the 2001 agreements null and void. The Region therefore decided to adopt a ministerial order on 11 June 2004 that reduced, on a promotional basis, the landing fees for aircraft at Charleroi airport. This order entered into retroactive force on 13 February 2004. It stipulated that, on a promotional basis and for all airlines, the landing fee for an aircraft on a scheduled route was EUR 1 per passenger (i.e. the fee paid by Ryanair under the 2001 agreements). This general reduction was valid only for a period of 36 months from the entry into force of the ministerial order.

| (96) | In a letter of 24 June 2004 (71), BSCA undertook towards Ryanair to continue applying the terms of the 2001 agreements until 31 March 2006 and guaranteed, in particular, that the company would pay a total cost for using the airport's services of EUR 5 per departing passenger, corresponding to the level that would have resulted from applying the 2001 agreements if they had continued to be applied in 2005 and 2006 (see Table 10). This provisional commercial framework was dependent on a limit of 2 million passengers per year not being exceeded in terms of all the airport's activities (72). However, despite this limit being slightly exceeded in 2004 (73), the conditions offered to Ryanair were not altered in 2004 and 2005. |
| --- | --- |

(96)

In a letter of 24 June 2004 (71), BSCA undertook towards Ryanair to continue applying the terms of the 2001 agreements until 31 March 2006 and guaranteed, in particular, that the company would pay a total cost for using the airport's services of EUR 5 per departing passenger, corresponding to the level that would have resulted from applying the 2001 agreements if they had continued to be applied in 2005 and 2006 (see Table 10). This provisional commercial framework was dependent on a limit of 2 million passengers per year not being exceeded in terms of all the airport's activities (72). However, despite this limit being slightly exceeded in 2004 (73), the conditions offered to Ryanair were not altered in 2004 and 2005.

71

72

73

3.2.3.   The 2005 amendment

The 2005 amendment

| (97) | By Decree of 3 February 2005, the Region delegated responsibility for setting airport charges to airport managers, including BSCA (74). |
| --- | --- |

(97)

By Decree of 3 February 2005, the Region delegated responsibility for setting airport charges to airport managers, including BSCA (74).

74

| (98) | From 1 April 2006, the general landing fee payable to BSCA was increased to EUR 2 per departing passenger. This fee of EUR 2 was indexed. In addition, a system of annual discounts according to the number of departing passengers was applied in accordance with Table 11.

  Table 11


  Discounts on landing fees applicable to all airlines operating at Charleroi airport from 1 April 2006
   (75)








  Discounts on an annual basis |
| --- | --- |
| Percentage discount
  (%) | From number of departing passengers | To number of departing passengers |
| 0 | 0 | 15 000 |
| 5 | 15 001 | 35 000 |
| 10 | 35 001 | 50 000 |
| 25 | 50 001 | 100 000 |
| 35 | 100 001 | 200 000 |
| 50 | 200 001 | — |

(98)

From 1 April 2006, the general landing fee payable to BSCA was increased to EUR 2 per departing passenger. This fee of EUR 2 was indexed. In addition, a system of annual discounts according to the number of departing passengers was applied in accordance with Table 11.

Table 11

Table 11

Discounts on landing fees applicable to all airlines operating at Charleroi airport from 1 April 2006
   (75)

Discounts on landing fees applicable to all airlines operating at Charleroi airport from 1 April 2006

75

Discounts on an annual basis

Percentage discount

(%)

From number of departing passengers

To number of departing passengers

0

0

15 000

5

15 001

35 000

10

35 001

50 000

25

50 001

100 000

35

100 001

200 000

50

200 001

—

| (99) | On 9 December 2005 BSCA proposed to Ryanair, which accepted this, a new commercial agreement dated 9 December 2005 (hereinafter ‘2005 amendment’) for the period from 1 April 2006 to 31 December 2015. |
| --- | --- |

(99)

On 9 December 2005 BSCA proposed to Ryanair, which accepted this, a new commercial agreement dated 9 December 2005 (hereinafter ‘2005 amendment’) for the period from 1 April 2006 to 31 December 2015.

| (100) | Under the 2005 amendment:






  — | the landing fee payable by Ryanair was calculated based on the general landing fee, which provided for a 50 % discount above 200 000 passengers (see Table 11), |
| --- | --- | --- |

(100)

Under the 2005 amendment:

—

the landing fee payable by Ryanair was calculated based on the general landing fee, which provided for a 50 % discount above 200 000 passengers (see Table 11),

| — | the ground handling fee applicable to Ryanair's operations was set until 2015 in accordance with Table 12, |
| --- | --- |

—

the ground handling fee applicable to Ryanair's operations was set until 2015 in accordance with Table 12,

| — | Ryanair was subject to a new fee, called the ‘infrastructure access fee’, |
| --- | --- |

—

Ryanair was subject to a new fee, called the ‘infrastructure access fee’,

| — | the contract no longer required the contribution by BSCA to Promocy. |
| --- | --- |

—

the contract no longer required the contribution by BSCA to Promocy.

Table 12

Table 12

Fees applicable to Ryanair under the 2005 amendment
   (76)

Fees applicable to Ryanair under the 2005 amendment

76

| | 2004 | 2005 | 2006 | 2007 | 2008 | 2009 | 2010 | 2011 | 2012 | 2013 | 2014 | 2015 |
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| Landing fee | | | [1-1,2 | [1-1,2 | [1-1,2 | [1-1,2 | [1-1,2 | [1-1,2 | [1-1,2 | [1-1,2 | [1-1,2 | [1-1,2 |
| Fee per passenger | | | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 |
| Ground handling services | | | [4-6] | [4-6] | [4-6] | [4-6] | [4-6] | [4-6] | [4-6] | [4-6] | [4-6] | [4-6] |
| Infrastructure access | | | [0-0,5] | [0-0,5] | [0-0,5] | [0-0,5] | [0-0,5] | [0-0,5] | [0-0,5] | [0-0,5] | [0-0,5] | [0-0,5] |
| | | | | | | | | | | | | |
| Net total paid by Ryanair | | | [5-7] | [5-7] | [5-7] | [5-7] | [5-7] | [5-7] | [5-7] | [5-7] | [5-7] | [5-7] |
| Difference compared with the 2001 contract | | | [0-0,5] | [0-0,5] | [0-0,5] | [0-0,5] | [0-0,5] | [0-0,5] | [0-0,5] | [0-0,5] | [0-0,5] | [0-0,5] |
| The landing fee figures are based on Ryanair's passenger projections at the time when the 2005 amendment was signed. |

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

Landing fee

[1-1,2

[1-1,2

[1-1,2

[1-1,2

[1-1,2

[1-1,2

[1-1,2

[1-1,2

[1-1,2

[1-1,2

Fee per passenger

0

0

0

0

0

0

0

0

0

0

Ground handling services

[4-6]

[4-6]

[4-6]

[4-6]

[4-6]

[4-6]

[4-6]

[4-6]

[4-6]

[4-6]

Infrastructure access

[0-0,5]

[0-0,5]

[0-0,5]

[0-0,5]

[0-0,5]

[0-0,5]

[0-0,5]

[0-0,5]

[0-0,5]

[0-0,5]

Net total paid by Ryanair

[5-7]

[5-7]

[5-7]

[5-7]

[5-7]

[5-7]

[5-7]

[5-7]

[5-7]

[5-7]

Difference compared with the 2001 contract

[0-0,5]

[0-0,5]

[0-0,5]

[0-0,5]

[0-0,5]

[0-0,5]

[0-0,5]

[0-0,5]

[0-0,5]

[0-0,5]

The landing fee figures are based on Ryanair's passenger projections at the time when the 2005 amendment was signed.

| (101) | The Commission notes that the amounts per passenger paid by Ryanair in accordance with Table 12 are, except for [...], identical to those stipulated by the 2001 contract (77) (see Table 10). |
| --- | --- |

(101)

The Commission notes that the amounts per passenger paid by Ryanair in accordance with Table 12 are, except for [...], identical to those stipulated by the 2001 contract (77) (see Table 10).

77

| (102) | Lastly, the 2005 contract stipulated that, for a period of at least six months after the new terminal's entry into use, Ryanair would base four aircraft at Charleroi with a minimum of [25-32] daily rotations. If it failed to do so, Ryanair would pay a [10-25] % surcharge. |
| --- | --- |

(102)

Lastly, the 2005 contract stipulated that, for a period of at least six months after the new terminal's entry into use, Ryanair would base four aircraft at Charleroi with a minimum of [25-32] daily rotations. If it failed to do so, Ryanair would pay a [10-25] % surcharge.

3.2.4.   The 2010 amendment

The 2010 amendment

| (103) | On 1 January 2009 BSCA introduced an additional fee per passenger, payable by all airlines operating at Charleroi airport, in relation to Passengers with Reduced Mobility (hereinafter ‘PRM fee’). Amendment No 7 to the Region/BSCA agreement authorises BSCA to set such a fee, which, according to Belgium, is in line with Union law (78). The PRM fee was set at 19,5 euro cents per departing passenger in 2009 (79). |
| --- | --- |

(103)

On 1 January 2009 BSCA introduced an additional fee per passenger, payable by all airlines operating at Charleroi airport, in relation to Passengers with Reduced Mobility (hereinafter ‘PRM fee’). Amendment No 7 to the Region/BSCA agreement authorises BSCA to set such a fee, which, according to Belgium, is in line with Union law (78). The PRM fee was set at 19,5 euro cents per departing passenger in 2009 (79).

78

79

| (104) | An amendment to the contract between BSCA and Ryanair was concluded on 6 December 2010 (hereinafter ‘2010 amendment’), following an exchange of letters between BSCA and Ryanair. It provides for:






  — | a general exemption from the PRM fee, under which Ryanair will pay [10-30] euro cents per passenger for the year from 1 February 2009 to 31 January 2010; moreover, the terms of indexation of the PRM fee provide for a reduction in this fee proportional to the increase in traffic generated by Ryanair (80), |
| --- | --- | --- |

(104)

An amendment to the contract between BSCA and Ryanair was concluded on 6 December 2010 (hereinafter ‘2010 amendment’), following an exchange of letters between BSCA and Ryanair. It provides for:

—

a general exemption from the PRM fee, under which Ryanair will pay [10-30] euro cents per passenger for the year from 1 February 2009 to 31 January 2010; moreover, the terms of indexation of the PRM fee provide for a reduction in this fee proportional to the increase in traffic generated by Ryanair (80),

80

| — | a reduction of [10-50] euro cents per Ryanair passenger in the ground handling fee. |
| --- | --- |

—

a reduction of [10-50] euro cents per Ryanair passenger in the ground handling fee.

3.2.5.   Sale of BSCA shares in Promocy

Sale of BSCA shares in Promocy

| (105) | On 31 March 2010 BSCA sold its 50 % holding in Promocy (81) to Ryanair. BSCA sold the shares at their book value for a total amount of EUR 31 100 (i.e. EUR 100 per share). All the risks and obligations were transferred to the sole shareholder, namely Ryanair. |
| --- | --- |

(105)

On 31 March 2010 BSCA sold its 50 % holding in Promocy (81) to Ryanair. BSCA sold the shares at their book value for a total amount of EUR 31 100 (i.e. EUR 100 per share). All the risks and obligations were transferred to the sole shareholder, namely Ryanair.

81

| (106) | According to Belgium, at the time of this sale, Promocy's cash resources totalled EUR 261 073 (balance of the assets, having deducted the capital and statutory reserve) (82). BSCA therefore sold half of Promocy's capital for a price well below half the value of the cash resources. |
| --- | --- |

(106)

According to Belgium, at the time of this sale, Promocy's cash resources totalled EUR 261 073 (balance of the assets, having deducted the capital and statutory reserve) (82). BSCA therefore sold half of Promocy's capital for a price well below half the value of the cash resources.

82

4.   COMMENTS FROM INTERESTED PARTIES

COMMENTS FROM INTERESTED PARTIES

4.1.   Comments from interested parties on the measures granted to BSCA

Comments from interested parties on the measures granted to BSCA

4.1.1.   Brussels Airport Company (hereinafter ‘BAC’)

Brussels Airport Company (hereinafter ‘BAC’)

(a)   Comments received in September 2012 following the adoption of the 2012 extension decision

| (107) | BAC considers that all the measures granted to BSCA, as described in the 2012 extension decision, constitute State aid that cannot be declared compatible with the internal market. |
| --- | --- |

(107)

BAC considers that all the measures granted to BSCA, as described in the 2012 extension decision, constitute State aid that cannot be declared compatible with the internal market.

| (108) | According to BAC, none of the investments described in the 2012 extension decision was the object of a legally binding decision before 12 December 2000. |
| --- | --- |

(108)

According to BAC, none of the investments described in the 2012 extension decision was the object of a legally binding decision before 12 December 2000.

| (109) | BAC considers that none of the infrastructure investments related to the exercise of public power, as they are all essential elements for the economic activities of the operator, including works to improve the operation of the airport such as landing systems or runway extensions, or to facilitate its economic development such as car parks, access roads or maintenance hangars. |
| --- | --- |

(109)

BAC considers that none of the infrastructure investments related to the exercise of public power, as they are all essential elements for the economic activities of the operator, including works to improve the operation of the airport such as landing systems or runway extensions, or to facilitate its economic development such as car parks, access roads or maintenance hangars.

(i)   BSCA's payment for the concession and infrastructure

| (110) | BAC submits that none of the measures granted to BSCA as described in the 2012 extension decision is in line with the market economy investor principle (hereinafter ‘MEIP’). Based on industry practice, the return on investment that the Region/SOWAER receives is far below what a private investor would expect (83). |
| --- | --- |

(110)

BAC submits that none of the measures granted to BSCA as described in the 2012 extension decision is in line with the market economy investor principle (hereinafter ‘MEIP’). Based on industry practice, the return on investment that the Region/SOWAER receives is far below what a private investor would expect (83).

83

| (111) | According to BAC, any investment aid granted to BSCA was not limited to the minimum necessary. This is because BSCA's payment for the concession and infrastructure remained constant between 2002 and 2010, apart from a step up in 2007, while passenger numbers and revenues increased over the same period. This resulted in an increase in the average net value of the infrastructure for BSCA, whereas average net payments decreased. |
| --- | --- |

(111)

According to BAC, any investment aid granted to BSCA was not limited to the minimum necessary. This is because BSCA's payment for the concession and infrastructure remained constant between 2002 and 2010, apart from a step up in 2007, while passenger numbers and revenues increased over the same period. This resulted in an increase in the average net value of the infrastructure for BSCA, whereas average net payments decreased.

(ii)   Services provided by SOWAER to BSCA and services reimbursed by the Region

| (112) | With reference to the services provided by SOWAER to BSCA and the services reimbursed by the Region to BSCA, BAC submits that, apart from public services such as police and customs, the Belgian State does not pay for any other activities at Brussels airport. BAC bears the cost of fire services, safety and maintenance itself. The flight tracking, recording and planning services provided by Belgocontrol are paid for directly by the airlines using Brussels airport. At Charleroi airport, airlines do not have to pay for these services. As such, the services reimbursed by the Region to BSCA do not relate to the exercise of public power. |
| --- | --- |

(112)

With reference to the services provided by SOWAER to BSCA and the services reimbursed by the Region to BSCA, BAC submits that, apart from public services such as police and customs, the Belgian State does not pay for any other activities at Brussels airport. BAC bears the cost of fire services, safety and maintenance itself. The flight tracking, recording and planning services provided by Belgocontrol are paid for directly by the airlines using Brussels airport. At Charleroi airport, airlines do not have to pay for these services. As such, the services reimbursed by the Region to BSCA do not relate to the exercise of public power.

| (113) | BAC considers that these services do not constitute services of general economic interest as they are inherent in the operation of an airport and in the essential aspects of the economic activities of an airport and do not meet the Altmark criteria. |
| --- | --- |

(113)

BAC considers that these services do not constitute services of general economic interest as they are inherent in the operation of an airport and in the essential aspects of the economic activities of an airport and do not meet the Altmark criteria.

Altmark

| (114) | BAC considers that the payments made to reimburse BSCA for these services are not in accordance with the MEIP and constitute operating aid. As the payments made by BSCA to the Region for the use of the infrastructure are less than what a private investor would find acceptable, such an investor would not agree to additional payments being made for services without a corresponding return. |
| --- | --- |

(114)

BAC considers that the payments made to reimburse BSCA for these services are not in accordance with the MEIP and constitute operating aid. As the payments made by BSCA to the Region for the use of the infrastructure are less than what a private investor would find acceptable, such an investor would not agree to additional payments being made for services without a corresponding return.

| (115) | BAC points out that operating aid can be declared compatible only under exceptional circumstances and under strict conditions in disadvantaged regions. None of these conditions is met in the case of Charleroi airport and the aid cannot be regarded as compatible with the internal market. |
| --- | --- |

(115)

BAC points out that operating aid can be declared compatible only under exceptional circumstances and under strict conditions in disadvantaged regions. None of these conditions is met in the case of Charleroi airport and the aid cannot be regarded as compatible with the internal market.

(iii)   Participation of SOWAER in the BSCA capital increase

| (116) | BAC doubts whether the BSCA capital increase of 3 December 2002 complied with the MEIP. BAC further points out that, when assessing whether the capital increase would have been made by a private investor, other aid measures from which BSCA benefits should not be taken into account. |
| --- | --- |

(116)

BAC doubts whether the BSCA capital increase of 3 December 2002 complied with the MEIP. BAC further points out that, when assessing whether the capital increase would have been made by a private investor, other aid measures from which BSCA benefits should not be taken into account.

(iv)   Impact on competition

| (117) | BAC submits that the aid measures have allowed Charleroi airport to strengthen its competitive position in relation to other airports and other means of transport such as high-speed rail, as they enable BSCA to apply low airport charges. This creates a significant disparity between the fees at Brussels airport and at Charleroi airport, particularly due to differences between the passenger fees and safety fees. The airport charges collected by BSCA are below market price in comparison with Brussels airport and other comparable airports in the Charleroi airport catchment area, such as Eindhoven, Lille and Cologne/Bonn airports. |
| --- | --- |

(117)

BAC submits that the aid measures have allowed Charleroi airport to strengthen its competitive position in relation to other airports and other means of transport such as high-speed rail, as they enable BSCA to apply low airport charges. This creates a significant disparity between the fees at Brussels airport and at Charleroi airport, particularly due to differences between the passenger fees and safety fees. The airport charges collected by BSCA are below market price in comparison with Brussels airport and other comparable airports in the Charleroi airport catchment area, such as Eindhoven, Lille and Cologne/Bonn airports.

| (118) | According to BAC, this difference has resulted in a loss of 2,5 million passengers over the 2004-2011 period. The growth of Charleroi airport is not purely the result of additional traffic that Brussels airport has failed to generate, as proven by the fact that the average annual growth of a reference sample of European airports was 20,5 % between 2005 and 2011, whereas traffic at Brussels airport remained constant. In addition, the increase in destinations and frequencies at Charleroi airport has led to a corresponding loss of destinations or reduction in frequencies at Brussels airport. |
| --- | --- |

(118)

According to BAC, this difference has resulted in a loss of 2,5 million passengers over the 2004-2011 period. The growth of Charleroi airport is not purely the result of additional traffic that Brussels airport has failed to generate, as proven by the fact that the average annual growth of a reference sample of European airports was 20,5 % between 2005 and 2011, whereas traffic at Brussels airport remained constant. In addition, the increase in destinations and frequencies at Charleroi airport has led to a corresponding loss of destinations or reduction in frequencies at Brussels airport.

(b)   Comments received in May 2014 following publication of the Guidelines on State aid to airports and airlines

| (119) | BAC considers that both the investment aid and the operating aid received by BSCA are State aid that cannot be regarded as compatible with the internal market. In its opinion, the entry into force of the aviation guidelines further supports this conclusion. |
| --- | --- |

(119)

BAC considers that both the investment aid and the operating aid received by BSCA are State aid that cannot be regarded as compatible with the internal market. In its opinion, the entry into force of the aviation guidelines further supports this conclusion.

(i)   Investment aid

| (120) | BAC believes that the investment aid received by BSCA constitutes State aid that must be regarded as incompatible with the internal market because it is not proportional to objectives of common interest (Brussels airport was not congested) and is not limited to the minimum necessary. |
| --- | --- |

(120)

BAC believes that the investment aid received by BSCA constitutes State aid that must be regarded as incompatible with the internal market because it is not proportional to objectives of common interest (Brussels airport was not congested) and is not limited to the minimum necessary.

(ii)   Operating aid

1.   Presence of State aid under Article 107(1) TFEU

| (121) | According to BAC, the opening decision basically focused on the different treatment in the financing of these activities between Charleroi airport and other undertakings within the same Member State, and other airports such as Brussels airport. In that regard, BAC considers that the reimbursement by the Region to BSCA of the costs of these services constitutes State aid and discrimination between BAC and BSCA within the Belgian State, because BAC had to bear these costs alone. |
| --- | --- |

(121)

According to BAC, the opening decision basically focused on the different treatment in the financing of these activities between Charleroi airport and other undertakings within the same Member State, and other airports such as Brussels airport. In that regard, BAC considers that the reimbursement by the Region to BSCA of the costs of these services constitutes State aid and discrimination between BAC and BSCA within the Belgian State, because BAC had to bear these costs alone.

2.   Compatibility of State aid measures under Article 107(3)(c) TFEU

| (122) | Point 137 of the Guidelines on State aid to airports and airlines (84) (hereinafter ‘aviation guidelines’) provides that a number of conditions must be met in order for past operating aid to be regarded as compatible with the internal market. According to BAC, the operating aid received by BSCA does not meet these conditions. |
| --- | --- |

(122)

Point 137 of the Guidelines on State aid to airports and airlines (84) (hereinafter ‘aviation guidelines’) provides that a number of conditions must be met in order for past operating aid to be regarded as compatible with the internal market. According to BAC, the operating aid received by BSCA does not meet these conditions.

84

(a)   The aid does not contribute to a well-defined objective of common interest

| (123) | Although Charleroi airport and Brussels airport are in competition in the same catchment area, the aid granted to BSCA has led, in BAC's opinion, to a duplication of airport capacity available in Belgium. The capacity of Charleroi airport has therefore been increased, even though the capacity of Brussels airport was not saturated. Accordingly, the total number of passengers using Charleroi and Brussels airports was 25,4 million in 2012, i.e. still less than the maximum capacity of Brussels airport alone. |
| --- | --- |

(123)

Although Charleroi airport and Brussels airport are in competition in the same catchment area, the aid granted to BSCA has led, in BAC's opinion, to a duplication of airport capacity available in Belgium. The capacity of Charleroi airport has therefore been increased, even though the capacity of Brussels airport was not saturated. Accordingly, the total number of passengers using Charleroi and Brussels airports was 25,4 million in 2012, i.e. still less than the maximum capacity of Brussels airport alone.

(b)   Lack of need for State intervention

| (124) | BAC points out that the annual traffic at Charleroi airport exceeded 1 million passengers in 2001-2002 and 3 million passengers in 2008-2009. In view of the categories laid down by the aviation guidelines, BSCA should have been able to cover the majority, if not all, of the costs incurred at Charleroi airport during the period covered by the Commission investigation. |
| --- | --- |

(124)

BAC points out that the annual traffic at Charleroi airport exceeded 1 million passengers in 2001-2002 and 3 million passengers in 2008-2009. In view of the categories laid down by the aviation guidelines, BSCA should have been able to cover the majority, if not all, of the costs incurred at Charleroi airport during the period covered by the Commission investigation.

| (125) | According to BAC, no operating aid should have been granted to BSCA since the aviation guidelines entered into force given that the annual passenger traffic has significantly exceeded the threshold of 3 million since 2009. |
| --- | --- |

(125)

According to BAC, no operating aid should have been granted to BSCA since the aviation guidelines entered into force given that the annual passenger traffic has significantly exceeded the threshold of 3 million since 2009.

(c)   The aid is not appropriate and its amount is disproportionate

| (126) | According to BAC, the amounts paid by BSCA for the following services could have been more appropriate: the amount for the airport infrastructure to be placed at its disposal and the amount for the services provided by SOWAER. This is also true of the reimbursement by the Region for certain services. In BAC's opinion, the State aid granted to BSCA was not limited to the minimum necessary and less distortive policy instruments were available to the Region and SOWAER. |
| --- | --- |

(126)

According to BAC, the amounts paid by BSCA for the following services could have been more appropriate: the amount for the airport infrastructure to be placed at its disposal and the amount for the services provided by SOWAER. This is also true of the reimbursement by the Region for certain services. In BAC's opinion, the State aid granted to BSCA was not limited to the minimum necessary and less distortive policy instruments were available to the Region and SOWAER.

(d)   The aid has negative effects on competition and trade

| (127) | Firstly, BAC points out that, contrary to the recommendation in point 131 of the aviation guidelines, the BSCA business plan did not study the effect of the development of its activities on traffic at Brussels airport. |
| --- | --- |

(127)

Firstly, BAC points out that, contrary to the recommendation in point 131 of the aviation guidelines, the BSCA business plan did not study the effect of the development of its activities on traffic at Brussels airport.

| (128) | Moreover, BAC draws the Commission's attention to the fact that the case in question cannot be compared with that of Groningen airport, in which the Commission regarded the operating aid as compatible with the internal market. In that case, the Commission recognised the need to relieve congestion at Schiphol airport and the fact that the airports were far enough apart. These two elements are not relevant in the present case. |
| --- | --- |

(128)

Moreover, BAC draws the Commission's attention to the fact that the case in question cannot be compared with that of Groningen airport, in which the Commission regarded the operating aid as compatible with the internal market. In that case, the Commission recognised the need to relieve congestion at Schiphol airport and the fact that the airports were far enough apart. These two elements are not relevant in the present case.

| (129) | This aid, which has enabled BSCA to artificially reduce the amount of its airport charges, has had the following negative effects on BAC: a significant fall in its use by passengers and a reduction in the frequency and even the loss of certain routes also served by Charleroi airport. |
| --- | --- |

(129)

This aid, which has enabled BSCA to artificially reduce the amount of its airport charges, has had the following negative effects on BAC: a significant fall in its use by passengers and a reduction in the frequency and even the loss of certain routes also served by Charleroi airport.

| (130) | In terms of the fall in the volume of passengers at Brussels airport, BAC points out that its origin essentially lies in the absorption of its customers by BSCA. Therefore, according to BAC, although the majority of European airports saw passenger numbers increase between 2005 and 2013, these numbers stagnated at Brussels airport, whilst at the same time the volume of passengers at Charleroi airport rose. |
| --- | --- |

(130)

In terms of the fall in the volume of passengers at Brussels airport, BAC points out that its origin essentially lies in the absorption of its customers by BSCA. Therefore, according to BAC, although the majority of European airports saw passenger numbers increase between 2005 and 2013, these numbers stagnated at Brussels airport, whilst at the same time the volume of passengers at Charleroi airport rose.

| (131) | BAC considers that the absorption of its customers also explains the loss of routes at Brussels airport and the reduced frequency of certain flights. In particular, it sees a correspondence between the flights lost from Brussels airport following the introduction of equivalent flights at Charleroi airport. |
| --- | --- |

(131)

BAC considers that the absorption of its customers also explains the loss of routes at Brussels airport and the reduced frequency of certain flights. In particular, it sees a correspondence between the flights lost from Brussels airport following the introduction of equivalent flights at Charleroi airport.

| (132) | BAC recommends that the Commission states, in its future decision on this aid and in accordance with the thresholds laid down by the new aviation guidelines, (i) that no more operating aid or investment aid can be granted to BSCA from the entry into force of the aviation guidelines, and (ii) that the services at Charleroi airport are charged at a level sufficient to cover the marginal costs generated. |
| --- | --- |

(132)

BAC recommends that the Commission states, in its future decision on this aid and in accordance with the thresholds laid down by the new aviation guidelines, (i) that no more operating aid or investment aid can be granted to BSCA from the entry into force of the aviation guidelines, and (ii) that the services at Charleroi airport are charged at a level sufficient to cover the marginal costs generated.

4.1.2.   Brussels Airlines

Brussels Airlines

(a)   Existence of aid granted to BSCA

(i)   Economic activity

| (133) | Brussels Airlines submits that fire, maintenance, safety and security services, and services associated with landing, take-off and infrastructure do not fall within its public service tasks but form part of the economic activity of managing an airport and should not be subsidised in a discriminatory manner. They cannot be regarded as services of general economic interest. Brussels Airlines submits that other industries in the Region finance their own fire services, as does Brussels airport. As the Region covers the safety and security costs at Charleroi airport, BSCA does not recover these costs from airlines, whereas no compensation has been given to Brussels airport for these costs. Passengers departing from Brussels airport are also subject to the Belgian Civil Aviation Authority fee, whereas passengers departing from Charleroi airport are not. |
| --- | --- |

(133)

Brussels Airlines submits that fire, maintenance, safety and security services, and services associated with landing, take-off and infrastructure do not fall within its public service tasks but form part of the economic activity of managing an airport and should not be subsidised in a discriminatory manner. They cannot be regarded as services of general economic interest. Brussels Airlines submits that other industries in the Region finance their own fire services, as does Brussels airport. As the Region covers the safety and security costs at Charleroi airport, BSCA does not recover these costs from airlines, whereas no compensation has been given to Brussels airport for these costs. Passengers departing from Brussels airport are also subject to the Belgian Civil Aviation Authority fee, whereas passengers departing from Charleroi airport are not.

(ii)   Advantage

| (134) | Brussels Airlines does not believe that the Region/SOWAER were behaving as a private operator in a market economy when giving support to BSCA. BSCA's profitability appears inflated due to subsidies, grants and compensatory measures, without which it would have a consistently negative profit margin. Brussels Airlines also questions whether the combined profitability of BSCA and SOWAER reflects market-driven practices. Brussels Airlines submits that the Region is not acting as a private investor given that such an investor would not invest in a structurally loss-making company. |
| --- | --- |

(134)

Brussels Airlines does not believe that the Region/SOWAER were behaving as a private operator in a market economy when giving support to BSCA. BSCA's profitability appears inflated due to subsidies, grants and compensatory measures, without which it would have a consistently negative profit margin. Brussels Airlines also questions whether the combined profitability of BSCA and SOWAER reflects market-driven practices. Brussels Airlines submits that the Region is not acting as a private investor given that such an investor would not invest in a structurally loss-making company.

(iii)   Distortions of competition

| (135) | Between 2004 and 2012, whilst the number of short-haul passengers using Charleroi airport tripled, the number using Brussels airport stagnated, given that this figure was the same in 2012 as in 2004. Brussels Airlines adds that the number of passengers that it carried fell from [...] million to [...] million. Given these findings and the fact that, when viewed as a whole, airport passenger numbers increased by 34 %, Brussels Airlines concludes that Charleroi airport benefited from all the growth. Brussels Airlines notes that from 2004 to 2007 other European airports experienced strong growth (over 20 %), but the growth at Charleroi airport is not explained solely by the increase in traffic, but also by the fact that a large number of passengers who previously used Brussels airport appeared to choose Charleroi airport instead. Brussels Airlines puts this loss at [...] million passengers per year to the benefit of Charleroi airport, i.e. a loss of revenue estimated at over EUR [...] million per year. |
| --- | --- |

(135)

Between 2004 and 2012, whilst the number of short-haul passengers using Charleroi airport tripled, the number using Brussels airport stagnated, given that this figure was the same in 2012 as in 2004. Brussels Airlines adds that the number of passengers that it carried fell from [...] million to [...] million. Given these findings and the fact that, when viewed as a whole, airport passenger numbers increased by 34 %, Brussels Airlines concludes that Charleroi airport benefited from all the growth. Brussels Airlines notes that from 2004 to 2007 other European airports experienced strong growth (over 20 %), but the growth at Charleroi airport is not explained solely by the increase in traffic, but also by the fact that a large number of passengers who previously used Brussels airport appeared to choose Charleroi airport instead. Brussels Airlines puts this loss at [...] million passengers per year to the benefit of Charleroi airport, i.e. a loss of revenue estimated at over EUR [...] million per year.

(b)   Legal basis on which to assess the compatibility of the aid to BSCA

| (136) | According to Brussels Airlines, the Commission does not have any legal basis for authorising operating aid that (i) was granted prior to the entry into force of the aviation guidelines and (ii) was incompatible with the internal market at the time when it was granted. Retroactive application of the aviation guidelines would be contrary to the general principles of law and, in particular, as in this case, where the conditions for authorising operating aid are comparatively less strict than in the past. |
| --- | --- |

(136)

According to Brussels Airlines, the Commission does not have any legal basis for authorising operating aid that (i) was granted prior to the entry into force of the aviation guidelines and (ii) was incompatible with the internal market at the time when it was granted. Retroactive application of the aviation guidelines would be contrary to the general principles of law and, in particular, as in this case, where the conditions for authorising operating aid are comparatively less strict than in the past.

| (137) | Firstly, the principles of legal certainty and non-retroactivity of European legislation rule out the possibility of a Union regulation taking effect before its publication, save in exceptional circumstances. In this particular case, Brussels Airlines submits that no exceptional circumstances exist. |
| --- | --- |

(137)

Firstly, the principles of legal certainty and non-retroactivity of European legislation rule out the possibility of a Union regulation taking effect before its publication, save in exceptional circumstances. In this particular case, Brussels Airlines submits that no exceptional circumstances exist.

| (138) | Secondly, the Commission notice on the determination of the applicable rules for the assessment of unlawful State aid indicates that the Commission shall always assess the compatibility of unlawful State aid with the common market in accordance with the substantive criteria set out in any instrument in force at the time when the aid was granted. Therefore, in the opinion of Brussels Airlines, the Commission cannot depart from its own rules without contravening the general principles of law (equal treatment, legitimate expectations). Brussels Airlines submits that there is consequently no legitimate reason not to apply this notice in the present case. |
| --- | --- |

(138)

Secondly, the Commission notice on the determination of the applicable rules for the assessment of unlawful State aid indicates that the Commission shall always assess the compatibility of unlawful State aid with the common market in accordance with the substantive criteria set out in any instrument in force at the time when the aid was granted. Therefore, in the opinion of Brussels Airlines, the Commission cannot depart from its own rules without contravening the general principles of law (equal treatment, legitimate expectations). Brussels Airlines submits that there is consequently no legitimate reason not to apply this notice in the present case.

| (139) | Lastly, operating aid is by nature incompatible with the internal market. According to Brussels Airlines, this principle was clearly set out in the 2005 aviation guidelines. |
| --- | --- |

(139)

Lastly, operating aid is by nature incompatible with the internal market. According to Brussels Airlines, this principle was clearly set out in the 2005 aviation guidelines.

| (140) | Brussels Airlines considers that the Commission's approach in this case is all the more unacceptable because:






  — | the Commission previously prohibited the measures from which Charleroi airport has benefited, |
| --- | --- | --- |

(140)

Brussels Airlines considers that the Commission's approach in this case is all the more unacceptable because:

—

the Commission previously prohibited the measures from which Charleroi airport has benefited,

| — | in its 2012 extension decision, the Commission extended the scope of the measures covered by the investigation procedure, |
| --- | --- |

—

in its 2012 extension decision, the Commission extended the scope of the measures covered by the investigation procedure,

| — | according to the 2012 extension decision, the measures investigated are clearly incompatible with the internal market. |
| --- | --- |

—

according to the 2012 extension decision, the measures investigated are clearly incompatible with the internal market.

| (141) | Consequently, Brussels Airlines submits that the Region and BSCA were perfectly well aware of the regulations in force on State aid. The prohibition of this aid does not therefore infringe the principle of legitimate expectations. On the contrary, it would be particularly unfair to retroactively justify their unlawful behaviour to the detriment of third parties, and especially to the detriment of those who have complied with the rules. The balance of interests at stake clearly means that this aid must be prohibited. |
| --- | --- |

(141)

Consequently, Brussels Airlines submits that the Region and BSCA were perfectly well aware of the regulations in force on State aid. The prohibition of this aid does not therefore infringe the principle of legitimate expectations. On the contrary, it would be particularly unfair to retroactively justify their unlawful behaviour to the detriment of third parties, and especially to the detriment of those who have complied with the rules. The balance of interests at stake clearly means that this aid must be prohibited.

| (142) | According to Brussels Airlines, by retroactively applying the aviation guidelines to past operating aid that is clearly incompatible, the Commission is implicitly acknowledging this incompatibility. |
| --- | --- |

(142)

According to Brussels Airlines, by retroactively applying the aviation guidelines to past operating aid that is clearly incompatible, the Commission is implicitly acknowledging this incompatibility.

(c)   Compatibility of the aid granted to BSCA based on the new aviation guidelines

(i)   Objective of common interest

| (143) | Brussels Airlines draws the Commission's attention to the fact that the positive effects expected of State aid policies, such as the development and accessibility of the regions, are uncertain. |
| --- | --- |

(143)

Brussels Airlines draws the Commission's attention to the fact that the positive effects expected of State aid policies, such as the development and accessibility of the regions, are uncertain.

| (144) | The phenomenon of regional airports absorbing traffic from established airports has several other negative consequences according to Brussels Airlines:






  — | Firstly, the fact that capacity is created whilst other capacity still exists results in the inefficient duplication of infrastructure. In support of this argument, Brussels Airlines points out that, during the period in question (2000-2012), the capacity available at Brussels airport was sufficient to accommodate more passengers. As an example, in 2011 the capacity of Brussels airport was a maximum of 28 million passengers, although the airport was being used by only 18,8 million passengers. At the same time, Charleroi was being used by 5,9 million passengers, whereas its capacity was between 6 and 7 million. The total capacity of the two airports in 2011 was 24,7 million, i.e. a total capacity below the maximum capacity of Brussels airport alone. |
| --- | --- | --- |

(144)

The phenomenon of regional airports absorbing traffic from established airports has several other negative consequences according to Brussels Airlines:

—

Firstly, the fact that capacity is created whilst other capacity still exists results in the inefficient duplication of infrastructure. In support of this argument, Brussels Airlines points out that, during the period in question (2000-2012), the capacity available at Brussels airport was sufficient to accommodate more passengers. As an example, in 2011 the capacity of Brussels airport was a maximum of 28 million passengers, although the airport was being used by only 18,8 million passengers. At the same time, Charleroi was being used by 5,9 million passengers, whereas its capacity was between 6 and 7 million. The total capacity of the two airports in 2011 was 24,7 million, i.e. a total capacity below the maximum capacity of Brussels airport alone.

| — | Secondly, Brussels Airlines points out that the development of activities at Charleroi airport, to the detriment of Brussels airport and Brussels Airlines, has seemingly had a negative social and economic impact. Brussels Airlines compares the direct and indirect added value of Brussels and Charleroi airports from 2007 to 2009. The added value of Charleroi airport is apparently EUR 38 million, whereas that of Brussels airport is EUR 358 million. Brussels Airlines also refers to the number of jobs created directly and indirectly by the airports between 2007 and 2009. Whereas employment at Charleroi airport increased over this period by 589 FTE (full-time equivalents), the number of jobs at Brussels airport fell by 1 057. Whilst the number of passengers at Charleroi airport substantially increased between 2007 and 2009, unlike at Brussels airport, the level of direct and indirect employment did not increase to the point of compensating for the loss of jobs at Brussels airport. |
| --- | --- |

—

Secondly, Brussels Airlines points out that the development of activities at Charleroi airport, to the detriment of Brussels airport and Brussels Airlines, has seemingly had a negative social and economic impact. Brussels Airlines compares the direct and indirect added value of Brussels and Charleroi airports from 2007 to 2009. The added value of Charleroi airport is apparently EUR 38 million, whereas that of Brussels airport is EUR 358 million. Brussels Airlines also refers to the number of jobs created directly and indirectly by the airports between 2007 and 2009. Whereas employment at Charleroi airport increased over this period by 589 FTE (full-time equivalents), the number of jobs at Brussels airport fell by 1 057. Whilst the number of passengers at Charleroi airport substantially increased between 2007 and 2009, unlike at Brussels airport, the level of direct and indirect employment did not increase to the point of compensating for the loss of jobs at Brussels airport.

| — | Finally, according to Brussels Airlines, the absorption phenomenon has had a negative impact on the profitability of traditional airlines to the benefit of the low-cost airlines, whose profitability is mainly due to subsidies. Brussels Airlines states that, whereas the average profitability of the AEA (Association of European Airlines) was low and even negative over the entire period in question (profits before interest and taxes were EUR 0,9 billion in 2000, with a loss of EUR 0,4 billion in 2012), the figure for Ryanair was substantial (profits before interest and taxes were EUR 84 million in 2000 and EUR 617 million in 2012). However, according to Brussels Airlines, this profitability was increased by the subsidies received from the airports. Brussels Airlines states that, without this aid (calculated at EUR 720 million in 2011), Ryanair's profitability would have been substantially lower, and even negative. |
| --- | --- |

—

Finally, according to Brussels Airlines, the absorption phenomenon has had a negative impact on the profitability of traditional airlines to the benefit of the low-cost airlines, whose profitability is mainly due to subsidies. Brussels Airlines states that, whereas the average profitability of the AEA (Association of European Airlines) was low and even negative over the entire period in question (profits before interest and taxes were EUR 0,9 billion in 2000, with a loss of EUR 0,4 billion in 2012), the figure for Ryanair was substantial (profits before interest and taxes were EUR 84 million in 2000 and EUR 617 million in 2012). However, according to Brussels Airlines, this profitability was increased by the subsidies received from the airports. Brussels Airlines states that, without this aid (calculated at EUR 720 million in 2011), Ryanair's profitability would have been substantially lower, and even negative.

| (145) | In addition, Brussels Airlines points out that the operating aid was granted to Charleroi airport even though (i) this airport is located in the same catchment area as Brussels airport and (ii) the latter still had available capacity. Consequently, according to Brussels Airlines, a business plan based on cargo and passenger traffic forecasts should have identified the potential impact of this airport's development on traffic at Brussels airport. Brussels Airlines stresses that such an assessment was never made. In any event, if such an assessment had been made, it would have shown that an increase in traffic at Charleroi airport would be to the detriment of traffic at Brussels airport. Brussels Airlines states that, in its view, this was in fact the outcome: an increase in market share for Charleroi airport correlated to a drop in market share for Brussels airport and to a reduction in the frequency and/or to the withdrawal of several Brussels Airlines routes. Brussels Airlines therefore reasserts that the operating aid granted to BSCA did not contribute to the achievement of an objective of common interest. In fact, on the contrary, these measures resulted in the misuse and wastage of resources. |
| --- | --- |

(145)

In addition, Brussels Airlines points out that the operating aid was granted to Charleroi airport even though (i) this airport is located in the same catchment area as Brussels airport and (ii) the latter still had available capacity. Consequently, according to Brussels Airlines, a business plan based on cargo and passenger traffic forecasts should have identified the potential impact of this airport's development on traffic at Brussels airport. Brussels Airlines stresses that such an assessment was never made. In any event, if such an assessment had been made, it would have shown that an increase in traffic at Charleroi airport would be to the detriment of traffic at Brussels airport. Brussels Airlines states that, in its view, this was in fact the outcome: an increase in market share for Charleroi airport correlated to a drop in market share for Brussels airport and to a reduction in the frequency and/or to the withdrawal of several Brussels Airlines routes. Brussels Airlines therefore reasserts that the operating aid granted to BSCA did not contribute to the achievement of an objective of common interest. In fact, on the contrary, these measures resulted in the misuse and wastage of resources.

(ii)   Need for aid

| (146) | Brussels Airlines points out that, in order to benefit from operating aid, the aviation guidelines require the annual traffic of an airport not to exceed 3 million passengers. Brussels Airlines stresses that this threshold was exceeded in 2009. Moreover, Brussels Airlines notes that the operating aid granted to BSCA did not evolve between 2002 and 2008 although, in theory, BSCA should have been capable of covering an increasing proportion of its operating costs. In addition, from 2009 Charleroi airport should have been able to cover its operating costs and was not eligible to receive further operating aid. |
| --- | --- |

(146)

Brussels Airlines points out that, in order to benefit from operating aid, the aviation guidelines require the annual traffic of an airport not to exceed 3 million passengers. Brussels Airlines stresses that this threshold was exceeded in 2009. Moreover, Brussels Airlines notes that the operating aid granted to BSCA did not evolve between 2002 and 2008 although, in theory, BSCA should have been capable of covering an increasing proportion of its operating costs. In addition, from 2009 Charleroi airport should have been able to cover its operating costs and was not eligible to receive further operating aid.

(iii)   Inappropriateness of the aid

| (147) | According to Brussels Airlines, even if it were proven that Charleroi airport still needed the operating aid in 2008, it was in fact clear that the public financing of BSCA through State aid was an inappropriate policy given that Charleroi airport was not profitable. Moreover, Brussels Airlines points out that the measures in question were all inappropriate because the Region did not, to its knowledge, previously attempt to compare its aid measures with measures that were less likely to hinder competition. |
| --- | --- |

(147)

According to Brussels Airlines, even if it were proven that Charleroi airport still needed the operating aid in 2008, it was in fact clear that the public financing of BSCA through State aid was an inappropriate policy given that Charleroi airport was not profitable. Moreover, Brussels Airlines points out that the measures in question were all inappropriate because the Region did not, to its knowledge, previously attempt to compare its aid measures with measures that were less likely to hinder competition.

(iv)   Distortion of competition

| (148) | Brussels Airlines notes that Charleroi airport is located in the same catchment area as Brussels airport and that the latter still had available capacity during the period in question. Moreover, Brussels Airlines points out that, while the number of passengers has increased at Charleroi airport, the number at Brussels airport has stagnated and even declined in recent years, despite the fact that air traffic has risen on the whole in all European countries. |
| --- | --- |

(148)

Brussels Airlines notes that Charleroi airport is located in the same catchment area as Brussels airport and that the latter still had available capacity during the period in question. Moreover, Brussels Airlines points out that, while the number of passengers has increased at Charleroi airport, the number at Brussels airport has stagnated and even declined in recent years, despite the fact that air traffic has risen on the whole in all European countries.

4.1.3.   Board of Airline Representatives (BAR)

Board of Airline Representatives (BAR)

(a)   Comments received following the 2012 extension decision

| (149) | BAR submits that terminal charges (fees), safety costs and certain security costs, and firefighting costs at Brussels airport are borne by its users, while at regional airports these are borne by the airport or regional authorities. In BAR's opinion this constitutes a substantial advantage for regional airports. |
| --- | --- |

(149)

BAR submits that terminal charges (fees), safety costs and certain security costs, and firefighting costs at Brussels airport are borne by its users, while at regional airports these are borne by the airport or regional authorities. In BAR's opinion this constitutes a substantial advantage for regional airports.

(b)   Comments received following publication of the Guidelines on State aid to airports and airlines

(i)   Distortion of competition caused by the operating aid granted to Brussels South Charleroi Airport (BSCA)

| (150) | BAR briefly notes the nature of the aid in question: operating aid received by BSCA and paid by the Region, ‘in all likelihood transferred to Ryanair, at least in part’. |
| --- | --- |

(150)

BAR briefly notes the nature of the aid in question: operating aid received by BSCA and paid by the Region, ‘in all likelihood transferred to Ryanair, at least in part’.

| (151) | BAR complains that the Commission, by announcing that it wanted to apply the principles set out in the aviation guidelines ‘to all cases concerning operating aid ... to airports even if the aid was granted before 4 April 2014’, infringed the principle of legal certainty and adopted an opposite approach to the one recommended in 2002 in its notice on the determination of the applicable rules for the assessment of unlawful State aid, given that, according to BAR, said notice states that aid must be assessed ‘in accordance with the texts in force at the time when the aid was granted’. Moreover, BAR considers that this change in Commission policy also infringes the principle that reasons must be given, because the Commission does not explain why developments in the aviation sector would have an impact on the assessment of past operating aid, or why only the latter type of aid is covered and not also past start-up or investment aid. In this respect, BAR points out that, if the Commission were to find that aid granted in the past was compatible with the internal market even though the opposite had been found previously, this would infringe not only the general principles referred to above, but also the principles of sound administration and legitimate expectations. |
| --- | --- |

(151)

BAR complains that the Commission, by announcing that it wanted to apply the principles set out in the aviation guidelines ‘to all cases concerning operating aid ... to airports even if the aid was granted before 4 April 2014’, infringed the principle of legal certainty and adopted an opposite approach to the one recommended in 2002 in its notice on the determination of the applicable rules for the assessment of unlawful State aid, given that, according to BAR, said notice states that aid must be assessed ‘in accordance with the texts in force at the time when the aid was granted’. Moreover, BAR considers that this change in Commission policy also infringes the principle that reasons must be given, because the Commission does not explain why developments in the aviation sector would have an impact on the assessment of past operating aid, or why only the latter type of aid is covered and not also past start-up or investment aid. In this respect, BAR points out that, if the Commission were to find that aid granted in the past was compatible with the internal market even though the opposite had been found previously, this would infringe not only the general principles referred to above, but also the principles of sound administration and legitimate expectations.

| (152) | According to BAR, the aid measures in question, including those granted in the past to BSCA, are not compatible with the internal market, even when assessed in the light of the provisions of the aviation guidelines, for the following reasons:






  — | The aid measures are not necessary: BSCA has exceeded the threshold of 1 million passengers, given that it handles 6 million passengers, and must therefore be able to bear its operating costs. In addition, the operating aid granted in the past cannot be regarded as compatible, given that BSCA had 3 million passengers, or necessary, given that BSCA should have been able to bear its operating costs. |
| --- | --- | --- |

(152)

According to BAR, the aid measures in question, including those granted in the past to BSCA, are not compatible with the internal market, even when assessed in the light of the provisions of the aviation guidelines, for the following reasons:

—

The aid measures are not necessary: BSCA has exceeded the threshold of 1 million passengers, given that it handles 6 million passengers, and must therefore be able to bear its operating costs. In addition, the operating aid granted in the past cannot be regarded as compatible, given that BSCA had 3 million passengers, or necessary, given that BSCA should have been able to bear its operating costs.

| — | The aid is and was anti-competitive: according to BAR, given that BSCA is located in the same catchment area as Brussels airport, which had spare capacity, the Region should have taken account of this when granting the aid, which did not happen. |
| --- | --- |

—

The aid is and was anti-competitive: according to BAR, given that BSCA is located in the same catchment area as Brussels airport, which had spare capacity, the Region should have taken account of this when granting the aid, which did not happen.

(ii)   Additional comments on the level playing field

| (153) | According to BAR, if BSCA considers that aid for the provision of certain public services at the airport must be authorised, then these services must be compared to the same services provided at Brussels airport. However, BAR points out that certain services provided at Charleroi airport are regarded as public services whereas they are not at Brussels airport. |
| --- | --- |

(153)

According to BAR, if BSCA considers that aid for the provision of certain public services at the airport must be authorised, then these services must be compared to the same services provided at Brussels airport. However, BAR points out that certain services provided at Charleroi airport are regarded as public services whereas they are not at Brussels airport.

| (154) | BAR stresses that the collection of airport charges must not lead to a situation of discrimination between users. In particular, BAR refers to the reductions enjoyed by Ryanair on the airport charges and not enjoyed by other airlines established at this airport, and to the fact that the airport charges at Brussels airport are much higher. |
| --- | --- |

(154)

BAR stresses that the collection of airport charges must not lead to a situation of discrimination between users. In particular, BAR refers to the reductions enjoyed by Ryanair on the airport charges and not enjoyed by other airlines established at this airport, and to the fact that the airport charges at Brussels airport are much higher.

| (155) | BAR notes that, since Brussels airport was privatised, its services are no longer expressly regarded as public services. These services constitute ‘regulated activities’ for which the charges paid by airport users or passengers are controlled according to a formula. |
| --- | --- |

(155)

BAR notes that, since Brussels airport was privatised, its services are no longer expressly regarded as public services. These services constitute ‘regulated activities’ for which the charges paid by airport users or passengers are controlled according to a formula.

| (156) | In addition, BAR draws the Commission's attention to the question of cross-subsidisation given that Ryanair operates at both Charleroi airport and Brussels airport. If such cross-subsidisation were found to exist, this would clearly represent a distortion of competition. |
| --- | --- |

(156)

In addition, BAR draws the Commission's attention to the question of cross-subsidisation given that Ryanair operates at both Charleroi airport and Brussels airport. If such cross-subsidisation were found to exist, this would clearly represent a distortion of competition.

4.1.4.   Association of European Airlines (AEA)

Association of European Airlines (AEA)

(a)   Comments received following the 2012 extension decision

| (157) | The AEA submits that subsidies to regional airports are acceptable only if they benefit all airport users without discrimination and do not create distortions between airports within the same catchment area. The AEA acknowledges that airports may adapt their infrastructure to meet the needs of specific users as long as principles of transparency, cost-relatedness and non-discrimination are observed. |
| --- | --- |

(157)

The AEA submits that subsidies to regional airports are acceptable only if they benefit all airport users without discrimination and do not create distortions between airports within the same catchment area. The AEA acknowledges that airports may adapt their infrastructure to meet the needs of specific users as long as principles of transparency, cost-relatedness and non-discrimination are observed.

4.1.5.   Air France

Air France

(a)   Comments received following the 2012 extension decision

| (158) | Air France asks the Commission not to approve what, in its view, is operating aid distorting competition between airlines and between airports. Air France believes that the Commission should comprehensively compare the fees charged at Charleroi airport and those charged at airports in the same catchment area, in particular Brussels airport. |
| --- | --- |

(158)

Air France asks the Commission not to approve what, in its view, is operating aid distorting competition between airlines and between airports. Air France believes that the Commission should comprehensively compare the fees charged at Charleroi airport and those charged at airports in the same catchment area, in particular Brussels airport.

| (159) | Air France also questions the retroactive application of the aviation guidelines to cases involving operating aid for airports, even where this aid was paid prior to the publication of said guidelines, for a number of reasons:






  — | According to Air France, the retroactive application of the aviation guidelines favours non-virtuous operators by legitimising conduct that did not comply with the rules applicable at the time. By contrast, this approach penalises operators who did comply with the previous guidelines by refraining from claiming public funds. |
| --- | --- | --- |

(159)

Air France also questions the retroactive application of the aviation guidelines to cases involving operating aid for airports, even where this aid was paid prior to the publication of said guidelines, for a number of reasons:

—

According to Air France, the retroactive application of the aviation guidelines favours non-virtuous operators by legitimising conduct that did not comply with the rules applicable at the time. By contrast, this approach penalises operators who did comply with the previous guidelines by refraining from claiming public funds.

| — | The retroactive application of the aviation guidelines to operating aid granted to airports is contrary to general principles of law and European case-law. |
| --- | --- |

—

The retroactive application of the aviation guidelines to operating aid granted to airports is contrary to general principles of law and European case-law.

| (160) | Air France claims that the new aviation guidelines will have the effect of favouring new operators to the detriment of incumbent operators. By allowing a new airline to pay only the incremental cost associated with its activity, they will discriminate against incumbent operators at the airport, who will be subject to higher fees. |
| --- | --- |

(160)

Air France claims that the new aviation guidelines will have the effect of favouring new operators to the detriment of incumbent operators. By allowing a new airline to pay only the incremental cost associated with its activity, they will discriminate against incumbent operators at the airport, who will be subject to higher fees.

| (161) | Lastly, Air France notes that, although the condition of non-discriminatory accessibility to the infrastructure of an airport may seem easy to fulfil in theory, the situation is quite different in practice, with certain operating models being consciously disadvantaged. |
| --- | --- |

(161)

Lastly, Air France notes that, although the condition of non-discriminatory accessibility to the infrastructure of an airport may seem easy to fulfil in theory, the situation is quite different in practice, with certain operating models being consciously disadvantaged.

4.1.6.   BSCA

BSCA

(a)   Comments received following the 2012 extension decision

| (162) | BSCA calls on the Commission to close its investigation due to the absence of any State aid granted to itself or its trading partners. |
| --- | --- |

(162)

BSCA calls on the Commission to close its investigation due to the absence of any State aid granted to itself or its trading partners.

| (163) | As a preliminary remark, BSCA considers that the time that has passed since the start of the case may have created legitimate expectations for BSCA and its users. BSCA notes that the Commission was previously informed, during its initial investigation that led to the 2004 decision, about the mechanism introduced by the Region and BSCA in 1991 under the concession agreement and its subsequent amendments. BSCA therefore objects to the extension of the scope of the measures examined by the Commission. |
| --- | --- |

(163)

As a preliminary remark, BSCA considers that the time that has passed since the start of the case may have created legitimate expectations for BSCA and its users. BSCA notes that the Commission was previously informed, during its initial investigation that led to the 2004 decision, about the mechanism introduced by the Region and BSCA in 1991 under the concession agreement and its subsequent amendments. BSCA therefore objects to the extension of the scope of the measures examined by the Commission.

| (164) | BSCA draws the Commission's attention to the importance of regional airports in terms of economic and social development, regional accessibility and tourism. It considers that the liberalisation of air transport has created a new category of passenger taking city trips and short-haul flights for family reasons, together with new low-cost business models meeting this new demand. BSCA therefore takes the view that competition between Charleroi airport and Brussels airport is only very limited. In this respect, BSCA stresses the limited impact on Brussels airport of the launch in the past of a route between Dublin and Charleroi airport (85). BSCA explains its success by the dynamic policy implemented by the Walloon authorities in recent years and also by the flexibility of its infrastructure and the drive of the airport teams. |
| --- | --- |

(164)

BSCA draws the Commission's attention to the importance of regional airports in terms of economic and social development, regional accessibility and tourism. It considers that the liberalisation of air transport has created a new category of passenger taking city trips and short-haul flights for family reasons, together with new low-cost business models meeting this new demand. BSCA therefore takes the view that competition between Charleroi airport and Brussels airport is only very limited. In this respect, BSCA stresses the limited impact on Brussels airport of the launch in the past of a route between Dublin and Charleroi airport (85). BSCA explains its success by the dynamic policy implemented by the Walloon authorities in recent years and also by the flexibility of its infrastructure and the drive of the airport teams.

85

| (165) | In terms of services of general interest, BSCA notes that since 1991 it has received compensation for services of general interest, as defined by Article 25 of the schedule of conditions concluded with the Walloon public authorities. BSCA disputes the analysis made by the Commission in its 2012 extension decision, refuting the non-economic nature of these activities. The airport manager considers that this represents, firstly, a reversal of position by the Commission in relation to its established decision-making practice and, secondly, a lack of understanding of the international and European regulations on transport safety and security. BSCA reminds the Commission that these services of general interest, which were previously provided by the administration, were transferred with the intention of ensuring sound management and flexibility. The compensation paid by the Walloon authorities is therefore capped and cost-based and does not create any advantage for BSCA. An audit system has been established in order to prevent any overcompensation. |
| --- | --- |

(165)

In terms of services of general interest, BSCA notes that since 1991 it has received compensation for services of general interest, as defined by Article 25 of the schedule of conditions concluded with the Walloon public authorities. BSCA disputes the analysis made by the Commission in its 2012 extension decision, refuting the non-economic nature of these activities. The airport manager considers that this represents, firstly, a reversal of position by the Commission in relation to its established decision-making practice and, secondly, a lack of understanding of the international and European regulations on transport safety and security. BSCA reminds the Commission that these services of general interest, which were previously provided by the administration, were transferred with the intention of ensuring sound management and flexibility. The compensation paid by the Walloon authorities is therefore capped and cost-based and does not create any advantage for BSCA. An audit system has been established in order to prevent any overcompensation.

| (166) | With regard to the capital increase, BSCA notes that the Commission did not question this during the initial investigation and takes the view that this complies with the market economy private investor principle. The airport manager adds that this increase was decided on the basis of a credible and realistic business plan and that it was justified by its needs due to the considerable development of its activities. In this respect, BSCA stresses that the Commission noted even in 2004 that the expected results for 2003 were higher than those taken into account in the 2001 business plan. Likewise, the number of passengers passing through Charleroi airport and the operating income in 2011 exceeded the estimates in this same business plan. Lastly, in BSCA's opinion, the development of its activities in partnership with Ryanair enabled SOWAER to profit from the good results achieved by BSCA, given that it made a substantial capital gain when it sold some of its shares in 2009. |
| --- | --- |

(166)

With regard to the capital increase, BSCA notes that the Commission did not question this during the initial investigation and takes the view that this complies with the market economy private investor principle. The airport manager adds that this increase was decided on the basis of a credible and realistic business plan and that it was justified by its needs due to the considerable development of its activities. In this respect, BSCA stresses that the Commission noted even in 2004 that the expected results for 2003 were higher than those taken into account in the 2001 business plan. Likewise, the number of passengers passing through Charleroi airport and the operating income in 2011 exceeded the estimates in this same business plan. Lastly, in BSCA's opinion, the development of its activities in partnership with Ryanair enabled SOWAER to profit from the good results achieved by BSCA, given that it made a substantial capital gain when it sold some of its shares in 2009.

4.2.   Comments from interested parties on the measures granted to Ryanair

Comments from interested parties on the measures granted to Ryanair

4.2.1.   Britannia

Britannia

(Comments received following the 2002 opening decision)

| (167) | The airline Britannia considers that it is normal for airports to be able to provide marketing support and reductions according to the volume of passengers supplied by airlines, especially in the case of airports that are not yet well established. However, these advantages must remain proportional, realistic and limited in duration. Britannia is worried about the inequality created between competing airlines in this specific case. The airport charges are unequal and unrealistic, even though the low-cost airlines use the runways, terminals and safety and security facilities in the same way as other airlines. |
| --- | --- |

(167)

The airline Britannia considers that it is normal for airports to be able to provide marketing support and reductions according to the volume of passengers supplied by airlines, especially in the case of airports that are not yet well established. However, these advantages must remain proportional, realistic and limited in duration. Britannia is worried about the inequality created between competing airlines in this specific case. The airport charges are unequal and unrealistic, even though the low-cost airlines use the runways, terminals and safety and security facilities in the same way as other airlines.

4.2.2.   Scandinavian Airlines

Scandinavian Airlines

(Comments received following the 2002 opening decision)

| (168) | SAS points out that the deregulation of European airspace has led to increased competition among the traditional airlines and has also allowed the creation of new airlines, which have developed new business concepts. It is of fundamental importance that this competition complies with a regulatory framework applied transparently and without discrimination. |
| --- | --- |

(168)

SAS points out that the deregulation of European airspace has led to increased competition among the traditional airlines and has also allowed the creation of new airlines, which have developed new business concepts. It is of fundamental importance that this competition complies with a regulatory framework applied transparently and without discrimination.

4.2.3.   KLM Royal Dutch Airlines

KLM Royal Dutch Airlines

(Comments received following the 2002 opening decision)

| (169) | KLM explains that low-cost airlines and traditional airlines offer different products and that each one has its own ‘raison d'être’ at both commercial and operational level. Low-cost airlines generally avoid large airports, where the logistics can be complicated and usage costs high. Instead they choose regional platforms allowing them to operate rapid rotations at a reduced cost. These developments should not be called into question, but they should not be based on aid. According to KLM, the advantages received by Ryanair at Charleroi airport go well beyond what is permitted under Article 107(1) TFEU, and the consideration offered by Ryanair, consisting of basing a number of aircraft at Charleroi airport, changes nothing in this state of affairs. |
| --- | --- |

(169)

KLM explains that low-cost airlines and traditional airlines offer different products and that each one has its own ‘raison d'être’ at both commercial and operational level. Low-cost airlines generally avoid large airports, where the logistics can be complicated and usage costs high. Instead they choose regional platforms allowing them to operate rapid rotations at a reduced cost. These developments should not be called into question, but they should not be based on aid. According to KLM, the advantages received by Ryanair at Charleroi airport go well beyond what is permitted under Article 107(1) TFEU, and the consideration offered by Ryanair, consisting of basing a number of aircraft at Charleroi airport, changes nothing in this state of affairs.

raison d'être

4.2.4.   Air France

Air France

(Comments received following the 2002 opening decision)

| (170) | Air France considers that the reduction in the fees charged to Ryanair and its absorption by the Region and BSCA create a disadvantage for Ryanair's competitors who provide links on the intra-Community market. The reduction in the landing fee allows Ryanair to reduce its operating costs and in fact makes it more competitive than its competitors, not only for the flights that it operates into or out of Charleroi airport but also throughout the Ryanair network. The compensation commitment made by the Region is also regarded as an advantage guaranteeing stability of operating conditions to Ryanair, given that ‘practical experience of using any airport platform demonstrates that the commercial and regulatory environment is never rigid. Airport charges can therefore easily rise if the airport manager is forced to finance specific measures, possibly with the aim of accommodating other carriers wishing to establish themselves at Charleroi airport. In addition, the development of environmental measures can alter the conditions of operation of an airport’. |
| --- | --- |

(170)

Air France considers that the reduction in the fees charged to Ryanair and its absorption by the Region and BSCA create a disadvantage for Ryanair's competitors who provide links on the intra-Community market. The reduction in the landing fee allows Ryanair to reduce its operating costs and in fact makes it more competitive than its competitors, not only for the flights that it operates into or out of Charleroi airport but also throughout the Ryanair network. The compensation commitment made by the Region is also regarded as an advantage guaranteeing stability of operating conditions to Ryanair, given that ‘practical experience of using any airport platform demonstrates that the commercial and regulatory environment is never rigid. Airport charges can therefore easily rise if the airport manager is forced to finance specific measures, possibly with the aim of accommodating other carriers wishing to establish themselves at Charleroi airport. In addition, the development of environmental measures can alter the conditions of operation of an airport’.

4.2.5.   Austrian Airlines

Austrian Airlines

(Comments received following the 2002 opening decision)

| (171) | According to Austrian Airlines, the arrival of low-cost airlines has resulted in a subsidies race between airports and regions wanting to be served by these carriers. These developments have called into question the principle of infrastructure availability payments, even though this is one of the basic rules in the civil aviation world. The aid granted is not degressive, it is independent of the success achieved by Ryanair in the links that it serves and it benefits one airline only, which leads to discrimination. Austrian Airlines concludes that ‘cooperation’ such as that observed between Ryanair and the Region causes significant distortions of competition between airlines and is largely incompatible with the smooth operation of the internal market for aviation. |
| --- | --- |

(171)

According to Austrian Airlines, the arrival of low-cost airlines has resulted in a subsidies race between airports and regions wanting to be served by these carriers. These developments have called into question the principle of infrastructure availability payments, even though this is one of the basic rules in the civil aviation world. The aid granted is not degressive, it is independent of the success achieved by Ryanair in the links that it serves and it benefits one airline only, which leads to discrimination. Austrian Airlines concludes that ‘cooperation’ such as that observed between Ryanair and the Region causes significant distortions of competition between airlines and is largely incompatible with the smooth operation of the internal market for aviation.

4.2.6.   Association of Residents and Inhabitants of Municipalities Close to Charleroi-Gosselies Airport (ARACH)

Association of Residents and Inhabitants of Municipalities Close to Charleroi-Gosselies Airport (ARACH)

(Comments received following the 2002 opening decision)

| (172) | The Association is concerned that the financial aid granted to Ryanair will lead to ‘unbridled development of the airport’ within an urban site, and that in these terms ‘as both citizens and taxpayers, we are concerned about the questionable State aid granted to a private company, as this involves improper use of the Walloon Region's budgetary resources’. |
| --- | --- |

(172)

The Association is concerned that the financial aid granted to Ryanair will lead to ‘unbridled development of the airport’ within an urban site, and that in these terms ‘as both citizens and taxpayers, we are concerned about the questionable State aid granted to a private company, as this involves improper use of the Walloon Region's budgetary resources’.

4.2.7.   Interested Party A

Interested Party A

(Comments received following the 2002 opening decision)

| (173) | Interested Party A states that it is ‘very concerned’ about the subsidies granted by the public authorities, which will affect the conditions of competition between the various modes of transport. ‘Ryanair is therefore benefiting in particular from public subsidies for the Charleroi-London link, while Eurostar, operated jointly by SNCB, British railway operators and SNCF, is not benefiting from them. Both means of transport are, however, in direct competition for the Brussels-London link. It is up to the railway operators alone to advertise the link, purchase the rolling stock and engines, pay infrastructure and tunnel tolls, etc. Equal treatment between competitors is therefore upset’. |
| --- | --- |

(173)

Interested Party A states that it is ‘very concerned’ about the subsidies granted by the public authorities, which will affect the conditions of competition between the various modes of transport. ‘Ryanair is therefore benefiting in particular from public subsidies for the Charleroi-London link, while Eurostar, operated jointly by SNCB, British railway operators and SNCF, is not benefiting from them. Both means of transport are, however, in direct competition for the Brussels-London link. It is up to the railway operators alone to advertise the link, purchase the rolling stock and engines, pay infrastructure and tunnel tolls, etc. Equal treatment between competitors is therefore upset’.

4.2.8.   Interested Party B

Interested Party B

(Comments received following the 2002 opening decision)

| (174) | Interested Party B points out that the advantages granted to Ryanair reduce its cost structure and enable it to charge lower fares. These practices affect the conditions of competition, whether these companies operate out of Charleroi airport or Brussels airport and whatever the route served. Competition between low-cost airlines is not merely competition that must be analysed on a route-by-route basis. For many travellers, the destinations of Venice or Barcelona are wholly exchangeable. Competition therefore applies to every route. |
| --- | --- |

(174)

Interested Party B points out that the advantages granted to Ryanair reduce its cost structure and enable it to charge lower fares. These practices affect the conditions of competition, whether these companies operate out of Charleroi airport or Brussels airport and whatever the route served. Competition between low-cost airlines is not merely competition that must be analysed on a route-by-route basis. For many travellers, the destinations of Venice or Barcelona are wholly exchangeable. Competition therefore applies to every route.

| (175) | This company explains that the direct costs out of Brussels airport are EUR 32,14 per passenger compared with EUR 5 for Ryanair operating out of Charleroi airport (86). |
| --- | --- |

(175)

This company explains that the direct costs out of Brussels airport are EUR 32,14 per passenger compared with EUR 5 for Ryanair operating out of Charleroi airport (86).

86

| (176) | Even though the ground handling services are more limited for Ryanair than for other airlines, this interested party points out that a considerable number of ground handling services are still necessary for all airlines. The fact that the ground handling market is open to competition at Brussels airport means that these fees should not normally be much higher at Brussels airport than at Charleroi airport. Ground handling fees are, generally speaking, higher at small airports than at large airports, given that companies cannot usually reach the critical size needed to make economies of scale. This interested party estimates that Ryanair saved EUR 17 million in 2003 on ground handling fees and landing fees. In its opinion, it also appears that BSCA has not taken account of Council Directive 96/67/EC (87): the airport should reach two million passengers a year quite quickly and BSCA will need to apply the Directive at this threshold and open the ground handling market to other operators. |
| --- | --- |

(176)

Even though the ground handling services are more limited for Ryanair than for other airlines, this interested party points out that a considerable number of ground handling services are still necessary for all airlines. The fact that the ground handling market is open to competition at Brussels airport means that these fees should not normally be much higher at Brussels airport than at Charleroi airport. Ground handling fees are, generally speaking, higher at small airports than at large airports, given that companies cannot usually reach the critical size needed to make economies of scale. This interested party estimates that Ryanair saved EUR 17 million in 2003 on ground handling fees and landing fees. In its opinion, it also appears that BSCA has not taken account of Council Directive 96/67/EC (87): the airport should reach two million passengers a year quite quickly and BSCA will need to apply the Directive at this threshold and open the ground handling market to other operators.

87

| (177) | BSCA has allegedly acted not as a private investor in a market economy but for political and social reasons, on the instructions of the Region. The 15-year contract will probably not allow BSCA to establish itself as a profitable business and it is expected to continue to experience operational problems. The prospect of a return on the investment could be undermined if Ryanair withdraws (88). |
| --- | --- |

(177)

BSCA has allegedly acted not as a private investor in a market economy but for political and social reasons, on the instructions of the Region. The 15-year contract will probably not allow BSCA to establish itself as a profitable business and it is expected to continue to experience operational problems. The prospect of a return on the investment could be undermined if Ryanair withdraws (88).

88

| (178) | BSCA allegedly receives contributions from the Region, such as 65 % of the revenue from the airport charges and the placing at its disposal of the infrastructure free of charge, even though the Region pays a contribution to SOWAER. In principle, each payment from the Region should be limited to the compensation for the costs associated with the public service obligations imposed on BSCA, and the situation is not very clear in this regard. |
| --- | --- |

(178)

BSCA allegedly receives contributions from the Region, such as 65 % of the revenue from the airport charges and the placing at its disposal of the infrastructure free of charge, even though the Region pays a contribution to SOWAER. In principle, each payment from the Region should be limited to the compensation for the costs associated with the public service obligations imposed on BSCA, and the situation is not very clear in this regard.

| (179) | For this company, which acknowledges having also on occasion benefited from ‘marketing’ advantages for the launch of new destinations, but never from reductions in airport charges or ground handling costs, the advantages granted to Ryanair at Charleroi airport go well beyond the bounds of current practice. It considers, however, that it took just as significant commercial risks by setting itself up at Brussels airport at a time when competition from Sabena was very strong. |
| --- | --- |

(179)

For this company, which acknowledges having also on occasion benefited from ‘marketing’ advantages for the launch of new destinations, but never from reductions in airport charges or ground handling costs, the advantages granted to Ryanair at Charleroi airport go well beyond the bounds of current practice. It considers, however, that it took just as significant commercial risks by setting itself up at Brussels airport at a time when competition from Sabena was very strong.

| (180) | The fact that other airport managers grant advantages to Ryanair does not prove that Charleroi airport has acted as a private investor in a market economy. The company refers to the Steinike & Weiling judgment (89). |
| --- | --- |

(180)

The fact that other airport managers grant advantages to Ryanair does not prove that Charleroi airport has acted as a private investor in a market economy. The company refers to the Steinike & Weiling judgment (89).

Steinike & Weiling

89

4.2.9.   Brussels International Airport Company, now Brussels Airport Company (hereinafter ‘BAC’)

Brussels International Airport Company, now Brussels Airport Company (hereinafter ‘BAC’)

(Comments received following the 2002 opening decision)

| (181) | According to BAC, BSCA has not behaved like a private investor given that the advantages granted differ in their extent from those granted by other airports (90). The fact that Ryanair receives advantages from other airports is not at all relevant, as those could also constitute State aid. |
| --- | --- |

(181)

According to BAC, BSCA has not behaved like a private investor given that the advantages granted differ in their extent from those granted by other airports (90). The fact that Ryanair receives advantages from other airports is not at all relevant, as those could also constitute State aid.

90

| (182) | The interested party draws the Commission's attention to several factors that must be taken into account when analysing the potential profitability of BSCA and that appear to exclude medium-term profits: |
| --- | --- |

(182)

The interested party draws the Commission's attention to several factors that must be taken into account when analysing the potential profitability of BSCA and that appear to exclude medium-term profits:

| (183) | BSCA benefited from a recapitalisation by the Region, totalling EUR 4 million, in December 2002.






  — | BSCA benefited from ‘an exemption from half of its fee due to the Region for the period 2001-2006. This advantage totals EUR 1 million per year, which BSCA will, however, have to pay back from 2007 onwards’. |
| --- | --- | --- |

(183)

BSCA benefited from a recapitalisation by the Region, totalling EUR 4 million, in December 2002.

—

BSCA benefited from ‘an exemption from half of its fee due to the Region for the period 2001-2006. This advantage totals EUR 1 million per year, which BSCA will, however, have to pay back from 2007 onwards’.

| — | The Commission should take account of the costs of the Charleroi airport expansion project, calculated at EUR 95 million, and the methods of financing. If this project is not paid for by BSCA, the conditions under which the Region places this infrastructure at the disposal of BSCA should be checked. This interested party doubts that, given the current state of its infrastructure, the airport is in a position to cater for sufficient passengers to ensure the financial balance of BSCA. |
| --- | --- |

—

The Commission should take account of the costs of the Charleroi airport expansion project, calculated at EUR 95 million, and the methods of financing. If this project is not paid for by BSCA, the conditions under which the Region places this infrastructure at the disposal of BSCA should be checked. This interested party doubts that, given the current state of its infrastructure, the airport is in a position to cater for sufficient passengers to ensure the financial balance of BSCA.

| — | The Region provides BSCA, free of charge, with the equipment and staff needed for all the security operations at Charleroi airport, namely passenger and baggage screening prior to embarkation, although, ‘as a general rule, security costs are borne by the airport users, either through a security fee payable to the airport operator or through a tax where these services are provided by the public authorities’. |
| --- | --- |

—

The Region provides BSCA, free of charge, with the equipment and staff needed for all the security operations at Charleroi airport, namely passenger and baggage screening prior to embarkation, although, ‘as a general rule, security costs are borne by the airport users, either through a security fee payable to the airport operator or through a tax where these services are provided by the public authorities’.

4.2.10.   Interested Party C

Interested Party C

(Comments received following the 2012 extension decision)

| (184) | Interested Party C believes that the advantages granted by the Region to BSCA and Ryanair harm competition and that Charleroi airport and Brussels airport operate in the same market. |
| --- | --- |

(184)

Interested Party C believes that the advantages granted by the Region to BSCA and Ryanair harm competition and that Charleroi airport and Brussels airport operate in the same market.

| (185) | Interested Party C criticises the relationship between the Region, BSCA and Ryanair and the resulting differences in charges levied on airlines at Brussels airport and Charleroi airport. Notably, (i) maintenance costs are not passed on to users but are compensated by the Region, (ii) landing fees favour Ryanair, [...]. |
| --- | --- |

(185)

Interested Party C criticises the relationship between the Region, BSCA and Ryanair and the resulting differences in charges levied on airlines at Brussels airport and Charleroi airport. Notably, (i) maintenance costs are not passed on to users but are compensated by the Region, (ii) landing fees favour Ryanair, [...].

| (186) | Interested Party C further submits that Ryanair does not pay for services that are part of normal airport management, such as fire services, expansion and construction of infrastructure and passenger fees. |
| --- | --- |

(186)

Interested Party C further submits that Ryanair does not pay for services that are part of normal airport management, such as fire services, expansion and construction of infrastructure and passenger fees.

4.2.11.   Brussels Airlines

Brussels Airlines

(a)   Existence of aid

(i)   Selective advantage

| (187) | According to Brussels Airlines, Ryanair has benefited from a selective advantage compared to other airlines. |
| --- | --- |

(187)

According to Brussels Airlines, Ryanair has benefited from a selective advantage compared to other airlines.

| (188) | The aid granted by the Region and SOWAER to BSCA reduces the latter's operating costs, enabling it to charge lower fees to airlines including Ryanair, in turn reducing the latter's operating costs. In particular, given that the Region covers the safety and security costs of Charleroi airport, BSCA does not recover these from the airlines, whereas Brussels airport has not benefited from any compensation in this respect. Brussels Airlines believes that the Region's comprehensive financial support programme for BSCA must be taken into account when assessing the commercial relationship between BSCA and Ryanair. |
| --- | --- |

(188)

The aid granted by the Region and SOWAER to BSCA reduces the latter's operating costs, enabling it to charge lower fees to airlines including Ryanair, in turn reducing the latter's operating costs. In particular, given that the Region covers the safety and security costs of Charleroi airport, BSCA does not recover these from the airlines, whereas Brussels airport has not benefited from any compensation in this respect. Brussels Airlines believes that the Region's comprehensive financial support programme for BSCA must be taken into account when assessing the commercial relationship between BSCA and Ryanair.

| (189) | Ryanair has also benefited from direct financial measures such as start-up aid and contributions to marketing activities. Brussels Airlines questions whether this aid complies with the conditions laid down by the 2005 guidelines as also the principles of proportionality and transparency. |
| --- | --- |

(189)

Ryanair has also benefited from direct financial measures such as start-up aid and contributions to marketing activities. Brussels Airlines questions whether this aid complies with the conditions laid down by the 2005 guidelines as also the principles of proportionality and transparency.

| (190) | Brussels Airlines considers that the cumulative effect of all the measures is to make it impossible to believe that BSCA is acting as a private investor, and it invites the Commission not to examine the measures separately, but as a whole. |
| --- | --- |

(190)

Brussels Airlines considers that the cumulative effect of all the measures is to make it impossible to believe that BSCA is acting as a private investor, and it invites the Commission not to examine the measures separately, but as a whole.

1.   Benchmarking.

| (191) | According to Brussels Airlines, the fees charged by BSCA to Ryanair during the period in question were much lower than those paid by other airlines at comparable airports. |
| --- | --- |

(191)

According to Brussels Airlines, the fees charged by BSCA to Ryanair during the period in question were much lower than those paid by other airlines at comparable airports.

| (192) | Brussels Airlines uses as its benchmark the airport charges of a number of other airports located in the catchment area of Charleroi airport (Eindhoven, Lille and Cologne) or that are of a similar size (Marseille, Porto and Bologna), and concludes that the airport charges applied at Charleroi airport are not in line with those that a private investor in a market economy would apply. |
| --- | --- |

(192)

Brussels Airlines uses as its benchmark the airport charges of a number of other airports located in the catchment area of Charleroi airport (Eindhoven, Lille and Cologne) or that are of a similar size (Marseille, Porto and Bologna), and concludes that the airport charges applied at Charleroi airport are not in line with those that a private investor in a market economy would apply.

| (193) | Brussels Airlines also considers that Brussels airport is a good benchmark for assessing the discriminatory nature of the airport charges: both airports are located in the same catchment area and face the same economic environment. In addition, Brussels airport can pass on its fixed costs to more airlines, which invalidates the argument that the fees applied by Brussels airport are necessarily higher due to its size. A comparison reveals a major difference between the level of airport charges at Brussels airport and at Charleroi airport, even when taking into account the additional services provided at Brussels airport due to differences in airline business models. |
| --- | --- |

(193)

Brussels Airlines also considers that Brussels airport is a good benchmark for assessing the discriminatory nature of the airport charges: both airports are located in the same catchment area and face the same economic environment. In addition, Brussels airport can pass on its fixed costs to more airlines, which invalidates the argument that the fees applied by Brussels airport are necessarily higher due to its size. A comparison reveals a major difference between the level of airport charges at Brussels airport and at Charleroi airport, even when taking into account the additional services provided at Brussels airport due to differences in airline business models.

2.   Cost coverage

| (194) | According to Brussels Airlines, BSCA has not proven that, when the agreements in question (from 2001 and the subsequent amendments) were concluded, BSCA was in a position to cover the costs arising from those agreements, for their entire term, while making a reasonable profit in the medium term. BSCA has not therefore acted as a private investor in a market economy. |
| --- | --- |

(194)

According to Brussels Airlines, BSCA has not proven that, when the agreements in question (from 2001 and the subsequent amendments) were concluded, BSCA was in a position to cover the costs arising from those agreements, for their entire term, while making a reasonable profit in the medium term. BSCA has not therefore acted as a private investor in a market economy.

| (195) | Brussels Airlines submits that BSCA's profit margin is much lower than that of other EU airports. In 2006 and 2007, the average profit margin across a range of EU airports was between 7 % and 9 %. BSCA/SOWAER's profit margins, adjusted to take account of the subsidies, were clearly negative and therefore not in line with these margins, suggesting non-market-driven practices. |
| --- | --- |

(195)

Brussels Airlines submits that BSCA's profit margin is much lower than that of other EU airports. In 2006 and 2007, the average profit margin across a range of EU airports was between 7 % and 9 %. BSCA/SOWAER's profit margins, adjusted to take account of the subsidies, were clearly negative and therefore not in line with these margins, suggesting non-market-driven practices.

| (196) | Brussels Airlines questions whether economies of scale can justify the 50 % reduction granted to Ryanair on these fees. Passenger fees, passenger with reduced mobility fees and ground handling fees appear to be non-existent or extremely low, although these are costs normally borne by airlines. |
| --- | --- |

(196)

Brussels Airlines questions whether economies of scale can justify the 50 % reduction granted to Ryanair on these fees. Passenger fees, passenger with reduced mobility fees and ground handling fees appear to be non-existent or extremely low, although these are costs normally borne by airlines.

| (197) | According to Brussels Airlines, the investment and operating costs that have not been borne by BSCA must be taken into account when examining the aid granted to Ryanair. |
| --- | --- |

(197)

According to Brussels Airlines, the investment and operating costs that have not been borne by BSCA must be taken into account when examining the aid granted to Ryanair.

| (198) | Brussels Airlines doubts whether BSCA has accurately projected the airport's estimated revenues and costs over the entire term of the agreements with Ryanair. |
| --- | --- |

(198)

Brussels Airlines doubts whether BSCA has accurately projected the airport's estimated revenues and costs over the entire term of the agreements with Ryanair.

| (199) | In return for the reduced fees, Ryanair could not guarantee BSCA a level of traffic generating income equivalent and proportional to the costs of the advantages granted to Ryanair. |
| --- | --- |

(199)

In return for the reduced fees, Ryanair could not guarantee BSCA a level of traffic generating income equivalent and proportional to the costs of the advantages granted to Ryanair.

| (200) | As a result, according to Brussels Airlines, the measures in question do not comply with the private investor in a market economy principle, are state aid and give Ryanair a selective advantage. |
| --- | --- |

(200)

As a result, according to Brussels Airlines, the measures in question do not comply with the private investor in a market economy principle, are state aid and give Ryanair a selective advantage.

(ii)   Distortions of competition

| (201) | Brussels Airlines submits that the aid measures have an adverse impact on airlines operating from Brussels airport. The aid measures enable BSCA to charge lower fees and thereby reduce the costs of airlines operating from Charleroi airport. These airlines are able to undercut the prices of competitors operating from other airports. As a result, the European point-to-point market out of Belgium has shifted towards Charleroi airport. Only Charleroi has seen its traffic increase in this segment. The number of passengers using Brussels airport has stagnated in recent years, whereas elsewhere in Europe traffic has increased. In other words, according to Brussels Airlines, the increase in local traffic has been entirely to the benefit of Charleroi airport. |
| --- | --- |

(201)

Brussels Airlines submits that the aid measures have an adverse impact on airlines operating from Brussels airport. The aid measures enable BSCA to charge lower fees and thereby reduce the costs of airlines operating from Charleroi airport. These airlines are able to undercut the prices of competitors operating from other airports. As a result, the European point-to-point market out of Belgium has shifted towards Charleroi airport. Only Charleroi has seen its traffic increase in this segment. The number of passengers using Brussels airport has stagnated in recent years, whereas elsewhere in Europe traffic has increased. In other words, according to Brussels Airlines, the increase in local traffic has been entirely to the benefit of Charleroi airport.

| (202) | Brussels Airlines reiterates that it is based at Brussels airport and that the latter's catchment area almost entirely overlaps with that of Charleroi airport. As a result, Brussels Airlines is in direct competition with Ryanair: they operate in the same catchment area and attract the same customers. Within the EU market, Brussels Airlines and Ryanair offer the same type of service (point-to-point service) and serve the same destinations. Sixty of the destinations served by Brussels Airlines are also served by Ryanair. Out of 46 destinations, Brussels Airlines is in competition with Ryanair for 16 destinations from the same airport and for 12 destinations from an airport in the same catchment area. |
| --- | --- |

(202)

Brussels Airlines reiterates that it is based at Brussels airport and that the latter's catchment area almost entirely overlaps with that of Charleroi airport. As a result, Brussels Airlines is in direct competition with Ryanair: they operate in the same catchment area and attract the same customers. Within the EU market, Brussels Airlines and Ryanair offer the same type of service (point-to-point service) and serve the same destinations. Sixty of the destinations served by Brussels Airlines are also served by Ryanair. Out of 46 destinations, Brussels Airlines is in competition with Ryanair for 16 destinations from the same airport and for 12 destinations from an airport in the same catchment area.

| (203) | The result of this situation is that Brussels Airlines has had to withdraw certain routes that are also served by Ryanair (7 since 2007) and reduce the frequency of flights on other routes (for 14 destinations). Between 2004 and 2012 Brussels Airlines' market share fell from [...] % to [...] %. Its market share is continuing to fall to the benefit of Charleroi airport, where the market share has risen from [...] % to [...] %. |
| --- | --- |

(203)

The result of this situation is that Brussels Airlines has had to withdraw certain routes that are also served by Ryanair (7 since 2007) and reduce the frequency of flights on other routes (for 14 destinations). Between 2004 and 2012 Brussels Airlines' market share fell from [...] % to [...] %. Its market share is continuing to fall to the benefit of Charleroi airport, where the market share has risen from [...] % to [...] %.

(b)   Incompatibility with the internal market.

| (204) | According to Brussels Airlines, most of the aid granted to Ryanair does not contribute to an objective of common interest. Furthermore, the aid has been granted in such a way that it is distorting competition, which is harming common interests. Brussels Airlines therefore considers that the aid granted to Ryanair is incompatible with the internal market. |
| --- | --- |

(204)

According to Brussels Airlines, most of the aid granted to Ryanair does not contribute to an objective of common interest. Furthermore, the aid has been granted in such a way that it is distorting competition, which is harming common interests. Brussels Airlines therefore considers that the aid granted to Ryanair is incompatible with the internal market.

4.2.12.   BSCA

BSCA

(Comments received following the 2012 extension decision)

| (205) | According to BSCA, the commercial framework agreed with Ryanair in no way involves aid being granted to Ryanair. The results of this partnership clearly show the profitability of the business model. Moreover, BSCA argues that it manages its activities entirely independently, without any direct or indirect intervention by the Walloon Government, particularly in the negotiation of commercial contracts with airlines. |
| --- | --- |

(205)

According to BSCA, the commercial framework agreed with Ryanair in no way involves aid being granted to Ryanair. The results of this partnership clearly show the profitability of the business model. Moreover, BSCA argues that it manages its activities entirely independently, without any direct or indirect intervention by the Walloon Government, particularly in the negotiation of commercial contracts with airlines.

4.2.13.   Ryanair

Ryanair

| (206) | Ryanair submits that the agreements concluded between Ryanair, BSCA and the Region do not contain any element of State aid for three reasons: the private investor in a market economy principle applies, there is no selectivity and the agreements do not distort competition. |
| --- | --- |

(206)

Ryanair submits that the agreements concluded between Ryanair, BSCA and the Region do not contain any element of State aid for three reasons: the private investor in a market economy principle applies, there is no selectivity and the agreements do not distort competition.

4.2.14.   TBI

TBI

| (207) | According to TBI, the agreements concluded at Charleroi airport are similar to the arrangements entered into by TBI with Ryanair and other low-cost airlines, particularly at Stockholm Skavsta airport. Granting discounts on landing fees and ground handling fees is a common business practice to attract airlines that can bring in a significant volume of passengers. The contributions made in terms of paying hotel, staff training or marketing costs must be compared against the investment made and the risk taken by the carrier. The ‘marketing’ contributions benefit the airport as its image is improved and it sees an increase in the number of passengers. TBI offers this type of contribution, especially when an operator is establishing a new service or increasing the frequency of certain flights on a given route. |
| --- | --- |

(207)

According to TBI, the agreements concluded at Charleroi airport are similar to the arrangements entered into by TBI with Ryanair and other low-cost airlines, particularly at Stockholm Skavsta airport. Granting discounts on landing fees and ground handling fees is a common business practice to attract airlines that can bring in a significant volume of passengers. The contributions made in terms of paying hotel, staff training or marketing costs must be compared against the investment made and the risk taken by the carrier. The ‘marketing’ contributions benefit the airport as its image is improved and it sees an increase in the number of passengers. TBI offers this type of contribution, especially when an operator is establishing a new service or increasing the frequency of certain flights on a given route.

4.2.15.   HRL Morrison and Co

HRL Morrison and Co

| (208) | According to HRL Morrison, a private investor might adopt the approach taken by Charleroi airport. It would base its offer on certain determining factors: the volume of passengers that an airline could bring to the airport; the airline's willingness to commit to the long term through contracts; the specific needs of the airline; the schedule of aircraft movements and its dovetailing with airport activities (existing traffic); and the needs in terms of terminal and ground handling resources. It would calculate the expected benefits of the agreement with Ryanair as a whole (and not its component parts taken separately). The benefits of such a transaction should be envisaged over a period of around 20 years, with activities expected to take off after three to five years. With regard to a 15-year agreement, Morrison's shareholders would regard this as commercially acceptable if a return on the investment could be made within around five years from the agreement being signed. |
| --- | --- |

(208)

According to HRL Morrison, a private investor might adopt the approach taken by Charleroi airport. It would base its offer on certain determining factors: the volume of passengers that an airline could bring to the airport; the airline's willingness to commit to the long term through contracts; the specific needs of the airline; the schedule of aircraft movements and its dovetailing with airport activities (existing traffic); and the needs in terms of terminal and ground handling resources. It would calculate the expected benefits of the agreement with Ryanair as a whole (and not its component parts taken separately). The benefits of such a transaction should be envisaged over a period of around 20 years, with activities expected to take off after three to five years. With regard to a 15-year agreement, Morrison's shareholders would regard this as commercially acceptable if a return on the investment could be made within around five years from the agreement being signed.

5.   COMMENTS FROM BELGIUM

COMMENTS FROM BELGIUM

5.1.   Comments from Belgium on the measures granted to BSCA

Comments from Belgium on the measures granted to BSCA

5.1.1.   Absence of State aid granted to BSCA

Absence of State aid granted to BSCA

5.1.1.1.   
  Comments from Belgium following the 2012 extension decision

Comments from Belgium following the 2012 extension decision

(a)   Provision of the infrastructure by SOWAER

(i)   Main argument presented by Belgium: the investment programme was approved by the Walloon Government prior to 12 December 2000

| (209) | According to Belgium, the investment programme was decided by the Walloon Government in July 2000 and confirmed in November 2000, i.e. before the Aéroports de Paris judgment (91) (hereinafter ‘ADP judgment’). This judgment marks the date when the TFEU rules on State aid became applicable to the financing of airports. |
| --- | --- |

(209)

According to Belgium, the investment programme was decided by the Walloon Government in July 2000 and confirmed in November 2000, i.e. before the Aéroports de Paris judgment (91) (hereinafter ‘ADP judgment’). This judgment marks the date when the TFEU rules on State aid became applicable to the financing of airports.

Aéroports de Paris

91

ADP

| (210) | The framework agreement of 20 July 2000, setting out the conditions for the development of regional airports and associated environmental measures, was the agreement reached within the Walloon Government through which the Region undertook to allocate part of its budget to the development of its own infrastructure at Charleroi airport. The decision of 8 November 2000 implemented the decision of 20 July 2000 by converting said framework agreement into a multiannual investment programme. Both decisions must therefore be considered as a whole, as the second supplements and clarifies the first, particularly with regard to the concrete schedule for implementing the financial measures decided. |
| --- | --- |

(210)

The framework agreement of 20 July 2000, setting out the conditions for the development of regional airports and associated environmental measures, was the agreement reached within the Walloon Government through which the Region undertook to allocate part of its budget to the development of its own infrastructure at Charleroi airport. The decision of 8 November 2000 implemented the decision of 20 July 2000 by converting said framework agreement into a multiannual investment programme. Both decisions must therefore be considered as a whole, as the second supplements and clarifies the first, particularly with regard to the concrete schedule for implementing the financial measures decided.

1.   Rebuttal of certain elements presented by the Commission in the 2012 extension decision

(a)   On the question of the absence of commitment towards a third party

| (211) | No third-party beneficiary was identified in these decisions, as the Region's investments were intended for itself. According to Belgium, the wording of these two decisions was therefore less formalistic than in a decision granting aid to a third party. In the case of aid granted to a third party, the Region would have adopted the investment principle and amounts in the same way, without any additional procedure, except for sending a letter notifying the government decision, which was pointless in this case. |
| --- | --- |

(211)

No third-party beneficiary was identified in these decisions, as the Region's investments were intended for itself. According to Belgium, the wording of these two decisions was therefore less formalistic than in a decision granting aid to a third party. In the case of aid granted to a third party, the Region would have adopted the investment principle and amounts in the same way, without any additional procedure, except for sending a letter notifying the government decision, which was pointless in this case.

| (212) | However, according to Belgium, this lack of formalism did not mean that these decisions were not binding. Although the Region was the beneficiary of the decisions made, the adoption of a government decision creates a commitment on the part of the government. The fact that this commitment was unilateral was not peculiar to this case. In fact, any financial measure, regardless of its beneficiaries, is always decided through a unilateral administrative act of the granting authority, which controls the application, amendment or withdrawal of said act. |
| --- | --- |

(212)

However, according to Belgium, this lack of formalism did not mean that these decisions were not binding. Although the Region was the beneficiary of the decisions made, the adoption of a government decision creates a commitment on the part of the government. The fact that this commitment was unilateral was not peculiar to this case. In fact, any financial measure, regardless of its beneficiaries, is always decided through a unilateral administrative act of the granting authority, which controls the application, amendment or withdrawal of said act.

| (213) | No formal letter granting aid was therefore sent to a beneficiary undertaking, even though the Fleuren Compost judgment (92) states that this is the act that must be regarded as the legally binding act through which the competent authority undertakes to grant the aid and that therefore marks the date of granting of the aid. In the absence of such a document, the only possible date is the date of the government decisions granting the investment (principle, amounts and schedule). |
| --- | --- |

(213)

No formal letter granting aid was therefore sent to a beneficiary undertaking, even though the Fleuren Compost judgment (92) states that this is the act that must be regarded as the legally binding act through which the competent authority undertakes to grant the aid and that therefore marks the date of granting of the aid. In the absence of such a document, the only possible date is the date of the government decisions granting the investment (principle, amounts and schedule).

Fleuren Compost

92

(b)   On the question of the irrevocable, firm and definitive nature of the 2000 decisions

| (214) | Belgium indicates that, according to the Commission, the decisions of 20 July and 8 November 2000 were substantially amended at a later date and were not therefore irrevocable, firm and definitive. |
| --- | --- |

(214)

Belgium indicates that, according to the Commission, the decisions of 20 July and 8 November 2000 were substantially amended at a later date and were not therefore irrevocable, firm and definitive.

| (215) | According to Belgium, a distinction must be made in this respect between decisions providing for new investments in new projects and decisions implementing investments decided previously, if necessary through certain adjustments. |
| --- | --- |

(215)

According to Belgium, a distinction must be made in this respect between decisions providing for new investments in new projects and decisions implementing investments decided previously, if necessary through certain adjustments.

| (216) | In this case, Belgium cites, as evidence that the decisions of July and November 2000 were binding and irrevocable, the fact that no new financing decision was subsequently adopted. The only decisions made subsequently by Wallonia, and then by SOWAER, were for the purpose of applying and implementing the financing measures in accordance with the government decisions of July and November 2000. |
| --- | --- |

(216)

In this case, Belgium cites, as evidence that the decisions of July and November 2000 were binding and irrevocable, the fact that no new financing decision was subsequently adopted. The only decisions made subsequently by Wallonia, and then by SOWAER, were for the purpose of applying and implementing the financing measures in accordance with the government decisions of July and November 2000.

| (217) | The subsequent adjustments to the investment amounts were not therefore new investment decisions, but the necessary adaptation, as a result of general developments in the situation, of what had already been agreed in July and November 2000. Some of the amounts in the framework agreement and financing programme had to be subsequently reassessed, particularly due to the increased cost of raw materials, the refinement of the necessary investments as a result of technical studies, technical constraints associated with the granting of permissions and the result of organising public procurement. According to Belgium, such budgetary or technical adjustments cannot be regarded as substantial amendments. |
| --- | --- |

(217)

The subsequent adjustments to the investment amounts were not therefore new investment decisions, but the necessary adaptation, as a result of general developments in the situation, of what had already been agreed in July and November 2000. Some of the amounts in the framework agreement and financing programme had to be subsequently reassessed, particularly due to the increased cost of raw materials, the refinement of the necessary investments as a result of technical studies, technical constraints associated with the granting of permissions and the result of organising public procurement. According to Belgium, such budgetary or technical adjustments cannot be regarded as substantial amendments.

| (218) | Also, aware of the limitations when estimating such investments, the government had stipulated from the start that certain items (including the construction of a new terminal) might be reassessed ‘according to the airport's actual activity’ or insofar as they were ‘dependent on the airport's actual needs’. As the airport's actual activity and needs inevitably evolved over the life of a framework agreement and investment programme covering several years, in Belgium's opinion it was logical for the government to have calculated certain items subject to the constant change in these factors. |
| --- | --- |

(218)

Also, aware of the limitations when estimating such investments, the government had stipulated from the start that certain items (including the construction of a new terminal) might be reassessed ‘according to the airport's actual activity’ or insofar as they were ‘dependent on the airport's actual needs’. As the airport's actual activity and needs inevitably evolved over the life of a framework agreement and investment programme covering several years, in Belgium's opinion it was logical for the government to have calculated certain items subject to the constant change in these factors.

| (219) | According to Belgium, the government's desire to calculate and set its commitments from the start, albeit subject to subsequent refinements, was evident on the adoption of the framework agreement of 20 July 2000 and on the adoption of the investment programme of 8 November 2000. The adjustments subsequently made to these decisions cannot call into question the binding nature of the commitment made on these dates by the government. |
| --- | --- |

(219)

According to Belgium, the government's desire to calculate and set its commitments from the start, albeit subject to subsequent refinements, was evident on the adoption of the framework agreement of 20 July 2000 and on the adoption of the investment programme of 8 November 2000. The adjustments subsequently made to these decisions cannot call into question the binding nature of the commitment made on these dates by the government.

| (220) | In the alternative, if certain adjustments were to be regarded as so substantial that in reality they appeared to be new investments, and not the subsequent adaptation of an investment already granted, which is not the case, only this investment, taken in isolation, could be regarded as subsequent to the decisions of 20 July and 8 November 2000. |
| --- | --- |

(220)

In the alternative, if certain adjustments were to be regarded as so substantial that in reality they appeared to be new investments, and not the subsequent adaptation of an investment already granted, which is not the case, only this investment, taken in isolation, could be regarded as subsequent to the decisions of 20 July and 8 November 2000.

| (221) | According to Belgium, in order for the reassessment of this investment to result in its requalification as a new investment, the amendment made must apply not only to the extent, but also to the nature of the investment set. This amendment must be such as to allow it to be asserted that the project envisaged at the time of the July and November 2000 decisions could not in any way relate to the project specifically financed and implemented subsequently, regardless of legitimate developments in the general situation. Therefore, for example, an ‘additional’ investment, not justified by a subsequent change in the airport's actual needs, but decided for the purpose of providing additional infrastructures over and above those initially specified in July and November 2000, could be regarded, in relation to this addition only, as a new investment decided outside the 2000 framework agreement and investment programme. |
| --- | --- |

(221)

According to Belgium, in order for the reassessment of this investment to result in its requalification as a new investment, the amendment made must apply not only to the extent, but also to the nature of the investment set. This amendment must be such as to allow it to be asserted that the project envisaged at the time of the July and November 2000 decisions could not in any way relate to the project specifically financed and implemented subsequently, regardless of legitimate developments in the general situation. Therefore, for example, an ‘additional’ investment, not justified by a subsequent change in the airport's actual needs, but decided for the purpose of providing additional infrastructures over and above those initially specified in July and November 2000, could be regarded, in relation to this addition only, as a new investment decided outside the 2000 framework agreement and investment programme.

| (222) | In this case, although it appeared that certain items had been underestimated or were unfeasible within the time-limit allowed, all the investments made had in principle been stipulated by the decisions of July and November 2000. Although the amounts were subsequently amended, this was due to new factors that could not have been anticipated or accurately determined at the time of the decisions. |
| --- | --- |

(222)

In this case, although it appeared that certain items had been underestimated or were unfeasible within the time-limit allowed, all the investments made had in principle been stipulated by the decisions of July and November 2000. Although the amounts were subsequently amended, this was due to new factors that could not have been anticipated or accurately determined at the time of the decisions.

2.   Belgium's arguments based on the assessment of the 2000 decisions

| (223) | According to Belgium, the assessment of the decisions of 20 July 2000 and 8 November 2000 confirms the legally binding nature of the commitments contained in those decisions. |
| --- | --- |

(223)

According to Belgium, the assessment of the decisions of 20 July 2000 and 8 November 2000 confirms the legally binding nature of the commitments contained in those decisions.

(a)   Decision of the Walloon Government of 20 July 2000 approving the framework agreement

| (224) | The framework agreement and investment programme were genuine decisions, which imposed a binding commitment on the government. Furthermore, the fact that this act was referred to as a ‘framework agreement’ did not prevent the Commission, in an earlier decision, from finding that this was a legally binding act and from using the date of signature of said act as the date when aid was granted (93). |
| --- | --- |

(224)

The framework agreement and investment programme were genuine decisions, which imposed a binding commitment on the government. Furthermore, the fact that this act was referred to as a ‘framework agreement’ did not prevent the Commission, in an earlier decision, from finding that this was a legally binding act and from using the date of signature of said act as the date when aid was granted (93).

93

| (225) | According to Belgium, the framework agreement of July 2000 went well beyond an agreement in principle, as it specifically covered the charging of the investments. It determined the appropriation items and also assessed the investment costs so that the expenditure could be immediately charged to the budget. |
| --- | --- |

(225)

According to Belgium, the framework agreement of July 2000 went well beyond an agreement in principle, as it specifically covered the charging of the investments. It determined the appropriation items and also assessed the investment costs so that the expenditure could be immediately charged to the budget.

| (226) | Moreover, the government was careful to stipulate that an ‘ad hoc financial mechanism’ should be put in place. This confirms that the government was already planning to create a new public body responsible for airport infrastructure. |
| --- | --- |

(226)

Moreover, the government was careful to stipulate that an ‘ad hoc financial mechanism’ should be put in place. This confirms that the government was already planning to create a new public body responsible for airport infrastructure.

| (227) | Confirming the implementation by SOWAER of the government decisions of July and November 2000, the SOWAER financial plan approved by the government on 23 May 2001 referred to the framework agreement of 20 July 2000, which removes any doubt about the commitments made by Wallonia. |
| --- | --- |

(227)

Confirming the implementation by SOWAER of the government decisions of July and November 2000, the SOWAER financial plan approved by the government on 23 May 2001 referred to the framework agreement of 20 July 2000, which removes any doubt about the commitments made by Wallonia.

| (228) | According to Belgium, this method of working is not in fact material when compared to the principle of approving the investment programme, which is the fundamental issue in this case. The formation of SOWAER was simply a way of implementing the decisions of July and November 2000, as it is purely Wallonia's financial vehicle. Although the specific financial mechanism for implementing the investments decided by the Region may have been determined after the decisions of July and November 2000, the commitments of the Walloon authorities were real and binding on the financial mechanism ultimately chosen. |
| --- | --- |

(228)

According to Belgium, this method of working is not in fact material when compared to the principle of approving the investment programme, which is the fundamental issue in this case. The formation of SOWAER was simply a way of implementing the decisions of July and November 2000, as it is purely Wallonia's financial vehicle. Although the specific financial mechanism for implementing the investments decided by the Region may have been determined after the decisions of July and November 2000, the commitments of the Walloon authorities were real and binding on the financial mechanism ultimately chosen.

(b)   Decision of 8 November 2000 of the Walloon Government implementing the framework agreement of 20 July 2000 and approving the multiannual investment programme for Brussels South Charleroi airport

| (229) | On 8 November 2000 the Walloon Government adopted a decision implementing its decision of 20 July 2000. Through this decision, it approved the ‘multiannual physical investment programme 2000-2004 for Brussels South Charleroi Airport and associated financial plan’. Each investment described in the note approved by the government was assessed and its cost precisely determined. |
| --- | --- |

(229)

On 8 November 2000 the Walloon Government adopted a decision implementing its decision of 20 July 2000. Through this decision, it approved the ‘multiannual physical investment programme 2000-2004 for Brussels South Charleroi Airport and associated financial plan’. Each investment described in the note approved by the government was assessed and its cost precisely determined.

| (230) | In conclusion, according to Belgium, the investment programme 2001-2010 for Brussels South Charleroi airport was clearly decided prior to 12 December 2000, which was the date of the ADP judgment. |
| --- | --- |

(230)

In conclusion, according to Belgium, the investment programme 2001-2010 for Brussels South Charleroi airport was clearly decided prior to 12 December 2000, which was the date of the ADP judgment.

ADP

(ii)   Argument presented by Belgium in the alternative: the infrastructure financing complies with the private investor principle

| (231) | In any event, according to Belgium, the infrastructure financing for Charleroi airport complies with the private investor principle. |
| --- | --- |

(231)

In any event, according to Belgium, the infrastructure financing for Charleroi airport complies with the private investor principle.

| (232) | In order to prove this, Belgium has produced a table of cash flows for the investments in the new terminal and car park between 2002 and 2036 (94). Out of these investment amounts, it has taken into account only 89,7 % of the investments for the car park and 28,1 % for the new terminal, on the basis that the other investments are for non-economic activities. Furthermore, Belgium has assumed that the public financing of services of general economic interest, and by extension the infrastructures used for these activities, are authorised by the European regulations on State aid. Belgium therefore concludes that, aside from the compensation granted by the Region to BSCA to support some of the fees associated with the infrastructures used for the services of general interest, the rate of return on the financing of these infrastructures is close to 2 %. As a result, the infrastructure has not been placed at BSCA's disposal for a price less than its value. |
| --- | --- |

(232)

In order to prove this, Belgium has produced a table of cash flows for the investments in the new terminal and car park between 2002 and 2036 (94). Out of these investment amounts, it has taken into account only 89,7 % of the investments for the car park and 28,1 % for the new terminal, on the basis that the other investments are for non-economic activities. Furthermore, Belgium has assumed that the public financing of services of general economic interest, and by extension the infrastructures used for these activities, are authorised by the European regulations on State aid. Belgium therefore concludes that, aside from the compensation granted by the Region to BSCA to support some of the fees associated with the infrastructures used for the services of general interest, the rate of return on the financing of these infrastructures is close to 2 %. As a result, the infrastructure has not been placed at BSCA's disposal for a price less than its value.

94

(b)   Services provided by SOWAER to BSCA

| (233) | Belgium points out that a considerable part of the major repairs and maintenance cost relates to infrastructures used for non-economic activities. |
| --- | --- |

(233)

Belgium points out that a considerable part of the major repairs and maintenance cost relates to infrastructures used for non-economic activities.

(c)   Financing of part of the cost of services of general interest by the Region

| (234) | In 1991 the principle of accounting separation in order to identify the costs covered by the compensation was laid down by Article 25 of the schedule of conditions. |
| --- | --- |

(234)

In 1991 the principle of accounting separation in order to identify the costs covered by the compensation was laid down by Article 25 of the schedule of conditions.

(i)   Main argument: the financing of non-economic activities

1.   Fire protection service

| (235) | According to Belgium, fire protection services are non-economic activities as they fall within the public policy remit. |
| --- | --- |

(235)

According to Belgium, fire protection services are non-economic activities as they fall within the public policy remit.

2.   Ground traffic safety services

| (236) | According to Belgium, ground traffic safety services also fall within the public policy remit. |
| --- | --- |

(236)

According to Belgium, ground traffic safety services also fall within the public policy remit.

| (237) | Belgium states that, when the Commission made its decision on 23 July 2008 on Leipzig/Halle airport, it itself recognised that operational safety services were non-economic activities (95). It is clear from the list of operational safety infrastructures provided by the German authorities and reproduced in the table in recital 58 of that decision that these infrastructures are essential for ground traffic safety, i.e.: uninterruptible power supply for aprons, transformer stations, runway lighting, apron lighting, etc. For the record, this position taken by the Commission was confirmed by the General Court in the Freistaat Sachsen judgment (96) following an action for annulment brought against the aforementioned Commission decision. |
| --- | --- |

(237)

Belgium states that, when the Commission made its decision on 23 July 2008 on Leipzig/Halle airport, it itself recognised that operational safety services were non-economic activities (95). It is clear from the list of operational safety infrastructures provided by the German authorities and reproduced in the table in recital 58 of that decision that these infrastructures are essential for ground traffic safety, i.e.: uninterruptible power supply for aprons, transformer stations, runway lighting, apron lighting, etc. For the record, this position taken by the Commission was confirmed by the General Court in the Freistaat Sachsen judgment (96) following an action for annulment brought against the aforementioned Commission decision.

95

Freistaat Sachsen

96

| (238) | It is clear from the description given of the ground traffic and airport site safety services in Amendment No 5 to the concession agreement of 9 July 1991 and the schedule of conditions concluded on 10 March 2006 that these costs, i.e. routine maintenance of the airport site for the purposes of safety, technical maintenance services for buildings, runways, surrounding areas and vehicle fleet, minor surfacing work, routine maintenance and repair of the runway and accesses, operational maintenance and servicing of the general lighting and runway lighting, mowing services, rubber removal from the runway and its markings, and snow clearance, do relate to the operational safety services accepted by the Commission, in its decision on Leipzig/Halle airport, as non-economic activities. |
| --- | --- |

(238)

It is clear from the description given of the ground traffic and airport site safety services in Amendment No 5 to the concession agreement of 9 July 1991 and the schedule of conditions concluded on 10 March 2006 that these costs, i.e. routine maintenance of the airport site for the purposes of safety, technical maintenance services for buildings, runways, surrounding areas and vehicle fleet, minor surfacing work, routine maintenance and repair of the runway and accesses, operational maintenance and servicing of the general lighting and runway lighting, mowing services, rubber removal from the runway and its markings, and snow clearance, do relate to the operational safety services accepted by the Commission, in its decision on Leipzig/Halle airport, as non-economic activities.

3.   Security services

| (239) | According to Belgium, security services fall within the public policy remit as they are activities traditionally carried out by the State. Belgium cites European regulations and the Commission decision on Leipzig/Halle airport (97) in support of its reasoning. |
| --- | --- |

(239)

According to Belgium, security services fall within the public policy remit as they are activities traditionally carried out by the State. Belgium cites European regulations and the Commission decision on Leipzig/Halle airport (97) in support of its reasoning.

97

4.   Flight tracking and recording, provisional flight planning and marshalling services

| (240) | According to Belgium, flight tracking and recording, provisional flight planning and marshalling services are essential parts of civil aviation safety and therefore fall within the public policy remit, given that they are fundamental components in the safety of an airport. |
| --- | --- |

(240)

According to Belgium, flight tracking and recording, provisional flight planning and marshalling services are essential parts of civil aviation safety and therefore fall within the public policy remit, given that they are fundamental components in the safety of an airport.

5.   Conclusions on the financing of the services of general interest provided by BSCA at the request of Wallonia

| (241) | It is clear from the above that, in Belgium's view, all the services of general interest defined by Article 25 of the schedule of conditions and covered by compensation from the Region to BSCA are non-economic activities excluded from the scope of Article 107(1) TFEU, in accordance with the Commission's decision-making practice and European case-law. |
| --- | --- |

(241)

It is clear from the above that, in Belgium's view, all the services of general interest defined by Article 25 of the schedule of conditions and covered by compensation from the Region to BSCA are non-economic activities excluded from the scope of Article 107(1) TFEU, in accordance with the Commission's decision-making practice and European case-law.

| (242) | Belgium stresses that these services were previously provided by the Walloon administration, i.e. before 1991 for the fire and maintenance services and before 2008 for the security, flight tracking and recording, provisional flight planning and marshalling services. |
| --- | --- |

(242)

Belgium stresses that these services were previously provided by the Walloon administration, i.e. before 1991 for the fire and maintenance services and before 2008 for the security, flight tracking and recording, provisional flight planning and marshalling services.

| (243) | By providing these services, BSCA has simply taken over the obligations imposed on the public authorities under international obligations resulting from the ICAO standards or in accordance with European regulations. |
| --- | --- |

(243)

By providing these services, BSCA has simply taken over the obligations imposed on the public authorities under international obligations resulting from the ICAO standards or in accordance with European regulations.

(ii)   In the alternative: financing of economic activities of general interest in accordance with the Altmark judgment

Altmark

| (244) | According to Belgium, if the Commission were to consider that some of the aforementioned activities are economic activities, it should note that these are financed through compensation that does not constitute aid, based on the criteria set out by the Altmark judgment (98). In fact, this compensation complies with the criteria established by the Altmark judgment, which therefore allows the existence of State aid to be ruled out. |
| --- | --- |

(244)

According to Belgium, if the Commission were to consider that some of the aforementioned activities are economic activities, it should note that these are financed through compensation that does not constitute aid, based on the criteria set out by the Altmark judgment (98). In fact, this compensation complies with the criteria established by the Altmark judgment, which therefore allows the existence of State aid to be ruled out.

Altmark

98

Altmark

1.   Existence of clearly defined public service obligations

| (245) | According to Belgium, the activities in question, which involve the safety and security of civil aviation and airport activities, pursue an aim of general interest. Article 25 of the schedule of conditions annexed to the concession agreement of 9 July 1991 defines the obligations incumbent on BSCA in the context of the safety and security tasks. This provision stipulates that these services are to be ‘provided by the concession-holder in the general interest’. It is clear from this provision that Wallonia has entrusted the concession-holder with the provision of these services and that it has given the latter a mandate in this respect. |
| --- | --- |

(245)

According to Belgium, the activities in question, which involve the safety and security of civil aviation and airport activities, pursue an aim of general interest. Article 25 of the schedule of conditions annexed to the concession agreement of 9 July 1991 defines the obligations incumbent on BSCA in the context of the safety and security tasks. This provision stipulates that these services are to be ‘provided by the concession-holder in the general interest’. It is clear from this provision that Wallonia has entrusted the concession-holder with the provision of these services and that it has given the latter a mandate in this respect.

2.   Compensation parameters defined in an objective and transparent manner

| (246) | The compensation parameters are defined in an objective and transparent manner by Article 25 of the schedule of conditions, which provides for a separate operating account to be kept by BSCA for the activities covered by this article. |
| --- | --- |

(246)

The compensation parameters are defined in an objective and transparent manner by Article 25 of the schedule of conditions, which provides for a separate operating account to be kept by BSCA for the activities covered by this article.

| (247) | For those costs that are not wholly attributable to a service of general interest, a proportional allocation is made based on the percentage of staff assigned to the service of general interest, on the percentage of the surface area assigned to such services or on other objective criteria that must be authorised by the Region. |
| --- | --- |

(247)

For those costs that are not wholly attributable to a service of general interest, a proportional allocation is made based on the percentage of staff assigned to the service of general interest, on the percentage of the surface area assigned to such services or on other objective criteria that must be authorised by the Region.

| (248) | Since 2006 for those items connected with the fire and maintenance services and since 2010 for the security, navigation office and marshalling services, the compensation has been capped at an amount specified in Article 25 of the schedule of conditions, subject to indexation. In any event, the compensation amount cannot exceed the costs actually incurred by BSCA for these services. |
| --- | --- |

(248)

Since 2006 for those items connected with the fire and maintenance services and since 2010 for the security, navigation office and marshalling services, the compensation has been capped at an amount specified in Article 25 of the schedule of conditions, subject to indexation. In any event, the compensation amount cannot exceed the costs actually incurred by BSCA for these services.

| (249) | As a result, compensation parameters have been defined in advance and in detail, which therefore satisfies the second criterion of the Altmark judgment. |
| --- | --- |

(249)

As a result, compensation parameters have been defined in advance and in detail, which therefore satisfies the second criterion of the Altmark judgment.

Altmark

3.   Limitation of the compensation to the costs incurred

| (250) | According to Belgium, various mechanisms have been used to avoid overcompensation:






  — | Before the compensation was capped, the precise definition of the costs assumed by Wallonia and the accounting separation principle enabled any overcompensation to be avoided. Furthermore, an audit mechanism was established to check, on the one hand, the budget presented by BSCA and, on the other hand, the absence of any overcompensation after the compensation was released. |
| --- | --- | --- |

(250)

According to Belgium, various mechanisms have been used to avoid overcompensation:

—

Before the compensation was capped, the precise definition of the costs assumed by Wallonia and the accounting separation principle enabled any overcompensation to be avoided. Furthermore, an audit mechanism was established to check, on the one hand, the budget presented by BSCA and, on the other hand, the absence of any overcompensation after the compensation was released.

| — | Since 2006 the compensation amount received for fire protection and ground traffic and airport site safety services has not been able to exceed EUR 5 774 000, indexed annually. |
| --- | --- |

—

Since 2006 the compensation amount received for fire protection and ground traffic and airport site safety services has not been able to exceed EUR 5 774 000, indexed annually.

| — | The compensation granted for security, navigation office and marshalling services has been capped since 2010 at an amount equivalent to the cost of these services in 2009, indexed annually. |
| --- | --- |

—

The compensation granted for security, navigation office and marshalling services has been capped since 2010 at an amount equivalent to the cost of these services in 2009, indexed annually.

| (251) | In addition, Article 25 provides that the amount received may never exceed the costs actually incurred, and that, if overcompensation occurs, a budgetary compensation mechanism will be automatically applied to the budget for the following year. For the record, a budget is prepared in advance by BSCA and checked by the Walloon administration. The latter also carries out on-the-spot checks every year to ensure that BSCA is complying with the provisions of Article 25 of the schedule of conditions. |
| --- | --- |

(251)

In addition, Article 25 provides that the amount received may never exceed the costs actually incurred, and that, if overcompensation occurs, a budgetary compensation mechanism will be automatically applied to the budget for the following year. For the record, a budget is prepared in advance by BSCA and checked by the Walloon administration. The latter also carries out on-the-spot checks every year to ensure that BSCA is complying with the provisions of Article 25 of the schedule of conditions.

4.   Comparison with a similar well-run and adequately equipped undertaking

| (252) | According to Belgium, no comparison between BSCA and a similar well-run and adequately equipped undertaking is necessary because BSCA is quite clearly a well-run and adequately equipped undertaking. |
| --- | --- |

(252)

According to Belgium, no comparison between BSCA and a similar well-run and adequately equipped undertaking is necessary because BSCA is quite clearly a well-run and adequately equipped undertaking.

| (253) | BSCA complies with the applicable international and accounting standards and all the ratios indicated in the Communication from the Commission of 20 December 2011 on the application of the European Union State aid rules to compensation granted for the provision of services of general economic interest prove that this company is efficiently managed. This fact also enabled BSCA to attract private investors in 2009 during its partial privatisation. |
| --- | --- |

(253)

BSCA complies with the applicable international and accounting standards and all the ratios indicated in the Communication from the Commission of 20 December 2011 on the application of the European Union State aid rules to compensation granted for the provision of services of general economic interest prove that this company is efficiently managed. This fact also enabled BSCA to attract private investors in 2009 during its partial privatisation.

| (254) | The fact that BSCA is a well-run and adequately equipped undertaking can mainly be seen from the constant progress made in its financial results since 2000. Whereas in 2000 BSCA recorded a turnover of EUR 7 578 000, in 2010 this figure had reached EUR 81 387 000. It is also evident that, if BSCA were not a well-run and adequately equipped undertaking, Charleroi airport would not have seen the remarkable progress made in its passenger volume between 1997 and 2011 (from 211 065 passengers to 5 901 007 passengers). |
| --- | --- |

(254)

The fact that BSCA is a well-run and adequately equipped undertaking can mainly be seen from the constant progress made in its financial results since 2000. Whereas in 2000 BSCA recorded a turnover of EUR 7 578 000, in 2010 this figure had reached EUR 81 387 000. It is also evident that, if BSCA were not a well-run and adequately equipped undertaking, Charleroi airport would not have seen the remarkable progress made in its passenger volume between 1997 and 2011 (from 211 065 passengers to 5 901 007 passengers).

| (255) | Lastly, it is clear from the financing mechanism put in place that, by definition, the compensation paid to BSCA is less than the market price of all the services entrusted to it, insofar as this compensation was capped in 2006 for the fire and ground traffic and airport site safety services and in 2010 for the security services. |
| --- | --- |

(255)

Lastly, it is clear from the financing mechanism put in place that, by definition, the compensation paid to BSCA is less than the market price of all the services entrusted to it, insofar as this compensation was capped in 2006 for the fire and ground traffic and airport site safety services and in 2010 for the security services.

(d)   BSCA's capital increase carried out by SOWAER in 2002

| (256) | According to Belgium, the Commission never expressed any reservations about BSCA's capital increase until the 2012 extension decision. On the contrary, it explicitly recognised that this operation was carried out in accordance with the private investor principle (see recital 132 of the 2004 decision). |
| --- | --- |

(256)

According to Belgium, the Commission never expressed any reservations about BSCA's capital increase until the 2012 extension decision. On the contrary, it explicitly recognised that this operation was carried out in accordance with the private investor principle (see recital 132 of the 2004 decision).

| (257) | The most recent figures prove that BSCA has generated profits allowing EUR 6 505 595 to be distributed among its public and private shareholders in 2010 alone. The results for the last five years are given in the following table.










  INCOME STATEMENTS
  (in EUR million) | 2011 | 2010 | 2009 | 2008 | 2007 |
| --- | --- | --- | --- | --- | --- | --- |
| |
| | |
| Sales and services | 53 618 | 48 533 | 35 434 | 27 002 | 19 543 |
| Profit for the year | 11 310 | 9 994 | 4 445 | 1 915 | 1 968 |
| Return on capital | 6 815 | 6 506 | 387 | 387 | 387 |

(257)

The most recent figures prove that BSCA has generated profits allowing EUR 6 505 595 to be distributed among its public and private shareholders in 2010 alone. The results for the last five years are given in the following table.

INCOME STATEMENTS

(in EUR million)

2011

2010

2009

2008

2007

Sales and services

53 618

48 533

35 434

27 002

19 543

Profit for the year

11 310

9 994

4 445

1 915

1 968

Return on capital

6 815

6 506

387

387

387

| (258) | The capital increase carried out by SOWAER presents an internal rate of return (IRR) of 26,09 %, which is similar to the estimate made by Deloitte & Touche in 2003, thus confirming the credibility of this analysis. Given the above, it must be accepted that this investment would undoubtedly have been made by a private investor. |
| --- | --- |

(258)

The capital increase carried out by SOWAER presents an internal rate of return (IRR) of 26,09 %, which is similar to the estimate made by Deloitte & Touche in 2003, thus confirming the credibility of this analysis. Given the above, it must be accepted that this investment would undoubtedly have been made by a private investor.

| (259) | The Commission's assessment of the capital increase, according to which ‘these doubts are reinforced by the finding that BSCA has not borne the cost of the infrastructures placed at its disposal or the various services provided by SOWAER’, is also marred by an error of law. The Commission should individually apply, to each form of intervention, the necessary criteria for assessing their respective regularity and determining, for each intervention, whether aid exists and, if so, whether or not this aid is compatible with the internal market. The philosophy of a capital increase in BSCA in fact differs from the objective of providing airport infrastructure, particularly given the context at the time. The Commission cannot therefore group both types of intervention together in order to determine the overall profitability. |
| --- | --- |

(259)

The Commission's assessment of the capital increase, according to which ‘these doubts are reinforced by the finding that BSCA has not borne the cost of the infrastructures placed at its disposal or the various services provided by SOWAER’, is also marred by an error of law. The Commission should individually apply, to each form of intervention, the necessary criteria for assessing their respective regularity and determining, for each intervention, whether aid exists and, if so, whether or not this aid is compatible with the internal market. The philosophy of a capital increase in BSCA in fact differs from the objective of providing airport infrastructure, particularly given the context at the time. The Commission cannot therefore group both types of intervention together in order to determine the overall profitability.

5.1.1.2.   
  Comments from Belgium following the comments from third parties on the absence of aid to BSCA received after the 2012 extension decision

Comments from Belgium following the comments from third parties on the absence of aid to BSCA received after the 2012 extension decision

(a)   Concession fee paid by BSCA

| (260) | In reply to BAC's comments on the fees paid by BSCA for the use of the infrastructure, Belgium indicates that some of the fees mentioned by BAC are not relevant to Charleroi, in particular:






  — | the ‘slot coordination fee’ in the absence of congestion at Charleroi airport, |
| --- | --- | --- |

(260)

In reply to BAC's comments on the fees paid by BSCA for the use of the infrastructure, Belgium indicates that some of the fees mentioned by BAC are not relevant to Charleroi, in particular:

—

the ‘slot coordination fee’ in the absence of congestion at Charleroi airport,

| — | the ‘terminal navigation charge’, which is not imposed on regional airports with a number of commercial flight movements below 50 000. |
| --- | --- |

—

the ‘terminal navigation charge’, which is not imposed on regional airports with a number of commercial flight movements below 50 000.

| (261) | Furthermore, according to Belgium and contrary to BAC's assertion, a fee for the centralised infrastructure is charged by BSCA, as infrastructure manager, to the ground handling companies, including BSCA as handler. This fee is included in the contract between BSCA and Ryanair. |
| --- | --- |

(261)

Furthermore, according to Belgium and contrary to BAC's assertion, a fee for the centralised infrastructure is charged by BSCA, as infrastructure manager, to the ground handling companies, including BSCA as handler. This fee is included in the contract between BSCA and Ryanair.

| (262) | The fee imposed by the federal administration of EUR 0,18 per departing passenger is the responsibility of the Federal State and not BSCA. |
| --- | --- |

(262)

The fee imposed by the federal administration of EUR 0,18 per departing passenger is the responsibility of the Federal State and not BSCA.

| (263) | The PRM fee is based on the actual costs incurred by BSCA. In this respect, according to Belgium, the size of the infrastructure at Charleroi airport simply needs to be compared with that at Brussels airport to realise that the management of this service provided to passengers with reduced mobility involves lower costs at Charleroi than at Brussels, if only in terms of the distance to be covered in order to reach the aircraft or leave the terminal. |
| --- | --- |

(263)

The PRM fee is based on the actual costs incurred by BSCA. In this respect, according to Belgium, the size of the infrastructure at Charleroi airport simply needs to be compared with that at Brussels airport to realise that the management of this service provided to passengers with reduced mobility involves lower costs at Charleroi than at Brussels, if only in terms of the distance to be covered in order to reach the aircraft or leave the terminal.

| (264) | In addition, Belgium confirms that it is correct that BSCA does not currently impose any security fee. This task falling within the public policy remit is the subject of compensation from Wallonia, but this compensation has been capped under the concession agreement between BSCA and Wallonia and any costs above this cap are payable by BSCA. However, BSCA is under no obligation to pass on these costs to passengers through a fee. |
| --- | --- |

(264)

In addition, Belgium confirms that it is correct that BSCA does not currently impose any security fee. This task falling within the public policy remit is the subject of compensation from Wallonia, but this compensation has been capped under the concession agreement between BSCA and Wallonia and any costs above this cap are payable by BSCA. However, BSCA is under no obligation to pass on these costs to passengers through a fee.

| (265) | With regard to the aircraft parking fees, according to Belgium, the figure given in the table provided by BAC is incorrect as it indicates that there are no parking fees at Charleroi airport, which is wrong because the charges published on the BSCA website clearly indicate the existence of such fees set at EUR 1,98 per day (24 hours) and per tonne. |
| --- | --- |

(265)

With regard to the aircraft parking fees, according to Belgium, the figure given in the table provided by BAC is incorrect as it indicates that there are no parking fees at Charleroi airport, which is wrong because the charges published on the BSCA website clearly indicate the existence of such fees set at EUR 1,98 per day (24 hours) and per tonne.

(b)   Financing of services of general interest

| (266) | Several of the third parties having submitted comments, in particular Brussels Airlines and BAC, have remarked on the financing of the services of general interest provided by BSCA to Wallonia. They question whether some of the services provided by BSCA, namely safety, security, fire protection, and ground traffic and airport site safety services, can be regarded as activities excluded from the scope of Article 107(1) TFEU. |
| --- | --- |

(266)

Several of the third parties having submitted comments, in particular Brussels Airlines and BAC, have remarked on the financing of the services of general interest provided by BSCA to Wallonia. They question whether some of the services provided by BSCA, namely safety, security, fire protection, and ground traffic and airport site safety services, can be regarded as activities excluded from the scope of Article 107(1) TFEU.

(i)   Comment on the comparison between Charleroi airport and BAC

| (267) | Brussels Airlines and BAC assert that, at Brussels airport, the cost of these various services is not borne by the competent public authorities, in this case the Federal State, from which they seem to deduce that Charleroi airport is receiving State aid. |
| --- | --- |

(267)

Brussels Airlines and BAC assert that, at Brussels airport, the cost of these various services is not borne by the competent public authorities, in this case the Federal State, from which they seem to deduce that Charleroi airport is receiving State aid.

| (268) | In this respect, it should be noted that Belgian airports do not all come under the same public authority, as regional airports come under the region in which they are situated, whilst Brussels airport is the responsibility of the Federal State (99). The responsibility of each authority for the airports entrusted to it was clearly set out when the management of airports (excluding Brussels airport) was regionalised through the cooperation agreement between the Belgian State, acting for the Société nationale des voies aériennes (S.N.V.A.) (100), and the regions (101). This agreement unequivocally states that ‘from the date when said Act enters into force, the regions shall be completely responsible for the activities transferred to them. From that date, they shall be authorised to adopt all appropriate measures, for which they shall therefore assume complete responsibility’. |
| --- | --- |

(268)

In this respect, it should be noted that Belgian airports do not all come under the same public authority, as regional airports come under the region in which they are situated, whilst Brussels airport is the responsibility of the Federal State (99). The responsibility of each authority for the airports entrusted to it was clearly set out when the management of airports (excluding Brussels airport) was regionalised through the cooperation agreement between the Belgian State, acting for the Société nationale des voies aériennes (S.N.V.A.) (100), and the regions (101). This agreement unequivocally states that ‘from the date when said Act enters into force, the regions shall be completely responsible for the activities transferred to them. From that date, they shall be authorised to adopt all appropriate measures, for which they shall therefore assume complete responsibility’.

99

100

101

| (269) | Charleroi airport is therefore governed by the regulations of Wallonia, whilst Brussels airport is regulated by the Federal State. In this case, under its regulatory power, the Region has chosen to finance part of the cost of certain services. The fact that identical services are, in one case, borne by a public authority and, in another case, borne by the operator does not, however, have any impact on their qualification as economic or non-economic activities. |
| --- | --- |

(269)

Charleroi airport is therefore governed by the regulations of Wallonia, whilst Brussels airport is regulated by the Federal State. In this case, under its regulatory power, the Region has chosen to finance part of the cost of certain services. The fact that identical services are, in one case, borne by a public authority and, in another case, borne by the operator does not, however, have any impact on their qualification as economic or non-economic activities.

| (270) | In the Flemish Region, for that matter, some of the services in question are directly provided by the regional administration and are therefore borne directly by the region. This is particularly the case with all the costs of airport safety and security services at Anvers and Ostend airports, regardless of the volume of traffic at these airports. |
| --- | --- |

(270)

In the Flemish Region, for that matter, some of the services in question are directly provided by the regional administration and are therefore borne directly by the region. This is particularly the case with all the costs of airport safety and security services at Anvers and Ostend airports, regardless of the volume of traffic at these airports.

(ii)   Fire protection services

| (271) | With specific regard to the fire protection services, Brussels Airlines asserts that other undertakings based in Wallonia and subject to the Seveso Directive (102) must bear the cost of their fire protection service, such as Total, which is based in Feluy, and that, at Brussels Airport, these services are not financed by the Flemish Region/Federal State. |
| --- | --- |

(271)

With specific regard to the fire protection services, Brussels Airlines asserts that other undertakings based in Wallonia and subject to the Seveso Directive (102) must bear the cost of their fire protection service, such as Total, which is based in Feluy, and that, at Brussels Airport, these services are not financed by the Flemish Region/Federal State.

102

| (272) | According to Belgium, this comparison with undertakings subject to obligations under the Seveso Directive is irrelevant as it is clear from the wording of that Directive that Member States are required to ensure that undertakings falling within its scope (103) themselves take measures to prevent fire. By contrast, the obligation to organise fire protection services at airports is imposed directly on Member States by an international convention adopted by the International Civil Aviation Organisation. |
| --- | --- |

(272)

According to Belgium, this comparison with undertakings subject to obligations under the Seveso Directive is irrelevant as it is clear from the wording of that Directive that Member States are required to ensure that undertakings falling within its scope (103) themselves take measures to prevent fire. By contrast, the obligation to organise fire protection services at airports is imposed directly on Member States by an international convention adopted by the International Civil Aviation Organisation.

103

| (273) | Furthermore, both the European Commission and the General Court have confirmed that fire protection services are public authority activities that may be excluded from the scope of Article 107(1) TFEU. |
| --- | --- |

(273)

Furthermore, both the European Commission and the General Court have confirmed that fire protection services are public authority activities that may be excluded from the scope of Article 107(1) TFEU.

(iii)   Ground traffic and airport site safety services

| (274) | Brussels Airlines also questions the qualification as non-economic activities of the maintenance services that correspond in this case to ground traffic and airport site safety. In this respect, Brussels Airlines simply stresses that such services form part of the management of an airport and are therefore economic activities. |
| --- | --- |

(274)

Brussels Airlines also questions the qualification as non-economic activities of the maintenance services that correspond in this case to ground traffic and airport site safety. In this respect, Brussels Airlines simply stresses that such services form part of the management of an airport and are therefore economic activities.

| (275) | The fact that the management of an airport constitutes an economic activity is already well-established. However, certain activities are excluded from the scope of Article 107(1) TFEU because they fall within the public policy remit or they are by nature non-economic, even if, as highlighted by Brussels Airlines, they are essential to the management of an airport. It is therefore clear, for example, that the management of an airport (economic activity) implies providing a customs service to check the identity of passengers, although it should be noted that such a service is one of the tasks traditionally reserved to the State and is therefore a non-economic activity. Consequently, the fact that ground traffic and airport site safety services are essential to the management of an airport is not sufficient to deprive them of their non-economic nature. |
| --- | --- |

(275)

The fact that the management of an airport constitutes an economic activity is already well-established. However, certain activities are excluded from the scope of Article 107(1) TFEU because they fall within the public policy remit or they are by nature non-economic, even if, as highlighted by Brussels Airlines, they are essential to the management of an airport. It is therefore clear, for example, that the management of an airport (economic activity) implies providing a customs service to check the identity of passengers, although it should be noted that such a service is one of the tasks traditionally reserved to the State and is therefore a non-economic activity. Consequently, the fact that ground traffic and airport site safety services are essential to the management of an airport is not sufficient to deprive them of their non-economic nature.

| (276) | As noted by the Commission in its aforementioned decision on Leipzig/Halle airport: ‘in the present case certain costs fall within the public policy remit. These costs relate to security and police functions, fire and public safety measures, operational safety, German Weather Service and German Air Traffic Control’ (104). In its comments following the 2012 decision extending the formal investigation procedure, Belgium reiterated that it is clear from this same decision that ‘operational safety activities’ cover everything needed in terms of ground traffic and airport site safety, namely power supply, runway lighting, apron lighting, etc. It is precisely the maintenance of these various functions that is the issue here. |
| --- | --- |

(276)

As noted by the Commission in its aforementioned decision on Leipzig/Halle airport: ‘in the present case certain costs fall within the public policy remit. These costs relate to security and police functions, fire and public safety measures, operational safety, German Weather Service and German Air Traffic Control’ (104). In its comments following the 2012 decision extending the formal investigation procedure, Belgium reiterated that it is clear from this same decision that ‘operational safety activities’ cover everything needed in terms of ground traffic and airport site safety, namely power supply, runway lighting, apron lighting, etc. It is precisely the maintenance of these various functions that is the issue here.

104

(iv)   General safety and security services

| (277) | Lastly, Brussels Airlines questions the qualification of general safety and security services as ‘non-economic’. In this case, it would seem that Brussels Airlines has included flight tracking and recording, flight planning and marshalling services among safety services. |
| --- | --- |

(277)

Lastly, Brussels Airlines questions the qualification of general safety and security services as ‘non-economic’. In this case, it would seem that Brussels Airlines has included flight tracking and recording, flight planning and marshalling services among safety services.

| (278) | Brussels Airlines more specifically questions whether flight tracking and recording, flight planning and marshalling services are covered by Regulation (EC) No 2320/2002 of the European Parliament and of the Council (105), which means ‘the combination of measures and human and natural resources intended to safeguard civil aviation against acts of unlawful interference’. |
| --- | --- |

(278)

Brussels Airlines more specifically questions whether flight tracking and recording, flight planning and marshalling services are covered by Regulation (EC) No 2320/2002 of the European Parliament and of the Council (105), which means ‘the combination of measures and human and natural resources intended to safeguard civil aviation against acts of unlawful interference’.

105

| (279) | However, the Walloon authorities have never regarded flight tracking and recording, flight planning and marshalling services as activities connected with airport security. They consider, in fact, that these activities are essential to the safety of an airport and refer, in this respect, to the explanations provided in their reply to the decision opening the formal investigation procedure. |
| --- | --- |

(279)

However, the Walloon authorities have never regarded flight tracking and recording, flight planning and marshalling services as activities connected with airport security. They consider, in fact, that these activities are essential to the safety of an airport and refer, in this respect, to the explanations provided in their reply to the decision opening the formal investigation procedure.

| (280) | With regard to BAC's comment that airlines operating out of Brussels airport must pay a fee for the flight tracking, recording and planning services provided by Belgocontrol, this again is an argument based on the source of financing of a service, which is not sufficient to qualify said service as non-economic. |
| --- | --- |

(280)

With regard to BAC's comment that airlines operating out of Brussels airport must pay a fee for the flight tracking, recording and planning services provided by Belgocontrol, this again is an argument based on the source of financing of a service, which is not sufficient to qualify said service as non-economic.

| (281) | Belgium also observes that the provision of certain services by Belgocontrol, free of charge, within regional airports was decided in the aforementioned 1989 cooperation agreement, which stipulated that ‘the regions may have recourse, free of charge, to the assistance provided by the central services of the [S.N.V.A.] in terms of applying the international standards and recommendations on civil aviation’ (106). This free provision is limited to the level of activity of the Walloon airports in 1989, with all services exceeding this level of activity being covered by Wallonia. |
| --- | --- |

(281)

Belgium also observes that the provision of certain services by Belgocontrol, free of charge, within regional airports was decided in the aforementioned 1989 cooperation agreement, which stipulated that ‘the regions may have recourse, free of charge, to the assistance provided by the central services of the [S.N.V.A.] in terms of applying the international standards and recommendations on civil aviation’ (106). This free provision is limited to the level of activity of the Walloon airports in 1989, with all services exceeding this level of activity being covered by Wallonia.

106

| (282) | It is clear from both the 2005 aviation guidelines and the EU regulations on air navigation services that these services are non-economic activities, which are therefore excluded from the scope of Article 107(1) TFEU. This is actually one of the ways of regionalising the management of airports other than Brussels airport. |
| --- | --- |

(282)

It is clear from both the 2005 aviation guidelines and the EU regulations on air navigation services that these services are non-economic activities, which are therefore excluded from the scope of Article 107(1) TFEU. This is actually one of the ways of regionalising the management of airports other than Brussels airport.

| (283) | According to Belgium, it follows from the above that none of the comments made by Brussels Airlines and BAC calls into question the fact that fire protection, ground traffic and airport site safety, security, flight tracking and recording, flight planning and marshalling services constitute non-economic activities. |
| --- | --- |

(283)

According to Belgium, it follows from the above that none of the comments made by Brussels Airlines and BAC calls into question the fact that fire protection, ground traffic and airport site safety, security, flight tracking and recording, flight planning and marshalling services constitute non-economic activities.

5.1.1.3.   
  Comments from Belgium following the comments from third parties received after the publication of the new aviation guidelines

Comments from Belgium following the comments from third parties received after the publication of the new aviation guidelines

| (284) | Belgium has particularly made comments on the impact on competition of the measures granted to BSCA following the comments from third parties received after the publication of the new Aviation Guidelines. |
| --- | --- |

(284)

Belgium has particularly made comments on the impact on competition of the measures granted to BSCA following the comments from third parties received after the publication of the new Aviation Guidelines.

| (285) | The third parties (BAC and Brussels Airlines) are of the opinion that the aid has enabled BSCA to apply ‘artificially low’ fees and that there is therefore a significant difference between the fees of BSCA and those of other airports. This practice has allegedly resulted in the reduced volume of passengers at Brussels airport. |
| --- | --- |

(285)

The third parties (BAC and Brussels Airlines) are of the opinion that the aid has enabled BSCA to apply ‘artificially low’ fees and that there is therefore a significant difference between the fees of BSCA and those of other airports. This practice has allegedly resulted in the reduced volume of passengers at Brussels airport.

| (286) | Belgium disputes certain figures provided by Brussels Airlines. For example, as regards the comparison of the fees charged by BAC and BSCA, Belgium stresses that ‘Brussels Airlines includes fees that do not apply to airlines but to ground handling services’. The table provided by Brussels Airlines allegedly does not include similar costs charged by BSCA. The same applies to other costs imposed by the Federal State. |
| --- | --- |

(286)

Belgium disputes certain figures provided by Brussels Airlines. For example, as regards the comparison of the fees charged by BAC and BSCA, Belgium stresses that ‘Brussels Airlines includes fees that do not apply to airlines but to ground handling services’. The table provided by Brussels Airlines allegedly does not include similar costs charged by BSCA. The same applies to other costs imposed by the Federal State.

| (287) | Belgium raises the same concerns about the tables comparing the various airports. Accordingly, in the ‘passenger charges or fee’ column for Marseille Provence airport, Brussels Airlines includes a fee of EUR 13,47, which actually corresponds, in Belgium's opinion, to a ‘security charge imposed by the State and not to a passenger fee within the meaning of airport fees’. |
| --- | --- |

(287)

Belgium raises the same concerns about the tables comparing the various airports. Accordingly, in the ‘passenger charges or fee’ column for Marseille Provence airport, Brussels Airlines includes a fee of EUR 13,47, which actually corresponds, in Belgium's opinion, to a ‘security charge imposed by the State and not to a passenger fee within the meaning of airport fees’.

| (288) | As regards the lack of any impact on trade, Belgium refers the Commission to its comments of 23 May 2012 and to its communication of 12 December 2012 on the differences between Brussels airport and Charleroi airport. |
| --- | --- |

(288)

As regards the lack of any impact on trade, Belgium refers the Commission to its comments of 23 May 2012 and to its communication of 12 December 2012 on the differences between Brussels airport and Charleroi airport.

| (289) | In terms of the negative impact on airlines based at Brussels airport, Belgium highlights a number of points:






  — | Brussels Airlines has allegedly withdrawn certain destinations such as Palermo, Cracow and Seville. This statement is true, but it fails to take into account that these destinations have subsequently been reintroduced in 2014. |
| --- | --- | --- |

(289)

In terms of the negative impact on airlines based at Brussels airport, Belgium highlights a number of points:

—

Brussels Airlines has allegedly withdrawn certain destinations such as Palermo, Cracow and Seville. This statement is true, but it fails to take into account that these destinations have subsequently been reintroduced in 2014.

| — | Although BAC states that flights to Nador and Tangier (Morocco) from Brussels airport have been reduced due to Jetairfly serving the same destinations from Charleroi airport, Belgium points out that the airline Air Arabia also flies to these destinations from Brussels airport. |
| --- | --- |

—

Although BAC states that flights to Nador and Tangier (Morocco) from Brussels airport have been reduced due to Jetairfly serving the same destinations from Charleroi airport, Belgium points out that the airline Air Arabia also flies to these destinations from Brussels airport.

| — | With regard to flights to Istanbul, Belgium highlights that Brussels airport has increased the frequency of flights to this destination following the transfer of the airline Pegasus to Charleroi airport, which serves Turkey. |
| --- | --- |

—

With regard to flights to Istanbul, Belgium highlights that Brussels airport has increased the frequency of flights to this destination following the transfer of the airline Pegasus to Charleroi airport, which serves Turkey.

| — | Lastly, Belgium stresses that Charleroi airport has also seen the frequency of certain flights reduce or certain destinations be withdrawn due to the transfer of certain flights by airlines to Brussels airport. For example, Charleroi airport has lost three flights per week to Casablanca, to the benefit of Brussels airport, due to these flights being transferred by the airline Air Arabia to Brussels airport. |
| --- | --- |

—

Lastly, Belgium stresses that Charleroi airport has also seen the frequency of certain flights reduce or certain destinations be withdrawn due to the transfer of certain flights by airlines to Brussels airport. For example, Charleroi airport has lost three flights per week to Casablanca, to the benefit of Brussels airport, due to these flights being transferred by the airline Air Arabia to Brussels airport.

| (290) | Belgium notes that Ryanair has recently established a base at Brussels airport, which proves that the high level of fees has not prevented it from going ahead with this new development. However, Belgium reasserts that competition between Charleroi airport and Brussels airport is limited, and to very specific segments, i.e. charter and low-cost. |
| --- | --- |

(290)

Belgium notes that Ryanair has recently established a base at Brussels airport, which proves that the high level of fees has not prevented it from going ahead with this new development. However, Belgium reasserts that competition between Charleroi airport and Brussels airport is limited, and to very specific segments, i.e. charter and low-cost.

| (291) | Moreover, Belgium disputes that only BSCA's commercial strategy in terms of its fees can explain the success of Charleroi airport. In its view, this claim ignores reality, which has seen the emergence of an entirely new low-cost market meeting a new demand. In this respect, Wallonia points out that, some years ago, 40 % of passengers at Charleroi airport were flying for the first time, which proves that they have not been ‘stolen’ from Brussels airport. |
| --- | --- |

(291)

Moreover, Belgium disputes that only BSCA's commercial strategy in terms of its fees can explain the success of Charleroi airport. In its view, this claim ignores reality, which has seen the emergence of an entirely new low-cost market meeting a new demand. In this respect, Wallonia points out that, some years ago, 40 % of passengers at Charleroi airport were flying for the first time, which proves that they have not been ‘stolen’ from Brussels airport.

5.1.2.   Compatibility of the aid granted to BSCA

Compatibility of the aid granted to BSCA

5.1.2.1.   
  Comments from Belgium on the compatibility of the measures granted to BSCA, assessed on the basis of the aviation guidelines

Comments from Belgium on the compatibility of the measures granted to BSCA, assessed on the basis of the aviation guidelines

| (292) | According to Belgium (107), if, somehow, the Commission were to consider that BSCA has benefited from aid, this aid should be qualified as operating aid, which can be authorised under the aviation guidelines. The conditions to be met in order for such aid to be authorised, as indicated in paragraph 137 of the aviation guidelines, are contribution to a well-defined objective of common interest, need for State intervention, appropriateness of State aid as a policy instrument, existence of incentive effect, proportionality of the aid amount and absence of negative effects on competition. |
| --- | --- |

(292)

According to Belgium (107), if, somehow, the Commission were to consider that BSCA has benefited from aid, this aid should be qualified as operating aid, which can be authorised under the aviation guidelines. The conditions to be met in order for such aid to be authorised, as indicated in paragraph 137 of the aviation guidelines, are contribution to a well-defined objective of common interest, need for State intervention, appropriateness of State aid as a policy instrument, existence of incentive effect, proportionality of the aid amount and absence of negative effects on competition.

107

(a)   Contribution to an objective of common interest

| (293) | Airport development in the Walloon Region formed part of a comprehensive economic and social development strategy of the regions concerned, which was implemented in 1989. Wallonia has supplied various documents and studies confirming the pursuit of this objective. |
| --- | --- |

(293)

Airport development in the Walloon Region formed part of a comprehensive economic and social development strategy of the regions concerned, which was implemented in 1989. Wallonia has supplied various documents and studies confirming the pursuit of this objective.

| (294) | In addition, as highlighted by the studies ordered by the Region and BSCA in 2000 and 2001, Brussels airport was at saturation point at that time and Charleroi airport was therefore in a position to contribute to the objective of tackling congestion. |
| --- | --- |

(294)

In addition, as highlighted by the studies ordered by the Region and BSCA in 2000 and 2001, Brussels airport was at saturation point at that time and Charleroi airport was therefore in a position to contribute to the objective of tackling congestion.

| (295) | Furthermore, it is clear from the various studies conducted at the request of the Region and BSCA that real demand existed for Charleroi airport in the low-cost segments. This demand has been confirmed in practice by its success, and it was therefore justified to develop Charleroi airport given the density of its catchment area, which is heavily populated and located at the centre of Europe. |
| --- | --- |

(295)

Furthermore, it is clear from the various studies conducted at the request of the Region and BSCA that real demand existed for Charleroi airport in the low-cost segments. This demand has been confirmed in practice by its success, and it was therefore justified to develop Charleroi airport given the density of its catchment area, which is heavily populated and located at the centre of Europe.

| (296) | The development of Charleroi airport has proven that this was not a case of financing unprofitable activities, as the airport became profitable in 2004. BSCA's business plan drawn up in 2001 forecast a return to profitability in 2005, i.e. a year later, which is testament to the prudent and reasonable nature of this plan. |
| --- | --- |

(296)

The development of Charleroi airport has proven that this was not a case of financing unprofitable activities, as the airport became profitable in 2004. BSCA's business plan drawn up in 2001 forecast a return to profitability in 2005, i.e. a year later, which is testament to the prudent and reasonable nature of this plan.

| (297) | According to Belgium, if the parallel development of passenger traffic at Brussels airport and Charleroi airport is examined, it can be concluded that any impact from Charleroi on Brussels has been marginal. The brake on development at Brussels airport was caused by the failure of Sabena in November 2001 and not by the concomitant development of Charleroi airport. As a reminder, a study carried out by BSCA in 2010 showed that 40 % of these passengers were flying for the first time, which proves that a significant part of the passenger volume has not been ‘stolen’ from Brussels airport. In addition, another significant part of the passenger volume consists of city trippers, who decide to take short-haul flights that they would not have taken in the absence of attractive fares. Until recently Brussels airport had seen little or no development in the low-cost segment. Accordingly, easyJet launched its first destinations from Brussels airport during 2007. |
| --- | --- |

(297)

According to Belgium, if the parallel development of passenger traffic at Brussels airport and Charleroi airport is examined, it can be concluded that any impact from Charleroi on Brussels has been marginal. The brake on development at Brussels airport was caused by the failure of Sabena in November 2001 and not by the concomitant development of Charleroi airport. As a reminder, a study carried out by BSCA in 2010 showed that 40 % of these passengers were flying for the first time, which proves that a significant part of the passenger volume has not been ‘stolen’ from Brussels airport. In addition, another significant part of the passenger volume consists of city trippers, who decide to take short-haul flights that they would not have taken in the absence of attractive fares. Until recently Brussels airport had seen little or no development in the low-cost segment. Accordingly, easyJet launched its first destinations from Brussels airport during 2007.

city trippers

(b)   Need for State intervention

| (298) | Any aid that may be identified by the Commission was certainly necessary to meet this objective of economic and regional development. |
| --- | --- |

(298)

Any aid that may be identified by the Commission was certainly necessary to meet this objective of economic and regional development.

(c)   Appropriateness of State aid

| (299) | Funding the costs of the general interest tasks entrusted by the Region to BSCA was the most appropriate way of achieving the aforementioned objective of common interest. There were no other policy instruments or aid instruments that could have achieved this objective. |
| --- | --- |

(299)

Funding the costs of the general interest tasks entrusted by the Region to BSCA was the most appropriate way of achieving the aforementioned objective of common interest. There were no other policy instruments or aid instruments that could have achieved this objective.

(d)   Incentive effect

| (300) | An incentive effect also exists because, in the absence of this funding, it would not have been possible to develop the airport's activities or achieve this volume level, which has resulted in improved mobility of European citizens and economic and regional development due to the airport's activities. Belgium refers the Commission to the number of passengers handled by BSCA over the period in question. As a reminder, during that period Charleroi airport was a category D airport with no possibility of distorting competition. The funding is also in line with the objectives of the aviation guidelines, namely ensuring the long-term profitability of regional airports. |
| --- | --- |

(300)

An incentive effect also exists because, in the absence of this funding, it would not have been possible to develop the airport's activities or achieve this volume level, which has resulted in improved mobility of European citizens and economic and regional development due to the airport's activities. Belgium refers the Commission to the number of passengers handled by BSCA over the period in question. As a reminder, during that period Charleroi airport was a category D airport with no possibility of distorting competition. The funding is also in line with the objectives of the aviation guidelines, namely ensuring the long-term profitability of regional airports.

(e)   Proportionality of the aid amount

| (301) | Lastly, the aid amount is proportional. As a reminder, the compensation granted for the general interest tasks, as stipulated in Article 25 of the schedule of conditions annexed to the concession agreement between the Region and BSCA, is capped so that, if this cap is exceeded, which is the case with the part of the compensation for fire protection and ground traffic safety services, the costs must be covered by BSCA. Any aid granted in terms of the provision of services by SOWAER involves a marginal amount. |
| --- | --- |

(301)

Lastly, the aid amount is proportional. As a reminder, the compensation granted for the general interest tasks, as stipulated in Article 25 of the schedule of conditions annexed to the concession agreement between the Region and BSCA, is capped so that, if this cap is exceeded, which is the case with the part of the compensation for fire protection and ground traffic safety services, the costs must be covered by BSCA. Any aid granted in terms of the provision of services by SOWAER involves a marginal amount.

| (302) | Given the limited amount of the aid in the context of this compensation for the services of general interest that may be called into question by the Commission and also the objective of these services, it must be considered that this proportionality condition is met. |
| --- | --- |

(302)

Given the limited amount of the aid in the context of this compensation for the services of general interest that may be called into question by the Commission and also the objective of these services, it must be considered that this proportionality condition is met.

(f)   Absence of negative effects on competition

| (303) | As regards the absence or avoidance of negative effects on competition, the Commission must refer back to the time when the public financing was granted in order to assess this condition. It cannot be considered that, at that time, there was any undue impact on competition. As proven to the Commission, Charleroi airport has not been developed at the expense of other airports. Its activities stem from the creation of a new market in a specific segment that was not being developed at all or only to a very limited extent at Brussels airport. |
| --- | --- |

(303)

As regards the absence or avoidance of negative effects on competition, the Commission must refer back to the time when the public financing was granted in order to assess this condition. It cannot be considered that, at that time, there was any undue impact on competition. As proven to the Commission, Charleroi airport has not been developed at the expense of other airports. Its activities stem from the creation of a new market in a specific segment that was not being developed at all or only to a very limited extent at Brussels airport.

| (304) | For the record, two studies carried out by independent experts, Roland Berger International Management Consultant and GTM, revealed the imminent saturation of Brussels airport and the lack of any overlap in terms of customers between the two airports. At the time the airlines operating at Brussels airport had no interest in Charleroi airport, whilst Ryanair, the main user of Charleroi airport, had no plans to base itself at the main airports. |
| --- | --- |

(304)

For the record, two studies carried out by independent experts, Roland Berger International Management Consultant and GTM, revealed the imminent saturation of Brussels airport and the lack of any overlap in terms of customers between the two airports. At the time the airlines operating at Brussels airport had no interest in Charleroi airport, whilst Ryanair, the main user of Charleroi airport, had no plans to base itself at the main airports.

| (305) | Furthermore, the Region's framework agreement of 20 July 2000, as extended by the decision of 8 November 2000, contained the objective of ‘implementing a policy allowing efficient collaboration with the managers of Brussels airport’ (108). |
| --- | --- |

(305)

Furthermore, the Region's framework agreement of 20 July 2000, as extended by the decision of 8 November 2000, contained the objective of ‘implementing a policy allowing efficient collaboration with the managers of Brussels airport’ (108).

108

| (306) | In addition, Charleroi airport was at a disadvantage due to the regulatory constraints on its opening hours. In 2000 the airport could open between 07:00 and 22:00. These hours were slightly altered to 06:30 and 23:00 in order to accommodate the aircraft based at the airport. |
| --- | --- |

(306)

In addition, Charleroi airport was at a disadvantage due to the regulatory constraints on its opening hours. In 2000 the airport could open between 07:00 and 22:00. These hours were slightly altered to 06:30 and 23:00 in order to accommodate the aircraft based at the airport.

| (307) | Furthermore, in 2000 Charleroi airport had a very poor image, as confirmed by the GTM and Roland Berger studies. The infrastructure was cramped, limited and little-used. The airport offered only one scheduled service and a number of charter flights in the summer. It cannot be considered that at the time Charleroi airport was in a position to compete with Brussels airport. |
| --- | --- |

(307)

Furthermore, in 2000 Charleroi airport had a very poor image, as confirmed by the GTM and Roland Berger studies. The infrastructure was cramped, limited and little-used. The airport offered only one scheduled service and a number of charter flights in the summer. It cannot be considered that at the time Charleroi airport was in a position to compete with Brussels airport.

| (308) | Lastly, Brussels airport was at an advantage in terms of infrastructure (several terminals, several runways, etc.) and accessibility due to its location close to the capital and the rail link that Charleroi airport lacked. |
| --- | --- |

(308)

Lastly, Brussels airport was at an advantage in terms of infrastructure (several terminals, several runways, etc.) and accessibility due to its location close to the capital and the rail link that Charleroi airport lacked.

5.1.2.2.   
  Comments from Belgium on the compatibility of the provision of infrastructure, assessed on the basis of Article 106(2) TFEU

Comments from Belgium on the compatibility of the provision of infrastructure, assessed on the basis of Article 106(2) TFEU

| (309) | These comments concern the compatibility:






  — | of the provision of infrastructure, assessed on the basis of the 2005 aviation guidelines (the latter having been replaced by the 2014 aviation guidelines), |
| --- | --- | --- |

(309)

These comments concern the compatibility:

—

of the provision of infrastructure, assessed on the basis of the 2005 aviation guidelines (the latter having been replaced by the 2014 aviation guidelines),

| — | of the financing of part of the costs of the services of general interest, assessed on the basis of Article 106(2) TFEU. |
| --- | --- |

—

of the financing of part of the costs of the services of general interest, assessed on the basis of Article 106(2) TFEU.

| (310) | With regard to the compatibility of the financing of part of the costs of the services of general interest, assessed on the basis of Article 106(2) TFEU, Belgium submits that this financing complies:






  — | with Article 106(2) TFEU for the period prior to 19 December 2005, |
| --- | --- | --- |

(310)

With regard to the compatibility of the financing of part of the costs of the services of general interest, assessed on the basis of Article 106(2) TFEU, Belgium submits that this financing complies:

—

with Article 106(2) TFEU for the period prior to 19 December 2005,

| — | with the Commission Decision of 28 November 2005 for the period from 19 December 2005 to 31 January 2012, |
| --- | --- |

—

with the Commission Decision of 28 November 2005 for the period from 19 December 2005 to 31 January 2012,

| — | with the Framework of 20 December 2011 for the period after 31 January 2012. |
| --- | --- |

—

with the Framework of 20 December 2011 for the period after 31 January 2012.

| (311) | According to Belgium, if the Commission considered that the criteria of the Altmark judgment were not all met, then it would be necessary to authorise the compensation of services of general interest based on the Decision of 28 November 2005 (109). |
| --- | --- |

(311)

According to Belgium, if the Commission considered that the criteria of the Altmark judgment were not all met, then it would be necessary to authorise the compensation of services of general interest based on the Decision of 28 November 2005 (109).

Altmark

109

| (312) | With regard to the measures granted prior to 19 December 2005, i.e. before the Decision of 28 November 2005 entered into force, their compatibility is directly based on Article 106(2) TFEU. It is clear from the Commission's decision-making practice (110) that the conditions of Article 106(2) TFEU are combined with those of the Decision of 28 November 2005 on the application of Article 86(2) of the EC Treaty to State aid in the form of public service compensation granted to certain undertakings entrusted with the operation of services of general economic interest (111). The measures granted prior to 19 December 2005 can therefore be assessed for compatibility together with those granted subsequently in accordance with Article 106(2) TFEU, using the same basic criteria as set out by the Decision of 28 November 2005. |
| --- | --- |

(312)

With regard to the measures granted prior to 19 December 2005, i.e. before the Decision of 28 November 2005 entered into force, their compatibility is directly based on Article 106(2) TFEU. It is clear from the Commission's decision-making practice (110) that the conditions of Article 106(2) TFEU are combined with those of the Decision of 28 November 2005 on the application of Article 86(2) of the EC Treaty to State aid in the form of public service compensation granted to certain undertakings entrusted with the operation of services of general economic interest (111). The measures granted prior to 19 December 2005 can therefore be assessed for compatibility together with those granted subsequently in accordance with Article 106(2) TFEU, using the same basic criteria as set out by the Decision of 28 November 2005.

110

111

| (313) | With regard to the measures granted since 19 December 2005, they fall within the scope of the Decision of 28 November 2005 where they correspond to public service compensation granted to undertakings with an average annual turnover before tax of less than EUR 100 million during the two financial years preceding that in which the service of general economic interest was assigned, which receive annual compensation for the service in question of less than EUR 30 million (112). However, at no time has BSCA had an annual turnover in excess of EUR 100 million. Furthermore, according to Belgium, it is evident that the compensation for any services of general interest that may be qualified as economic by the Commission would be far from reaching the threshold of EUR 30 million. As a result, this compensation clearly falls within the scope of the Decision of 28 November 2005. |
| --- | --- |

(313)

With regard to the measures granted since 19 December 2005, they fall within the scope of the Decision of 28 November 2005 where they correspond to public service compensation granted to undertakings with an average annual turnover before tax of less than EUR 100 million during the two financial years preceding that in which the service of general economic interest was assigned, which receive annual compensation for the service in question of less than EUR 30 million (112). However, at no time has BSCA had an annual turnover in excess of EUR 100 million. Furthermore, according to Belgium, it is evident that the compensation for any services of general interest that may be qualified as economic by the Commission would be far from reaching the threshold of EUR 30 million. As a result, this compensation clearly falls within the scope of the Decision of 28 November 2005.

112

| (314) | Based on the Decision of 28 November 2005, measures falling within its scope are compatible where they meet the following criteria. |
| --- | --- |

(314)

Based on the Decision of 28 November 2005, measures falling within its scope are compatible where they meet the following criteria.

(a)   Mandate

| (315) | Belgium considers that it proved the existence of public service obligations when it ‘established’ that the first criterion of the Altmark judgment was met (see Section 5.1.1.1(c)(ii)). Moreover, according to Belgium, the parameters for calculating the compensation and the methods used to prevent any overcompensation were explained when Belgium proved that the third and fourth criteria of the Altmark judgment were met. |
| --- | --- |

(315)

Belgium considers that it proved the existence of public service obligations when it ‘established’ that the first criterion of the Altmark judgment was met (see Section 5.1.1.1(c)(ii)). Moreover, according to Belgium, the parameters for calculating the compensation and the methods used to prevent any overcompensation were explained when Belgium proved that the third and fourth criteria of the Altmark judgment were met.

Altmark

Altmark

(b)   Compensation

| (316) | Belgium notes that Wallonia's intervention has been capped since 2006 with regard to the fire protection and ground traffic and airport site safety services and since 2010 with regard to the security, navigation office and marshalling services. The cost accounting system put in place by BSCA enables compliance with this criterion to be proven. |
| --- | --- |

(316)

Belgium notes that Wallonia's intervention has been capped since 2006 with regard to the fire protection and ground traffic and airport site safety services and since 2010 with regard to the security, navigation office and marshalling services. The cost accounting system put in place by BSCA enables compliance with this criterion to be proven.

(c)   Accounting separation

| (317) | According to Belgium, accounting separation is guaranteed by the application of Article 25 of the schedule of conditions, which provides that the ‘concession-holder shall keep a separate operating account for the Services. This account may be subject at any time to on-the-spot checks by the concession authority’. This is also confirmed by the document in Annex 8. |
| --- | --- |

(317)

According to Belgium, accounting separation is guaranteed by the application of Article 25 of the schedule of conditions, which provides that the ‘concession-holder shall keep a separate operating account for the Services. This account may be subject at any time to on-the-spot checks by the concession authority’. This is also confirmed by the document in Annex 8.

(d)   Checks for overcompensation

| (318) | Wallonia has the right to check, at any time, BSCA's accounts for the services of general interest, under Article 25 of the schedule of conditions. Accordingly, every year the Walloon administration conducts an on-the-spot check to examine the evidence underlying the declaration of claim submitted by BSCA in order to obtain the compensation for the services of general interest. |
| --- | --- |

(318)

Wallonia has the right to check, at any time, BSCA's accounts for the services of general interest, under Article 25 of the schedule of conditions. Accordingly, every year the Walloon administration conducts an on-the-spot check to examine the evidence underlying the declaration of claim submitted by BSCA in order to obtain the compensation for the services of general interest.

(e)   Conclusion

| (319) | It follows from the above that the financing of the services of general interest that may be qualified as economic by the Commission can be declared compatible with the internal market based on the Decision of 28 November 2005. |
| --- | --- |

(319)

It follows from the above that the financing of the services of general interest that may be qualified as economic by the Commission can be declared compatible with the internal market based on the Decision of 28 November 2005.

5.2.   Comments from Belgium on the measures granted to Ryanair

Comments from Belgium on the measures granted to Ryanair

| (320) | Following the 2002 opening decision and the 2012 extension decision, Belgium submitted comments aimed at proving that the measures granted to Ryanair, as examined in the present decision, do not constitute State aid. |
| --- | --- |

(320)

Following the 2002 opening decision and the 2012 extension decision, Belgium submitted comments aimed at proving that the measures granted to Ryanair, as examined in the present decision, do not constitute State aid.

5.3.   Comments from Belgium on the limitation period

Comments from Belgium on the limitation period

| (321) | According to the comments submitted by Belgium following the adoption of the 2012 extension decision, even if the financing of the services of general interest is regarded as constituting State aid, this benefits from the limitation period laid down by Article 15 of Council Regulation (EC) No 659/1999 (113) (hereinafter ‘Procedural Regulation’). |
| --- | --- |

(321)

According to the comments submitted by Belgium following the adoption of the 2012 extension decision, even if the financing of the services of general interest is regarded as constituting State aid, this benefits from the limitation period laid down by Article 15 of Council Regulation (EC) No 659/1999 (113) (hereinafter ‘Procedural Regulation’).

113

| (322) | Under this provision, the limitation period begins on the day on which the unlawful aid is awarded to the beneficiary. In accordance with EU regulations (114) and the Commission's decision-making practice (115), the Commission must assess a measure according to the rules applicable at the moment the aid is awarded, ‘that is, the moment of the legally binding act on the basis of which the beneficiary acquires the right to receive the aid’. EU case-law confirms that the date of award of the aid corresponds to the date of the ‘legally binding act by which the competent [national] authorities undertake to grant aid’ (116). The legal act becomes binding on the date when, under national law, the State is obliged to meet its commitment based on the act in question. Prior to that, there is simply a declaration of intention (117). |
| --- | --- |

(322)

Under this provision, the limitation period begins on the day on which the unlawful aid is awarded to the beneficiary. In accordance with EU regulations (114) and the Commission's decision-making practice (115), the Commission must assess a measure according to the rules applicable at the moment the aid is awarded, ‘that is, the moment of the legally binding act on the basis of which the beneficiary acquires the right to receive the aid’. EU case-law confirms that the date of award of the aid corresponds to the date of the ‘legally binding act by which the competent [national] authorities undertake to grant aid’ (116). The legal act becomes binding on the date when, under national law, the State is obliged to meet its commitment based on the act in question. Prior to that, there is simply a declaration of intention (117).

114

115

116

117

| (323) | It follows from the above that the date when the compensation for the services of general interest provided by BSCA was granted is 9 July 1991, i.e. the date of the concession agreement and schedule of conditions forming the legal basis of this compensation binding the Region. Since that date, notwithstanding the adoption of various provisions without any impact on the principle of compulsory reimbursement by the Region of this expenditure, Wallonia has been responsible for paying this compensation. Only a few non-economic services set out in Amendment No 6 of 15 January 2008 are apparently not covered by this limitation period. The starting point of the 10-year limitation period is therefore 9 July 1991. |
| --- | --- |

(323)

It follows from the above that the date when the compensation for the services of general interest provided by BSCA was granted is 9 July 1991, i.e. the date of the concession agreement and schedule of conditions forming the legal basis of this compensation binding the Region. Since that date, notwithstanding the adoption of various provisions without any impact on the principle of compulsory reimbursement by the Region of this expenditure, Wallonia has been responsible for paying this compensation. Only a few non-economic services set out in Amendment No 6 of 15 January 2008 are apparently not covered by this limitation period. The starting point of the 10-year limitation period is therefore 9 July 1991.

| (324) | No Commission measure regarding the compensation received for the services of general interest provided by BSCA, as required by Article 15 of the Procedural Regulation, interrupted the 10-year limitation period, which therefore expired in July 2001. Despite this compensation not being formalised in the agreement for the 2000-2001 period, the parties, i.e. Wallonia and BSCA, always intended to maintain this compensation for an indefinite period. This intention was confirmed by the funding of these costs for said period and was stipulated in the 2002 amendment, such that the starting point of the limitation period has not been called into question. |
| --- | --- |

(324)

No Commission measure regarding the compensation received for the services of general interest provided by BSCA, as required by Article 15 of the Procedural Regulation, interrupted the 10-year limitation period, which therefore expired in July 2001. Despite this compensation not being formalised in the agreement for the 2000-2001 period, the parties, i.e. Wallonia and BSCA, always intended to maintain this compensation for an indefinite period. This intention was confirmed by the funding of these costs for said period and was stipulated in the 2002 amendment, such that the starting point of the limitation period has not been called into question.

| (325) | Only the Commission letter of 24 April 2002, which in particular contains questions on BSCA's financing and might therefore indirectly concern the funding of the costs of the services of general interest, could have interrupted the limitation period. Detailed explanations were provided by the Walloon authorities following this request, but the Commission did not at any time question the legality of this financing. |
| --- | --- |

(325)

Only the Commission letter of 24 April 2002, which in particular contains questions on BSCA's financing and might therefore indirectly concern the funding of the costs of the services of general interest, could have interrupted the limitation period. Detailed explanations were provided by the Walloon authorities following this request, but the Commission did not at any time question the legality of this financing.

| (326) | It follows from the above that, even if the compensation paid for the services of general interest is regarded as State aid, which it is not, the Commission's powers to recover the aid are limited under Article 15 of the Procedural Regulation. |
| --- | --- |

(326)

It follows from the above that, even if the compensation paid for the services of general interest is regarded as State aid, which it is not, the Commission's powers to recover the aid are limited under Article 15 of the Procedural Regulation.

5.4.   Comments from Belgium on the infringement of legitimate expectations

Comments from Belgium on the infringement of legitimate expectations

| (327) | Following the 2012 extension decision, Belgium submitted comments on the application of the principle of legitimate expectations to the subsidy paid by the Region for certain services associated with the airport activities. |
| --- | --- |

(327)

Following the 2012 extension decision, Belgium submitted comments on the application of the principle of legitimate expectations to the subsidy paid by the Region for certain services associated with the airport activities.

| (328) | In accordance with the case-law of the Court of Justice on State aid, the Commission is required to take into consideration on its own initiative the exceptional circumstances that provide justification, pursuant to Article 14(1) of the Procedural Regulation, for it to refrain from ordering the recovery of unlawfully granted aid where such recovery is contrary to a general principle of Community law, such as respect for the legitimate expectation of beneficiaries. |
| --- | --- |

(328)

In accordance with the case-law of the Court of Justice on State aid, the Commission is required to take into consideration on its own initiative the exceptional circumstances that provide justification, pursuant to Article 14(1) of the Procedural Regulation, for it to refrain from ordering the recovery of unlawfully granted aid where such recovery is contrary to a general principle of Community law, such as respect for the legitimate expectation of beneficiaries.

| (329) | As summarised by Advocate General Philippe Léger, the infringement of this principle is recognised when the three following conditions are satisfied: ‘First of all, there must be an act or conduct on the part of the Community administration capable of having given rise to such an expectation ... Next, the person concerned must not be able to foresee the change to the pattern of conduct previously adopted by the Community administration ... Lastly, the Community interest which the contested measure seeks to achieve must not justify the infringement of the legitimate expectation of the party concerned’. |
| --- | --- |

(329)

As summarised by Advocate General Philippe Léger, the infringement of this principle is recognised when the three following conditions are satisfied: ‘First of all, there must be an act or conduct on the part of the Community administration capable of having given rise to such an expectation ... Next, the person concerned must not be able to foresee the change to the pattern of conduct previously adopted by the Community administration ... Lastly, the Community interest which the contested measure seeks to achieve must not justify the infringement of the legitimate expectation of the party concerned’.

| (330) | According to Belgium, particularly as regards the subsidy paid by the Region for certain services associated with the airport activities, the three conditions cited in the preceding recital are satisfied. |
| --- | --- |

(330)

According to Belgium, particularly as regards the subsidy paid by the Region for certain services associated with the airport activities, the three conditions cited in the preceding recital are satisfied.

| (331) | The Commission examined the subsidy paid by the Region for certain services associated with the airport activities during the first investigation and did not raise any objections in this respect in its 2004 decision. In that decision, the Commission expressly stated that it ‘does not dispute the legitimate possibility of the Walloon authorities continuing to bear the cost of the fire and maintenance services’ (118). The maintenance services provided by BSCA at that time were defined as follows: ‘the concession-holder must provide, in the context of the service concession, maintenance for the land, buildings, equipment and structures included in the concession and placed at its disposal, so that they are always suitable for the use for which they are intended’. In the same respect, in recital 352 of the same decision, the Commission stated that ‘Some of the financial burdens of these airports, whether they are private or public, are, however, often covered by public service compensation relating to safety or security tasks, or by other contributions to the costs of activities that would not be economically viable in themselves but that are necessary to the operation of these platforms. This may be the case with air traffic control, police or fire fighting services, etc.’ |
| --- | --- |

(331)

The Commission examined the subsidy paid by the Region for certain services associated with the airport activities during the first investigation and did not raise any objections in this respect in its 2004 decision. In that decision, the Commission expressly stated that it ‘does not dispute the legitimate possibility of the Walloon authorities continuing to bear the cost of the fire and maintenance services’ (118). The maintenance services provided by BSCA at that time were defined as follows: ‘the concession-holder must provide, in the context of the service concession, maintenance for the land, buildings, equipment and structures included in the concession and placed at its disposal, so that they are always suitable for the use for which they are intended’. In the same respect, in recital 352 of the same decision, the Commission stated that ‘Some of the financial burdens of these airports, whether they are private or public, are, however, often covered by public service compensation relating to safety or security tasks, or by other contributions to the costs of activities that would not be economically viable in themselves but that are necessary to the operation of these platforms. This may be the case with air traffic control, police or fire fighting services, etc.’

118

| (332) | Belgium also stresses that the annulment by the General Court in no way related to this aspect of the 2004 decision. |
| --- | --- |

(332)

Belgium also stresses that the annulment by the General Court in no way related to this aspect of the 2004 decision.

| (333) | It therefore concludes that the three conditions set out in recital 329 are satisfied. |
| --- | --- |

(333)

It therefore concludes that the three conditions set out in recital 329 are satisfied.

| (334) | Firstly, the decision made in 2004 by the Commission and the lack of censure by the General Court on this point have ‘previously created a situation which could give rise to such an expectation’. According to Belgium, BSCA has received precise assurances that the funding of the costs of the services of general interest was not likely to constitute State aid, given the lack of any complaint on this point in the 2004 decision. This legitimate expectation is further reinforced by the settled decision-making practice of the Commission on this issue, in particular the distinction between economic activities and non-economic activities, as reiterated in particular in the decision on Leipzig/Halle airport. |
| --- | --- |

(334)

Firstly, the decision made in 2004 by the Commission and the lack of censure by the General Court on this point have ‘previously created a situation which could give rise to such an expectation’. According to Belgium, BSCA has received precise assurances that the funding of the costs of the services of general interest was not likely to constitute State aid, given the lack of any complaint on this point in the 2004 decision. This legitimate expectation is further reinforced by the settled decision-making practice of the Commission on this issue, in particular the distinction between economic activities and non-economic activities, as reiterated in particular in the decision on Leipzig/Halle airport.

| (335) | Secondly, BSCA was not ‘able to foresee the change to the pattern of conduct previously adopted by the Community administration’. According to Belgium, there was nothing to indicate to BSCA that the Commission was going to re-examine, in 2012, a measure on which it had not expressed any reservations in 2004, and which the General Court did not question in 2008. |
| --- | --- |

(335)

Secondly, BSCA was not ‘able to foresee the change to the pattern of conduct previously adopted by the Community administration’. According to Belgium, there was nothing to indicate to BSCA that the Commission was going to re-examine, in 2012, a measure on which it had not expressed any reservations in 2004, and which the General Court did not question in 2008.

| (336) | Thirdly, the Community interest does not prevail over that of BSCA ‘in seeing the situation maintained that it might legitimately have assumed to be a stable one’. According to Belgium, BSCA would suffer considerable harm from a Commission decision ordering recovery of the subsidies received by BSCA in return for providing the services of general interest. |
| --- | --- |

(336)

Thirdly, the Community interest does not prevail over that of BSCA ‘in seeing the situation maintained that it might legitimately have assumed to be a stable one’. According to Belgium, BSCA would suffer considerable harm from a Commission decision ordering recovery of the subsidies received by BSCA in return for providing the services of general interest.

| (337) | In conclusion, Belgium considers that this financial compensation, which is vital to ensure the safety and security of the airport site and activities, has been maintained and extended since the 2004 decision, particularly due to the legitimate expectation arising from the Commission's position that the financing of the services of general interest did not constitute State aid within the meaning of Article 107 TFEU. Given the legitimate expectation created by the Commission in the mind of BSCA, even if the Commission were to consider that the subsidies in question constitute State aid, it could not order their recovery, pursuant to Article 15 of the Procedural Regulation. |
| --- | --- |

(337)

In conclusion, Belgium considers that this financial compensation, which is vital to ensure the safety and security of the airport site and activities, has been maintained and extended since the 2004 decision, particularly due to the legitimate expectation arising from the Commission's position that the financing of the services of general interest did not constitute State aid within the meaning of Article 107 TFEU. Given the legitimate expectation created by the Commission in the mind of BSCA, even if the Commission were to consider that the subsidies in question constitute State aid, it could not order their recovery, pursuant to Article 15 of the Procedural Regulation.

6.   ASSESSMENT OF THE MEASURES

ASSESSMENT OF THE MEASURES

| (338) | Under Article 107(1) TFEU, any aid granted by a Member State or through State resources in any form whatsoever which distorts or threatens to distort competition by favouring certain undertakings or the production of certain goods shall, insofar as it affects trade between Member States, be incompatible with the internal market. |
| --- | --- |

(338)

Under Article 107(1) TFEU, any aid granted by a Member State or through State resources in any form whatsoever which distorts or threatens to distort competition by favouring certain undertakings or the production of certain goods shall, insofar as it affects trade between Member States, be incompatible with the internal market.

| (339) | A measure is therefore qualified as State aid where all the following conditions are met: (1) the beneficiary or beneficiaries is or are undertakings within the meaning of Article 107(1) TFEU; (2) the measure provides a selective advantage to its beneficiary; (3) the measure is financed by State resources and is imputable to the State; and (4) the measure distorts or threatens to distort competition and may affect trade between Member States. |
| --- | --- |

(339)

A measure is therefore qualified as State aid where all the following conditions are met: (1) the beneficiary or beneficiaries is or are undertakings within the meaning of Article 107(1) TFEU; (2) the measure provides a selective advantage to its beneficiary; (3) the measure is financed by State resources and is imputable to the State; and (4) the measure distorts or threatens to distort competition and may affect trade between Member States.

| (340) | In this chapter, the Commission assesses whether the measures described in Chapter 3 may constitute aid to BSCA and/or Ryanair, and then considers whether the aid identified is compatible with the internal market and whether the limitation period and principle of legitimate expectations apply. |
| --- | --- |

(340)

In this chapter, the Commission assesses whether the measures described in Chapter 3 may constitute aid to BSCA and/or Ryanair, and then considers whether the aid identified is compatible with the internal market and whether the limitation period and principle of legitimate expectations apply.

6.1.   Existence of State aid granted to BSCA

Existence of State aid granted to BSCA

6.1.1.   Definition of undertaking within the meaning of Article 107 TFEU

Definition of undertaking within the meaning of Article 107 TFEU

| (341) | Under Article 107(1) TFEU, in order to be regarded as State aid, a measure must favour ‘certain undertakings or the production of certain goods’. |
| --- | --- |

(341)

Under Article 107(1) TFEU, in order to be regarded as State aid, a measure must favour ‘certain undertakings or the production of certain goods’.

| (342) | The Court of Justice has consistently defined undertakings as any entity engaged in an economic activity, regardless of the legal status of the entity or the way in which it is financed (119). Moreover, the Court has consistently held that an economic activity is any activity consisting in offering goods and services on a given market. (120). |
| --- | --- |

(342)

The Court of Justice has consistently defined undertakings as any entity engaged in an economic activity, regardless of the legal status of the entity or the way in which it is financed (119). Moreover, the Court has consistently held that an economic activity is any activity consisting in offering goods and services on a given market. (120).

119

120

| (343) | In its ADP judgment, the Court of First Instance concluded that the operation of an airport, which consists in providing airport facilities to airlines, is an economic activity. |
| --- | --- |

(343)

In its ADP judgment, the Court of First Instance concluded that the operation of an airport, which consists in providing airport facilities to airlines, is an economic activity.

ADP

| (344) | In its Leipzig-Halle Airport judgment (121), the Court confirmed that the operation of an airport in return for payment constitutes an economic activity, from which the activity consisting in the construction of airport infrastructure cannot be dissociated (122). Where an airport operator engages in economic activities, regardless of its legal status or the way in which it is financed, it constitutes an undertaking within the meaning of Article 107(1) TFEU and therefore falls within the scope of the TFEU rules on State aid (123). The Court also confirmed that, unlike their effects, the regional, economic or transport policy objectives pursued by the construction or extension of airport infrastructure were not relevant when determining whether an economic activity existed. |
| --- | --- |

(344)

In its Leipzig-Halle Airport judgment (121), the Court confirmed that the operation of an airport in return for payment constitutes an economic activity, from which the activity consisting in the construction of airport infrastructure cannot be dissociated (122). Where an airport operator engages in economic activities, regardless of its legal status or the way in which it is financed, it constitutes an undertaking within the meaning of Article 107(1) TFEU and therefore falls within the scope of the TFEU rules on State aid (123). The Court also confirmed that, unlike their effects, the regional, economic or transport policy objectives pursued by the construction or extension of airport infrastructure were not relevant when determining whether an economic activity existed.

Leipzig-Halle Airport

121

122

123

| (345) | The question of whether there is a market for given services can depend on how those services are organised in the Member State concerned (124). The State aid rules apply only where a given activity is carried out in a commercial environment. The economic nature of given services can therefore vary from one Member State to another. In addition, the qualification of a given service can alter over time depending on policy choices or economic developments. |
| --- | --- |

(345)

The question of whether there is a market for given services can depend on how those services are organised in the Member State concerned (124). The State aid rules apply only where a given activity is carried out in a commercial environment. The economic nature of given services can therefore vary from one Member State to another. In addition, the qualification of a given service can alter over time depending on policy choices or economic developments.

124

| (346) | As a result, prior to the ADP judgment, the Commission's consistent practice was to consider that the activity of developing and managing airport infrastructure did not constitute an economic activity falling within the scope of Article 107(1) TFEU (125). Following the ADP judgment, the Commission decided that, due to the gradual liberalisation of the market, this activity had become an economic activity. This is also clarified by the aviation guidelines (126) in points 28 and 29: ‘from the date of the judgment in ‘Aéroports de Paris’ (12 December 2000), the operation and construction of airport infrastructure must be considered as falling within the ambit of State aid control. Conversely, due to the uncertainty that existed prior to the judgment in ‘Aéroports de Paris’, public authorities could legitimately consider that the financing of airport infrastructure did not constitute State aid and, accordingly, that such measures did not need to be notified to the Commission. It follows that the Commission cannot now bring into question, on the basis of State aid rules, financing measures granted before the ‘Aéroports de Paris’ judgment’. |
| --- | --- |

(346)

As a result, prior to the ADP judgment, the Commission's consistent practice was to consider that the activity of developing and managing airport infrastructure did not constitute an economic activity falling within the scope of Article 107(1) TFEU (125). Following the ADP judgment, the Commission decided that, due to the gradual liberalisation of the market, this activity had become an economic activity. This is also clarified by the aviation guidelines (126) in points 28 and 29: ‘from the date of the judgment in ‘Aéroports de Paris’ (12 December 2000), the operation and construction of airport infrastructure must be considered as falling within the ambit of State aid control. Conversely, due to the uncertainty that existed prior to the judgment in ‘Aéroports de Paris’, public authorities could legitimately consider that the financing of airport infrastructure did not constitute State aid and, accordingly, that such measures did not need to be notified to the Commission. It follows that the Commission cannot now bring into question, on the basis of State aid rules, financing measures granted before the ‘Aéroports de Paris’ judgment’.

ADP

125

ADP

126

Aéroports de Paris

Aéroports de Paris

Aéroports de Paris

| (347) | It should therefore be determined whether the measures granted to BSCA for the operation and construction of airport infrastructure were granted before or after 12 December 2000, which was the date of the ADP judgment. |
| --- | --- |

(347)

It should therefore be determined whether the measures granted to BSCA for the operation and construction of airport infrastructure were granted before or after 12 December 2000, which was the date of the ADP judgment.

ADP

| (348) | In addition, even after the ADP judgment, as highlighted by points 34 and 35 of the aviation guidelines, not all the activities of an airport operator are necessarily regarded as economic in nature. The Court of Justice has therefore confirmed that activities that normally fall under State responsibility in the exercise of its official powers as a public authority are not economic in nature (127). At an airport, activities such as air traffic control, police, customs, firefighting, measures designed to protect civil aviation from acts of unlawful interference, and investment in the infrastructure and equipment needed for such activities are regarded, as a general rule, as not being economic in nature. |
| --- | --- |

(348)

In addition, even after the ADP judgment, as highlighted by points 34 and 35 of the aviation guidelines, not all the activities of an airport operator are necessarily regarded as economic in nature. The Court of Justice has therefore confirmed that activities that normally fall under State responsibility in the exercise of its official powers as a public authority are not economic in nature (127). At an airport, activities such as air traffic control, police, customs, firefighting, measures designed to protect civil aviation from acts of unlawful interference, and investment in the infrastructure and equipment needed for such activities are regarded, as a general rule, as not being economic in nature.

ADP

127

| (349) | In conclusion, the measures granted to BSCA after 12 December 2000 must be identified and those measures granted for activities normally falling under State responsibility in the exercise of its official powers as a public authority must be excluded. |
| --- | --- |

(349)

In conclusion, the measures granted to BSCA after 12 December 2000 must be identified and those measures granted for activities normally falling under State responsibility in the exercise of its official powers as a public authority must be excluded.

6.1.1.1.   
  Land and infrastructure of Charleroi airport placed at the disposal of BSCA, including infrastructure constructed under the investment programme, and provision of certain services, particularly major repairs, in return for a concession fee

Land and infrastructure of Charleroi airport placed at the disposal of BSCA, including infrastructure constructed under the investment programme, and provision of certain services, particularly major repairs, in return for a concession fee

| (350) | In this section, the Commission examines:






  — | whether the measure, including new infrastructure constructed under the investment programme being placed at the disposal of BSCA, was granted before the ADP judgment, |
| --- | --- | --- |

(350)

In this section, the Commission examines:

—

whether the measure, including new infrastructure constructed under the investment programme being placed at the disposal of BSCA, was granted before the ADP judgment,

ADP

| — | which investments and which services provided by SOWAER must be excluded from the examination due to being non-economic in nature. |
| --- | --- |

—

which investments and which services provided by SOWAER must be excluded from the examination due to being non-economic in nature.

(a)   Was the measure, including new infrastructure constructed under the investment programme being placed at the disposal of BSCA, granted before the ADP judgment?

ADP

| (351) | As highlighted in recital 344 et seq., the construction of airport infrastructure cannot in principle be dissociated from the economic activity of operating the airport platform. |
| --- | --- |

(351)

As highlighted in recital 344 et seq., the construction of airport infrastructure cannot in principle be dissociated from the economic activity of operating the airport platform.

| (352) | With regard to the construction of infrastructure at Charleroi airport, which was included in the multiannual investment programme, the Belgian authorities consider, however, that this investment programme was decided prior to 12 December 2000, which was the date of the ADP judgment. Belgium's arguments, set out in Section 5.1.1.1(a)(i), essentially aim to refute the scope and accuracy of the preliminary arguments given by the Commission in the 2012 extension decision, according to which the framework agreement of 20 July 2000 and the decision of the Walloon Government of 8 November 2000 (hereinafter the ‘2000 decisions’) do not impose any commitment on the Region with regard to a third party and are not irrevocable, firm and definitive in nature. |
| --- | --- |

(352)

With regard to the construction of infrastructure at Charleroi airport, which was included in the multiannual investment programme, the Belgian authorities consider, however, that this investment programme was decided prior to 12 December 2000, which was the date of the ADP judgment. Belgium's arguments, set out in Section 5.1.1.1(a)(i), essentially aim to refute the scope and accuracy of the preliminary arguments given by the Commission in the 2012 extension decision, according to which the framework agreement of 20 July 2000 and the decision of the Walloon Government of 8 November 2000 (hereinafter the ‘2000 decisions’) do not impose any commitment on the Region with regard to a third party and are not irrevocable, firm and definitive in nature.

ADP

| (353) | However, the Commission takes the view, for the reasons given below, that the decision to place the infrastructure at BSCA's disposal, including new infrastructure decided and constructed under the investment programme, and to provide certain services in return for a fee did not stem from the 2000 decisions, but from the 2002 agreement between SOWAER and BSCA. |
| --- | --- |

(353)

However, the Commission takes the view, for the reasons given below, that the decision to place the infrastructure at BSCA's disposal, including new infrastructure decided and constructed under the investment programme, and to provide certain services in return for a fee did not stem from the 2000 decisions, but from the 2002 agreement between SOWAER and BSCA.

| (354) | The relevant criterion for the date at which a possible aid measure is deemed to have been granted is the date of the legally binding act by which public authorities undertake to award the measure at stake to its beneficiary (128). |
| --- | --- |

(354)

The relevant criterion for the date at which a possible aid measure is deemed to have been granted is the date of the legally binding act by which public authorities undertake to award the measure at stake to its beneficiary (128).

128

| (355) | In the present case, the Commission takes the view that:






  — | the beneficiary of the possible aid measure is BSCA, |
| --- | --- | --- |

(355)

In the present case, the Commission takes the view that:

—

the beneficiary of the possible aid measure is BSCA,

| — | the public authorities having granted the aid measure are the Region and/or SOWAER. As indicated in recital 39 of this decision and acknowledged by Belgium (129), SOWAER is the vehicle created by the Region and placed under its exclusive control to develop Wallonia's airport infrastructure and place this infrastructure at the disposal of the airport management companies in question. SOWAER, like the Region, is capable of granting State aid. |
| --- | --- |

—

the public authorities having granted the aid measure are the Region and/or SOWAER. As indicated in recital 39 of this decision and acknowledged by Belgium (129), SOWAER is the vehicle created by the Region and placed under its exclusive control to develop Wallonia's airport infrastructure and place this infrastructure at the disposal of the airport management companies in question. SOWAER, like the Region, is capable of granting State aid.

129

| (356) | Prior to the 2002 SOWAER/BSCA agreement, BSCA did not benefit from any commitment on the part of the Region or SOWAER with regard to implementing the investment programme. |
| --- | --- |

(356)

Prior to the 2002 SOWAER/BSCA agreement, BSCA did not benefit from any commitment on the part of the Region or SOWAER with regard to implementing the investment programme.

| (357) | Belgium in fact recognises that no formal letter granting the aid was sent to BSCA. However, according to Belgium, although the Region was itself the beneficiary of the 2000 decisions, these created a commitment on the part of the Walloon Government. Belgium takes the view that the fact that this commitment was unilateral was not peculiar to this case. In its opinion, any financial measure, regardless of its beneficiaries, is always decided through a unilateral administrative act of the granting authority, which controls the application, amendment or withdrawal of said act. |
| --- | --- |

(357)

Belgium in fact recognises that no formal letter granting the aid was sent to BSCA. However, according to Belgium, although the Region was itself the beneficiary of the 2000 decisions, these created a commitment on the part of the Walloon Government. Belgium takes the view that the fact that this commitment was unilateral was not peculiar to this case. In its opinion, any financial measure, regardless of its beneficiaries, is always decided through a unilateral administrative act of the granting authority, which controls the application, amendment or withdrawal of said act.

| (358) | The Commission notes that the 2000 decisions were not published or notified to BSCA. At any time before the 2002 SOWAER/BSCA agreement was signed, the Region could have altered the investment programme, by adopting a new unilateral decision or even totally abandoning this programme, without such a decision infringing BSCA's rights. |
| --- | --- |

(358)

The Commission notes that the 2000 decisions were not published or notified to BSCA. At any time before the 2002 SOWAER/BSCA agreement was signed, the Region could have altered the investment programme, by adopting a new unilateral decision or even totally abandoning this programme, without such a decision infringing BSCA's rights.

| (359) | Furthermore, as indicated in the 2012 extension decision, this investment programme contained uncertainties about the financing mechanism and amounts. The latter could have been altered in line with changing needs. Accordingly, the new North terminal needed to be modular and its construction ‘had to be gradual and tailored to the development of the airport's actual activities and resulting operational needs’. In addition, the financing mechanism envisaged at the time — i.e. involving the Société Régionale Wallonne du Transport — was ultimately abandoned in favour of financing through SOWAER, a new instrument that received its financial resources only when it was created on 1 July 2001 and in the amount of EUR 75 000 000 only. |
| --- | --- |

(359)

Furthermore, as indicated in the 2012 extension decision, this investment programme contained uncertainties about the financing mechanism and amounts. The latter could have been altered in line with changing needs. Accordingly, the new North terminal needed to be modular and its construction ‘had to be gradual and tailored to the development of the airport's actual activities and resulting operational needs’. In addition, the financing mechanism envisaged at the time — i.e. involving the Société Régionale Wallonne du Transport — was ultimately abandoned in favour of financing through SOWAER, a new instrument that received its financial resources only when it was created on 1 July 2001 and in the amount of EUR 75 000 000 only.

| (360) | On the other hand, given that the investment programme was included in the 2002 SOWAER/BSCA agreement, SOWAER was under an obligation towards BSCA: it had to place the land and infrastructure at BSCA's disposal, including the infrastructure to be constructed in accordance with the investment programme, and to provide certain services, in return for a concession fee, otherwise it would fail to comply with its contractual obligations. |
| --- | --- |

(360)

On the other hand, given that the investment programme was included in the 2002 SOWAER/BSCA agreement, SOWAER was under an obligation towards BSCA: it had to place the land and infrastructure at BSCA's disposal, including the infrastructure to be constructed in accordance with the investment programme, and to provide certain services, in return for a concession fee, otherwise it would fail to comply with its contractual obligations.

| (361) | The Commission also takes the view that SOWAER's commitment to implement an investment programme and to provide certain services must be examined together with BSCA's commitment to pay a concession fee. It is impossible to determine whether the Region's plans to place the infrastructure at BSCA's disposal, including new infrastructure constructed in accordance with the investment programme, and to provide certain services constitute aid until the amount of the fee to be paid by BSCA in return is known. |
| --- | --- |

(361)

The Commission also takes the view that SOWAER's commitment to implement an investment programme and to provide certain services must be examined together with BSCA's commitment to pay a concession fee. It is impossible to determine whether the Region's plans to place the infrastructure at BSCA's disposal, including new infrastructure constructed in accordance with the investment programme, and to provide certain services constitute aid until the amount of the fee to be paid by BSCA in return is known.

| (362) | The Commission concludes that the measure consisting in placing the infrastructure at BSCA's disposal, including new infrastructure which SOWAER undertook to construct, and in providing certain services in return for a fee was granted by the 2002 SOWAER/BSCA agreement. It therefore postdates the ADP judgment. |
| --- | --- |

(362)

The Commission concludes that the measure consisting in placing the infrastructure at BSCA's disposal, including new infrastructure which SOWAER undertook to construct, and in providing certain services in return for a fee was granted by the 2002 SOWAER/BSCA agreement. It therefore postdates the ADP judgment.

ADP

| (363) | Moreover, it should be recalled that the investment programme included in the 2002 SOWAER/BSCA agreement was significantly amended by the decision of the Walloon Government of 3 April 2003. In this decision of 3 April 2003, the Walloon Government officially noted a revision to the investment programme (130), whereby the amount of the investment increased from EUR 93 million to almost EUR 151 million, i.e. an increase of EUR 57,8 million, including EUR 33 million for the new terminal. The Commission takes the view that this revision of the investment programme constitutes a substantial change and therefore a new measure potentially constituting new State aid granted to BSCA, in addition to the potential aid already granted through the 2002 SOWAER/BSCA agreement. Given that it stems from a decision of 3 April 2003, this measure constitutes a new measure, adopted after the ADP judgment and therefore subject to the applicable rules on State aid. |
| --- | --- |

(363)

Moreover, it should be recalled that the investment programme included in the 2002 SOWAER/BSCA agreement was significantly amended by the decision of the Walloon Government of 3 April 2003. In this decision of 3 April 2003, the Walloon Government officially noted a revision to the investment programme (130), whereby the amount of the investment increased from EUR 93 million to almost EUR 151 million, i.e. an increase of EUR 57,8 million, including EUR 33 million for the new terminal. The Commission takes the view that this revision of the investment programme constitutes a substantial change and therefore a new measure potentially constituting new State aid granted to BSCA, in addition to the potential aid already granted through the 2002 SOWAER/BSCA agreement. Given that it stems from a decision of 3 April 2003, this measure constitutes a new measure, adopted after the ADP judgment and therefore subject to the applicable rules on State aid.

130

ADP

(b)   Investments and services provided by SOWAER that must be excluded from the analysis due to being non-economic in nature

| (364) | As highlighted by points 34 and 35 of the aviation guidelines, not all the activities of an airport operator are necessarily economic in nature. The Court of Justice has therefore confirmed that activities that normally fall under State responsibility in the exercise of its official powers as a public authority are not economic in nature (131). Such activities include, in particular, security, air traffic control, police and customs (132). |
| --- | --- |

(364)

As highlighted by points 34 and 35 of the aviation guidelines, not all the activities of an airport operator are necessarily economic in nature. The Court of Justice has therefore confirmed that activities that normally fall under State responsibility in the exercise of its official powers as a public authority are not economic in nature (131). Such activities include, in particular, security, air traffic control, police and customs (132).

131

132

| (365) | The Commission takes the view that investments and major repairs involving assets associated with air navigation (relating to the control tower, for example), aircraft firefighting, security (defined as combating acts of unlawful interference), police and customs may be non-economic in nature. Given that, in the present case, air navigation, aircraft firefighting, security, police and customs services are not organised according to a market logic, the Commission considers that the investments and major repairs involving assets associated with these services are not economic in nature. In particular, the fencing of the part of the airport site that is accessed through police checkpoints and the part of the site where the aircraft are located may be regarded as a non-economic activity insofar as it concerns security. |
| --- | --- |

(365)

The Commission takes the view that investments and major repairs involving assets associated with air navigation (relating to the control tower, for example), aircraft firefighting, security (defined as combating acts of unlawful interference), police and customs may be non-economic in nature. Given that, in the present case, air navigation, aircraft firefighting, security, police and customs services are not organised according to a market logic, the Commission considers that the investments and major repairs involving assets associated with these services are not economic in nature. In particular, the fencing of the part of the airport site that is accessed through police checkpoints and the part of the site where the aircraft are located may be regarded as a non-economic activity insofar as it concerns security.

| (366) | The Commission also considers as non-economic those costs associated with investments in and maintenance of buildings and equipment used for both economic activities and non-economic activities, in a proportion corresponding to their use for a non-economic activity. In particular, 7 % of the cost of investments made in the new terminal may be regarded as non-economic in nature, because 7 % of the terminal surface area is occupied by police and customs services, passenger and baggage search officials, and officials from the Walloon Public Service responsible for site safety. |
| --- | --- |

(366)

The Commission also considers as non-economic those costs associated with investments in and maintenance of buildings and equipment used for both economic activities and non-economic activities, in a proportion corresponding to their use for a non-economic activity. In particular, 7 % of the cost of investments made in the new terminal may be regarded as non-economic in nature, because 7 % of the terminal surface area is occupied by police and customs services, passenger and baggage search officials, and officials from the Walloon Public Service responsible for site safety.

| (367) | However, the Commission regards as economic those investments and major repairs involving the Category III ILS (133) and runway lighting. These costs are not associated with a public policy remit, but are inherent in the commercial operation of the infrastructure, which involves placing this infrastructure at the disposal of airlines under satisfactory safety conditions. In particular, ensuring ground traffic safety (including during landings and take-offs) forms an integral part of the airport's commercial operation and is therefore economic in nature. In the recent Commission decision on Marseille airport (134), operational safety was also excluded from the scope of ‘non-economic activities’. |
| --- | --- |

(367)

However, the Commission regards as economic those investments and major repairs involving the Category III ILS (133) and runway lighting. These costs are not associated with a public policy remit, but are inherent in the commercial operation of the infrastructure, which involves placing this infrastructure at the disposal of airlines under satisfactory safety conditions. In particular, ensuring ground traffic safety (including during landings and take-offs) forms an integral part of the airport's commercial operation and is therefore economic in nature. In the recent Commission decision on Marseille airport (134), operational safety was also excluded from the scope of ‘non-economic activities’.

133

134

| (368) | The Commission also takes the view that investments in fire detection in passenger car parks are economic in nature. These costs are not associated with a public policy remit, but are inherent in the commercial operation of the passenger car park. |
| --- | --- |

(368)

The Commission also takes the view that investments in fire detection in passenger car parks are economic in nature. These costs are not associated with a public policy remit, but are inherent in the commercial operation of the passenger car park.

| (369) | Moreover, as highlighted by point 36 of the aviation guidelines, the Commission must check that the funding of non-economic activities is strictly limited to compensating the costs to which they give rise and may not be used for economic activities (135). Otherwise their funding cannot escape the State aid rules. |
| --- | --- |

(369)

Moreover, as highlighted by point 36 of the aviation guidelines, the Commission must check that the funding of non-economic activities is strictly limited to compensating the costs to which they give rise and may not be used for economic activities (135). Otherwise their funding cannot escape the State aid rules.

135

| (370) | SOWAER is directly responsible for the investments and major repairs. These costs are not therefore financed through aid paid to BSCA, which the latter could use for economic activities. |
| --- | --- |

(370)

SOWAER is directly responsible for the investments and major repairs. These costs are not therefore financed through aid paid to BSCA, which the latter could use for economic activities.

| (371) | Lastly, as highlighted by point 37 of the aviation guidelines, the Commission must check that the funding of non-economic activities does not lead to undue discrimination between airports. Otherwise their funding cannot escape the State aid rules. |
| --- | --- |

(371)

Lastly, as highlighted by point 37 of the aviation guidelines, the Commission must check that the funding of non-economic activities does not lead to undue discrimination between airports. Otherwise their funding cannot escape the State aid rules.

| (372) | As clarified by Belgium, SOWAER carries out the investments and major repairs without discriminating between the airports for which it is responsible, namely the airports in the Walloon region. |
| --- | --- |

(372)

As clarified by Belgium, SOWAER carries out the investments and major repairs without discriminating between the airports for which it is responsible, namely the airports in the Walloon region.

| (373) | As highlighted by recital 26 of this decision, the Belgian regions have been given the necessary powers to equip and operate public airports situated within their territory, except for Brussels National Airport. Given this legal framework, the Commission takes the view that the relevant level for assessing the existence of discrimination in terms of the financing of the investments and services provided by SOWAER is the region, and not the Federal State. As SOWAER carries out the investments and major repairs without discriminating between the two main Walloon airports (Liège and Charleroi), the Commission concludes that there is no undue discrimination between the airports. |
| --- | --- |

(373)

As highlighted by recital 26 of this decision, the Belgian regions have been given the necessary powers to equip and operate public airports situated within their territory, except for Brussels National Airport. Given this legal framework, the Commission takes the view that the relevant level for assessing the existence of discrimination in terms of the financing of the investments and services provided by SOWAER is the region, and not the Federal State. As SOWAER carries out the investments and major repairs without discriminating between the two main Walloon airports (Liège and Charleroi), the Commission concludes that there is no undue discrimination between the airports.

| (374) | The financing of the non-economic activities described in recital 365 cannot therefore be qualified as State aid and is consequently excluded from the subsequent analysis. |
| --- | --- |

(374)

The financing of the non-economic activities described in recital 365 cannot therefore be qualified as State aid and is consequently excluded from the subsequent analysis.

6.1.1.2.   
  Subsidy paid by the Region for certain services associated with the airport activities

Subsidy paid by the Region for certain services associated with the airport activities

| (375) | As indicated in Section 5.1.1.1(c)(i), Belgium considers that the tasks for which the Region pays a subsidy fall within the public policy remit and do not therefore constitute an economic activity. |
| --- | --- |

(375)

As indicated in Section 5.1.1.1(c)(i), Belgium considers that the tasks for which the Region pays a subsidy fall within the public policy remit and do not therefore constitute an economic activity.

| (376) | In order to determine whether the subsidy relates to non-economic activities and cannot therefore be qualified as State aid, the same examination as described in Section 6.1.1.1(b) must be made. |
| --- | --- |

(376)

In order to determine whether the subsidy relates to non-economic activities and cannot therefore be qualified as State aid, the same examination as described in Section 6.1.1.1(b) must be made.

(a)   Fire protection and security

| (377) | As indicated in recital 365, the Commission takes the view that, in the present case, the activities associated with aircraft fire protection and security (136) do not constitute economic activities. |
| --- | --- |

(377)

As indicated in recital 365, the Commission takes the view that, in the present case, the activities associated with aircraft fire protection and security (136) do not constitute economic activities.

136

(i)   Application of point 36 of the aviation guidelines

| (378) | As highlighted by point 36 of the aviation guidelines, even where an activity is regarded as non-economic, the Commission must check that the funding of non-economic activities is strictly limited to compensating the costs to which they give rise and may not be used for economic activities (137). Otherwise their funding cannot escape the State aid rules. |
| --- | --- |

(378)

As highlighted by point 36 of the aviation guidelines, even where an activity is regarded as non-economic, the Commission must check that the funding of non-economic activities is strictly limited to compensating the costs to which they give rise and may not be used for economic activities (137). Otherwise their funding cannot escape the State aid rules.

137

1.   Fire protection

| (379) | As regards fire protection, the Commission indicates that, under Article 25 of the schedule of conditions annexed to the 1991 Region/BSCA agreement, in order for the Region to fund the fire and maintenance services, BSCA must keep a separate operating account that may at any time be analysed and checked by the concession authority. |
| --- | --- |

(379)

As regards fire protection, the Commission indicates that, under Article 25 of the schedule of conditions annexed to the 1991 Region/BSCA agreement, in order for the Region to fund the fire and maintenance services, BSCA must keep a separate operating account that may at any time be analysed and checked by the concession authority.

| (380) | Moreover, under Article 3.2.3 of the Region/BSCA agreement, as amended by Amendment No 3 of 29 March 2002, the costs inherent in the fire and maintenance services are reimbursed in 12 instalments. The twelfth instalment is paid after the Minister receives and approves a report, based on BSCA's annual accounts, providing justification for the costs incurred and presented in the same format as required for the provisional budget, i.e. based on the headings defined by Article 25 of the schedule of conditions. |
| --- | --- |

(380)

Moreover, under Article 3.2.3 of the Region/BSCA agreement, as amended by Amendment No 3 of 29 March 2002, the costs inherent in the fire and maintenance services are reimbursed in 12 instalments. The twelfth instalment is paid after the Minister receives and approves a report, based on BSCA's annual accounts, providing justification for the costs incurred and presented in the same format as required for the provisional budget, i.e. based on the headings defined by Article 25 of the schedule of conditions.

| (381) | Lastly, for the period after 10 March 2006, Article 25.7 of the schedule of conditions, introduced by Amendment No 5 of 10 March 2006, provides that the amount of the compensation for the fire protection and ground traffic and airport site safety services may not exceed the actual costs incurred by BSCA and that any overcompensation of the costs will result in budgetary compensation through the budget entry for the following year. |
| --- | --- |

(381)

Lastly, for the period after 10 March 2006, Article 25.7 of the schedule of conditions, introduced by Amendment No 5 of 10 March 2006, provides that the amount of the compensation for the fire protection and ground traffic and airport site safety services may not exceed the actual costs incurred by BSCA and that any overcompensation of the costs will result in budgetary compensation through the budget entry for the following year.

| (382) | The Commission takes the view that these provisions are sufficient to conclude that, since Amendment No 3 of 2002 to the Region/BSCA agreement, the compensation paid by the Region for the fire protection costs has been proportionate and has not been used to subsidise economic activities. |
| --- | --- |

(382)

The Commission takes the view that these provisions are sufficient to conclude that, since Amendment No 3 of 2002 to the Region/BSCA agreement, the compensation paid by the Region for the fire protection costs has been proportionate and has not been used to subsidise economic activities.

2.   Security

| (383) | Security was added to the activities for which BSCA receives compensation through Amendment No 6 of 15 January 2008. The security tasks are defined as ‘the combination of measures and human and natural resources intended to safeguard civil aviation against acts of unlawful interference’ (138). The security services include ‘screening, remote surveillance, security rounds and patrols, access control and issue of visitor badges’ (139). |
| --- | --- |

(383)

Security was added to the activities for which BSCA receives compensation through Amendment No 6 of 15 January 2008. The security tasks are defined as ‘the combination of measures and human and natural resources intended to safeguard civil aviation against acts of unlawful interference’ (138). The security services include ‘screening, remote surveillance, security rounds and patrols, access control and issue of visitor badges’ (139).

138

139

| (384) | Article 25.7 of the schedule of conditions, as amended by Amendment No 6 of 15 January 2008, provides that ‘the amount of the compensation intended to cover the costs incurred in providing the services may not exceed the actual costs incurred by the concession-holder in this context, after deducting any fees collected from users to cover these services. Any overcompensation of these costs will result in budgetary compensation through the budget entry for the following year’. |
| --- | --- |

(384)

Article 25.7 of the schedule of conditions, as amended by Amendment No 6 of 15 January 2008, provides that ‘the amount of the compensation intended to cover the costs incurred in providing the services may not exceed the actual costs incurred by the concession-holder in this context, after deducting any fees collected from users to cover these services. Any overcompensation of these costs will result in budgetary compensation through the budget entry for the following year’.

| (385) | The Commission takes the view that these provisions are sufficient to conclude that the compensation paid for the security costs has been proportionate and has not been used to subsidise economic activities. |
| --- | --- |

(385)

The Commission takes the view that these provisions are sufficient to conclude that the compensation paid for the security costs has been proportionate and has not been used to subsidise economic activities.

(ii)   Application of point 37 of the aviation guidelines

| (386) | As highlighted by point 37 of the aviation guidelines, the Commission must check that the funding of non-economic activities does not lead to undue discrimination between airports. Otherwise their funding cannot escape the State aid rules. |
| --- | --- |

(386)

As highlighted by point 37 of the aviation guidelines, the Commission must check that the funding of non-economic activities does not lead to undue discrimination between airports. Otherwise their funding cannot escape the State aid rules.

| (387) | As clarified by Belgium, the non-economic activities of the two main Walloon airports (Liège and Charleroi) are funded in a non-discriminatory manner by the Region. |
| --- | --- |

(387)

As clarified by Belgium, the non-economic activities of the two main Walloon airports (Liège and Charleroi) are funded in a non-discriminatory manner by the Region.

| (388) | As highlighted by recital 26 of this decision, the Belgian regions have been given the necessary powers to equip and operate public airports situated within their territory, except for Brussels National Airport. Given this legal framework, the Commission takes the view that the relevant level for assessing the existence of discrimination in terms of the financing of certain non-economic services associated with the airport activities is the region, and not the Federal State. As the non-economic activities of the two main Walloon airports (Liège and Charleroi) are funded in a non-discriminatory manner by the Region, the Commission concludes that there is no undue discrimination between the airports. |
| --- | --- |

(388)

As highlighted by recital 26 of this decision, the Belgian regions have been given the necessary powers to equip and operate public airports situated within their territory, except for Brussels National Airport. Given this legal framework, the Commission takes the view that the relevant level for assessing the existence of discrimination in terms of the financing of certain non-economic services associated with the airport activities is the region, and not the Federal State. As the non-economic activities of the two main Walloon airports (Liège and Charleroi) are funded in a non-discriminatory manner by the Region, the Commission concludes that there is no undue discrimination between the airports.

| (389) | The compensation paid for BSCA's activities associated with fire protection and security cannot therefore be qualified as State aid and is consequently excluded from the subsequent analysis. |
| --- | --- |

(389)

The compensation paid for BSCA's activities associated with fire protection and security cannot therefore be qualified as State aid and is consequently excluded from the subsequent analysis.

(b)   Maintenance/ground traffic safety

| (390) | In this section, the Commission examines whether the following services may escape the applicable State aid rules due to their non-economic nature:






  — | the ‘maintenance services’, as defined by Articles 12 and 19 of the schedule of conditions annexed to the Region/BSCA agreement; |
| --- | --- | --- |

(390)

In this section, the Commission examines whether the following services may escape the applicable State aid rules due to their non-economic nature:

—

the ‘maintenance services’, as defined by Articles 12 and 19 of the schedule of conditions annexed to the Region/BSCA agreement;

| — | the ‘ground traffic safety services’, as defined by Article 25 of the schedule of conditions amended by Amendment No 5 of 10 March 2006. |
| --- | --- |

—

the ‘ground traffic safety services’, as defined by Article 25 of the schedule of conditions amended by Amendment No 5 of 10 March 2006.

| (391) | As indicated in recital 71, the maintenance service is defined by Articles 12 and 19 of the schedule of conditions as ‘technical maintenance services for buildings, runways, surrounding areas, vehicle fleet, etc.’ (140), and as ‘maintenance of land, buildings and building facilities, and equipment forming part of the concession or placed at the disposal of the concession, such that they are always fit for their intended purpose’ (141). |
| --- | --- |

(391)

As indicated in recital 71, the maintenance service is defined by Articles 12 and 19 of the schedule of conditions as ‘technical maintenance services for buildings, runways, surrounding areas, vehicle fleet, etc.’ (140), and as ‘maintenance of land, buildings and building facilities, and equipment forming part of the concession or placed at the disposal of the concession, such that they are always fit for their intended purpose’ (141).

140

141

| (392) | As indicated in recitals 73 and 74, Amendment No 5 of 10 March 2006 amended Article 3.2.2 of the Region/BSCA agreement and Article 25 of the schedule of conditions. As a result of these amendments, the Region pays compensation to BSCA for the costs of the fire protection and ground traffic and airport site safety services. Article 25 of the schedule of conditions, as amended, provides that ‘the ground traffic and airport site safety services include routine maintenance of the airport site, technical maintenance services for buildings, runways, surrounding areas and vehicle fleet, minor surfacing work, routine maintenance and repair of the runway and accesses, operational maintenance and servicing of the general lighting and runway lighting, mowing services, rubber removal from the runway and its markings, snow clearance and any other services ensuring the safety of ground traffic, airport site and infrastructures, except for commercial areas of the airport zone’. |
| --- | --- |

(392)

As indicated in recitals 73 and 74, Amendment No 5 of 10 March 2006 amended Article 3.2.2 of the Region/BSCA agreement and Article 25 of the schedule of conditions. As a result of these amendments, the Region pays compensation to BSCA for the costs of the fire protection and ground traffic and airport site safety services. Article 25 of the schedule of conditions, as amended, provides that ‘the ground traffic and airport site safety services include routine maintenance of the airport site, technical maintenance services for buildings, runways, surrounding areas and vehicle fleet, minor surfacing work, routine maintenance and repair of the runway and accesses, operational maintenance and servicing of the general lighting and runway lighting, mowing services, rubber removal from the runway and its markings, snow clearance and any other services ensuring the safety of ground traffic, airport site and infrastructures, except for commercial areas of the airport zone’.

| (393) | The Commission points out that the definition of ‘ground traffic and airport site safety services’, for which BSCA receives compensation from 10 March 2006, substantially overlaps with the definition of ‘maintenance services’, for which BSCA received compensation before 10 March 2006. In order to determine whether these services constitute economic services, it will examine these together. |
| --- | --- |

(393)

The Commission points out that the definition of ‘ground traffic and airport site safety services’, for which BSCA receives compensation from 10 March 2006, substantially overlaps with the definition of ‘maintenance services’, for which BSCA received compensation before 10 March 2006. In order to determine whether these services constitute economic services, it will examine these together.

| (394) | The Commission takes the view that these services, whether they involve routine maintenance of the airport site, maintenance of buildings, runways, surrounding areas and vehicle fleet, minor surfacing work, routine maintenance and repair of the runway and accesses, operational maintenance and servicing of the general lighting and runway lighting, mowing services, rubber removal from the runway and its markings, snow clearance or any other services ensuring the safety of ground traffic, airport site and infrastructures, do not fall within the public policy remit. These services differ in particular from the security services. They are inherent in the commercial operation of the airport, which involves ensuring that the airport site, including its runways, is sufficiently well-maintained to enable the landing and take-off of aircraft under satisfactory safety conditions. No public policy remit is associated with this type of service. |
| --- | --- |

(394)

The Commission takes the view that these services, whether they involve routine maintenance of the airport site, maintenance of buildings, runways, surrounding areas and vehicle fleet, minor surfacing work, routine maintenance and repair of the runway and accesses, operational maintenance and servicing of the general lighting and runway lighting, mowing services, rubber removal from the runway and its markings, snow clearance or any other services ensuring the safety of ground traffic, airport site and infrastructures, do not fall within the public policy remit. These services differ in particular from the security services. They are inherent in the commercial operation of the airport, which involves ensuring that the airport site, including its runways, is sufficiently well-maintained to enable the landing and take-off of aircraft under satisfactory safety conditions. No public policy remit is associated with this type of service.

| (395) | According to Belgium (see recital 237), when the Commission made its decision on 23 July 2008 on Leipzig/Halle airport, it recognised that operational safety services were non-economic activities (142). It is clear from the list of operational safety infrastructures provided by the German authorities that these infrastructures are essential for ground traffic safety, i.e.: uninterruptible power supply for aprons, transformer stations, runway lighting, apron lighting, etc. According to Belgium, this position taken by the Commission was confirmed by the General Court in the judgment delivered on 24 March 2011 (143) following an action for annulment brought against the aforementioned Commission decision. |
| --- | --- |

(395)

According to Belgium (see recital 237), when the Commission made its decision on 23 July 2008 on Leipzig/Halle airport, it recognised that operational safety services were non-economic activities (142). It is clear from the list of operational safety infrastructures provided by the German authorities that these infrastructures are essential for ground traffic safety, i.e.: uninterruptible power supply for aprons, transformer stations, runway lighting, apron lighting, etc. According to Belgium, this position taken by the Commission was confirmed by the General Court in the judgment delivered on 24 March 2011 (143) following an action for annulment brought against the aforementioned Commission decision.

142

143

| (396) | The Commission disputes that it can be concluded from recitals 182 and 183 of the decision on Leipzig/Halle airport that the Commission has in the past taken the view that tasks comparable to maintenance and traffic safety, as defined in the Region/BSCA agreement, fall within the public policy remit, for the following reasons. |
| --- | --- |

(396)

The Commission disputes that it can be concluded from recitals 182 and 183 of the decision on Leipzig/Halle airport that the Commission has in the past taken the view that tasks comparable to maintenance and traffic safety, as defined in the Region/BSCA agreement, fall within the public policy remit, for the following reasons.

| (397) | Firstly, the maintenance and traffic safety costs defined in the Region/BSCA agreement are much broader than the operational safety investment costs referred to in the decision on Leipzig/Halle airport. The latter consist of the uninterruptible power supply for the aprons, transformer station, high voltage cables and runway lighting. The maintenance and traffic safety costs defined in the Region/BSCA agreement ‘include routine maintenance of the airport site, technical maintenance services for buildings, runways, surrounding areas and vehicle fleet, minor surfacing work, routine maintenance and repair of the runway and accesses, operational maintenance and servicing of the general lighting and runway lighting, mowing services, rubber removal from the runway and its markings, snow clearance and any other services ensuring the safety of ground traffic, airport site and infrastructures, except for commercial areas of the airport zone’. |
| --- | --- |

(397)

Firstly, the maintenance and traffic safety costs defined in the Region/BSCA agreement are much broader than the operational safety investment costs referred to in the decision on Leipzig/Halle airport. The latter consist of the uninterruptible power supply for the aprons, transformer station, high voltage cables and runway lighting. The maintenance and traffic safety costs defined in the Region/BSCA agreement ‘include routine maintenance of the airport site, technical maintenance services for buildings, runways, surrounding areas and vehicle fleet, minor surfacing work, routine maintenance and repair of the runway and accesses, operational maintenance and servicing of the general lighting and runway lighting, mowing services, rubber removal from the runway and its markings, snow clearance and any other services ensuring the safety of ground traffic, airport site and infrastructures, except for commercial areas of the airport zone’.

| (398) | Secondly, the Commission points out that, contrary to Belgium's argument, the Commission did not conclude that the operational safety tasks referred to in the Leipzig/Halle decision constitute tasks falling within the public policy remit. Recital 182 of that decision states that ‘the Commission can conclude that in the present case certain costs fall within the public policy remit’ (emphasis added). In recital 183 of the same decision, the Commission considers that ‘to the extent that they fall within the public policy remit’, the measures may not amount to State aid (emphasis added). It indicates that ‘in the present case independently [of] whether the Commission was to accept the approach advanced by the German authorities that none of the costs should be considered as State aid, the final assessment of the measure would not change’ (emphasis added). As a result, in those recitals the Commission neither confirmed nor contradicted Germany's position that certain tasks, including operational safety tasks, fell within the public policy remit, but instead indicated that it did not need to take a position, given that, assuming that the measure did constitute aid, this would be authorised. |
| --- | --- |

(398)

Secondly, the Commission points out that, contrary to Belgium's argument, the Commission did not conclude that the operational safety tasks referred to in the Leipzig/Halle decision constitute tasks falling within the public policy remit. Recital 182 of that decision states that ‘the Commission can conclude that in the present case certain costs fall within the public policy remit’ (emphasis added). In recital 183 of the same decision, the Commission considers that ‘to the extent that they fall within the public policy remit’, the measures may not amount to State aid (emphasis added). It indicates that ‘in the present case independently [of] whether the Commission was to accept the approach advanced by the German authorities that none of the costs should be considered as State aid, the final assessment of the measure would not change’ (emphasis added). As a result, in those recitals the Commission neither confirmed nor contradicted Germany's position that certain tasks, including operational safety tasks, fell within the public policy remit, but instead indicated that it did not need to take a position, given that, assuming that the measure did constitute aid, this would be authorised.

can

certain

to the extent that

independently [of] whether the Commission was to accept the approach advanced by the German authorities that none of the costs should be considered as State aid

| (399) | Thirdly, the Commission points out that, in the General Court's judgment on the Commission decision on Leipzig/Halle airport, contrary to Belgium's argument, the Court did not confirm this alleged Commission position in paragraph 225 of its judgment. The Court in fact reproduced recitals 182 and 183 of the Commission decision in order to recall the latter's position and concluded that the Commission had considered that it did not have to reach a definitive conclusion on this question (namely if it were to accept the German authorities' argument that none of the costs should be considered as State aid). |
| --- | --- |

(399)

Thirdly, the Commission points out that, in the General Court's judgment on the Commission decision on Leipzig/Halle airport, contrary to Belgium's argument, the Court did not confirm this alleged Commission position in paragraph 225 of its judgment. The Court in fact reproduced recitals 182 and 183 of the Commission decision in order to recall the latter's position and concluded that the Commission had considered that it did not have to reach a definitive conclusion on this question (namely if it were to accept the German authorities' argument that none of the costs should be considered as State aid).

| (400) | The Commission therefore concludes that the ‘maintenance services’, as defined by Articles 12 and 19 of the schedule of conditions annexed to the Region/BSCA agreement, and the ‘ground traffic safety services’, as defined by Article 25 of the schedule of conditions amended by Amendment No 5 of 10 March 2006, constitute economic services. Their funding does not therefore escape the applicable State aid rules. |
| --- | --- |

(400)

The Commission therefore concludes that the ‘maintenance services’, as defined by Articles 12 and 19 of the schedule of conditions annexed to the Region/BSCA agreement, and the ‘ground traffic safety services’, as defined by Article 25 of the schedule of conditions amended by Amendment No 5 of 10 March 2006, constitute economic services. Their funding does not therefore escape the applicable State aid rules.

(c)   Flight tracking and recording, provisional flight planning and marshalling

| (401) | In this section, the Commission examines whether the following services, the provision of which was entrusted to BSCA and for which BSCA receives compensation under Amendment No 6 of 15 January 2008, may escape the applicable State aid rules due to their non-economic nature:






  — | flight tracking and recording (144) and flight planning (145), |
| --- | --- | --- |

(401)

In this section, the Commission examines whether the following services, the provision of which was entrusted to BSCA and for which BSCA receives compensation under Amendment No 6 of 15 January 2008, may escape the applicable State aid rules due to their non-economic nature:

—

flight tracking and recording (144) and flight planning (145),

144

145

| — | marshalling (146). |
| --- | --- |

—

marshalling (146).

146

| (402) | According to Belgium (see recital 240), flight tracking and recording, provisional flight planning and marshalling services are essential parts of civil aviation safety and therefore fall within the public policy remit, given that they are fundamental components in the safety of an airport. |
| --- | --- |

(402)

According to Belgium (see recital 240), flight tracking and recording, provisional flight planning and marshalling services are essential parts of civil aviation safety and therefore fall within the public policy remit, given that they are fundamental components in the safety of an airport.

| (403) | The Commission takes the view that the services covered by this compensation are activities inseparable from the economic activity of the airport operator BSCA. These services cannot be included within the security services intended to combat acts of unlawful interference or within any activity falling within the public policy remit. |
| --- | --- |

(403)

The Commission takes the view that the services covered by this compensation are activities inseparable from the economic activity of the airport operator BSCA. These services cannot be included within the security services intended to combat acts of unlawful interference or within any activity falling within the public policy remit.

| (404) | The Commission therefore concludes that flight tracking and recording, flight planning and marshalling constitute economic services. Their funding does not therefore escape the applicable State aid rules. |
| --- | --- |

(404)

The Commission therefore concludes that flight tracking and recording, flight planning and marshalling constitute economic services. Their funding does not therefore escape the applicable State aid rules.

6.1.1.3.   
  Capital increase subscribed by SOWAER

Capital increase subscribed by SOWAER

| (405) | As the capital increase, which was covered by the formal investigation procedure, was subscribed by SOWAER to the benefit of BSCA in 2002, i.e. after the ADP judgment (147), it falls under the Commission's control of State aid (see recital 346). |
| --- | --- |

(405)

As the capital increase, which was covered by the formal investigation procedure, was subscribed by SOWAER to the benefit of BSCA in 2002, i.e. after the ADP judgment (147), it falls under the Commission's control of State aid (see recital 346).

ADP

147

6.1.2.   Selective advantage

Selective advantage

| (406) | In order to determine whether a State measure constitutes aid, it is necessary to establish whether the recipient undertaking receives an economic advantage that it would not have obtained under normal market conditions. The presence of an economic advantage can be ruled out where the measures in question constitute economic operations carried out by public bodies or undertakings under normal market conditions (148). In this case it must be determined whether, in similar circumstances, a private operator, having regard to the foreseeability of obtaining a return and leaving aside all social, regional policy and sectoral considerations, would have taken part in the same operations as the entity granting the measure (hereinafter ‘the market economy operator test’). The presence of an economic advantage can also be ruled out where the measures in question constitute financial compensation granted to the undertakings concerned in order to enable them to operate a service of general economic interest, provided that such compensation satisfies all the conditions set out in the Altmark judgment (149). The Commission will now proceed to analyse the measures concerned in turn, in the light of the conditions of the Altmark judgment and the market economy operator test. |
| --- | --- |

(406)

In order to determine whether a State measure constitutes aid, it is necessary to establish whether the recipient undertaking receives an economic advantage that it would not have obtained under normal market conditions. The presence of an economic advantage can be ruled out where the measures in question constitute economic operations carried out by public bodies or undertakings under normal market conditions (148). In this case it must be determined whether, in similar circumstances, a private operator, having regard to the foreseeability of obtaining a return and leaving aside all social, regional policy and sectoral considerations, would have taken part in the same operations as the entity granting the measure (hereinafter ‘the market economy operator test’). The presence of an economic advantage can also be ruled out where the measures in question constitute financial compensation granted to the undertakings concerned in order to enable them to operate a service of general economic interest, provided that such compensation satisfies all the conditions set out in the Altmark judgment (149). The Commission will now proceed to analyse the measures concerned in turn, in the light of the conditions of the Altmark judgment and the market economy operator test.

148

Altmark

149

Altmark

6.1.2.1.   
  Application of the Altmark judgment conditions

Application of the Altmark

| (407) | It is firstly necessary to examine Belgium's argument, set out in Section 5.1.1.1(c)(ii), according to which the subsidy for certain services associated with the airport activities — assuming that some of these services are economic in nature — allegedly does not constitute an advantage for BSCA under the Altmark judgment (150). |
| --- | --- |

(407)

It is firstly necessary to examine Belgium's argument, set out in Section 5.1.1.1(c)(ii), according to which the subsidy for certain services associated with the airport activities — assuming that some of these services are economic in nature — allegedly does not constitute an advantage for BSCA under the Altmark judgment (150).

Altmark

150

| (408) | As established in Section 6.1.1, the Commission considers that some of the services for which the subsidy is paid are not economic in nature (for example, firefighting and security services) and will exclude from its analysis the part of the subsidy compensating for the costs of those services. |
| --- | --- |

(408)

As established in Section 6.1.1, the Commission considers that some of the services for which the subsidy is paid are not economic in nature (for example, firefighting and security services) and will exclude from its analysis the part of the subsidy compensating for the costs of those services.

| (409) | However, the Commission considers that other services for which the subsidy is paid are economic in nature, such as maintenance and repair of infrastructures operated commercially, and even marshalling. |
| --- | --- |

(409)

However, the Commission considers that other services for which the subsidy is paid are economic in nature, such as maintenance and repair of infrastructures operated commercially, and even marshalling.

| (410) | The Commission takes the view that Belgium is committing a manifest error of assessment in qualifying these services as services of general economic interest. As recalled by paragraph 47 of the Communication from the Commission on the application of the European Union State aid rules to compensation granted for the provision of services of general economic interest (151), generally speaking, a ‘particular public service task’ implies the supply of services which, if it were considering its own commercial interest, an undertaking would not assume or would not assume to the same extent or under the same conditions. In paragraph 50 of said Communication, the Commission also considers that the services to be classified as services of general economic interest must be addressed to citizens or be in the interest of society as a whole. In the present case, the economic services identified are not supplied in the interest of citizens, but only to enable BSCA to provide an airport service. They are indissociable from the economic activity of operating the airport. |
| --- | --- |

(410)

The Commission takes the view that Belgium is committing a manifest error of assessment in qualifying these services as services of general economic interest. As recalled by paragraph 47 of the Communication from the Commission on the application of the European Union State aid rules to compensation granted for the provision of services of general economic interest (151), generally speaking, a ‘particular public service task’ implies the supply of services which, if it were considering its own commercial interest, an undertaking would not assume or would not assume to the same extent or under the same conditions. In paragraph 50 of said Communication, the Commission also considers that the services to be classified as services of general economic interest must be addressed to citizens or be in the interest of society as a whole. In the present case, the economic services identified are not supplied in the interest of citizens, but only to enable BSCA to provide an airport service. They are indissociable from the economic activity of operating the airport.

151

| (411) | Furthermore, BSCA was not chosen in a procedure meeting the requirements of the fourth Altmark condition. |
| --- | --- |

(411)

Furthermore, BSCA was not chosen in a procedure meeting the requirements of the fourth Altmark condition.

Altmark

| (412) | In addition, Belgium has not provided any evidence that the amount of the subsidy was determined on the basis of an analysis of the costs that a typical undertaking, well run and adequately equipped, would have incurred in order to meet the necessary public service requirements. Belgium's arguments are actually insufficient for the following reasons:






  — | Belgium indicates that the ratios mentioned in the Communication referred to above in recital 410 demonstrate BSCA's efficient management (see recital 253), without, however, indicating the nature and value of those ratios. |
| --- | --- | --- |

(412)

In addition, Belgium has not provided any evidence that the amount of the subsidy was determined on the basis of an analysis of the costs that a typical undertaking, well run and adequately equipped, would have incurred in order to meet the necessary public service requirements. Belgium's arguments are actually insufficient for the following reasons:

—

Belgium indicates that the ratios mentioned in the Communication referred to above in recital 410 demonstrate BSCA's efficient management (see recital 253), without, however, indicating the nature and value of those ratios.

| — | Belgium adds that this sound management enabled private investors to be attracted in 2009 during BSCA's partial privatisation. However, the Commission stresses that, although investors did decide to participate in BSCA's capital (while obtaining a right of veto over important decisions), this may have been due to the existence of the aid, allowing them to expect that BSCA would attract a significant volume of traffic and therefore generate high profits, rather than due to sound management. It can also be pointed out in this regard that private investors may take holdings in mismanaged companies that they hope to turn around once they have or share control of the company in question, as is the case with BSCA's private investor who has obtained a right of veto over important decisions. |
| --- | --- |

—

Belgium adds that this sound management enabled private investors to be attracted in 2009 during BSCA's partial privatisation. However, the Commission stresses that, although investors did decide to participate in BSCA's capital (while obtaining a right of veto over important decisions), this may have been due to the existence of the aid, allowing them to expect that BSCA would attract a significant volume of traffic and therefore generate high profits, rather than due to sound management. It can also be pointed out in this regard that private investors may take holdings in mismanaged companies that they hope to turn around once they have or share control of the company in question, as is the case with BSCA's private investor who has obtained a right of veto over important decisions.

| — | It also cannot be concluded, as Belgium has done, that the airport is well run simply due to the fact that the turnover or traffic at Charleroi airport is on the increase (see recital 254). This increase in turnover and traffic may stem from the aid, which enables BSCA to offer very favourable conditions to airlines and thus attract traffic. |
| --- | --- |

—

It also cannot be concluded, as Belgium has done, that the airport is well run simply due to the fact that the turnover or traffic at Charleroi airport is on the increase (see recital 254). This increase in turnover and traffic may stem from the aid, which enables BSCA to offer very favourable conditions to airlines and thus attract traffic.

| — | Lastly, Belgium's argument that ‘it is clear from the financing mechanism put in place that, by definition, the compensation paid to BSCA is less than the market price of all the services entrusted to it, insofar as this compensation was capped in 2006 for the fire and ground traffic and airport site safety services and in 2010 for the security services’ (see recital 255), also does not prove that BSCA is efficiently managed, but only that there may be no overcompensation. |
| --- | --- |

—

Lastly, Belgium's argument that ‘it is clear from the financing mechanism put in place that, by definition, the compensation paid to BSCA is less than the market price of all the services entrusted to it, insofar as this compensation was capped in 2006 for the fire and ground traffic and airport site safety services and in 2010 for the security services’ (see recital 255), also does not prove that BSCA is efficiently managed, but only that there may be no overcompensation.

| (413) | In conclusion, at least the first and fourth conditions of the Altmark judgment are not satisfied. The Commission cannot therefore rule out, under the Altmark judgment, that the Region's subsidy for the services associated with the airport activities constitutes an advantage. |
| --- | --- |

(413)

In conclusion, at least the first and fourth conditions of the Altmark judgment are not satisfied. The Commission cannot therefore rule out, under the Altmark judgment, that the Region's subsidy for the services associated with the airport activities constitutes an advantage.

Altmark

Altmark

6.1.2.2.   
  Application of the market economy operator test

Application of the market economy operator test

| (414) | As regards identifying the entity granting the measure, the Commission considers that the actions of (i) the Region, as owner of the airport zone land, on the one hand, and (ii) SOWAER, a company under the exclusive control of the Region, as concession-holder of the airport zone land, owner of the infrastructures built on the airport zone land, and holder of the tasks delegated by the Region, on the other hand, must be assessed together where they involve the same activity and the same airport. Under these circumstances, SOWAER appears to be an intermediary of the Region in this context. Consequently, in order to determine whether or not the measures defined in Section 3.1 give BSCA an economic advantage, the Commission will consider that the entity granting the measure is the group consisting of the Region and SOWAER (hereinafter ‘Region-SOWAER’). |
| --- | --- |

(414)

As regards identifying the entity granting the measure, the Commission considers that the actions of (i) the Region, as owner of the airport zone land, on the one hand, and (ii) SOWAER, a company under the exclusive control of the Region, as concession-holder of the airport zone land, owner of the infrastructures built on the airport zone land, and holder of the tasks delegated by the Region, on the other hand, must be assessed together where they involve the same activity and the same airport. Under these circumstances, SOWAER appears to be an intermediary of the Region in this context. Consequently, in order to determine whether or not the measures defined in Section 3.1 give BSCA an economic advantage, the Commission will consider that the entity granting the measure is the group consisting of the Region and SOWAER (hereinafter ‘Region-SOWAER’).

| (415) | As a result, the Commission considers that it must examine together the commitments of the Region-SOWAER where they alter the economics of the concession (provision of the infrastructures, including development of the investment programme and funding of the major repairs, concession fee, subsidy for certain services associated with the airport activities where these services are economic in nature) and where they are virtually simultaneous and linked. |
| --- | --- |

(415)

As a result, the Commission considers that it must examine together the commitments of the Region-SOWAER where they alter the economics of the concession (provision of the infrastructures, including development of the investment programme and funding of the major repairs, concession fee, subsidy for certain services associated with the airport activities where these services are economic in nature) and where they are virtually simultaneous and linked.

| (416) | The Commission will therefore apply the market economy operator test to the following four sets of measures, considered in turn:






  — | the 2002 SOWAER/BSCA agreement and the amendment of 29 March 2002 to the Region/BSCA agreement (hereinafter ‘the 2002 agreements’), |
| --- | --- | --- |

(416)

The Commission will therefore apply the market economy operator test to the following four sets of measures, considered in turn:

—

the 2002 SOWAER/BSCA agreement and the amendment of 29 March 2002 to the Region/BSCA agreement (hereinafter ‘the 2002 agreements’),

| — | the decision of the Walloon Government of 3 April 2003 to build a terminal with a larger capacity than originally planned (3 million passengers instead of 2 million) and to provide for larger capacity car parks (hereinafter ‘the 2003 investment decision’), |
| --- | --- |

—

the decision of the Walloon Government of 3 April 2003 to build a terminal with a larger capacity than originally planned (3 million passengers instead of 2 million) and to provide for larger capacity car parks (hereinafter ‘the 2003 investment decision’),

| — | the service agreement of 4 April 2006 between SOWAER and BSCA and the amendment of 10 March 2006 to the Region/BSCA agreement (hereinafter ‘the 2006 agreements’), |
| --- | --- |

—

the service agreement of 4 April 2006 between SOWAER and BSCA and the amendment of 10 March 2006 to the Region/BSCA agreement (hereinafter ‘the 2006 agreements’),

| — | the amendment of 15 January 2008 to the Region/BSCA agreement (hereinafter ‘the 2008 amendment’). |
| --- | --- |

—

the amendment of 15 January 2008 to the Region/BSCA agreement (hereinafter ‘the 2008 amendment’).

| (417) | The Commission will also apply the market economy operator test to BSCA's capital increase subscribed by SOWAER in December 2002. |
| --- | --- |

(417)

The Commission will also apply the market economy operator test to BSCA's capital increase subscribed by SOWAER in December 2002.

| (418) | If any of these measures constitutes an advantage, the Commission will examine whether that advantage is selective. |
| --- | --- |

(418)

If any of these measures constitutes an advantage, the Commission will examine whether that advantage is selective.

(a)   Application of the market economy operator test to the measures involving the provision of the infrastructure, including new investments and major repairs, and the granting of a subsidy for certain services associated with the airport activities

(i)   2002 agreements

1.   Application of the market economy operator test

(a)   General principles applicable to the four measures

| (419) | As highlighted by point 51 of the aviation guidelines, the analysis of conformity with the market economy operator test should be based on sound ex ante profitability prospects for the entity granting the financing (152). |
| --- | --- |

(419)

As highlighted by point 51 of the aviation guidelines, the analysis of conformity with the market economy operator test should be based on sound ex ante profitability prospects for the entity granting the financing (152).

ex ante

152

| (420) | The Commission notes that the Region did not supply any business plan proving the expected return for the Region and/or SOWAER from the scheduled investments when the binding decisions were made on each investment. The absence of a business plan suggests that the Region and/or SOWAER were not acting according to a market economy operator logic when they adopted the measures granted to BSCA. |
| --- | --- |

(420)

The Commission notes that the Region did not supply any business plan proving the expected return for the Region and/or SOWAER from the scheduled investments when the binding decisions were made on each investment. The absence of a business plan suggests that the Region and/or SOWAER were not acting according to a market economy operator logic when they adopted the measures granted to BSCA.

| (421) | The Commission also notes that the reports supplied in support of the Walloon Government's decisions justify the need for these investments through the positive impact of the airport's development on the economy and employment situation in Charleroi and its region (153). However, the Commission points out that it is settled case-law that regional development considerations cannot be taken into account when applying the market economy operator test (154). |
| --- | --- |

(421)

The Commission also notes that the reports supplied in support of the Walloon Government's decisions justify the need for these investments through the positive impact of the airport's development on the economy and employment situation in Charleroi and its region (153). However, the Commission points out that it is settled case-law that regional development considerations cannot be taken into account when applying the market economy operator test (154).

153

154

| (422) | Despite no business plan being supplied by the Region and/or SOWAER, the Commission has examined whether, for the group consisting of the Region-SOWAER, the net present value of each set of measures identified in recital 416 is positive. If the net present value of a measure is positive, this means that the measure in question is profitable for the operator concerned. |
| --- | --- |

(422)

Despite no business plan being supplied by the Region and/or SOWAER, the Commission has examined whether, for the group consisting of the Region-SOWAER, the net present value of each set of measures identified in recital 416 is positive. If the net present value of a measure is positive, this means that the measure in question is profitable for the operator concerned.

| (423) | The net present value has been calculated by totalling the discounted cash flows (revenue minus expenditure), aggregated for the Region-SOWAER, expected from each set of measures at the time when it was granted. |
| --- | --- |

(423)

The net present value has been calculated by totalling the discounted cash flows (revenue minus expenditure), aggregated for the Region-SOWAER, expected from each set of measures at the time when it was granted.

| (424) | The discount rate used to calculate the net present value has been determined by establishing the cost of capital for the entity having granted the measure at the time when it was granted. The cost of capital for an entity depends on its financing structure, particularly in terms of equity and debt. In the present case, most of the expenditure associated with the project undertaken by the Region-SOWAER group is covered by the investments funded by SOWAER. That is why the Commission has decided to calculate the cost of capital for the entity granting the measure by using the cost of capital given by the structure of SOWAER's balance sheet, which is the financing structure chosen by the Region-SOWAER group, and its conditions of access to capital markets. |
| --- | --- |

(424)

The discount rate used to calculate the net present value has been determined by establishing the cost of capital for the entity having granted the measure at the time when it was granted. The cost of capital for an entity depends on its financing structure, particularly in terms of equity and debt. In the present case, most of the expenditure associated with the project undertaken by the Region-SOWAER group is covered by the investments funded by SOWAER. That is why the Commission has decided to calculate the cost of capital for the entity granting the measure by using the cost of capital given by the structure of SOWAER's balance sheet, which is the financing structure chosen by the Region-SOWAER group, and its conditions of access to capital markets.

(b)   Application of the market economy operator test to the 2002 agreements

| (425) | Under the 2002 agreements, the Region-SOWAER decided to place the land and infrastructure of Charleroi airport at BSCA's disposal, in return for a concession fee, while undertaking to develop this infrastructure in accordance with the investment programme annexed to the 2002 SOWAER/BSCA agreement, and to carry out the major repairs and maintenance as well as pay BSCA a subsidy for certain services associated with the airport activities. |
| --- | --- |

(425)

Under the 2002 agreements, the Region-SOWAER decided to place the land and infrastructure of Charleroi airport at BSCA's disposal, in return for a concession fee, while undertaking to develop this infrastructure in accordance with the investment programme annexed to the 2002 SOWAER/BSCA agreement, and to carry out the major repairs and maintenance as well as pay BSCA a subsidy for certain services associated with the airport activities.

| (426) | The counterfactual scenario would have consisted in the Region-SOWAER not signing the 2002 agreements and therefore not committing to further significant investments or granting the ‘fire-maintenance’ subsidy. The Commission has assumed that, in this counterfactual scenario without any aid, the airport would probably have continued to operate, but to a much lesser extent, given the need for the investments stipulated by the 2002 agreements in order to significantly increase traffic at the airport. This counterfactual scenario would have led to a slightly positive net present value, which is impossible to estimate with any degree of reliability, particularly as it would be very difficult to estimate the expected traffic in the absence of the 2002 agreements and the concession fees obtained from BSCA by the Region-SOWAER. In its net present value calculations, the Commission has therefore assumed that the net present value of the counterfactual scenario is zero. If, on the basis of this assumption, the net present value of the 2002 agreements is negative, this would definitely be the case if the net present value of the counterfactual scenario were assumed to be positive. This assumption is therefore favourable to the Region-SOWAER and to BSCA. |
| --- | --- |

(426)

The counterfactual scenario would have consisted in the Region-SOWAER not signing the 2002 agreements and therefore not committing to further significant investments or granting the ‘fire-maintenance’ subsidy. The Commission has assumed that, in this counterfactual scenario without any aid, the airport would probably have continued to operate, but to a much lesser extent, given the need for the investments stipulated by the 2002 agreements in order to significantly increase traffic at the airport. This counterfactual scenario would have led to a slightly positive net present value, which is impossible to estimate with any degree of reliability, particularly as it would be very difficult to estimate the expected traffic in the absence of the 2002 agreements and the concession fees obtained from BSCA by the Region-SOWAER. In its net present value calculations, the Commission has therefore assumed that the net present value of the counterfactual scenario is zero. If, on the basis of this assumption, the net present value of the 2002 agreements is negative, this would definitely be the case if the net present value of the counterfactual scenario were assumed to be positive. This assumption is therefore favourable to the Region-SOWAER and to BSCA.

(i)   Costs and revenue taken into account in calculating the net present value of the 2002 measure

| (427) | In order to calculate the net present value of the 2002 agreements for the Region-SOWAER, the Commission has determined the costs and revenue of the Region-SOWAER that could have been anticipated due to these agreements, by including:






  — | for the period from 2002 to 2015:






  — | the estimated cost of the economic investments (see Table 13) and services to be provided by SOWAER, and also the part of the subsidy paid by the Region for certain services associated with the airport activities, which is paid for economic services, |
| --- | --- | --- | --- |

(427)

In order to calculate the net present value of the 2002 agreements for the Region-SOWAER, the Commission has determined the costs and revenue of the Region-SOWAER that could have been anticipated due to these agreements, by including:

—

for the period from 2002 to 2015:

—

the estimated cost of the economic investments (see Table 13) and services to be provided by SOWAER, and also the part of the subsidy paid by the Region for certain services associated with the airport activities, which is paid for economic services,

| — | the expected revenue from the concession fee payable by BSCA to SOWAER, |
| --- | --- |

—

the expected revenue from the concession fee payable by BSCA to SOWAER,

| — | for the period from 2016 to 2040:






  — | the value of the cash flows expected from the project after 2015. The value of the project's cash flows after 2015 has been estimated using the perpetuity growth method with a growth rate of 2 %, reflecting the expected rate of inflation over the period (155). |
| --- | --- | --- |

—

for the period from 2016 to 2040:

—

the value of the cash flows expected from the project after 2015. The value of the project's cash flows after 2015 has been estimated using the perpetuity growth method with a growth rate of 2 %, reflecting the expected rate of inflation over the period (155).

155

| (428) | These figures are based on the forecasts available to the Region and SOWAER in 2002, particularly with regard to traffic and costs. The Commission has not therefore taken account of any cost drifts in the investment programme that could not have been anticipated at the time of the decision to commit to the programme in April 2002 (for example, increase in building costs and cost drifts associated with soil stability problems that were unknown when the investment programme was prepared). |
| --- | --- |

(428)

These figures are based on the forecasts available to the Region and SOWAER in 2002, particularly with regard to traffic and costs. The Commission has not therefore taken account of any cost drifts in the investment programme that could not have been anticipated at the time of the decision to commit to the programme in April 2002 (for example, increase in building costs and cost drifts associated with soil stability problems that were unknown when the investment programme was prepared).

| (429) | In calculating the net present value, the Commission has also not taken account of the value of the land and infrastructure, either when calculating the scenario in which the 2002 agreements were adopted or when calculating the counterfactual scenario. The net present value calculation is therefore based on the future cash flows expected in 2002. |
| --- | --- |

(429)

In calculating the net present value, the Commission has also not taken account of the value of the land and infrastructure, either when calculating the scenario in which the 2002 agreements were adopted or when calculating the counterfactual scenario. The net present value calculation is therefore based on the future cash flows expected in 2002.

| (430) | Lastly, the Commission has not taken account of any capital gains or dividends received by SOWAER from its holding in BSCA's capital. The Court of Justice has in fact stated that (156), ‘in order to determine whether a State measure constitutes aid, it is necessary to establish whether the recipient undertaking receives an economic advantage which it would not have obtained under normal market conditions. In examining that question, it is for the national court to determine what is normal remuneration for the services in question’. The Commission takes the view that, in the present case, the provision of infrastructure at a price below market price constitutes an advantage for BSCA, even if SOWAER expects to recover its loss through the growth in its capital or the dividends that it will receive. The Commission also notes the effects on competition of an approach in which any capital gains and dividends are taken into account. In extreme cases, this scenario would result in the acceptance that a public authority could demand a zero concession fee from an airport in which it was a shareholder (as said authority could expect dividends and/or an increase in the value of its shares), without this constituting aid. This would enable the airport in question to offer very low charges to airlines, thus distorting competition, particularly in relation to private airports. |
| --- | --- |

(430)

Lastly, the Commission has not taken account of any capital gains or dividends received by SOWAER from its holding in BSCA's capital. The Court of Justice has in fact stated that (156), ‘in order to determine whether a State measure constitutes aid, it is necessary to establish whether the recipient undertaking receives an economic advantage which it would not have obtained under normal market conditions. In examining that question, it is for the national court to determine what is normal remuneration for the services in question’. The Commission takes the view that, in the present case, the provision of infrastructure at a price below market price constitutes an advantage for BSCA, even if SOWAER expects to recover its loss through the growth in its capital or the dividends that it will receive. The Commission also notes the effects on competition of an approach in which any capital gains and dividends are taken into account. In extreme cases, this scenario would result in the acceptance that a public authority could demand a zero concession fee from an airport in which it was a shareholder (as said authority could expect dividends and/or an increase in the value of its shares), without this constituting aid. This would enable the airport in question to offer very low charges to airlines, thus distorting competition, particularly in relation to private airports.

156

| (431) | The following table indicates the cost of the economic investments taken into account by the Commission in calculating the net present value of the 2002 measure.
  In order to produce this table, the Commission started with the investment programme planned for Charleroi airport, which was annexed to the SOWAER/BSCA agreement of 15 April 2002. Although annexed to the SOWAER/BSCA agreement of 15 April 2002, this programme does not identify the investments remaining to be made on the date of 15 April 2002, but all the investments that should have been made from 1 January 2001 or that remained to be made. In order to identify the investments remaining to be made on the date of 15 April 2002, the Commission transferred to 2002 the investments planned in 2001 and 2002 (157) and then deducted from this sum those investments already made on 15 April 2002
   (158).

  Table 13


  Cost of the investments remaining to be made as at 15 April 2002










  (EUR million) |
| --- | --- |
| | 2002 | 2003 | 2004 | 2002 + 2003 + 2004 |
| Compulsory purchase (balance of 1st phase) | 0,55 | 0,00 | 0,00 | 0,55 |
| Purchase of new land | 3,59 | 0,00 | 0,00 | 3,59 |
| Balance of new land | 0,00 | 0,00 | 0,94 | 0,94 |
| SABCA renovation | 1,39 | 0,00 | 0,00 | 1,39 |
| Deferral, accrual and other | 1,12 | 0,00 | 0,00 | 1,12 |
| Sub-Total | 6,64 | 0,00 | 0,94 | 7,59 |
| | | | | |
| Renovation of technical and administrative premises | 1,55 | 0,00 | 0,00 | 1,55 |
| Fencing of airport site | 0,27 | 0,00 | 0,00 | 0,27 |
| Approach and taxiway lighting | 0,42 | 0,00 | 0,00 | 0,42 |
| Repair of drains | 0,27 | 0,00 | 0,00 | 0,27 |
| Extension of aviation fuel station | 0,27 | 0,00 | 0,00 | 0,27 |
| Waste removal | 0,12 | 0,00 | 0,00 | 0,12 |
| Repair of south taxiway | 0,50 | 0,00 | 0,00 | 0,50 |
| Cemetery car park | 0,03 | 0,00 | 0,00 | 0,03 |
| Fire detection in the underground passenger car park | 0,17 | 0,00 | 0,00 | 0,17 |
| Sewage system and treatment | 5,18 | 0,00 | 0,00 | 5,18 |
| Power and telecoms equipment | 2,01 | 0,00 | 0,00 | 2,01 |
| Technical tunnel | 0,74 | 0,45 | 0,00 | 1,19 |
| Service road | 0,00 | 0,00 | 0,82 | 0,82 |
| Onsite backfill | 6,20 | 1,86 | 0,62 | 8,68 |
| Runway extension | 9,92 | 2,48 | 0,00 | 12,39 |
| North taxiway and runway exit | 2,48 | 3,72 | 1,02 | 7,21 |
| Aircraft parking and slab resurfacing | 4,96 | 2,48 | 0,00 | 7,44 |
| Navigation aid | 0,00 | 0,50 | 3,07 | 3,57 |
| Assistance hangar fuel | 0,25 | 1,61 | 0,00 | 1,86 |
| Control tower | 0,00 | 0,25 | 0,25 | 0,50 |
| Cargo + office buildings | 0,00 | 0,25 | 2,13 | 2,38 |
| Sub-Total | 35,33 | 13,58 | 7,91 | 56,82 |
| New terminal | 12,64 | 12,39 | 2,97 | 28,01 |
| TOTAL | 54,62 | 25,98 | 11,82 | 92,42 |

(431)

The following table indicates the cost of the economic investments taken into account by the Commission in calculating the net present value of the 2002 measure.

In order to produce this table, the Commission started with the investment programme planned for Charleroi airport, which was annexed to the SOWAER/BSCA agreement of 15 April 2002. Although annexed to the SOWAER/BSCA agreement of 15 April 2002, this programme does not identify the investments remaining to be made on the date of 15 April 2002, but all the investments that should have been made from 1 January 2001 or that remained to be made. In order to identify the investments remaining to be made on the date of 15 April 2002, the Commission transferred to 2002 the investments planned in 2001 and 2002 (157) and then deducted from this sum those investments already made on 15 April 2002
   (158).

157

158

Table 13

Table 13

Cost of the investments remaining to be made as at 15 April 2002

Cost of the investments remaining to be made as at 15 April 2002

(EUR million)

2002

2003

2004

2002 + 2003 + 2004

Compulsory purchase (balance of 1st phase)

0,55

0,00

0,00

0,55

Purchase of new land

3,59

0,00

0,00

3,59

Balance of new land

0,00

0,00

0,94

0,94

SABCA renovation

1,39

0,00

0,00

1,39

Deferral, accrual and other

1,12

0,00

0,00

1,12

Sub-Total

6,64

0,00

0,94

7,59

Renovation of technical and administrative premises

1,55

0,00

0,00

1,55

Fencing of airport site

0,27

0,00

0,00

0,27

Approach and taxiway lighting

0,42

0,00

0,00

0,42

Repair of drains

0,27

0,00

0,00

0,27

Extension of aviation fuel station

0,27

0,00

0,00

0,27

Waste removal

0,12

0,00

0,00

0,12

Repair of south taxiway

0,50

0,00

0,00

0,50

Cemetery car park

0,03

0,00

0,00

0,03

Fire detection in the underground passenger car park

0,17

0,00

0,00

0,17

Sewage system and treatment

5,18

0,00

0,00

5,18

Power and telecoms equipment

2,01

0,00

0,00

2,01

Technical tunnel

0,74

0,45

0,00

1,19

Service road

0,00

0,00

0,82

0,82

Onsite backfill

6,20

1,86

0,62

8,68

Runway extension

9,92

2,48

0,00

12,39

North taxiway and runway exit

2,48

3,72

1,02

7,21

Aircraft parking and slab resurfacing

4,96

2,48

0,00

7,44

Navigation aid

0,00

0,50

3,07

3,57

Assistance hangar fuel

0,25

1,61

0,00

1,86

Control tower

0,00

0,25

0,25

0,50

Cargo + office buildings

0,00

0,25

2,13

2,38

Sub-Total

35,33

13,58

7,91

56,82

New terminal

12,64

12,39

2,97

28,01

TOTAL

54,62

25,98

11,82

92,42

The Commission then kept only the part of these investments that it regarded as being associated with the economic activities. The following were therefore excluded:

| — | fencing of the part of the airport site that is accessed through police checkpoints and the part of the site where the aircraft are located (see explanations in recital 365), |
| --- | --- |

—

fencing of the part of the airport site that is accessed through police checkpoints and the part of the site where the aircraft are located (see explanations in recital 365),

| — | control tower (see explanations in recital 365), |
| --- | --- |

—

control tower (see explanations in recital 365),

| — | 7 % of the cost of the investments associated with the new terminal (see explanations in recital 366). |
| --- | --- |

—

7 % of the cost of the investments associated with the new terminal (see explanations in recital 366).

The Commission ended up with the following investment plan:

Table 14

Table 14

Cost of the investments in economic activities taken into account by the Commission in calculating the net present value of the 2002 measure

Cost of the investments in economic activities taken into account by the Commission in calculating the net present value of the 2002 measure

| (EUR million) |
| --- |
| | Economic part (%) | 2002 | 2003 | 2004 | 2002 + 2003 + 2004 |
| Compulsory purchase (balance of 1st phase) | 100 | 0,55 | 0,00 | 0,00 | 0,55 |
| Purchase of new land | 100 | 3,59 | 0,00 | 0,00 | 3,59 |
| Balance of new land | 100 | 0,00 | 0,00 | 0,94 | 0,94 |
| SABCA renovation | 100 | 1,39 | 0,00 | 0,00 | 1,39 |
| Deferral, accrual and other | 100 | 1,12 | 0,00 | 0,00 | 1,12 |
| Sub-Total | | 6,64 | 0,00 | 0,94 | 7,59 |
| | | | | | |
| Renovation of technical and administrative premises | 100 | 1,55 | 0,00 | 0,00 | 1,55 |
| Fencing of airport site | 0 | 0,00 | 0,00 | 0,00 | 0,00 |
| Approach and taxiway lighting | 100 | 0,42 | 0,00 | 0,00 | 0,42 |
| Repair of drains | 100 | 0,27 | 0,00 | 0,00 | 0,27 |
| Extension of aviation fuel station | 100 | 0,27 | 0,00 | 0,00 | 0,27 |
| Waste removal | 100 | 0,12 | 0,00 | 0,00 | 0,12 |
| Repair of south taxiway | 100 | 0,50 | 0,00 | 0,00 | 0,50 |
| Cemetery car park | 100 | 0,03 | 0,00 | 0,00 | 0,03 |
| Fire detection in the underground passenger car park | 100 | 0,17 | 0,00 | 0,00 | 0,17 |
| Sewage system and treatment | 100 | 5,18 | 0,00 | 0,00 | 5,18 |
| Power and telecoms equipment | 100 | 2,01 | 0,00 | 0,00 | 2,01 |
| Technical tunnel | 100 | 0,74 | 0,45 | 0,00 | 1,19 |
| Service road | 100 | 0,00 | 0,00 | 0,82 | 0,82 |
| Onsite backfill | 100 | 6,20 | 1,86 | 0,62 | 8,68 |
| Runway extension | 100 | 9,92 | 2,48 | 0,00 | 12,39 |
| North taxiway and runway exit | 100 | 2,48 | 3,72 | 1,02 | 7,21 |
| Aircraft parking and slab resurfacing | 100 | 4,96 | 2,48 | 0,00 | 7,44 |
| Navigation aid | 100 | 0,00 | 0,50 | 3,07 | 3,57 |
| Assistance hangar fuel | 100 | 0,25 | 1,61 | 0,00 | 1,86 |
| Control tower | 0 | 0,00 | 0,00 | 0,00 | 0,00 |
| Cargo + office buildings | 100 | 0,00 | 0,25 | 2,13 | 2,38 |
| Sub-Total | | 35,06 | 13,34 | 7,66 | 56,06 |
| New terminal | 93 | 11,76 | 11,53 | 2,77 | 26,05 |
| TOTAL | | 53,46 | 24,86 | 11,37 | 89,69 |

(EUR million)

Economic part (%)

2002

2003

2004

2002 + 2003 + 2004

Compulsory purchase (balance of 1st phase)

100

0,55

0,00

0,00

0,55

Purchase of new land

100

3,59

0,00

0,00

3,59

Balance of new land

100

0,00

0,00

0,94

0,94

SABCA renovation

100

1,39

0,00

0,00

1,39

Deferral, accrual and other

100

1,12

0,00

0,00

1,12

Sub-Total

6,64

0,00

0,94

7,59

Renovation of technical and administrative premises

100

1,55

0,00

0,00

1,55

Fencing of airport site

0

0,00

0,00

0,00

0,00

Approach and taxiway lighting

100

0,42

0,00

0,00

0,42

Repair of drains

100

0,27

0,00

0,00

0,27

Extension of aviation fuel station

100

0,27

0,00

0,00

0,27

Waste removal

100

0,12

0,00

0,00

0,12

Repair of south taxiway

100

0,50

0,00

0,00

0,50

Cemetery car park

100

0,03

0,00

0,00

0,03

Fire detection in the underground passenger car park

100

0,17

0,00

0,00

0,17

Sewage system and treatment

100

5,18

0,00

0,00

5,18

Power and telecoms equipment

100

2,01

0,00

0,00

2,01

Technical tunnel

100

0,74

0,45

0,00

1,19

Service road

100

0,00

0,00

0,82

0,82

Onsite backfill

100

6,20

1,86

0,62

8,68

Runway extension

100

9,92

2,48

0,00

12,39

North taxiway and runway exit

100

2,48

3,72

1,02

7,21

Aircraft parking and slab resurfacing

100

4,96

2,48

0,00

7,44

Navigation aid

100

0,00

0,50

3,07

3,57

Assistance hangar fuel

100

0,25

1,61

0,00

1,86

Control tower

0

0,00

0,00

0,00

0,00

Cargo + office buildings

100

0,00

0,25

2,13

2,38

Sub-Total

35,06

13,34

7,66

56,06

New terminal

93

11,76

11,53

2,77

26,05

TOTAL

53,46

24,86

11,37

89,69

According to the Commission's calculations, the investments initially planned in economic activities amounted to EUR 89 690 000, i.e. 97 % of the investments initially planned.

| (432) | SOWAER's maintenance and operating costs attributable to the economic activities of Charleroi airport, as stipulated by the Region/SOWAER (159), should be added to these investments. Bearing in mind that 97 % of the investments initially planned were for economic activities (160), the Commission has multiplied by 0,97 the maintenance costs and operating costs indicated on page 10 of the SOWAER business plan annexed to the Region's decision of 23 May 2001. With regard to the operating costs, the Commission considers that, based on the information provided by the Region, 29 % of the costs for Charleroi and Liège airports are attributable to Charleroi.

  Table 15


  Sum of SOWAER's maintenance costs (A) and operating costs (B) attributable to the economic activities of Charleroi airport




















  (EUR million) |
| --- | --- |
| | 2002 | 2003 | 2004 | 2005 | 2006 | 2007 | 2008 | 2009 | 2010 | 2011 | 2012 | 2013 | 2014 | 2015 |
| A | 0,84 | 0,84 | 0,84 | 1,56 | 1,56 | 1,56 | 1,56 | 1,56 | 2,41 | 2,41 | 2,41 | 2,41 | 2,41 | 2,41 |
| B | 0,47 | 0,48 | 0,49 | 0,50 | 0,51 | 0,52 | 0,53 | 0,54 | 0,55 | 0,56 | 0,57 | 0,58 | 0,60 | 0,61 |
| A+B | 1,31 | 1,32 | 1,33 | 2,06 | 2,07 | 2,08 | 2,09 | 2,10 | 2,96 | 2,97 | 2,98 | 2,99 | 3,00 | 3,01 |

(432)

SOWAER's maintenance and operating costs attributable to the economic activities of Charleroi airport, as stipulated by the Region/SOWAER (159), should be added to these investments. Bearing in mind that 97 % of the investments initially planned were for economic activities (160), the Commission has multiplied by 0,97 the maintenance costs and operating costs indicated on page 10 of the SOWAER business plan annexed to the Region's decision of 23 May 2001. With regard to the operating costs, the Commission considers that, based on the information provided by the Region, 29 % of the costs for Charleroi and Liège airports are attributable to Charleroi.

159

160

Table 15

Table 15

Sum of SOWAER's maintenance costs (A) and operating costs (B) attributable to the economic activities of Charleroi airport

Sum of SOWAER's maintenance costs (A) and operating costs (B) attributable to the economic activities of Charleroi airport

(EUR million)

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

A

0,84

0,84

0,84

1,56

1,56

1,56

1,56

1,56

2,41

2,41

2,41

2,41

2,41

2,41

B

0,47

0,48

0,49

0,50

0,51

0,52

0,53

0,54

0,55

0,56

0,57

0,58

0,60

0,61

A+B

1,31

1,32

1,33

2,06

2,07

2,08

2,09

2,10

2,96

2,97

2,98

2,99

3,00

3,01

| (433) | The part of the ‘fire-maintenance’ subsidy attributable to the economic activities should also be added. The Commission estimates that 10 % of the expenditure compensated by the ‘fire-maintenance’ subsidy, as indicated in the 2002 BSCA business plan, is economic in nature.

  Table 16


  Part of the ‘fire-maintenance’ subsidy compensating for economic activities



















  (EUR million) |
| --- | --- |
| 2002 | 2003 | 2004 | 2005 | 2006 | 2007 | 2008 | 2009 | 2010 | 2011 | 2012 | 2013 | 2014 | 2015 |
| 0,33 | 0,34 | 0,35 | 0,39 | 0,40 | 0,44 | 0,44 | 0,48 | 0,49 | 0,50 | 0,51 | 0,52 | 0,53 | 0,54 |

(433)

The part of the ‘fire-maintenance’ subsidy attributable to the economic activities should also be added. The Commission estimates that 10 % of the expenditure compensated by the ‘fire-maintenance’ subsidy, as indicated in the 2002 BSCA business plan, is economic in nature.

Table 16

Table 16

Part of the ‘fire-maintenance’ subsidy compensating for economic activities

Part of the ‘fire-maintenance’ subsidy compensating for economic activities

(EUR million)

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

0,33

0,34

0,35

0,39

0,40

0,44

0,44

0,48

0,49

0,50

0,51

0,52

0,53

0,54

| (434) | In order to determine the outgoing cash flows to be taken into account in calculating the net present value of the 2002 measure, the Commission therefore added together the final rows of Table 14, Table 15 and Table 16.

  Table 17


  Outgoing cash flows up to 2015 taken into account by the Commission in calculating the net present value of the 2002 measure



















  (EUR million) |
| --- | --- |
| 2002 | 2003 | 2004 | 2005 | 2006 | 2007 | 2008 | 2009 | 2010 | 2011 | 2012 | 2013 | 2014 | 2015 |
| 55,10 | 26,53 | 13,05 | 2,45 | 2,47 | 2,52 | 2,53 | 2,58 | 3,44 | 3,46 | 3,48 | 3,50 | 3,52 | 3,54 |

(434)

In order to determine the outgoing cash flows to be taken into account in calculating the net present value of the 2002 measure, the Commission therefore added together the final rows of Table 14, Table 15 and Table 16.

Table 17

Table 17

Outgoing cash flows up to 2015 taken into account by the Commission in calculating the net present value of the 2002 measure

Outgoing cash flows up to 2015 taken into account by the Commission in calculating the net present value of the 2002 measure

(EUR million)

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

55,10

26,53

13,05

2,45

2,47

2,52

2,53

2,58

3,44

3,46

3,48

3,50

3,52

3,54

| (435) | In order to calculate the net present value of the project, the anticipated revenue needs to be determined. This anticipated revenue consists of the variable part of the BSCA concession fee, as set by Article 11.1 of the 2002 SOWAER/BSCA agreement, i.e. 35 % of BSCA's aviation revenue, with a cap changing over time. Given the aviation revenue forecasts, the cap on this variable fee could be expected to apply up to 2015. This cap was set at EUR 883 689 in 2002, which was to be increased by 2 % per year up to 2006. It was then to be increased to EUR 2 651 067 in 2007, which was subsequently also increased by 2 % per year. The 2002 SOWAER/BSCA agreement stipulated that these amounts would be reviewed from 2015. The Commission has assumed that the cap would be removed from 2015 (if the Commission had assumed that the cap would be maintained after 2015, this would have resulted in a net present value lower than the one calculated).

  Table 18


  Incoming cash flows up to 2015 taken into account by the Commission in calculating the net present value of the 2002 measure



















  (EUR million) |
| --- | --- |
| 2002 | 2003 | 2004 | 2005 | 2006 | 2007 | 2008 | 2009 | 2010 | 2011 | 2012 | 2013 | 2014 | 2015 |
| 0,88 | 0,90 | 0,92 | 0,94 | 0,96 | 2,65 | 2,70 | 2,76 | 2,81 | 2,87 | 2,93 | 2,99 | 3,05 | 3,11 |

(435)

In order to calculate the net present value of the project, the anticipated revenue needs to be determined. This anticipated revenue consists of the variable part of the BSCA concession fee, as set by Article 11.1 of the 2002 SOWAER/BSCA agreement, i.e. 35 % of BSCA's aviation revenue, with a cap changing over time. Given the aviation revenue forecasts, the cap on this variable fee could be expected to apply up to 2015. This cap was set at EUR 883 689 in 2002, which was to be increased by 2 % per year up to 2006. It was then to be increased to EUR 2 651 067 in 2007, which was subsequently also increased by 2 % per year. The 2002 SOWAER/BSCA agreement stipulated that these amounts would be reviewed from 2015. The Commission has assumed that the cap would be removed from 2015 (if the Commission had assumed that the cap would be maintained after 2015, this would have resulted in a net present value lower than the one calculated).

Table 18

Table 18

Incoming cash flows up to 2015 taken into account by the Commission in calculating the net present value of the 2002 measure

Incoming cash flows up to 2015 taken into account by the Commission in calculating the net present value of the 2002 measure

(EUR million)

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

0,88

0,90

0,92

0,94

0,96

2,65

2,70

2,76

2,81

2,87

2,93

2,99

3,05

3,11

| (436) | The Commission has calculated the net cash flows (incoming less outgoing) taken into account by the Commission in calculating the net present value of the 2002 measure by deducting the final row of Table 18 from the final row of Table 17.

  Table 19


  Net cash flows (incoming less outgoing) up to 2015 taken into account by the Commission in calculating the net present value of the 2002 measure



















  (EUR million) |
| --- | --- |
| 2002 | 2003 | 2004 | 2005 | 2006 | 2007 | 2008 | 2009 | 2010 | 2011 | 2012 | 2013 | 2014 | 2015 |
| – 54,21 | – 25,63 | – 12,13 | – 1,52 | – 1,51 | 0,13 | 0,17 | 0,18 | – 0,63 | – 0,59 | – 0,56 | – 0,52 | – 0,48 | – 0,44 |

(436)

The Commission has calculated the net cash flows (incoming less outgoing) taken into account by the Commission in calculating the net present value of the 2002 measure by deducting the final row of Table 18 from the final row of Table 17.

Table 19

Table 19

Net cash flows (incoming less outgoing) up to 2015 taken into account by the Commission in calculating the net present value of the 2002 measure

Net cash flows (incoming less outgoing) up to 2015 taken into account by the Commission in calculating the net present value of the 2002 measure

(EUR million)

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

– 54,21

– 25,63

– 12,13

– 1,52

– 1,51

0,13

0,17

0,18

– 0,63

– 0,59

– 0,56

– 0,52

– 0,48

– 0,44

(ii)   Discount rate taken into account in calculating the net present value of the 2002 measure

| (437) | As explained in recital 424, in order to determine the discount rate, the Commission has estimated the weighted average cost of capital for SOWAER at the time when the measure was granted. This estimate has been produced using the following figures and assumptions:






  — | a debt/equity ratio of 30 % for SOWAER (161) and therefore a proportion of debt financing (rD) of 23 %, |
| --- | --- | --- |

(437)

As explained in recital 424, in order to determine the discount rate, the Commission has estimated the weighted average cost of capital for SOWAER at the time when the measure was granted. This estimate has been produced using the following figures and assumptions:

—

a debt/equity ratio of 30 % for SOWAER (161) and therefore a proportion of debt financing (rD) of 23 %,

161

D

| — | a pre-tax cost of debt (kD) equal to the weighted average pre-tax cost of debt for SOWAER in 2002, i.e. between 4,9 % and 5,5 %, |
| --- | --- |

—

a pre-tax cost of debt (kD) equal to the weighted average pre-tax cost of debt for SOWAER in 2002, i.e. between 4,9 % and 5,5 %,

D

| — | a risk premium (Δk) of 5,51 % (162), |
| --- | --- |

—

a risk premium (Δk) of 5,51 % (162),

162

| — | a beta (163) between 0,91 and 1,23 (164), |
| --- | --- |

—

a beta (163) between 0,91 and 1,23 (164),

163

164

| — | with regard to the cost of equity, a pre-tax cost of capital invested without risk (rf) between 5,16 % and 5,37 % (165), |
| --- | --- |

—

with regard to the cost of equity, a pre-tax cost of capital invested without risk (rf) between 5,16 % and 5,37 % (165),

f

165

| — | a tax rate (t) of 40,2 %. |
| --- | --- |

—

a tax rate (t) of 40,2 %.

Based on these figures and assumptions, the Commission can calculate the weighted average cost of capital (C) using the following conventional formula:

C = (1 – rD) × kE + rD × kD

D

E

D

D

Where the cost of capital (kE) is given by the capital asset pricing model (CAPM) according to the formula:

E

kE = rf + β × Δk

E

f

Based on this formula and the above assumptions, the Commission estimates that a discount rate of 9 % is reasonable.

(iii)   Result of the net present value calculation

| (438) | The net cash flows indicated in Table 19 discounted at the rate of 9 % result in a net present value of EUR – 83,7 million. |
| --- | --- |

(438)

The net cash flows indicated in Table 19 discounted at the rate of 9 % result in a net present value of EUR – 83,7 million.

| (439) | In order to calculate the net present value over the entire term of the concession, a terminal value needs to be allocated to the project in 2015. This is carried out by assuming, from 2015, a cash flow equal to the average cash flow for 2013-2015 increasing by 2 % per year. If it is assumed that the cap on the variable part of the concession fee will be removed from 2016, the values to be taken into account are the cap-free cash flows in 2013-2015. Based on these assumptions, the Commission has calculated that the terminal value of the project in 2015 could be put at EUR 8,07 million. |
| --- | --- |

(439)

In order to calculate the net present value over the entire term of the concession, a terminal value needs to be allocated to the project in 2015. This is carried out by assuming, from 2015, a cash flow equal to the average cash flow for 2013-2015 increasing by 2 % per year. If it is assumed that the cap on the variable part of the concession fee will be removed from 2016, the values to be taken into account are the cap-free cash flows in 2013-2015. Based on these assumptions, the Commission has calculated that the terminal value of the project in 2015 could be put at EUR 8,07 million.

| (440) | The net present value of the 2002 measure is therefore EUR – 75,63 million. As this net present value is negative, the Commission concludes that the 2002 agreements do not pass the market economy operator test and therefore give an advantage to BSCA over its competitors. |
| --- | --- |

(440)

The net present value of the 2002 measure is therefore EUR – 75,63 million. As this net present value is negative, the Commission concludes that the 2002 agreements do not pass the market economy operator test and therefore give an advantage to BSCA over its competitors.

2.   Selectivity

| (441) | Under the 2002 agreements, the Region-SOWAER decided to place the land and infrastructure of Charleroi airport at BSCA's disposal, while undertaking to develop this infrastructure in accordance with the investment programme annexed to the 2002 SOWAER/BSCA agreement, and to carry out the major repairs and maintenance as well as pay BSCA a subsidy for certain services associated with the airport activities, in return for a concession fee that was lower than what a market economy operator would have required. |
| --- | --- |

(441)

Under the 2002 agreements, the Region-SOWAER decided to place the land and infrastructure of Charleroi airport at BSCA's disposal, while undertaking to develop this infrastructure in accordance with the investment programme annexed to the 2002 SOWAER/BSCA agreement, and to carry out the major repairs and maintenance as well as pay BSCA a subsidy for certain services associated with the airport activities, in return for a concession fee that was lower than what a market economy operator would have required.

| (442) | The Commission notes that the measure was granted to BSCA only. |
| --- | --- |

(442)

The Commission notes that the measure was granted to BSCA only.

| (443) | Admittedly, according to Belgium (166), there was no discrimination within the Region with regard to the subsidy for certain services associated with the airport activities (167). Furthermore, according to Belgium, security and safety services within the Walloon Region are provided by the latter. |
| --- | --- |

(443)

Admittedly, according to Belgium (166), there was no discrimination within the Region with regard to the subsidy for certain services associated with the airport activities (167). Furthermore, according to Belgium, security and safety services within the Walloon Region are provided by the latter.

166

167

| (444) | However, the Commission would make the following comments. |
| --- | --- |

(444)

However, the Commission would make the following comments.

| (445) | Firstly, as the advantage was gained due to the concession fee being lower than what a private operator would have required for the provision of the infrastructure, services and subsidy, it should be examined whether the measure gave BSCA a selective advantage. In this context, the sole fact that the subsidy was paid in a non-discriminatory manner by the Region to other airports that it managed is not sufficient. It would need to be proven that the Region granted the same measure to other airports that it managed, while accepting a fee lower than the market fee under the same conditions as those granted to BSCA. Belgium has not proven this situation. |
| --- | --- |

(445)

Firstly, as the advantage was gained due to the concession fee being lower than what a private operator would have required for the provision of the infrastructure, services and subsidy, it should be examined whether the measure gave BSCA a selective advantage. In this context, the sole fact that the subsidy was paid in a non-discriminatory manner by the Region to other airports that it managed is not sufficient. It would need to be proven that the Region granted the same measure to other airports that it managed, while accepting a fee lower than the market fee under the same conditions as those granted to BSCA. Belgium has not proven this situation.

| (446) | Even assuming that Belgium were able to prove this situation, the Commission notes that, in any event, such a measure would still give a selective advantage to BSCA as this measure would benefit a given economic sector (namely the airport management sector) and would not therefore be a general measure (168). In particular, managers of other modes of transport would not benefit from such an advantage. |
| --- | --- |

(446)

Even assuming that Belgium were able to prove this situation, the Commission notes that, in any event, such a measure would still give a selective advantage to BSCA as this measure would benefit a given economic sector (namely the airport management sector) and would not therefore be a general measure (168). In particular, managers of other modes of transport would not benefit from such an advantage.

168

| (447) | The Commission therefore concludes that the measure gives a selective advantage to BSCA. |
| --- | --- |

(447)

The Commission therefore concludes that the measure gives a selective advantage to BSCA.

(ii)   2003 investment decision

1.   Application of the market economy operator test

| (448) | The Region could have kept to the 2002 programme. There is therefore a counterfactual scenario to the April 2003 decision, which consists in keeping to the investment programme annexed to the SOWAER/BSCA agreement. The costs of the 2003 investment decision for the Region-SOWAER therefore correspond to the costs over and above those stipulated in the 2002 ‘investment programme’. |
| --- | --- |

(448)

The Region could have kept to the 2002 programme. There is therefore a counterfactual scenario to the April 2003 decision, which consists in keeping to the investment programme annexed to the SOWAER/BSCA agreement. The costs of the 2003 investment decision for the Region-SOWAER therefore correspond to the costs over and above those stipulated in the 2002 ‘investment programme’.

| (449) | In order to determine whether a market operator would have made the 2003 investment decision, it should be examined whether the net present value of the 2003 measure is positive. |
| --- | --- |

(449)

In order to determine whether a market operator would have made the 2003 investment decision, it should be examined whether the net present value of the 2003 measure is positive.

| (450) | The differences between the 2003 and 2002 plans concern both the investment forecasts and the expected number of passengers. |
| --- | --- |

(450)

The differences between the 2003 and 2002 plans concern both the investment forecasts and the expected number of passengers.

| (451) | As regards the investments, the Commission notes a difference in the ‘new terminal’ and ‘car park’ items, in terms of both the amounts and dates of the investments. The investments in the car park and terminal were respectively increased in 2002 in the initial investment plan and in 2004 in the 2003 investment plan. The Commission therefore finds that there was a two-year gap between the two plans in terms of investments. Furthermore, based on the information provided by Belgium, the Commission estimates that the economic part of the car park and terminal investments is 93 %. The amount of additional investment resulting from the 2003 measure is therefore shown by the following comparison:

  Table 20


  Amount of additional investment with a two-year gap resulting from the 2003 measure











  (EUR million) |
| --- | --- |
| | 2003 | 2004 | 2005 | 2006 | 2007 |
| New terminal | 1,6 | 14 | 17 | 9,4 | — |
| Car park | 0,8 | 6 | 6 | 5 | 1,2 |
| Total | 2,4 | 20 | 23 | 14,4 | 1,2 |
| Economic part | 2,23 | 18,60 | 21,39 | 13,39 | 1,12 |
| | | | | | |
| | 2001 | 2002 | 2003 | 2004 | 2005 |
| Investments according to the 2001/2002 plan | 0,23 | 11,53 | 11,53 | 2,77 | 0,00 |
| | | | | | |
| Amount of additional investment (with a two-year gap) | 2,00 | 7,07 | 9,86 | 10,63 | 1,12 |

(451)

As regards the investments, the Commission notes a difference in the ‘new terminal’ and ‘car park’ items, in terms of both the amounts and dates of the investments. The investments in the car park and terminal were respectively increased in 2002 in the initial investment plan and in 2004 in the 2003 investment plan. The Commission therefore finds that there was a two-year gap between the two plans in terms of investments. Furthermore, based on the information provided by Belgium, the Commission estimates that the economic part of the car park and terminal investments is 93 %. The amount of additional investment resulting from the 2003 measure is therefore shown by the following comparison:

Table 20

Table 20

Amount of additional investment with a two-year gap resulting from the 2003 measure

Amount of additional investment with a two-year gap resulting from the 2003 measure

(EUR million)

2003

2004

2005

2006

2007

New terminal

1,6

14

17

9,4

—

Car park

0,8

6

6

5

1,2

Total

2,4

20

23

14,4

1,2

Economic part

2,23

18,60

21,39

13,39

1,12

2001

2002

2003

2004

2005

Investments according to the 2001/2002 plan

0,23

11,53

11,53

2,77

0,00

Amount of additional investment (with a two-year gap)

2,00

7,07

9,86

10,63

1,12

| (452) | With regard to passenger traffic, the Commission notes a divergence between the number of passengers for 2003 anticipated in 2002 (1,47 million) and in 2003 (1,7 million). The Commission therefore considers that it was anticipated that the additional investment would lead to 16 % more passengers (1,7/1,47) over the entire period. This increase in passengers would not, however, lead to increased revenue for the 2003-2015 period given that it was anticipated that the cap on the variable concession fee would have already been reached prior to this period. However, this increase in traffic does have an impact on revenue from 2016 and therefore on the airport's terminal value in 2015. |
| --- | --- |

(452)

With regard to passenger traffic, the Commission notes a divergence between the number of passengers for 2003 anticipated in 2002 (1,47 million) and in 2003 (1,7 million). The Commission therefore considers that it was anticipated that the additional investment would lead to 16 % more passengers (1,7/1,47) over the entire period. This increase in passengers would not, however, lead to increased revenue for the 2003-2015 period given that it was anticipated that the cap on the variable concession fee would have already been reached prior to this period. However, this increase in traffic does have an impact on revenue from 2016 and therefore on the airport's terminal value in 2015.

| (453) | As explained in recital 424, in order to determine the discount rate, the Commission has estimated the weighted average cost of capital for SOWAER at the time when the measure was granted. This estimate has been produced using the following figures and assumptions:






  — | a debt/equity ratio of 30 % for SOWAER (169) and therefore a proportion of debt financing (rD) of 23 %, |
| --- | --- | --- |

(453)

As explained in recital 424, in order to determine the discount rate, the Commission has estimated the weighted average cost of capital for SOWAER at the time when the measure was granted. This estimate has been produced using the following figures and assumptions:

—

a debt/equity ratio of 30 % for SOWAER (169) and therefore a proportion of debt financing (rD) of 23 %,

169

D

| — | a pre-tax cost of debt (kD) equal to the weighted average pre-tax cost of debt for SOWAER in 2002, i.e. between 4,9 % and 5,5 %, |
| --- | --- |

—

a pre-tax cost of debt (kD) equal to the weighted average pre-tax cost of debt for SOWAER in 2002, i.e. between 4,9 % and 5,5 %,

D

| — | a risk premium (Δk) of 5,64 % (170), |
| --- | --- |

—

a risk premium (Δk) of 5,64 % (170),

170

| — | a beta between 0,91 and 1,25 (170), |
| --- | --- |

—

a beta between 0,91 and 1,25 (170),

170

| — | with regard to the cost of equity, a pre-tax cost of capital invested without risk (rf) between 4,3 % and 4,7 % (171), |
| --- | --- |

—

with regard to the cost of equity, a pre-tax cost of capital invested without risk (rf) between 4,3 % and 4,7 % (171),

f

171

| — | a tax rate (t) of 33,99 %. |
| --- | --- |

—

a tax rate (t) of 33,99 %.

Based on these figures and assumptions, the Commission can calculate the weighted average cost of capital (C) using the following conventional formula:

C = (1 – rD) × kE + rD × kD

D

E

D

D

Where the cost of capital (kE) is given by the capital asset pricing model (CAPM) according to the formula:

E

kE = rf + β × Δk

E

f

Based on this formula and the above assumptions, the Commission estimates that a discount rate of 9,5 % is reasonable.

| (454) | Bearing in mind the investments over the 2003-2007 period and the anticipated revenue in the form of the terminal value in 2015, the calculation of the net present value based on a weighted average cost of capital of 9,5 % results in a value of EUR – 19,81 million. The 2003 investment decision, like that in 2002, therefore does not pass the market economy operator test. |
| --- | --- |

(454)

Bearing in mind the investments over the 2003-2007 period and the anticipated revenue in the form of the terminal value in 2015, the calculation of the net present value based on a weighted average cost of capital of 9,5 % results in a value of EUR – 19,81 million. The 2003 investment decision, like that in 2002, therefore does not pass the market economy operator test.

2.   Selectivity

| (455) | The Commission notes that the measure was granted to BSCA only. The Commission therefore concludes that the measure gives a selective advantage to BSCA. |
| --- | --- |

(455)

The Commission notes that the measure was granted to BSCA only. The Commission therefore concludes that the measure gives a selective advantage to BSCA.

(iii)   2006 agreements

| (456) | The 2006 agreements:






  — | amended the scope of the services for which BSCA receives a subsidy from the Region and introduced a cap on this subsidy, |
| --- | --- | --- |

(456)

The 2006 agreements:

—

amended the scope of the services for which BSCA receives a subsidy from the Region and introduced a cap on this subsidy,

| — | amended the methods of calculating the variable part of the concession fee, while maintaining the cap at the level set by the 2002 SOWAER/BSCA agreement. |
| --- | --- |

—

amended the methods of calculating the variable part of the concession fee, while maintaining the cap at the level set by the 2002 SOWAER/BSCA agreement.

| (457) | With regard to the expected costs of the 2006 measures, while introducing a cap on the subsidy granted by the Region, the 2006 measures, including from an ex ante perspective, limited the increase in the subsidy and thus reduced the costs of the Region/SOWAER group compared to the previous situation. |
| --- | --- |

(457)

With regard to the expected costs of the 2006 measures, while introducing a cap on the subsidy granted by the Region, the 2006 measures, including from an ex ante perspective, limited the increase in the subsidy and thus reduced the costs of the Region/SOWAER group compared to the previous situation.

ex ante

| (458) | With regard to the expected revenue from the 2006 measures, it should be noted that, according to Belgium, it was decided to amend the methods of calculating the variable part of the concession fee so that the airport management companies (and therefore BSCA), which had just won the right to set the level of airport charges, could not reduce the fee payable to SOWAER (given that this fee previously depended on the airport charges). According to Belgium, SOWAER and BSCA wanted to ensure that the 2006 agreements did not alter the financial balance created by the 2002 agreements. That is why:






  — | the cap on the measures was not changed, |
| --- | --- | --- |

(458)

With regard to the expected revenue from the 2006 measures, it should be noted that, according to Belgium, it was decided to amend the methods of calculating the variable part of the concession fee so that the airport management companies (and therefore BSCA), which had just won the right to set the level of airport charges, could not reduce the fee payable to SOWAER (given that this fee previously depended on the airport charges). According to Belgium, SOWAER and BSCA wanted to ensure that the 2006 agreements did not alter the financial balance created by the 2002 agreements. That is why:

—

the cap on the measures was not changed,

| — | a safeguard clause was introduced, stipulating ‘that, in the event of exceptional circumstances or changes in the law ..., which are beyond the control of the parties and which may significantly alter the economics of the agreement to the detriment of one of the parties ..., the parties will equitably determine the amendments to be made to the agreement in order to re-establish the balance of their reciprocal undertakings while safeguarding their respective interests, in consultation with the Walloon Region’. |
| --- | --- |

—

a safeguard clause was introduced, stipulating ‘that, in the event of exceptional circumstances or changes in the law ..., which are beyond the control of the parties and which may significantly alter the economics of the agreement to the detriment of one of the parties ..., the parties will equitably determine the amendments to be made to the agreement in order to re-establish the balance of their reciprocal undertakings while safeguarding their respective interests, in consultation with the Walloon Region’.

| (459) | The Commission takes the view that it was in fact reasonable for SOWAER to negotiate with BSCA an amendment to the methods of calculating the variable part of the concession fee, so that BSCA could not alter the variable amount of the concession fee by reducing the airport charges (172). In addition, the Commission notes that, in the absence of cargo, the cap introduced by the 2006 measures was reached at 637 689 passengers in 2006 and at 1 737 378 passengers in 2007, whereas Charleroi airport already had 2 170 000 passengers in 2006. Therefore, keeping the cap on the variable part of the concession fee at the same level should have enabled the level of SOWAER's revenue to be maintained. In the event of exceptional circumstances leading to a fall in the variable amount of the concession fee, SOWAER could renegotiate with BSCA so as to determine the amendments to be made in order to re-establish the balance of their reciprocal undertakings. The 2006 measures should not therefore have a priori reduced the revenue of the Region/SOWAER group. |
| --- | --- |

(459)

The Commission takes the view that it was in fact reasonable for SOWAER to negotiate with BSCA an amendment to the methods of calculating the variable part of the concession fee, so that BSCA could not alter the variable amount of the concession fee by reducing the airport charges (172). In addition, the Commission notes that, in the absence of cargo, the cap introduced by the 2006 measures was reached at 637 689 passengers in 2006 and at 1 737 378 passengers in 2007, whereas Charleroi airport already had 2 170 000 passengers in 2006. Therefore, keeping the cap on the variable part of the concession fee at the same level should have enabled the level of SOWAER's revenue to be maintained. In the event of exceptional circumstances leading to a fall in the variable amount of the concession fee, SOWAER could renegotiate with BSCA so as to determine the amendments to be made in order to re-establish the balance of their reciprocal undertakings. The 2006 measures should not therefore have a priori reduced the revenue of the Region/SOWAER group.

172

| (460) | The 2006 measures should therefore have a priori limited the costs of the Region/SOWAER group (see recital 457), while maintaining its revenue (see recital 459). The Commission therefore concludes that these measures pass the market economy operator test. As a result, they do not constitute State aid. This measure is therefore excluded from the subsequent analysis. |
| --- | --- |

(460)

The 2006 measures should therefore have a priori limited the costs of the Region/SOWAER group (see recital 457), while maintaining its revenue (see recital 459). The Commission therefore concludes that these measures pass the market economy operator test. As a result, they do not constitute State aid. This measure is therefore excluded from the subsequent analysis.

(iv)   2008 amendment to the Region/BSCA agreement

| (461) | The amendment to the Region/BSCA agreement of 15 January 2008 introduced the Region's commitment to fund new economic services (marshalling etc.) through the subsidy for certain services associated with the airport activities. These activities had previously been carried out directly by the Region. |
| --- | --- |

(461)

The amendment to the Region/BSCA agreement of 15 January 2008 introduced the Region's commitment to fund new economic services (marshalling etc.) through the subsidy for certain services associated with the airport activities. These activities had previously been carried out directly by the Region.

| (462) | According to Belgium, this transfer of responsibility was in the interests of the Region/SOWAER group, even though it undertook to fund the associated costs, because it was expecting the costs to fall given that these services were going to be provided by BSCA instead of being provided directly by the Region. |
| --- | --- |

(462)

According to Belgium, this transfer of responsibility was in the interests of the Region/SOWAER group, even though it undertook to fund the associated costs, because it was expecting the costs to fall given that these services were going to be provided by BSCA instead of being provided directly by the Region.

| (463) | In support of its position, Belgium cites the explanatory memorandum of the draft decree (173) that transferred responsibility to BSCA for the security and safety tasks, as well as a report from the Walloon Parliament of 6 December 2007 on this same decree. |
| --- | --- |

(463)

In support of its position, Belgium cites the explanatory memorandum of the draft decree (173) that transferred responsibility to BSCA for the security and safety tasks, as well as a report from the Walloon Parliament of 6 December 2007 on this same decree.

173

| (464) | The explanatory memorandum of this draft decree sets out the objectives in transferring the security and safety tasks to the companies managing Walloon airports, namely:






  — | generating economies of scale, |
| --- | --- | --- |

(464)

The explanatory memorandum of this draft decree sets out the objectives in transferring the security and safety tasks to the companies managing Walloon airports, namely:

—

generating economies of scale,

| — | ensuring the profitability of the investments granted by the Region, |
| --- | --- |

—

ensuring the profitability of the investments granted by the Region,

| — | making the management companies responsible for managing and financing the performance of operational tasks, |
| --- | --- |

—

making the management companies responsible for managing and financing the performance of operational tasks,

| — | optimising the taxation of the services provided by these subsidiaries. |
| --- | --- |

—

optimising the taxation of the services provided by these subsidiaries.

| (465) | As regards the last point, Belgium has clarified that this involved recovering the VAT on the services provided by the subcontractor BSCA Security (for the security task), which the Region could not have recovered otherwise from BSCA. |
| --- | --- |

(465)

As regards the last point, Belgium has clarified that this involved recovering the VAT on the services provided by the subcontractor BSCA Security (for the security task), which the Region could not have recovered otherwise from BSCA.

| (466) | Belgium also cites a report (174) from the Walloon Parliament on the draft decree, in which the Minister for Housing, Transport and Regional Development of the Walloon Region indicates that:






  — | the total potential saving from coordinated management (175) for the Walloon budget up to 2015 is between EUR 12 million (constant policy scenario) and EUR 32 million (scenario involving the recruitment of new officials instead of subcontracting), |
| --- | --- | --- |

(466)

Belgium also cites a report (174) from the Walloon Parliament on the draft decree, in which the Minister for Housing, Transport and Regional Development of the Walloon Region indicates that:

174

—

the total potential saving from coordinated management (175) for the Walloon budget up to 2015 is between EUR 12 million (constant policy scenario) and EUR 32 million (scenario involving the recruitment of new officials instead of subcontracting),

175

| — | with regard to VAT, the new structures will enable VAT to be recovered (i.e. 21 % of EUR 7 million each year). |
| --- | --- |

—

with regard to VAT, the new structures will enable VAT to be recovered (i.e. 21 % of EUR 7 million each year).

| (467) | Lastly, according to Belgium, the services associated with security checks vary significantly from one time of day to another and from one season to another depending on the number of passengers frequenting the airport. When these tasks were the Region's responsibility, the latter had to ensure a constant presence, even when only a limited service was required, because it was forced to do so by the staff regulations of officials. By contrast, the working hours of employees of BSCA and its subcontractor BSCA Security can be adjusted according to the airport's activity level. |
| --- | --- |

(467)

Lastly, according to Belgium, the services associated with security checks vary significantly from one time of day to another and from one season to another depending on the number of passengers frequenting the airport. When these tasks were the Region's responsibility, the latter had to ensure a constant presence, even when only a limited service was required, because it was forced to do so by the staff regulations of officials. By contrast, the working hours of employees of BSCA and its subcontractor BSCA Security can be adjusted according to the airport's activity level.

| (468) | The Commission takes the view that a reasonable market economy operator might have asked BSCA to relieve it of these activities by compensating BSCA for the costs incurred (instead of continuing to carry out these activities itself), since it could expect a reduction in these costs. The information provided by Belgium is sufficient to prove that such a reduction in costs could be expected from the measure. The Commission therefore concludes that the measure passes the market economy operator test and, as a result, does not constitute State aid. This measure is therefore excluded from the subsequent analysis. |
| --- | --- |

(468)

The Commission takes the view that a reasonable market economy operator might have asked BSCA to relieve it of these activities by compensating BSCA for the costs incurred (instead of continuing to carry out these activities itself), since it could expect a reduction in these costs. The information provided by Belgium is sufficient to prove that such a reduction in costs could be expected from the measure. The Commission therefore concludes that the measure passes the market economy operator test and, as a result, does not constitute State aid. This measure is therefore excluded from the subsequent analysis.

(b)   Application of the market economy operator test to the capital increase subscribed by SOWAER in December 2002

| (469) | On 3 December 2002 SOWAER contributed the sum of EUR 3 808 660 to purchase 6 143 shares in BSCA, representing 49,23 % of BSCA's capital, i.e. a price of EUR 620 per share. |
| --- | --- |

(469)

On 3 December 2002 SOWAER contributed the sum of EUR 3 808 660 to purchase 6 143 shares in BSCA, representing 49,23 % of BSCA's capital, i.e. a price of EUR 620 per share.

| (470) | The consultancy firm Deloitte & Touche, in its analysis of the 2002 business plan, asserted that the Region/SOWAER had acted as a prudent investor, given that the funds invested in BSCA were expected to produce a return on investment in the order of 27 % in view of BSCA's expected results for the 2001-2010 period (176). |
| --- | --- |

(470)

The consultancy firm Deloitte & Touche, in its analysis of the 2002 business plan, asserted that the Region/SOWAER had acted as a prudent investor, given that the funds invested in BSCA were expected to produce a return on investment in the order of 27 % in view of BSCA's expected results for the 2001-2010 period (176).

176

| (471) | According to the Commission's calculations based on the BSCA 2001 business plan, the net present value of BSCA, after the capital injection, was EUR 65,6 million. Given the total number of shares following the capital injection, this net present value corresponds to a price per share of EUR 5 287, which is significantly higher than the price paid of EUR 620 per share. |
| --- | --- |

(471)

According to the Commission's calculations based on the BSCA 2001 business plan, the net present value of BSCA, after the capital injection, was EUR 65,6 million. Given the total number of shares following the capital injection, this net present value corresponds to a price per share of EUR 5 287, which is significantly higher than the price paid of EUR 620 per share.

| (472) | These points therefore suggest that the capital increase subscribed by SOWAER in December 2002 passes the market economy operator test. However, the Commission does not consider itself in a position to rule out the possibility that this capital increase conferred an economic advantage on BSCA. The Commission points out that this capital increase was carried out shortly after the 2002 agreements were concluded and that, in addition, BSCA's losses, which necessitated the capital injection, were linked to the basic structure of the system defined by the 2002 agreements. Those agreements therefore conferred an advantage on BSCA. As a result, the Commission cannot rule out that the 2002 capital injection may also have conferred an economic advantage on BSCA. If such an advantage exists, it was conferred only on BSCA and is therefore selective. |
| --- | --- |

(472)

These points therefore suggest that the capital increase subscribed by SOWAER in December 2002 passes the market economy operator test. However, the Commission does not consider itself in a position to rule out the possibility that this capital increase conferred an economic advantage on BSCA. The Commission points out that this capital increase was carried out shortly after the 2002 agreements were concluded and that, in addition, BSCA's losses, which necessitated the capital injection, were linked to the basic structure of the system defined by the 2002 agreements. Those agreements therefore conferred an advantage on BSCA. As a result, the Commission cannot rule out that the 2002 capital injection may also have conferred an economic advantage on BSCA. If such an advantage exists, it was conferred only on BSCA and is therefore selective.

6.1.3.   Use of State resources and imputability of the measures to the State

Use of State resources and imputability of the measures to the State

| (473) | In this section, the Commission examines whether the 2002 agreements, the 2002 capital increase and the 2003 investment decision are measures granted through State resources. To that end, the Commission will determine (i) whether the resources of the Region and SOWAER are State resources and (ii) whether SOWAER's decisions on the measures are imputable to the public authorities. |
| --- | --- |

(473)

In this section, the Commission examines whether the 2002 agreements, the 2002 capital increase and the 2003 investment decision are measures granted through State resources. To that end, the Commission will determine (i) whether the resources of the Region and SOWAER are State resources and (ii) whether SOWAER's decisions on the measures are imputable to the public authorities.

6.1.3.1.   
  State resources

State resources

| (474) | The resources available to the Region as a local authority (177) constitute State resources. |
| --- | --- |

(474)

The resources available to the Region as a local authority (177) constitute State resources.

177

| (475) | As SOWAER wholly belongs to the Region and is under its exclusive control, its resources for carrying out the tasks assigned to it by the Region constitute State resources. |
| --- | --- |

(475)

As SOWAER wholly belongs to the Region and is under its exclusive control, its resources for carrying out the tasks assigned to it by the Region constitute State resources.

| (476) | Consequently, the measures granted to BSCA have been granted through State resources. |
| --- | --- |

(476)

Consequently, the measures granted to BSCA have been granted through State resources.

6.1.3.2.   
  Imputability of the measures to the State

Imputability of the measures to the State

| (477) | As the Region is a local authority (178), its decisions are imputable to the State. |
| --- | --- |

(477)

As the Region is a local authority (178), its decisions are imputable to the State.

178

| (478) | As regards the decisions made by SOWAER, the Commission takes the view that, based in particular on the Stardust judgment (179), the imputability of those decisions can be established through the following points:






  (a) | General points






  — | As stipulated by the recital to the 2002 SOWAER/BSCA agreement, SOWAER is a ‘specialised company acting, by delegation, on behalf of the Walloon Region’. |
| --- | --- | --- | --- |

(478)

As regards the decisions made by SOWAER, the Commission takes the view that, based in particular on the Stardust judgment (179), the imputability of those decisions can be established through the following points:

Stardust

179

(a)

General points

—

As stipulated by the recital to the 2002 SOWAER/BSCA agreement, SOWAER is a ‘specialised company acting, by delegation, on behalf of the Walloon Region’.

| — | SOWAER is wholly owned by the Region and is under its exclusive control. |
| --- | --- |

—

SOWAER is wholly owned by the Region and is under its exclusive control.

| — | The Board of Directors consists solely of representatives of the Region. |
| --- | --- |

—

The Board of Directors consists solely of representatives of the Region.

| — | SOWAER has particularly been entrusted by the Region with implementing, on its behalf and under its control, the investment programmes approved by the Walloon Government. |
| --- | --- |

—

SOWAER has particularly been entrusted by the Region with implementing, on its behalf and under its control, the investment programmes approved by the Walloon Government.

| — | As clarified by Belgium (180), the Walloon Government, as the sole shareholder in SOWAER, approves the investment programme and monitors its implementation. |
| --- | --- |

—

As clarified by Belgium (180), the Walloon Government, as the sole shareholder in SOWAER, approves the investment programme and monitors its implementation.

180

| — | SOWAER manages, on behalf of the Region, the financial holdings in the airport management companies (including BSCA) in order to ensure public participation in those companies and that their strategy complies with the guidelines set out by the Walloon Government. |
| --- | --- |

—

SOWAER manages, on behalf of the Region, the financial holdings in the airport management companies (including BSCA) in order to ensure public participation in those companies and that their strategy complies with the guidelines set out by the Walloon Government.

| (b) | Points specific to the measures examined |
| --- | --- |

(b)

Points specific to the measures examined

(i)   2002 SOWAER/BSCA agreement

| (479) | In a decision of 23 May 2001, the Walloon Government approved SOWAER's financial plan. This financial plan includes an investment programme for Charleroi airport. It was this programme that was annexed to the 2002 SOWAER/BSCA agreement. |
| --- | --- |

(479)

In a decision of 23 May 2001, the Walloon Government approved SOWAER's financial plan. This financial plan includes an investment programme for Charleroi airport. It was this programme that was annexed to the 2002 SOWAER/BSCA agreement.

| (480) | The amount of the fee remaining to be paid by BSCA for the provision of the infrastructure and certain services depends on the subsidy paid by the Region to BSCA to cover the fixed fee. |
| --- | --- |

(480)

The amount of the fee remaining to be paid by BSCA for the provision of the infrastructure and certain services depends on the subsidy paid by the Region to BSCA to cover the fixed fee.

(ii)   2003 investment decision

| (481) | In a decision of 3 April 2003, the Walloon Government officially noted the 2003 investment programme. |
| --- | --- |

(481)

In a decision of 3 April 2003, the Walloon Government officially noted the 2003 investment programme.

(iii)   Capital increase subscribed by SOWAER in 2002

| (482) | In its decision of 23 May 2001 on the SOWAER financial plan, the Region confirmed the principle of successive capital injections in the companies managing the Walloon airports (181). At that time the SOWAER financial plan suggested ‘a capital investment in BSCA in the amount of +/– BEF 60 million ... followed by, spread over three years, three times 30 million (capital of 600 million with SOWAER holding 25 %, i.e. 150 million)’, i.e. a capital injection of EUR 3,718 million spread over three years. |
| --- | --- |

(482)

In its decision of 23 May 2001 on the SOWAER financial plan, the Region confirmed the principle of successive capital injections in the companies managing the Walloon airports (181). At that time the SOWAER financial plan suggested ‘a capital investment in BSCA in the amount of +/– BEF 60 million ... followed by, spread over three years, three times 30 million (capital of 600 million with SOWAER holding 25 %, i.e. 150 million)’, i.e. a capital injection of EUR 3,718 million spread over three years.

181

| (483) | The Commission concludes from the above that the 2002 agreements, the 2002 capital increase and the 2003 investment decision constitute measures imputable to the State. |
| --- | --- |

(483)

The Commission concludes from the above that the 2002 agreements, the 2002 capital increase and the 2003 investment decision constitute measures imputable to the State.

6.1.4.   Distortion of competition and effect on trade

Distortion of competition and effect on trade

| (484) | As the manager of Charleroi airport, BSCA is in competition with the managers of other airport platforms serving the same catchment area. The Commission notes in particular that Brussels airport is 69 km away by road, Liège 78 km, Lille-Lesquin 121 km and Maastricht-Aachen airport 126 km (182). These airports that are in competition with Charleroi airport are located in Belgium or other Member States. |
| --- | --- |

(484)

As the manager of Charleroi airport, BSCA is in competition with the managers of other airport platforms serving the same catchment area. The Commission notes in particular that Brussels airport is 69 km away by road, Liège 78 km, Lille-Lesquin 121 km and Maastricht-Aachen airport 126 km (182). These airports that are in competition with Charleroi airport are located in Belgium or other Member States.

182

| (485) | BSCA's website confirms this international dimension of Charleroi airport, which ‘is located 45 minutes from the centre of Brussels, to the south of the Netherlands, to the north-west of France and Luxemburg, and to the west of Germany, 2 hours by road from major cities such as Cologne, Paris and Amsterdam’. Its catchment area contains ‘5 million potential passengers who are less than 1 hour away by road and more than 15 million who are less than 2 hours away’. (183) |
| --- | --- |

(485)

BSCA's website confirms this international dimension of Charleroi airport, which ‘is located 45 minutes from the centre of Brussels, to the south of the Netherlands, to the north-west of France and Luxemburg, and to the west of Germany, 2 hours by road from major cities such as Cologne, Paris and Amsterdam’. Its catchment area contains ‘5 million potential passengers who are less than 1 hour away by road and more than 15 million who are less than 2 hours away’. (183)

183

| (486) | The measures granted to BSCA, insofar as they give the latter an economic advantage, encourage airlines and passengers to choose Charleroi airport — and therefore its manager BSCA — rather than airports serving the same catchment area, including airports situated in other Member States. They therefore threaten to distort competition between airport managers and affect trade between Member States. |
| --- | --- |

(486)

The measures granted to BSCA, insofar as they give the latter an economic advantage, encourage airlines and passengers to choose Charleroi airport — and therefore its manager BSCA — rather than airports serving the same catchment area, including airports situated in other Member States. They therefore threaten to distort competition between airport managers and affect trade between Member States.

6.1.5.   Conclusion on the existence of aid granted to BSCA

Conclusion on the existence of aid granted to BSCA

| (487) | In the light of the above, the Commission takes the view that the 2002 agreements and the 2003 investment decision constitute State aid granted to BSCA. The Commission cannot rule out that BSCA's capital increase subscribed by SOWAER in 2002 may also constitute State aid granted to BSCA. |
| --- | --- |

(487)

In the light of the above, the Commission takes the view that the 2002 agreements and the 2003 investment decision constitute State aid granted to BSCA. The Commission cannot rule out that BSCA's capital increase subscribed by SOWAER in 2002 may also constitute State aid granted to BSCA.

6.2.   Existence of State aid granted to Ryanair

Existence of State aid granted to Ryanair

| (488) | In order to determine whether the measures granted to Ryanair constitute State aid, the Commission will firstly examine whether the 2010 amendment is imputable to the State (Section 6.2.1). It will then examine whether the other measures granted to Ryanair give the latter an advantage (Section 6.2.2). |
| --- | --- |

(488)

In order to determine whether the measures granted to Ryanair constitute State aid, the Commission will firstly examine whether the 2010 amendment is imputable to the State (Section 6.2.1). It will then examine whether the other measures granted to Ryanair give the latter an advantage (Section 6.2.2).

6.2.1.   Imputability to the State of the 2010 amendment

Imputability to the State of the 2010 amendment

| (489) | In this section, the Commission will examine whether the conclusion of the 2010 amendment is imputable to the State. As found by the Court of Justice in the Stardust judgment (184), ‘the mere fact that a[n] ... undertaking is under State control is not sufficient for measures taken by that undertaking ... to be imputed to the State. It is also necessary to examine whether the public authorities must be regarded as having been involved, in one way or another, in the adoption of those measures’. The Stardust judgment also states that ‘the imputability to the State of an aid measure taken by a public undertaking may be inferred from a set of indicators arising from the circumstances of the case and the context in which that measure was taken’. |
| --- | --- |

(489)

In this section, the Commission will examine whether the conclusion of the 2010 amendment is imputable to the State. As found by the Court of Justice in the Stardust judgment (184), ‘the mere fact that a[n] ... undertaking is under State control is not sufficient for measures taken by that undertaking ... to be imputed to the State. It is also necessary to examine whether the public authorities must be regarded as having been involved, in one way or another, in the adoption of those measures’. The Stardust judgment also states that ‘the imputability to the State of an aid measure taken by a public undertaking may be inferred from a set of indicators arising from the circumstances of the case and the context in which that measure was taken’.

Stardust

184

Stardust

(a)   With regard to the capital ownership and the votes attached to shares issued by the undertaking:

| (490) | On 6 December 2010 when the 2010 amendment to the contract with Ryanair was concluded, BSCA's capital was owned as follows:






  — | 22,56 % by SOWAER, a company wholly owned by the Region and under its exclusive control, |
| --- | --- | --- |

(490)

On 6 December 2010 when the 2010 amendment to the contract with Ryanair was concluded, BSCA's capital was owned as follows:

—

22,56 % by SOWAER, a company wholly owned by the Region and under its exclusive control,

| — | 27,65 % by Sogepa (‘Société Wallonne de Gestion et de Participation’), a company wholly owned by the Region and under its exclusive control, which is the Region's financial arm for assistance given to restructuring businesses, |
| --- | --- |

—

27,65 % by Sogepa (‘Société Wallonne de Gestion et de Participation’), a company wholly owned by the Region and under its exclusive control, which is the Region's financial arm for assistance given to restructuring businesses,

| — | 19,16 % by Sambrinvest, a venture capital company 50 % owned by the Region and under the joint control of the Region and private shareholders (185), |
| --- | --- |

—

19,16 % by Sambrinvest, a venture capital company 50 % owned by the Region and under the joint control of the Region and private shareholders (185),

185

| — | 2,32 % by Igretec (‘Intercommunale pour la Gestion et la Réalisation d'Etudes Techniques et Economiques’), |
| --- | --- |

—

2,32 % by Igretec (‘Intercommunale pour la Gestion et la Réalisation d'Etudes Techniques et Economiques’),

| — | 27,65 % by Belgian Airports, a wholly private company consisting of the Italian group SAVE and the Belgian company Holding Communal SA. |
| --- | --- |

—

27,65 % by Belgian Airports, a wholly private company consisting of the Italian group SAVE and the Belgian company Holding Communal SA.

As SOWAER and Sogepa held over half of BSCA's shares and were themselves wholly owned by the Region, the public authorities owned the majority of BSCA's capital and held the majority of the votes attached to those shares.

(b)   With regard to the possibility of appointing over half of the members of the Board of Directors:

| (491) | When the amendment was concluded on 6 December 2010, BSCA's Articles of Association applicable at the time stipulated as follows (186):

  ‘The Board of Directors of BSCA shall consist of a maximum of 19 members:






  (i) | 12 directors appointed on the proposal of category A shareholders (187); |
| --- | --- | --- |

(491)

When the amendment was concluded on 6 December 2010, BSCA's Articles of Association applicable at the time stipulated as follows (186):

186

‘The Board of Directors of BSCA shall consist of a maximum of 19 members:

(i)

12 directors appointed on the proposal of category A shareholders (187);

187

| (ii) | 4 directors appointed on the proposal of category C shareholders (188); |
| --- | --- |

(ii)

4 directors appointed on the proposal of category C shareholders (188);

188

| (iii) | 3 independent directors, with 2 appointed on the proposal of category A shareholders, whose candidatures must have been approved in advance by the Region, and 1 independent director appointed on the proposal of category C shareholders ... |
| --- | --- |

(iii)

3 independent directors, with 2 appointed on the proposal of category A shareholders, whose candidatures must have been approved in advance by the Region, and 1 independent director appointed on the proposal of category C shareholders ...

With regard to the 12 directors referred to in point (i), two shall be proposed by Sambrinvest, one by Igretec and two by Sogepa ...

Candidates proposed by category A shareholders shall always be approved in advance by the Walloon Region, except, however, for those proposed by Igretec, Sambrinvest and Sogepa’.

| (492) | The majority of directors (12 out of 19) were therefore appointed:






  — | either with the Region's approval (9 directors, including 7 appointed by category A shareholders and 2 independent directors), |
| --- | --- | --- |

(492)

The majority of directors (12 out of 19) were therefore appointed:

—

either with the Region's approval (9 directors, including 7 appointed by category A shareholders and 2 independent directors),

| — | or on the proposal of entities under the Region's exclusive control (3 directors appointed on the proposal of Igretec and Sogepa). |
| --- | --- |

—

or on the proposal of entities under the Region's exclusive control (3 directors appointed on the proposal of Igretec and Sogepa).

| (493) | Even excluding the two independent directors, the majority of directors (10) were appointed either with the Region's approval (7) or on the proposal of entities under the Region's exclusive control (3). |
| --- | --- |

(493)

Even excluding the two independent directors, the majority of directors (10) were appointed either with the Region's approval (7) or on the proposal of entities under the Region's exclusive control (3).

| (494) | The three criteria laid down by the Transparency Directive were therefore met at the time when the 2010 amendment was concluded. However, these criteria only allow the dominant influence of the public authorities to be presumed. As indicated by Article 2 of the Transparency Directive, the rules in force should also be examined to determine whether the public authorities had a dominant influence. |
| --- | --- |

(494)

The three criteria laid down by the Transparency Directive were therefore met at the time when the 2010 amendment was concluded. However, these criteria only allow the dominant influence of the public authorities to be presumed. As indicated by Article 2 of the Transparency Directive, the rules in force should also be examined to determine whether the public authorities had a dominant influence.

(c)   With regard to the rules in force determining whether the public authorities had a dominant influence:

| (495) | Article 4.2.3 of the June 2009 shareholders' agreement between SOWAER, Sogepa, Sambrinvest and Igretec, on the one hand, and Belgian Airports (Save), on the other hand, as reflected by Article 16 of BSCA's Articles of Association in force at the time when the 2010 amendment was concluded, stipulates that category C directors, appointed on the proposal of Belgian Airports, have a right of veto over certain categories of decision:

  ‘... Decisions shall be taken by the Board of Directors by a simple majority of votes, except for decisions concerning the following matters, which shall also require the agreement of all category C directors:






  (i) | any amendment to the Business Plan; |
| --- | --- | --- |

(495)

Article 4.2.3 of the June 2009 shareholders' agreement between SOWAER, Sogepa, Sambrinvest and Igretec, on the one hand, and Belgian Airports (Save), on the other hand, as reflected by Article 16 of BSCA's Articles of Association in force at the time when the 2010 amendment was concluded, stipulates that category C directors, appointed on the proposal of Belgian Airports, have a right of veto over certain categories of decision:

‘... Decisions shall be taken by the Board of Directors by a simple majority of votes, except for decisions concerning the following matters, which shall also require the agreement of all category C directors:

(i)

any amendment to the Business Plan;

| (ii) | the adoption of new business plans on the expiry of the Business Plan 2009-2012 and any amendment to such plans; |
| --- | --- |

(ii)

the adoption of new business plans on the expiry of the Business Plan 2009-2012 and any amendment to such plans;

| (iii) | any decision deviating from the current business plan without formally amending it; |
| --- | --- |

(iii)

any decision deviating from the current business plan without formally amending it;

| (iv) | the adoption of the Company's annual budget (particularly with regard to developments, investments, projects, studies, equipment, indirect and staff costs) and any amendment to the budget exceeding EUR 100 000; |
| --- | --- |

(iv)

the adoption of the Company's annual budget (particularly with regard to developments, investments, projects, studies, equipment, indirect and staff costs) and any amendment to the budget exceeding EUR 100 000;

| (v) | the proposal to amend the dividend policy, to be submitted to the general meeting; |
| --- | --- |

(v)

the proposal to amend the dividend policy, to be submitted to the general meeting;

| (vi) | the approval of any contract or agreement between the Company and the Walloon Region or any company directly or indirectly controlled by the latter; |
| --- | --- |

(vi)

the approval of any contract or agreement between the Company and the Walloon Region or any company directly or indirectly controlled by the latter;

| (vii) | the relationship between the Company and Ryanair; |
| --- | --- |

(vii)

the relationship between the Company and Ryanair;

| (viii) | the appointment and removal of the Chief Executive Officer; |
| --- | --- |

(viii)

the appointment and removal of the Chief Executive Officer;

| (ix) | any company decision concerning or involving facts stated in a complaint submitted by Belgian Airports to SOWAER in accordance with the Share Sale Agreement; |
| --- | --- |

(ix)

any company decision concerning or involving facts stated in a complaint submitted by Belgian Airports to SOWAER in accordance with the Share Sale Agreement;

| (x) | any decision concerning the relationship between BSCA and BSCA Security in terms of security; and |
| --- | --- |

(x)

any decision concerning the relationship between BSCA and BSCA Security in terms of security; and

| (xi) | ... the conclusion, amendment of terms, termination or abandonment of any joint venture or strategic collaboration other than with the Shareholders of Save or associated companies’. |
| --- | --- |

(xi)

... the conclusion, amendment of terms, termination or abandonment of any joint venture or strategic collaboration other than with the Shareholders of Save or associated companies’.

| (496) | The Commission concludes that, at the time when the 2010 amendment was concluded, no major decision on the management of BSCA's affairs could have been taken without the approval of Belgian Airports. BSCA was therefore under the joint control of its private and public shareholders and, as a result, was not under the dominant influence of the public shareholders alone. |
| --- | --- |

(496)

The Commission concludes that, at the time when the 2010 amendment was concluded, no major decision on the management of BSCA's affairs could have been taken without the approval of Belgian Airports. BSCA was therefore under the joint control of its private and public shareholders and, as a result, was not under the dominant influence of the public shareholders alone.

| (497) | In this respect, it should be noted that Belgian Airports' right of veto covered the relationship between BSCA and Ryanair (see point (iv) of recital 495). Without the approval of Belgian Airports, BSCA was therefore unable to implement any instructions from the public authorities on the conclusion of the 2010 amendment. |
| --- | --- |

(497)

In this respect, it should be noted that Belgian Airports' right of veto covered the relationship between BSCA and Ryanair (see point (iv) of recital 495). Without the approval of Belgian Airports, BSCA was therefore unable to implement any instructions from the public authorities on the conclusion of the 2010 amendment.

| (498) | Moreover, an examination of the minutes of the Board of Directors' meetings on the conclusion of the 2010 amendment, particularly the minutes of the meetings of 25 February and 29 April 2010, does not reveal the existence of any such instructions. |
| --- | --- |

(498)

Moreover, an examination of the minutes of the Board of Directors' meetings on the conclusion of the 2010 amendment, particularly the minutes of the meetings of 25 February and 29 April 2010, does not reveal the existence of any such instructions.

| (499) | During its meeting on 25 February 2010, BSCA's Board of Directors unanimously approved the proposed agreement with Ryanair. |
| --- | --- |

(499)

During its meeting on 25 February 2010, BSCA's Board of Directors unanimously approved the proposed agreement with Ryanair.

| (500) | The Commission therefore concludes that BSCA's decision to conclude the 2010 amendment to the contract with Ryanair is not imputable to the State. |
| --- | --- |

(500)

The Commission therefore concludes that BSCA's decision to conclude the 2010 amendment to the contract with Ryanair is not imputable to the State.

6.2.2.   Application of the market economy operator test

Application of the market economy operator test

| (501) | In order to determine whether a State measure constitutes aid, it is necessary to establish whether the recipient undertaking receives an economic advantage that it would not have obtained under normal market conditions (189). |
| --- | --- |

(501)

In order to determine whether a State measure constitutes aid, it is necessary to establish whether the recipient undertaking receives an economic advantage that it would not have obtained under normal market conditions (189).

189

| (502) | In order to determine whether (i) the 2001 agreements, (ii) the Ministerial Order of 11 June 2004 and the BSCA letter of 24 June 2004, (iii) the 2005 amendment and (iv) the sale by BSCA of its shares in Promocy have given an advantage to Ryanair, the Commission has examined whether, in adopting these measures, the entity having granted them acted as a market economy operator. |
| --- | --- |

(502)

In order to determine whether (i) the 2001 agreements, (ii) the Ministerial Order of 11 June 2004 and the BSCA letter of 24 June 2004, (iii) the 2005 amendment and (iv) the sale by BSCA of its shares in Promocy have given an advantage to Ryanair, the Commission has examined whether, in adopting these measures, the entity having granted them acted as a market economy operator.

6.2.2.1.   
  Determination of the entity having granted the measures

Determination of the entity having granted the measures

| (503) | In paragraph 102 of its judgment of 17 December 2008 on the 2004 decision, the General Court concluded that ‘the Commission's refusal to examine together the advantages granted by the Walloon Region and by BSCA and to apply the private investor principle to the measures adopted by the Walloon Region in spite of the economic links binding those two entities is vitiated by an error in law’. |
| --- | --- |

(503)

In paragraph 102 of its judgment of 17 December 2008 on the 2004 decision, the General Court concluded that ‘the Commission's refusal to examine together the advantages granted by the Walloon Region and by BSCA and to apply the private investor principle to the measures adopted by the Walloon Region in spite of the economic links binding those two entities is vitiated by an error in law’.

| (504) | In order to apply the market economy operator test to (i) the 2001 agreements, (ii) the Ministerial Order of 11 June 2004 and the BSCA letter of 24 June 2004, (iii) the 2005 amendment and (iv) the sale by BSCA of its shares in Promocy, the Commission will therefore consider, given the economic and functional links between the Region/SOWAER and BSCA at the time when these measures were granted (190), that the entity having granted the measures is the group consisting of the Region, SOWAER and BSCA (hereinafter ‘Region-SOWAER-BSCA’). |
| --- | --- |

(504)

In order to apply the market economy operator test to (i) the 2001 agreements, (ii) the Ministerial Order of 11 June 2004 and the BSCA letter of 24 June 2004, (iii) the 2005 amendment and (iv) the sale by BSCA of its shares in Promocy, the Commission will therefore consider, given the economic and functional links between the Region/SOWAER and BSCA at the time when these measures were granted (190), that the entity having granted the measures is the group consisting of the Region, SOWAER and BSCA (hereinafter ‘Region-SOWAER-BSCA’).

190

| (505) | Consequently, the two 2001 contracts must be regarded as a single measure (hereinafter ‘the 2001 contracts’). Likewise, the Ministerial Order of 11 June 2004 and the BSCA letter of 24 June 2004 (hereinafter ‘the 2004 provisional commercial framework’) must be regarded as a single measure. |
| --- | --- |

(505)

Consequently, the two 2001 contracts must be regarded as a single measure (hereinafter ‘the 2001 contracts’). Likewise, the Ministerial Order of 11 June 2004 and the BSCA letter of 24 June 2004 (hereinafter ‘the 2004 provisional commercial framework’) must be regarded as a single measure.

| (506) | Furthermore, in order to apply the market economy operator test, the cash flows between the three entities will be ignored and their accounts will be consolidated. |
| --- | --- |

(506)

Furthermore, in order to apply the market economy operator test, the cash flows between the three entities will be ignored and their accounts will be consolidated.

6.2.2.2.   
  Application of the market economy operator test

Application of the market economy operator test

| (507) | In order to determine whether the measures defined in Section 3.2 pass the market economy operator test, the Commission has examined, in accordance with point 53 of the aviation guidelines (191), if:






  (a) | the price charged for the airport services corresponds to the market price; or |
| --- | --- | --- |

(507)

In order to determine whether the measures defined in Section 3.2 pass the market economy operator test, the Commission has examined, in accordance with point 53 of the aviation guidelines (191), if:

191

(a)

the price charged for the airport services corresponds to the market price; or

| (b) | it can be demonstrated through an ex ante analysis that the agreements with Ryanair were intended to lead to a positive incremental profit contribution for the group consisting of the Region-SOWAER-BSCA. |
| --- | --- |

(b)

it can be demonstrated through an ex ante analysis that the agreements with Ryanair were intended to lead to a positive incremental profit contribution for the group consisting of the Region-SOWAER-BSCA.

ex ante

(a)   Comparison of the prices charged for airport services at Charleroi with the market price

| (508) | The Commission has strong doubts that, at the present time, an appropriate benchmark can be identified to establish a true ‘market price’ for services provided by airport managers. |
| --- | --- |

(508)

The Commission has strong doubts that, at the present time, an appropriate benchmark can be identified to establish a true ‘market price’ for services provided by airport managers.

| (509) | The application of the market economy operator test using an average price observed in other similar markets may prove conclusive where a market price can be reasonably identified or deduced from other market indicators. However, this method may not be as relevant in the case of airport services. The revenue and cost structure tends to differ significantly from airport to airport. These costs and revenues depend on the airport's state of development, number of airlines operating from/to the airport, available capacity in terms of passenger traffic, state of the infrastructure, the regulatory burden, which may vary from Member State to Member State, and historical debts and obligations of the airport (192). |
| --- | --- |

(509)

The application of the market economy operator test using an average price observed in other similar markets may prove conclusive where a market price can be reasonably identified or deduced from other market indicators. However, this method may not be as relevant in the case of airport services. The revenue and cost structure tends to differ significantly from airport to airport. These costs and revenues depend on the airport's state of development, number of airlines operating from/to the airport, available capacity in terms of passenger traffic, state of the infrastructure, the regulatory burden, which may vary from Member State to Member State, and historical debts and obligations of the airport (192).

192

| (510) | Moreover, the liberalisation of the air transport market complicates any comparative analysis. As the present case amply demonstrates, commercial arrangements between airports and airlines are not necessarily based on a list of public prices for individual services. These commercial relationships vary widely. They include the sharing of risks in terms of traffic and of correlative commercial and financial responsibilities, the generalised use of incentive mechanisms (for example, in the form of discounts connected with the number of links or passengers carried), and variations in the distribution of risk over the term of contracts. As a result, it is difficult to compare transactions based on a price per rotation or per passenger. |
| --- | --- |

(510)

Moreover, the liberalisation of the air transport market complicates any comparative analysis. As the present case amply demonstrates, commercial arrangements between airports and airlines are not necessarily based on a list of public prices for individual services. These commercial relationships vary widely. They include the sharing of risks in terms of traffic and of correlative commercial and financial responsibilities, the generalised use of incentive mechanisms (for example, in the form of discounts connected with the number of links or passengers carried), and variations in the distribution of risk over the term of contracts. As a result, it is difficult to compare transactions based on a price per rotation or per passenger.

| (511) | Ryanair argues that the market economy operator principle can be applied based on a comparison with the commercial arrangements of other European airports. Ryanair cites a study by Oxera from 2 October 2011, which proposes Glasgow Prestwick and Liverpool John Lennon airports as comparators. |
| --- | --- |

(511)

Ryanair argues that the market economy operator principle can be applied based on a comparison with the commercial arrangements of other European airports. Ryanair cites a study by Oxera from 2 October 2011, which proposes Glasgow Prestwick and Liverpool John Lennon airports as comparators.

| (512) | However, the Commission has strong doubts that these two benchmarks are relevant for assessing the situation of Charleroi airport, given that the revenue structure of Glasgow Prestwick airport is heavily based on cargo, which does not exist at Charleroi. Moreover, both airports have apparently received public funding in recent years. |
| --- | --- |

(512)

However, the Commission has strong doubts that these two benchmarks are relevant for assessing the situation of Charleroi airport, given that the revenue structure of Glasgow Prestwick airport is heavily based on cargo, which does not exist at Charleroi. Moreover, both airports have apparently received public funding in recent years.

| (513) | In addition, as indicated above, the transactions to be analysed consist of several ‘prices’, i.e. in particular the various airport charges, the price of ground handling services and, for certain measures, the contributions to Promocy for marketing activities. Each of these transactions therefore leads to a complex set of cash flows between the airport manager and the airline and its subsidiaries. |
| --- | --- |

(513)

In addition, as indicated above, the transactions to be analysed consist of several ‘prices’, i.e. in particular the various airport charges, the price of ground handling services and, for certain measures, the contributions to Promocy for marketing activities. Each of these transactions therefore leads to a complex set of cash flows between the airport manager and the airline and its subsidiaries.

| (514) | Accordingly, a comparison between just the airport charges invoiced by BSCA to Ryanair and the airport charges invoiced at the comparison airports would not provide any useful indication as to compliance with the market economy operator principle. At the very least, in order to validly compare the transactions covered by this assessment, it would be necessary to identify, for the airports in the comparison sample, a set of comparable transactions, which must particularly include equivalent marketing services and equivalent ground handling services. Identifying such a sample of comparable transactions would prove impossible, given that the transactions covered by this assessment are so complex and specific, and all the more so as the prices of ground handling services and marketing services are rarely made public and would be difficult to obtain in order to form a basis for comparison. |
| --- | --- |

(514)

Accordingly, a comparison between just the airport charges invoiced by BSCA to Ryanair and the airport charges invoiced at the comparison airports would not provide any useful indication as to compliance with the market economy operator principle. At the very least, in order to validly compare the transactions covered by this assessment, it would be necessary to identify, for the airports in the comparison sample, a set of comparable transactions, which must particularly include equivalent marketing services and equivalent ground handling services. Identifying such a sample of comparable transactions would prove impossible, given that the transactions covered by this assessment are so complex and specific, and all the more so as the prices of ground handling services and marketing services are rarely made public and would be difficult to obtain in order to form a basis for comparison.

| (515) | Lastly, assuming that it could be established, based on a valid comparative analysis, that the ‘prices’ applied in the various transactions covered by this assessment were equivalent to or higher than the ‘market prices’ established using the sample of comparison transactions, the Commission could not, however, conclude that those transactions corresponded to the market price if it proved that, on their conclusion, the airport manager may have expected them to lead to incremental costs higher than the incremental revenues. A market economy operator would not in fact be interested in offering goods or services at the ‘market price’ if this led to an incremental loss. |
| --- | --- |

(515)

Lastly, assuming that it could be established, based on a valid comparative analysis, that the ‘prices’ applied in the various transactions covered by this assessment were equivalent to or higher than the ‘market prices’ established using the sample of comparison transactions, the Commission could not, however, conclude that those transactions corresponded to the market price if it proved that, on their conclusion, the airport manager may have expected them to lead to incremental costs higher than the incremental revenues. A market economy operator would not in fact be interested in offering goods or services at the ‘market price’ if this led to an incremental loss.

| (516) | The Commission considers it appropriate to reiterate in the context of this analysis that, following the adoption of the aviation guidelines, both Belgium and the interested parties were invited to submit comments on the application of those guidelines to the present case. In the event, neither Belgium nor the interested parties, except for Ryanair, disputed in substance the Commission's approach according to which, where an appropriate benchmark cannot be identified to establish a true market price for the services provided by airports to airlines, the most relevant criterion for assessing the arrangements concluded between these two parties is an ex ante incremental profitability analysis. |
| --- | --- |

(516)

The Commission considers it appropriate to reiterate in the context of this analysis that, following the adoption of the aviation guidelines, both Belgium and the interested parties were invited to submit comments on the application of those guidelines to the present case. In the event, neither Belgium nor the interested parties, except for Ryanair, disputed in substance the Commission's approach according to which, where an appropriate benchmark cannot be identified to establish a true market price for the services provided by airports to airlines, the most relevant criterion for assessing the arrangements concluded between these two parties is an ex ante incremental profitability analysis.

ex ante

(b)   Ex ante analysis of the profitability of measures

Ex ante

| (517) | In the light of the above, the Commission considers that the approach generally recommended in the aviation guidelines for applying the market economy operator test to relationships between airports and airlines, namely the ex ante incremental profitability analysis, must be applied to the present case. This approach is justified by the fact that an airport manager may have an objective interest in concluding a transaction with an airline where it may reasonably expect this transaction to improve its profits (or reduce its losses) compared to a counterfactual situation in which this transaction is not concluded (193), regardless of any comparison with the conditions offered to airlines by other airport managers, or even with the conditions offered by the same airport manager to other airlines. |
| --- | --- |

(517)

In the light of the above, the Commission considers that the approach generally recommended in the aviation guidelines for applying the market economy operator test to relationships between airports and airlines, namely the ex ante incremental profitability analysis, must be applied to the present case. This approach is justified by the fact that an airport manager may have an objective interest in concluding a transaction with an airline where it may reasonably expect this transaction to improve its profits (or reduce its losses) compared to a counterfactual situation in which this transaction is not concluded (193), regardless of any comparison with the conditions offered to airlines by other airport managers, or even with the conditions offered by the same airport manager to other airlines.

ex ante

193

| (518) | As stated by point 63 of the aviation guidelines, ‘The Commission considers that arrangements concluded between airlines and an airport can be deemed to satisfy the MEO test when they incrementally contribute, from an ex ante standpoint, to the profitability of the airport. The airport should demonstrate that, when setting up an arrangement with an airline ..., it is capable of covering all costs stemming from the arrangement, over the duration of the arrangement, with a reasonable profit margin on the basis of sound medium-term prospects’ (194). |
| --- | --- |

(518)

As stated by point 63 of the aviation guidelines, ‘The Commission considers that arrangements concluded between airlines and an airport can be deemed to satisfy the MEO test when they incrementally contribute, from an ex ante standpoint, to the profitability of the airport. The airport should demonstrate that, when setting up an arrangement with an airline ..., it is capable of covering all costs stemming from the arrangement, over the duration of the arrangement, with a reasonable profit margin on the basis of sound medium-term prospects’ (194).

ex ante

194

| (519) | The Commission stresses that the criterion indicated in point 63 of the aviation guidelines reflects the logic of the market economy operator test, but that this criterion, which refers to the arrangements concluded between specific airports and airlines rather than to a general business plan as is usually the case when applying the market economy operator test, has only recently been introduced. Consequently, the Commission admits that it may be difficult for Member States and the operators concerned to provide documents dating from the moment when the measure was granted and precisely meeting the requirements in point 63 of the aviation guidelines, where these arrangements were concluded some years previously. The Commission will take these considerations into account when applying the market economy operator test to the agreements with Ryanair. |
| --- | --- |

(519)

The Commission stresses that the criterion indicated in point 63 of the aviation guidelines reflects the logic of the market economy operator test, but that this criterion, which refers to the arrangements concluded between specific airports and airlines rather than to a general business plan as is usually the case when applying the market economy operator test, has only recently been introduced. Consequently, the Commission admits that it may be difficult for Member States and the operators concerned to provide documents dating from the moment when the measure was granted and precisely meeting the requirements in point 63 of the aviation guidelines, where these arrangements were concluded some years previously. The Commission will take these considerations into account when applying the market economy operator test to the agreements with Ryanair.

| (520) | According to point 64 of the aviation guidelines, ‘In order to assess whether an arrangement concluded by an airport with an airline satisfies the MEO test, expected non-aeronautical revenues stemming from the airline's activity should be taken into consideration together with airport charges, net of any rebates, marketing support or incentive schemes. Similarly, all expected costs incrementally incurred by the airport in relation to the airline's activity at the airport should be taken into account ... In contrast, costs which the airport would have to incur anyway independently from the arrangement with the airline should not be taken into account in the MEO test’ (the footnotes have not been reproduced). |
| --- | --- |

(520)

According to point 64 of the aviation guidelines, ‘In order to assess whether an arrangement concluded by an airport with an airline satisfies the MEO test, expected non-aeronautical revenues stemming from the airline's activity should be taken into consideration together with airport charges, net of any rebates, marketing support or incentive schemes. Similarly, all expected costs incrementally incurred by the airport in relation to the airline's activity at the airport should be taken into account ... In contrast, costs which the airport would have to incur anyway independently from the arrangement with the airline should not be taken into account in the MEO test’ (the footnotes have not been reproduced).

| (521) | Furthermore, according to point 66 of said guidelines, ‘When assessing airport/airline arrangements, the Commission will also take into account the extent to which the arrangements under assessment can be considered part of the implementation of an overall strategy of the airport expected to lead to profitability at least in the long term’ (195). |
| --- | --- |

(521)

Furthermore, according to point 66 of said guidelines, ‘When assessing airport/airline arrangements, the Commission will also take into account the extent to which the arrangements under assessment can be considered part of the implementation of an overall strategy of the airport expected to lead to profitability at least in the long term’ (195).

195

| (522) | The Commission has therefore applied the market economy operator test to the following measures, in line with the principles set out above: |
| --- | --- |

(522)

The Commission has therefore applied the market economy operator test to the following measures, in line with the principles set out above:

(i)   2001 contracts

| (523) | In order to determine whether the 2001 contracts contributed, from an ex ante point of view, to the profitability of the entity having granted the aid, in accordance with point 63 of the aviation guidelines, the Commission has assessed whether the net present value (hereinafter ‘NPV’) of the 2001 contracts was positive for the entity Region-SOWAER-BSCA. The counterfactual scenario is a situation in which the 2001 contracts would not have been concluded and the entity Region-SOWAER-BSCA would have chosen to waive the revenue generated by the additional traffic resulting from the contracts in question, and not to bear the costs created by this same traffic. |
| --- | --- |

(523)

In order to determine whether the 2001 contracts contributed, from an ex ante point of view, to the profitability of the entity having granted the aid, in accordance with point 63 of the aviation guidelines, the Commission has assessed whether the net present value (hereinafter ‘NPV’) of the 2001 contracts was positive for the entity Region-SOWAER-BSCA. The counterfactual scenario is a situation in which the 2001 contracts would not have been concluded and the entity Region-SOWAER-BSCA would have chosen to waive the revenue generated by the additional traffic resulting from the contracts in question, and not to bear the costs created by this same traffic.

ex ante

Recreation of an incremental business plan

| (524) | Prior to the 2001 agreements, BSCA drew up a business plan. However, on the one hand, this business plan covered not only the revenue received from the traffic generated by Ryanair, but also the revenue received from the traffic generated by other airlines. On the other hand, it identified the revenue and costs of BSCA only, whereas, in order to apply the market economy operator test, it should be considered that the entity that concluded the 2001 contracts with Ryanair was the entity Region-SOWAER-BSCA. This business plan can therefore be used as a source of information, but must be reworked so that it can be used to apply the market economy operator test. |
| --- | --- |

(524)

Prior to the 2001 agreements, BSCA drew up a business plan. However, on the one hand, this business plan covered not only the revenue received from the traffic generated by Ryanair, but also the revenue received from the traffic generated by other airlines. On the other hand, it identified the revenue and costs of BSCA only, whereas, in order to apply the market economy operator test, it should be considered that the entity that concluded the 2001 contracts with Ryanair was the entity Region-SOWAER-BSCA. This business plan can therefore be used as a source of information, but must be reworked so that it can be used to apply the market economy operator test.

| (525) | The Commission has therefore recreated what would have been a business plan produced by the entity Region-SOWAER-BSCA in order to assess the expected profitability of these contracts, with only the revenue and costs of the incremental economic activities associated with these contracts being included. To this end, the Commission started with BSCA's general business plan (i.e. covering all the airport's activities and not just the specific effect of the 2001 contracts), as available prior to the conclusion of the 2001 contracts. Using this general business plan, the Commission constructed an incremental business plan including only the incremental economic activities (i.e. taking into account only the revenue and costs associated with Ryanair's traffic), by isolating the incremental traffic, costs and revenue to be expected from the contracts with Ryanair on their conclusion (196). The Commission then created a business plan for the entity Region-SOWAER-BSCA by adding the incremental costs and revenue of the Region and SOWAER associated with these contracts and by neutralising the internal flows within the entity Region-SOWAER-BSCA. |
| --- | --- |

(525)

The Commission has therefore recreated what would have been a business plan produced by the entity Region-SOWAER-BSCA in order to assess the expected profitability of these contracts, with only the revenue and costs of the incremental economic activities associated with these contracts being included. To this end, the Commission started with BSCA's general business plan (i.e. covering all the airport's activities and not just the specific effect of the 2001 contracts), as available prior to the conclusion of the 2001 contracts. Using this general business plan, the Commission constructed an incremental business plan including only the incremental economic activities (i.e. taking into account only the revenue and costs associated with Ryanair's traffic), by isolating the incremental traffic, costs and revenue to be expected from the contracts with Ryanair on their conclusion (196). The Commission then created a business plan for the entity Region-SOWAER-BSCA by adding the incremental costs and revenue of the Region and SOWAER associated with these contracts and by neutralising the internal flows within the entity Region-SOWAER-BSCA.

196

Expected incremental costs

Expected incremental investment costs

| (526) | In order to determine whether part of the investment costs should be taken into account in the expected incremental investment costs due to the 2001 contracts, the Commission examined, in accordance with point 64 of the aviation guidelines, whether the investment programme for Charleroi airport was decided in connection with the 2001 contracts or independently from those agreements. |
| --- | --- |

(526)

In order to determine whether part of the investment costs should be taken into account in the expected incremental investment costs due to the 2001 contracts, the Commission examined, in accordance with point 64 of the aviation guidelines, whether the investment programme for Charleroi airport was decided in connection with the 2001 contracts or independently from those agreements.

| (527) | The Commission found that, at the end of the 1990s, i.e. before the 2001 contracts were signed, the Region wanted to develop the airport in order to boost economic activity within its territory. Accordingly, in its regional policy declaration approved on 15 July 1999, the Walloon Parliament recognised that the regional airports constituted important centres of economic development and job creation for the Walloon Region (197). In a note of 8 November 2000 to the Walloon Government (this note was intended to inform the Walloon Government with a view to a decision approving the investment programme), the minister with responsibility for the economy stressed that it was vital, ‘in order to allow the airport to play its role as a regional economic lever, to equip it with a complete infrastructure in the context of its comprehensive development’. |
| --- | --- |

(527)

The Commission found that, at the end of the 1990s, i.e. before the 2001 contracts were signed, the Region wanted to develop the airport in order to boost economic activity within its territory. Accordingly, in its regional policy declaration approved on 15 July 1999, the Walloon Parliament recognised that the regional airports constituted important centres of economic development and job creation for the Walloon Region (197). In a note of 8 November 2000 to the Walloon Government (this note was intended to inform the Walloon Government with a view to a decision approving the investment programme), the minister with responsibility for the economy stressed that it was vital, ‘in order to allow the airport to play its role as a regional economic lever, to equip it with a complete infrastructure in the context of its comprehensive development’.

197

| (528) | According to Belgium, at the end of the 1990s (and therefore before the 2001 agreements), due to technical constraints associated with the existing infrastructure (198), it was clear that a new terminal needed to be built in the northern part of the site. Land had already been compulsorily purchased by the intercommunal body Igretec, which was responsible for creating the ‘Aéropôle’ airport business park. The Region had itself compulsorily purchased further land during the 1990s, and in 1999 Igretec transferred to the Region the land that it had purchased. It was on this land that the new passenger terminal was built. |
| --- | --- |

(528)

According to Belgium, at the end of the 1990s (and therefore before the 2001 agreements), due to technical constraints associated with the existing infrastructure (198), it was clear that a new terminal needed to be built in the northern part of the site. Land had already been compulsorily purchased by the intercommunal body Igretec, which was responsible for creating the ‘Aéropôle’ airport business park. The Region had itself compulsorily purchased further land during the 1990s, and in 1999 Igretec transferred to the Region the land that it had purchased. It was on this land that the new passenger terminal was built.

198

| (529) | During a session on 20 July 2000, the Region approved the outlines of a framework agreement on a multiannual investment programme for Charleroi airport, referring in particular to the ‘concept of a new passenger terminal’, with a total budget of EUR 113 740 000. On 8 November 2000 the Region adopted a decision implementing its decision of 20 July 2000, amending the assumptions of the multiannual investment programme. Although these decisions did not legally bind the Region, they show that the Region had laid the foundations of the investment programme well before the 2001 contracts were signed. |
| --- | --- |

(529)

During a session on 20 July 2000, the Region approved the outlines of a framework agreement on a multiannual investment programme for Charleroi airport, referring in particular to the ‘concept of a new passenger terminal’, with a total budget of EUR 113 740 000. On 8 November 2000 the Region adopted a decision implementing its decision of 20 July 2000, amending the assumptions of the multiannual investment programme. Although these decisions did not legally bind the Region, they show that the Region had laid the foundations of the investment programme well before the 2001 contracts were signed.

| (530) | The decision of 8 November 2000 was particularly based on a note from the minister with responsibility for the economy, which referred to two studies ordered by the Region and carried out at the end of the 1990s/beginning of the 2000s:






  — | a study conducted by the International Air Transport Association (hereinafter ‘IATA’): this study identified three options for developing passenger traffic at Charleroi airport, based on assumptions of growth in the number of passengers for scheduled, charter and business flights, |
| --- | --- | --- |

(530)

The decision of 8 November 2000 was particularly based on a note from the minister with responsibility for the economy, which referred to two studies ordered by the Region and carried out at the end of the 1990s/beginning of the 2000s:

—

a study conducted by the International Air Transport Association (hereinafter ‘IATA’): this study identified three options for developing passenger traffic at Charleroi airport, based on assumptions of growth in the number of passengers for scheduled, charter and business flights,

| — | a study conducted by Tractebel, which was completed in April 2000: the aim of this study was to establish an infrastructure development plan based on the commercial assumptions (‘high scenario’) of the IATA study. |
| --- | --- |

—

a study conducted by Tractebel, which was completed in April 2000: the aim of this study was to establish an infrastructure development plan based on the commercial assumptions (‘high scenario’) of the IATA study.

The summary of these studies presented by the minister to the Walloon Government refers to general traffic assumptions, which are not presented as being connected with a particular company or future contract.

| (531) | On 31 July 2001 a ‘strategic guidance note’, accompanying the 2001 BSCA business plan, was presented to BSCA's Board of Directors. This note indicated that BSCA should target low-cost airlines and possibly airlines from eastern countries. It stressed that it was vital for BSCA to attract new airlines (over and above Ryanair) and that Charleroi airport should position itself as a potential destination for the new bases to be opened by low-cost airlines in the future. |
| --- | --- |

(531)

On 31 July 2001 a ‘strategic guidance note’, accompanying the 2001 BSCA business plan, was presented to BSCA's Board of Directors. This note indicated that BSCA should target low-cost airlines and possibly airlines from eastern countries. It stressed that it was vital for BSCA to attract new airlines (over and above Ryanair) and that Charleroi airport should position itself as a potential destination for the new bases to be opened by low-cost airlines in the future.

| (532) | The 2001 BSCA business plan also confirms that the investments and in particular the construction of the new terminal were envisaged not only in terms of meeting the needs of Ryanair, but also meeting the needs of all airlines that Charleroi airport could attract. In fact, according to this business plan, the number of departing passengers carried by Ryanair was expected to grow only from 360 000 to 700 000 passengers by 2015 (see table presented in recital 536). This growth was mainly expected to occur in 2001-2003, i.e. before the opening of the new terminal, which was planned at the time for 2005. The Region and BSCA therefore expected that the increase in traffic facilitated by these investments would stem from airlines other than Ryanair. |
| --- | --- |

(532)

The 2001 BSCA business plan also confirms that the investments and in particular the construction of the new terminal were envisaged not only in terms of meeting the needs of Ryanair, but also meeting the needs of all airlines that Charleroi airport could attract. In fact, according to this business plan, the number of departing passengers carried by Ryanair was expected to grow only from 360 000 to 700 000 passengers by 2015 (see table presented in recital 536). This growth was mainly expected to occur in 2001-2003, i.e. before the opening of the new terminal, which was planned at the time for 2005. The Region and BSCA therefore expected that the increase in traffic facilitated by these investments would stem from airlines other than Ryanair.

| (533) | The Region and BSCA did not therefore make the investments with a view to specifically increasing the number of Ryanair passengers, but to enable the significant traffic potential, which was not specifically linked to one airline, to be realised. The Commission therefore concludes that these investments cannot be specifically attributed to Ryanair. As a result, it is not relevant to attribute incremental investment costs to the 2001 contracts. |
| --- | --- |

(533)

The Region and BSCA did not therefore make the investments with a view to specifically increasing the number of Ryanair passengers, but to enable the significant traffic potential, which was not specifically linked to one airline, to be realised. The Commission therefore concludes that these investments cannot be specifically attributed to Ryanair. As a result, it is not relevant to attribute incremental investment costs to the 2001 contracts.

Expected incremental operating costs

| (534) | The expected incremental operating costs due to the 2001 contracts are equal to the expected operating costs directly attributable to Ryanair, to which the Commission has added part of the expected indirect operating costs in proportion to the number of Ryanair passengers compared to the total number of passengers. The Commission stresses that if, in this case, the net present value of the 2001 contracts is positive, this would be even more true if the expected incremental operating costs had been determined using a linear regression, as proposed in the study submitted for Ryanair by Oxera. |
| --- | --- |

(534)

The expected incremental operating costs due to the 2001 contracts are equal to the expected operating costs directly attributable to Ryanair, to which the Commission has added part of the expected indirect operating costs in proportion to the number of Ryanair passengers compared to the total number of passengers. The Commission stresses that if, in this case, the net present value of the 2001 contracts is positive, this would be even more true if the expected incremental operating costs had been determined using a linear regression, as proposed in the study submitted for Ryanair by Oxera.

Expected incremental revenue

| (535) | Contrary to Ryanair's opinion, the Commission analysis has excluded any residual value of the contract with Ryanair, because the long-term effect of advertising on total traffic at Charleroi is undocumented and difficult to measure. |
| --- | --- |

(535)

Contrary to Ryanair's opinion, the Commission analysis has excluded any residual value of the contract with Ryanair, because the long-term effect of advertising on total traffic at Charleroi is undocumented and difficult to measure.

Net present value of the 2001 contracts

| (536) | The results of the net present value calculation are presented in Table 21. They reveal a positive incremental contribution by Ryanair for all the years concerned.

  Table 21


  Expected cash flows due to the 2001 measure | 2001 | 2002 | 2003 | 2004 | 2005 | 2006 | 2007 | 2008 | 2009 | 2010 | 2011 | 2012 | 2013 | 2014 | 2015 |
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| Number of Ryanair departing passengers | 360 000 | 600 000 | 700 000 | 700 000 | 700 000 | 700 000 | 700 000 | 700 000 | 700 000 | 700 000 | 700 000 | 700 000 | 700 000 | 700 000 | 700 000 |
| Total number of departing passengers | 384 400 | 627 800 | 732 800 | 797 800 | 867 800 | 931 034 | 1 078 275 | 1 208 523 | 1 333 779 | 1 459 042 | 1 524 314 | 1 565 343 | 1 608 418 | 1 653 642 | 1 701 120 |
| Revenue per departing passenger |
| Passenger fee | 7,00 | 7,00 | 7,00 | 7,00 | 7,00 | 7,50 | 7,50 | 8,00 | 8,00 | 8,00 | 8,00 | 8,00 | 8,00 | 8,00 | 8,00 |
| Boarding fee | 1,00 | 1,00 | 1,00 | 1,00 | 1,00 | 1,13 | 1,13 | 1,13 | 1,13 | 1,13 | 1,30 | 1,30 | 1,30 | 1,30 | 1,30 |
| Fuel | [0,3-0,7] | [0,3-0,7] | [0,3-0,7] | [0,3-0,7] | [0,3-0,7] | [0,3-0,7] | [0,3-0,7] | [0,3-0,7] | [0,3-0,7] | [0,3-0,7] | [0,3-0,7] | [0,3-0,7] | [0,3-0,7] | [0,3-0,7] | [0,3-0,7] |
| Duty free shop | [3-4] | [3-4] | [3-4] | [3-4] | 0,00 | 0,00 | 0,00 | 0,00 | 0,00 | 0,00 | 0,00 | 0,00 | 0,00 | 0,00 | 0,00 |
| Other shops | [0-0,5] | [0-0,5] | [0-0,5] | [0-0,5] | [0-0,5] | [0-0,5] | [0-0,5] | [0-0,5] | [0-0,5] | [0-0,5] | [0-0,5] | [0-0,5] | [0-0,5] | [0-0,5] | [0-0,5] |
| Horeca | [0-0,5] | [0-0,5] | [0-0,5] | [0-0,5] | [0-0,5] | [0-0,5] | [0-0,5] | [0-0,5] | [0-0,5] | [0-0,5] | [0-0,5] | [0-0,5] | [0-0,5] | [0-0,5] | [0-0,5] |
| Car park | [2-4] | [2-4] | [2-4] | [2-4] | [2-4] | [2-4] | [2-4] | [2-4] | [2-4] | [2-4] | [2-4] | [2-4] | [2-4] | [2-4] | [2-4] |
| Handling | [1-1,3] | [1-1,3] | [1-1,3] | [1-1,3] | [1-1,3] | [1-1,3] | [1-1,3] | [1-1,3] | [1-1,3] | [1-1,3] | [1-1,3] | [1-1,3] | [1-1,3] | [1-1,3] | [1-1,3] |
| Sales commission | [0-0,5] | [0-0,5] | [0-0,5] | [0-0,5] | [0-0,5] | [0-0,5] | [0-0,5] | [0-0,5] | [0-0,5] | [0-0,5] | [0-0,5] | [0-0,5] | [0-0,5] | [0-0,5] | [0-0,5] |
| Total | [14-17] | [14-17] | [14-17] | [14-17] | [14-17] | [14-17] | [14-17] | [14-17] | [14-17] | [14-17] | [14-17] | [14-17] | [14-17] | [14-17] | [14-17] |
| Costs per departing passenger |
| Promotional contribution | 4,00 | 4,00 | 4,00 | 4,00 | 4,00 | 4,00 | 4,00 | 4,00 | 4,00 | 4,00 | 4,00 | 4,00 | 4,00 | 4,00 | 4,00 |
| Duty free shop purchases | [1,5-2,5] | [1,5-2,5] | [1,5-2,5] | [1,5-2,5] | 0,00 | 0,00 | 0,00 | 0,00 | 0,00 | 0,00 | 0,00 | 0,00 | 0,00 | 0,00 | 0,00 |
| Environment fund |
| Other goods and services | [1,5-2,5] | [1,5-2,5] | [1,5-2,5] | [1,5-2,5] | [1,5-2,5] | [1,5-2,5] | [1,5-2,5] | [1,5-2,5] | [1,5-2,5] | [1,5-2,5] | [1,5-2,5] | [1,5-2,5] | [1,5-2,5] | [1,5-2,5] | [1,5-2,5] |
| Wages and social security contributions | [4-5] | [4-5] | [4-5] | [4-5] | [4-5] | [4-5] | [4-5] | [4-5] | [4-5] | [4-5] | [4-5] | [4-5] | [4-5] | [4-5] | [4-5] |
| Sub-Total | [10-13] | [10-13] | [10-13] | [10-13] | [10-13] | [10-13] | [10-13] | [10-13] | [10-13] | [10-13] | [10-13] | [10-13] | [10-13] | [10-13] | [10-13] |
| Marketing contribution | 1,21 | 1,23 | 1,17 | 0,55 | 0,23 | 0,23 | 0,23 | 0,11 | 0,00 | 0,00 | 0,00 | 0,00 | 0,00 | 0,00 | 0,00 |
| Total | [10-14] | [10-14] | [10-14] | [10-14] | [10-14] | [10-14] | [10-14] | [10-14] | [10-14] | [10-14] | [10-14] | [10-14] | [10-14] | [10-14] | [10-14] |
| Total revenue per Ryanair departing passenger | [14-17] | [14-17] | [14-17] | [14-17] | [14-17] | [14-17] | [14-17] | [14-17] | [14-17] | [14-17] | [14-17] | [14-17] | [14-17] | [14-17] | [14-17] |
| Total cost per Ryanair departing passenger | [10-14] | [10-14] | [10-14] | [10-14] | [10-14] | [10-14] | [10-14] | [10-14] | [10-14] | [10-14] | [10-14] | [10-14] | [10-14] | [10-14] | [10-14] |
| Incremental contribution per Ryanair passenger | [1,5-5,5] | [1,5-5,5] | [1,5-5,5] | [1,5-5,5] | [1,5-5,5] | [1,5-5,5] | [1,5-5,5] | [1,5-5,5] | [1,5-5,5] | [1,5-5,5] | [1,5-5,5] | [1,5-5,5] | [1,5-5,5] | [1,5-5,5] | [1,5-5,5] |
| Total incremental contribution of Ryanair (EUR million) | [0,5-4] | [0,5-4] | [0,5-4] | [0,5-4] | [0,5-4] | [0,5-4] | [0,5-4] | [0,5-4] | [0,5-4] | [0,5-4] | [0,5-4] | [0,5-4] | [0,5-4] | [0,5-4] | [0,5-4] |

(536)

The results of the net present value calculation are presented in Table 21. They reveal a positive incremental contribution by Ryanair for all the years concerned.

Table 21

Table 21

Expected cash flows due to the 2001 measure

Expected cash flows due to the 2001 measure

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

Number of Ryanair departing passengers

360 000

600 000

700 000

700 000

700 000

700 000

700 000

700 000

700 000

700 000

700 000

700 000

700 000

700 000

700 000

Total number of departing passengers

384 400

627 800

732 800

797 800

867 800

931 034

1 078 275

1 208 523

1 333 779

1 459 042

1 524 314

1 565 343

1 608 418

1 653 642

1 701 120

Revenue per departing passenger

Passenger fee

7,00

7,00

7,00

7,00

7,00

7,50

7,50

8,00

8,00

8,00

8,00

8,00

8,00

8,00

8,00

Boarding fee

1,00

1,00

1,00

1,00

1,00

1,13

1,13

1,13

1,13

1,13

1,30

1,30

1,30

1,30

1,30

Fuel

[0,3-0,7]

[0,3-0,7]

[0,3-0,7]

[0,3-0,7]

[0,3-0,7]

[0,3-0,7]

[0,3-0,7]

[0,3-0,7]

[0,3-0,7]

[0,3-0,7]

[0,3-0,7]

[0,3-0,7]

[0,3-0,7]

[0,3-0,7]

[0,3-0,7]

Duty free shop

[3-4]

[3-4]

[3-4]

[3-4]

0,00

0,00

0,00

0,00

0,00

0,00

0,00

0,00

0,00

0,00

0,00

Other shops

[0-0,5]

[0-0,5]

[0-0,5]

[0-0,5]

[0-0,5]

[0-0,5]

[0-0,5]

[0-0,5]

[0-0,5]

[0-0,5]

[0-0,5]

[0-0,5]

[0-0,5]

[0-0,5]

[0-0,5]

Horeca

[0-0,5]

[0-0,5]

[0-0,5]

[0-0,5]

[0-0,5]

[0-0,5]

[0-0,5]

[0-0,5]

[0-0,5]

[0-0,5]

[0-0,5]

[0-0,5]

[0-0,5]

[0-0,5]

[0-0,5]

Car park

[2-4]

[2-4]

[2-4]

[2-4]

[2-4]

[2-4]

[2-4]

[2-4]

[2-4]

[2-4]

[2-4]

[2-4]

[2-4]

[2-4]

[2-4]

Handling

[1-1,3]

[1-1,3]

[1-1,3]

[1-1,3]

[1-1,3]

[1-1,3]

[1-1,3]

[1-1,3]

[1-1,3]

[1-1,3]

[1-1,3]

[1-1,3]

[1-1,3]

[1-1,3]

[1-1,3]

Sales commission

[0-0,5]

[0-0,5]

[0-0,5]

[0-0,5]

[0-0,5]

[0-0,5]

[0-0,5]

[0-0,5]

[0-0,5]

[0-0,5]

[0-0,5]

[0-0,5]

[0-0,5]

[0-0,5]

[0-0,5]

Total

[14-17]

[14-17]

[14-17]

[14-17]

[14-17]

[14-17]

[14-17]

[14-17]

[14-17]

[14-17]

[14-17]

[14-17]

[14-17]

[14-17]

[14-17]

Costs per departing passenger

Promotional contribution

4,00

4,00

4,00

4,00

4,00

4,00

4,00

4,00

4,00

4,00

4,00

4,00

4,00

4,00

4,00

Duty free shop purchases

[1,5-2,5]

[1,5-2,5]

[1,5-2,5]

[1,5-2,5]

0,00

0,00

0,00

0,00

0,00

0,00

0,00

0,00

0,00

0,00

0,00

Environment fund

Other goods and services

[1,5-2,5]

[1,5-2,5]

[1,5-2,5]

[1,5-2,5]

[1,5-2,5]

[1,5-2,5]

[1,5-2,5]

[1,5-2,5]

[1,5-2,5]

[1,5-2,5]

[1,5-2,5]

[1,5-2,5]

[1,5-2,5]

[1,5-2,5]

[1,5-2,5]

Wages and social security contributions

[4-5]

[4-5]

[4-5]

[4-5]

[4-5]

[4-5]

[4-5]

[4-5]

[4-5]

[4-5]

[4-5]

[4-5]

[4-5]

[4-5]

[4-5]

Sub-Total

[10-13]

[10-13]

[10-13]

[10-13]

[10-13]

[10-13]

[10-13]

[10-13]

[10-13]

[10-13]

[10-13]

[10-13]

[10-13]

[10-13]

[10-13]

Marketing contribution

1,21

1,23

1,17

0,55

0,23

0,23

0,23

0,11

0,00

0,00

0,00

0,00

0,00

0,00

0,00

Total

[10-14]

[10-14]

[10-14]

[10-14]

[10-14]

[10-14]

[10-14]

[10-14]

[10-14]

[10-14]

[10-14]

[10-14]

[10-14]

[10-14]

[10-14]

Total revenue per Ryanair departing passenger

[14-17]

[14-17]

[14-17]

[14-17]

[14-17]

[14-17]

[14-17]

[14-17]

[14-17]

[14-17]

[14-17]

[14-17]

[14-17]

[14-17]

[14-17]

Total cost per Ryanair departing passenger

[10-14]

[10-14]

[10-14]

[10-14]

[10-14]

[10-14]

[10-14]

[10-14]

[10-14]

[10-14]

[10-14]

[10-14]

[10-14]

[10-14]

[10-14]

Incremental contribution per Ryanair passenger

[1,5-5,5]

[1,5-5,5]

[1,5-5,5]

[1,5-5,5]

[1,5-5,5]

[1,5-5,5]

[1,5-5,5]

[1,5-5,5]

[1,5-5,5]

[1,5-5,5]

[1,5-5,5]

[1,5-5,5]

[1,5-5,5]

[1,5-5,5]

[1,5-5,5]

Total incremental contribution of Ryanair (EUR million)

[0,5-4]

[0,5-4]

[0,5-4]

[0,5-4]

[0,5-4]

[0,5-4]

[0,5-4]

[0,5-4]

[0,5-4]

[0,5-4]

[0,5-4]

[0,5-4]

[0,5-4]

[0,5-4]

[0,5-4]

| (537) | As Ryanair's incremental contribution is positive for all the years concerned, the net present value of the contract will necessarily be positive, regardless of the weighted average cost of capital in question. |
| --- | --- |

(537)

As Ryanair's incremental contribution is positive for all the years concerned, the net present value of the contract will necessarily be positive, regardless of the weighted average cost of capital in question.

| (538) | By way of illustration, however, the Commission has calculated the NPV based on an average cost of between 8,7 % and 9 %. The discount rate used to calculate the NPV of contracts is the weighted average cost of capital of the entity granting the aid at the moment when the aid is granted. In the present case, the revenue and costs associated with the contract with Ryanair affect the accounts of BSCA. The Commission has therefore chosen to use BSCA's capital cost as the discount rate. The calculation of the weighted average capital cost for BSCA is based on a number of assumptions:






  — | financing solely through equity, |
| --- | --- | --- |

(538)

By way of illustration, however, the Commission has calculated the NPV based on an average cost of between 8,7 % and 9 %. The discount rate used to calculate the NPV of contracts is the weighted average cost of capital of the entity granting the aid at the moment when the aid is granted. In the present case, the revenue and costs associated with the contract with Ryanair affect the accounts of BSCA. The Commission has therefore chosen to use BSCA's capital cost as the discount rate. The calculation of the weighted average capital cost for BSCA is based on a number of assumptions:

—

financing solely through equity,

| — | a risk premium of 5,51 % (199), |
| --- | --- |

—

a risk premium of 5,51 % (199),

199

| — | a beta of 0,69 (199), |
| --- | --- |

—

a beta of 0,69 (199),

199

| — | a pre-tax cost of capital invested without risk between 4,9 % and 5,2 %, |
| --- | --- |

—

a pre-tax cost of capital invested without risk between 4,9 % and 5,2 %,

| — | a tax rate of 40,2 %. |
| --- | --- |

—

a tax rate of 40,2 %.

| (539) | Therefore, as an illustration, based on an average rate between 8,7 % and 9 %, i.e. 8,85 %, the Commission has concluded that the net present value was positive at EUR 19,5 million.

  Table 22


  Net present value (NPV) of the 2001 measure







  (EUR million) |
| --- | --- |
| | Discount rate of 8,85 % |
| NPV | 19,5 |

(539)

Therefore, as an illustration, based on an average rate between 8,7 % and 9 %, i.e. 8,85 %, the Commission has concluded that the net present value was positive at EUR 19,5 million.

Table 22

Table 22

Net present value (NPV) of the 2001 measure

Net present value (NPV) of the 2001 measure

(EUR million)

Discount rate of 8,85 %

NPV

19,5

This positive NPV and the positive contributions for all the years concerned show that the 2001 contracts could be expected to increase the profitability of the Region-SOWAER-BSCA.

| (540) | With regard to the Region's undertaking to compensate Ryanair for the losses that the airline might incur due to a possible change in the level of airport charges or opening hours during the years 2001 to 2016, the Commission notes that this compensation may not exceed the loss directly incurred by Ryanair due to the change. As a result, if the Region were to pay compensation to Ryanair under this provision, Ryanair would not be in a more favourable situation than it would have been if the Region had respected its undertaking. This provision does not therefore give Ryanair an additional advantage. |
| --- | --- |

(540)

With regard to the Region's undertaking to compensate Ryanair for the losses that the airline might incur due to a possible change in the level of airport charges or opening hours during the years 2001 to 2016, the Commission notes that this compensation may not exceed the loss directly incurred by Ryanair due to the change. As a result, if the Region were to pay compensation to Ryanair under this provision, Ryanair would not be in a more favourable situation than it would have been if the Region had respected its undertaking. This provision does not therefore give Ryanair an additional advantage.

| (541) | Furthermore, in accordance with point 66 of the aviation guidelines, these agreements form part of an overall strategy expected to lead the airport to profitability at least in the long term. BSCA's strategy was to develop traffic at Charleroi airport with the specific aim of increasing its revenue and thereby better covering its fixed costs and becoming profitable. To that end, BSCA decided to focus on the niche market of short- and medium-haul point-to-point flights, and in particular on low-cost flights. BSCA based this strategy on studies commissioned from outside consultants at the end of the 1990s. According to some of these studies (200), Charleroi airport enjoyed comparative advantages in terms of developing in this segment, particularly its low costs. Accordingly, a BSCA ‘strategic guidance note’ of 31 July 2001 indicated that BSCA's objective was to reach 2,5 to 3 million passengers (201) by 2010, which, according to this note, ‘does not seem unrealistic given the establishment of Ryanair's base and the growth in air transport’. The 2001 agreements therefore formed part of this strategy to grow traffic and revenue. |
| --- | --- |

(541)

Furthermore, in accordance with point 66 of the aviation guidelines, these agreements form part of an overall strategy expected to lead the airport to profitability at least in the long term. BSCA's strategy was to develop traffic at Charleroi airport with the specific aim of increasing its revenue and thereby better covering its fixed costs and becoming profitable. To that end, BSCA decided to focus on the niche market of short- and medium-haul point-to-point flights, and in particular on low-cost flights. BSCA based this strategy on studies commissioned from outside consultants at the end of the 1990s. According to some of these studies (200), Charleroi airport enjoyed comparative advantages in terms of developing in this segment, particularly its low costs. Accordingly, a BSCA ‘strategic guidance note’ of 31 July 2001 indicated that BSCA's objective was to reach 2,5 to 3 million passengers (201) by 2010, which, according to this note, ‘does not seem unrealistic given the establishment of Ryanair's base and the growth in air transport’. The 2001 agreements therefore formed part of this strategy to grow traffic and revenue.

200

201

| (542) | As the market economy operator test is satisfied, the 2001 contracts do not constitute State aid. |
| --- | --- |

(542)

As the market economy operator test is satisfied, the 2001 contracts do not constitute State aid.

(ii)   2004 provisional commercial framework

| (543) | In order to determine whether the 2004 commercial framework contributed, from an ex ante point of view, to the profitability of the entity having granted the aid, in accordance with point 63 of the aviation guidelines, the Commission has assessed whether the NPV of the 2004 commercial framework was positive for the entity Region-SOWAER-BSCA. The counterfactual scenario to the decision to adopt the 2004 commercial framework is having no contract with Ryanair and therefore waiving the incremental revenue and costs associated with Ryanair's traffic. |
| --- | --- |

(543)

In order to determine whether the 2004 commercial framework contributed, from an ex ante point of view, to the profitability of the entity having granted the aid, in accordance with point 63 of the aviation guidelines, the Commission has assessed whether the NPV of the 2004 commercial framework was positive for the entity Region-SOWAER-BSCA. The counterfactual scenario to the decision to adopt the 2004 commercial framework is having no contract with Ryanair and therefore waiving the incremental revenue and costs associated with Ryanair's traffic.

ex ante

| (544) | On 22 January 2004, prior to the conclusion of the 2004 provisional commercial framework, BSCA updated its business plan. According to Belgium, the business plan of 22 January 2004 was prepared in the wake of the 2004 decision with a view to confirming the new proposal to be made to Ryanair (202). However, on the one hand, this business plan covers not only the revenue received from the traffic generated by Ryanair, but also the revenue received from the traffic generated by other airlines. On the other hand, it identifies the revenue and costs of BSCA only, whereas, in order to apply the market economy operator test, it should be considered that the entity that concluded the 2004 provisional commercial framework with Ryanair was the entity Region-SOWAER-BSCA. |
| --- | --- |

(544)

On 22 January 2004, prior to the conclusion of the 2004 provisional commercial framework, BSCA updated its business plan. According to Belgium, the business plan of 22 January 2004 was prepared in the wake of the 2004 decision with a view to confirming the new proposal to be made to Ryanair (202). However, on the one hand, this business plan covers not only the revenue received from the traffic generated by Ryanair, but also the revenue received from the traffic generated by other airlines. On the other hand, it identifies the revenue and costs of BSCA only, whereas, in order to apply the market economy operator test, it should be considered that the entity that concluded the 2004 provisional commercial framework with Ryanair was the entity Region-SOWAER-BSCA.

202

| (545) | The Commission has therefore recreated a business plan for the entity Region-SOWAER-BSCA, which contains only the revenue and costs of the economic activities associated with the 2004 commercial framework. To this end, the Commission started with BSCA's general business plan of 22 January 2004 and applied the same methodology as that used for the 2001 contracts and described in recital 525. |
| --- | --- |

(545)

The Commission has therefore recreated a business plan for the entity Region-SOWAER-BSCA, which contains only the revenue and costs of the economic activities associated with the 2004 commercial framework. To this end, the Commission started with BSCA's general business plan of 22 January 2004 and applied the same methodology as that used for the 2001 contracts and described in recital 525.

| (546) | In order to determine the incremental costs attributable to the 2004 provisional commercial framework, the Commission in particular examined whether the Region, SOWAER or BSCA were expected to make certain investments due to the 2004 commercial framework. As a reminder, the 2004 commercial framework was put in place in order to fill the legal vacuum left by the annulment of the 2001 contracts following the Commission's 2004 decision. Under this commercial framework, the group consisting of the Region-SOWAER-BSCA was not required to make new investments. The investments under the 2002 SOWAER/BSCA agreement and the 2003 investment programme had already been decided and the work had started. In addition, as indicated in recital 533, the investment programme included in the 2002 SOWAER/BSCA agreement would probably have been adopted even in the absence of the contracts with Ryanair. The same is true for the 2003 revision of the investment programme, which formed part of the same logic to develop the airport with, if possible, a diverse customer base in terms of airlines. The Commission therefore concludes that it is not relevant to attribute incremental investment costs to the 2004 provisional commercial framework. |
| --- | --- |

(546)

In order to determine the incremental costs attributable to the 2004 provisional commercial framework, the Commission in particular examined whether the Region, SOWAER or BSCA were expected to make certain investments due to the 2004 commercial framework. As a reminder, the 2004 commercial framework was put in place in order to fill the legal vacuum left by the annulment of the 2001 contracts following the Commission's 2004 decision. Under this commercial framework, the group consisting of the Region-SOWAER-BSCA was not required to make new investments. The investments under the 2002 SOWAER/BSCA agreement and the 2003 investment programme had already been decided and the work had started. In addition, as indicated in recital 533, the investment programme included in the 2002 SOWAER/BSCA agreement would probably have been adopted even in the absence of the contracts with Ryanair. The same is true for the 2003 revision of the investment programme, which formed part of the same logic to develop the airport with, if possible, a diverse customer base in terms of airlines. The Commission therefore concludes that it is not relevant to attribute incremental investment costs to the 2004 provisional commercial framework.

| (547) | Based on those assumptions, the Commission has determined that the relevant cash flows for analysing the profitability of the 2004 commercial framework are as follows:

  Table 23


  Expected cash flows due to the 2004 measure | 2004 | 2005 | 2006 | 2007 | 2008 | 2009 | 2010 | 2011 | 2012 | 2013 | 2014 | 2015 |
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| Number of Ryanair departing passengers | 1 033 941 | 1 223 941 | 1 223 941 | 1 223 941 | 1 223 941 | 1 223 941 | 1 223 941 | 1 223 941 | 1 223 941 | 1 223 941 | 1 223 941 | 1 223 941 |
| Total number of departing passengers | 1 099 944 | 1 292 535 | 1 295 174 | 1 346 381 | 1 397 587 | 1 448 794 | 1 500 000 | 1 500 000 | 1 500 000 | 1 500 000 | 1 500 000 | 1 500 000 |
| Revenue per departing passenger |
| Passenger fee | 7,00 | 7,00 | 7,50 | 7,50 | 8,00 | 8,00 | 8,00 | 8,00 | 8,00 | 8,00 | 8,00 | 8,00 |
| Boarding fee | 1,00 | 1,00 | 1,13 | 1,13 | 1,13 | 1,13 | 1,13 | 1,30 | 1,30 | 1,30 | 1,30 | 1,30 |
| Handling | [1-1,3] | [1-1,3] | [1-1,3] | [1-1,3] | [1-1,3] | [1-1,3] | [1-1,3] | [1-1,3] | [1-1,3] | [1-1,3] | [1-1,3] | [1-1,3] |
| Fuel | [0,05-0,15] | [0,05-0,15] | [0,05-0,15] | [0,05-0,15] | [0,05-0,15] | [0,05-0,15] | [0,05-0,15] | [0,05-0,15] | [0,05-0,15] | [0,05-0,15] | [0,05-0,15] | [0,05-0,15] |
| Commercial concessions | [5-9] | [5-9] | [5-9] | [5-9] | [5-9] | [5-9] | [5-9] | [5-9] | [5-9] | [5-9] | [5-9] | [5-9] |
| Total | [14-20] | [14-20] | [14-20] | [14-20] | [14-20] | [14-20] | [14-20] | [14-20] | [14-20] | [14-20] | [14-20] | [14-20] |
| Costs per departing passenger |
| Promotional contribution | 4,00 | 4,00 | 4,00 | 4,00 | 4,00 | 4,00 | 4,00 | 4,00 | 4,00 | 4,00 | 4,00 | 4,00 |
| Other goods and services | [1,5-2,5] | [1,5-2,5] | [1,5-2,5] | [1,5-2,5] | [1,5-2,5] | [1,5-2,5] | [1,5-2,5] | [1,5-2,5] | [1,5-2,5] | [1,5-2,5] | [1,5-2,5] | [1,5-2,5] |
| Wages and social security contributions | [4-5] | [4-5] | [4-5] | [4-5] | [4-5] | [4-5] | [4-5] | [4-5] | [4-5] | [4-5] | [4-5] | [4-5] |
| Sub-Total | [9,5-11,5] | [9,5-11,5] | [9,5-11,5] | [9,5-11,5] | [9,5-11,5] | [9,5-11,5] | [9,5-11,5] | [9,5-11,5] | [9,5-11,5] | [9,5-11,5] | [9,5-11,5] | [9,5-11,5] |
| Launch costs | 0,34 | 0,18 | 0,04 | 0,00 | 0,00 | 0,00 | 0,00 | 0,00 | 0,00 | 0,00 | 0,00 | 0,00 |
| Total | [9,5-11,5] | [9,5-11,5] | [9,5-11,5] | [9,5-11,5] | [9,5-11,5] | [9,5-11,5] | [9,5-11,5] | [9,5-11,5] | [9,5-11,5] | [9,5-11,5] | [9,5-11,5] | [9,5-11,5] |
| Total revenue per Ryanair departing passenger | [14-20] | [14-20] | [14-20] | [14-20] | [14-20] | [14-20] | [14-20] | [14-20] | [14-20] | [14-20] | [14-20] | [14-20] |
| Total cost per Ryanair departing passenger | [9,5-11,5] | [9,5-11,5] | [9,5-11,5] | [9,5-11,5] | [9,5-11,5] | [9,5-11,5] | [9,5-11,5] | [9,5-11,5] | [9,5-11,5] | [9,5-11,5] | [9,5-11,5] | [9,5-11,5] |
| Incremental contribution per Ryanair passenger | [3-9] | [3-9] | [3-9] | [3-9] | [3-9] | [3-9] | [3-9] | [3-9] | [3-9] | [3-9] | [3-9] | [3-9] |
| Total incremental contribution of Ryanair (EUR million) | [3-11] | [3-11] | [3-11] | [3-11] | [3-11] | [3-11] | [3-11] | [3-11] | [3-11] | [3-11] | [3-11] | [3-11] |

(547)

Based on those assumptions, the Commission has determined that the relevant cash flows for analysing the profitability of the 2004 commercial framework are as follows:

Table 23

Table 23

Expected cash flows due to the 2004 measure

Expected cash flows due to the 2004 measure

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

Number of Ryanair departing passengers

1 033 941

1 223 941

1 223 941

1 223 941

1 223 941

1 223 941

1 223 941

1 223 941

1 223 941

1 223 941

1 223 941

1 223 941

Total number of departing passengers

1 099 944

1 292 535

1 295 174

1 346 381

1 397 587

1 448 794

1 500 000

1 500 000

1 500 000

1 500 000

1 500 000

1 500 000

Revenue per departing passenger

Passenger fee

7,00

7,00

7,50

7,50

8,00

8,00

8,00

8,00

8,00

8,00

8,00

8,00

Boarding fee

1,00

1,00

1,13

1,13

1,13

1,13

1,13

1,30

1,30

1,30

1,30

1,30

Handling

[1-1,3]

[1-1,3]

[1-1,3]

[1-1,3]

[1-1,3]

[1-1,3]

[1-1,3]

[1-1,3]

[1-1,3]

[1-1,3]

[1-1,3]

[1-1,3]

Fuel

[0,05-0,15]

[0,05-0,15]

[0,05-0,15]

[0,05-0,15]

[0,05-0,15]

[0,05-0,15]

[0,05-0,15]

[0,05-0,15]

[0,05-0,15]

[0,05-0,15]

[0,05-0,15]

[0,05-0,15]

Commercial concessions

[5-9]

[5-9]

[5-9]

[5-9]

[5-9]

[5-9]

[5-9]

[5-9]

[5-9]

[5-9]

[5-9]

[5-9]

Total

[14-20]

[14-20]

[14-20]

[14-20]

[14-20]

[14-20]

[14-20]

[14-20]

[14-20]

[14-20]

[14-20]

[14-20]

Costs per departing passenger

Promotional contribution

4,00

4,00

4,00

4,00

4,00

4,00

4,00

4,00

4,00

4,00

4,00

4,00

Other goods and services

[1,5-2,5]

[1,5-2,5]

[1,5-2,5]

[1,5-2,5]

[1,5-2,5]

[1,5-2,5]

[1,5-2,5]

[1,5-2,5]

[1,5-2,5]

[1,5-2,5]

[1,5-2,5]

[1,5-2,5]

Wages and social security contributions

[4-5]

[4-5]

[4-5]

[4-5]

[4-5]

[4-5]

[4-5]

[4-5]

[4-5]

[4-5]

[4-5]

[4-5]

Sub-Total

[9,5-11,5]

[9,5-11,5]

[9,5-11,5]

[9,5-11,5]

[9,5-11,5]

[9,5-11,5]

[9,5-11,5]

[9,5-11,5]

[9,5-11,5]

[9,5-11,5]

[9,5-11,5]

[9,5-11,5]

Launch costs

0,34

0,18

0,04

0,00

0,00

0,00

0,00

0,00

0,00

0,00

0,00

0,00

Total

[9,5-11,5]

[9,5-11,5]

[9,5-11,5]

[9,5-11,5]

[9,5-11,5]

[9,5-11,5]

[9,5-11,5]

[9,5-11,5]

[9,5-11,5]

[9,5-11,5]

[9,5-11,5]

[9,5-11,5]

Total revenue per Ryanair departing passenger

[14-20]

[14-20]

[14-20]

[14-20]

[14-20]

[14-20]

[14-20]

[14-20]

[14-20]

[14-20]

[14-20]

[14-20]

Total cost per Ryanair departing passenger

[9,5-11,5]

[9,5-11,5]

[9,5-11,5]

[9,5-11,5]

[9,5-11,5]

[9,5-11,5]

[9,5-11,5]

[9,5-11,5]

[9,5-11,5]

[9,5-11,5]

[9,5-11,5]

[9,5-11,5]

Incremental contribution per Ryanair passenger

[3-9]

[3-9]

[3-9]

[3-9]

[3-9]

[3-9]

[3-9]

[3-9]

[3-9]

[3-9]

[3-9]

[3-9]

Total incremental contribution of Ryanair (EUR million)

[3-11]

[3-11]

[3-11]

[3-11]

[3-11]

[3-11]

[3-11]

[3-11]

[3-11]

[3-11]

[3-11]

[3-11]

| (548) | These flows reveal a positive incremental contribution by Ryanair for all the years concerned. Accordingly, the commercial framework necessarily has a positive net present value, regardless of the weighted average cost of capital chosen. |
| --- | --- |

(548)

These flows reveal a positive incremental contribution by Ryanair for all the years concerned. Accordingly, the commercial framework necessarily has a positive net present value, regardless of the weighted average cost of capital chosen.

| (549) | However, by way of illustration, in order to calculate the NPV of the 2004 measure, the Commission has determined the discount rate to be used. This rate is the weighted average cost of capital of the entity granting the aid at the moment when the aid is granted. As indicated in recital 538, the Commission has used BSCA's weighted average cost of capital. Based on the following assumptions, the Commission has estimated that this rate was 9,7 %:






  — | financing solely through equity, |
| --- | --- | --- |

(549)

However, by way of illustration, in order to calculate the NPV of the 2004 measure, the Commission has determined the discount rate to be used. This rate is the weighted average cost of capital of the entity granting the aid at the moment when the aid is granted. As indicated in recital 538, the Commission has used BSCA's weighted average cost of capital. Based on the following assumptions, the Commission has estimated that this rate was 9,7 %:

—

financing solely through equity,

| — | a risk premium of 5,72 % (203), |
| --- | --- |

—

a risk premium of 5,72 % (203),

203

| — | a beta of 0,95 (203), |
| --- | --- |

—

a beta of 0,95 (203),

203

| — | a pre-tax cost of capital invested without risk between 4,2 % and 4,4 %. |
| --- | --- |

—

a pre-tax cost of capital invested without risk between 4,2 % and 4,4 %.

| (550) | The following table gives the result of the net present value calculation for the 2004 commercial framework, based on a discount rate of 9,7 %.

  Table 24


  Net present value (NPV) of the 2004 measure







  (EUR million) |
| --- | --- |
| | Discount rate of 9,7 % |
| NPV | 53 |

(550)

The following table gives the result of the net present value calculation for the 2004 commercial framework, based on a discount rate of 9,7 %.

Table 24

Table 24

Net present value (NPV) of the 2004 measure

Net present value (NPV) of the 2004 measure

(EUR million)

Discount rate of 9,7 %

NPV

53

This positive NPV confirms that the 2004 commercial framework could be expected to increase the profitability of the Region-SOWAER-BSCA.

| (551) | Point 66 of the aviation guidelines states that agreements must form part of an overall strategy expected to lead the airport to profitability at least in the long term. In this respect, during its meeting on 15 April 2004, BSCA's Board of Directors took note of the proposals made to Ryanair and instructed ‘the Chief Executive Officer to validate the BSCA business plan and measure any consequences of these proposals’. ‘The overall analysis must also confirm, in all respects, that the sustainability and future of the airport are not in any way jeopardised and that BSCA has sufficient room for manoeuvre in the long term in order to pursue its development’. During its next meeting on 6 May 2004, the Board of Directors noted that ‘the proposals recently discussed in Dublin with Ryanair representatives may, given the airport's foreseeable development, ensure that Charleroi keeps the Ryanair operations under the conditions of the original business plan ...’ As the original business plan was itself part of a long-term development strategy, the Commission therefore concludes that the 2004 commercial framework fell within the same strategy. |
| --- | --- |

(551)

Point 66 of the aviation guidelines states that agreements must form part of an overall strategy expected to lead the airport to profitability at least in the long term. In this respect, during its meeting on 15 April 2004, BSCA's Board of Directors took note of the proposals made to Ryanair and instructed ‘the Chief Executive Officer to validate the BSCA business plan and measure any consequences of these proposals’. ‘The overall analysis must also confirm, in all respects, that the sustainability and future of the airport are not in any way jeopardised and that BSCA has sufficient room for manoeuvre in the long term in order to pursue its development’. During its next meeting on 6 May 2004, the Board of Directors noted that ‘the proposals recently discussed in Dublin with Ryanair representatives may, given the airport's foreseeable development, ensure that Charleroi keeps the Ryanair operations under the conditions of the original business plan ...’ As the original business plan was itself part of a long-term development strategy, the Commission therefore concludes that the 2004 commercial framework fell within the same strategy.

| (552) | As the market economy operator test is satisfied, the 2004 commercial framework does not constitute State aid. |
| --- | --- |

(552)

As the market economy operator test is satisfied, the 2004 commercial framework does not constitute State aid.

(iii)   2005 contract

| (553) | In order to determine whether the 2005 contract contributed, from an ex ante point of view, to the profitability of the entity having granted the aid, in accordance with point 63 of the aviation guidelines, the Commission has assessed whether the NPV of the 2005 contract was positive for the entity Region-SOWAER-BSCA. The counterfactual scenario is no longer having any agreement with Ryanair after the expiry, in March 2006, of the BSCA letter to Ryanair of 24 June 2004. |
| --- | --- |

(553)

In order to determine whether the 2005 contract contributed, from an ex ante point of view, to the profitability of the entity having granted the aid, in accordance with point 63 of the aviation guidelines, the Commission has assessed whether the NPV of the 2005 contract was positive for the entity Region-SOWAER-BSCA. The counterfactual scenario is no longer having any agreement with Ryanair after the expiry, in March 2006, of the BSCA letter to Ryanair of 24 June 2004.

ex ante

| (554) | In order to calculate the NPV, the Commission has recreated a business plan for the entity Region-SOWAER-BSCA, which contains only the revenue and costs of the economic activities associated with the 2005 contract. To this end, the Commission started with BSCA's general business plan of 24 January 2004, which, according to Belgium, is the business plan prepared in the wake of the 2004 decision with a view to confirming the new proposal to be made to Ryanair, and which led to the proposal sent to Ryanair on 9 December 2005 (204). The Commission then applied the same methodology as that used for the 2001 contracts and described in recital 525. |
| --- | --- |

(554)

In order to calculate the NPV, the Commission has recreated a business plan for the entity Region-SOWAER-BSCA, which contains only the revenue and costs of the economic activities associated with the 2005 contract. To this end, the Commission started with BSCA's general business plan of 24 January 2004, which, according to Belgium, is the business plan prepared in the wake of the 2004 decision with a view to confirming the new proposal to be made to Ryanair, and which led to the proposal sent to Ryanair on 9 December 2005 (204). The Commission then applied the same methodology as that used for the 2001 contracts and described in recital 525.

204

| (555) | In order to determine the incremental costs attributable to the 2005 contract, the Commission in particular examined whether the Region, SOWAER or BSCA were expected to make certain investments due to the 2005 contract. Under this contract, the group consisting of the Region-SOWAER-BSCA was not required to make new investments. The investments under the 2002 SOWAER/BSCA agreement and the 2003 investment programme had already been decided and the work had started. In addition, as indicated in recital 533, the investment programme included in the 2002 SOWAER/BSCA agreement would probably have been adopted even in the absence of the contracts with Ryanair. The same is true for the 2003 revision of the investment programme, which formed part of the same logic to develop the airport with, if possible, a diverse customer base in terms of airlines. The Commission therefore concludes that it is not relevant to attribute incremental investment costs to the 2005 contract. |
| --- | --- |

(555)

In order to determine the incremental costs attributable to the 2005 contract, the Commission in particular examined whether the Region, SOWAER or BSCA were expected to make certain investments due to the 2005 contract. Under this contract, the group consisting of the Region-SOWAER-BSCA was not required to make new investments. The investments under the 2002 SOWAER/BSCA agreement and the 2003 investment programme had already been decided and the work had started. In addition, as indicated in recital 533, the investment programme included in the 2002 SOWAER/BSCA agreement would probably have been adopted even in the absence of the contracts with Ryanair. The same is true for the 2003 revision of the investment programme, which formed part of the same logic to develop the airport with, if possible, a diverse customer base in terms of airlines. The Commission therefore concludes that it is not relevant to attribute incremental investment costs to the 2005 contract.

| (556) | Based on those assumptions, the Commission has determined that the relevant cash flows for analysing the profitability of the 2005 measure are as follows:

  Table 25


  Expected cash flows due to the 2005 measure | 2006 | 2007 | 2008 | 2009 | 2010 | 2011 | 2012 | 2013 | 2014 | 2015 |
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| Number of Ryanair departing passengers | 1 155 498 | 1 258 976 | 1 499 999 | 1 749 999 | 1 749 999 | 1 749 999 | 1 749 999 | 1 749 999 | 1 749 999 | 1 749 999 |
| Total number of departing passengers | 1 226 732 | 1 381 415 | 1 644 635 | 1 894 635 | 1 894 635 | 1 894 635 | 1 894 635 | 1 894 635 | 1 894 635 | 1 894 635 |
| Revenue per departing passenger |
| Passenger fee | 2,33 | 0,00 | 0,00 | 0,00 | 0,00 | 0,00 | 0,00 | 0,00 | 0,00 | 0,00 |
| Landing fee | [1-1,2] | [1-1,2] | [1-1,2] | [1-1,2] | [1-1,2] | [1-1,2] | [1-1,2] | [1-1,2] | [1-1,2] | [1-1,2] |
| Commercial concessions | [6-10] | [6-10] | [6-10] | [6-10] | [6-10] | [6-10] | [6-10] | [6-10] | [6-10] | [6-10] |
| Handling | [3-6] | [3-6] | [3-6] | [3-6] | [3-6] | [3-6] | [3-6] | [3-6] | [3-6] | [3-6] |
| Fuel | [0,05-0,15] | [0,05-0,15] | [0,05-0,15] | [0,05-0,15] | [0,05-0,15] | [0,05-0,15] | [0,05-0,15] | [0,05-0,15] | [0,05-0,15] | [0,05-0,15] |
| Infrastructure access charge | [0-0,5] | [0-0,5] | [0-0,5] | [0-0,5] | [0-0,5] | [0-0,5] | [0-0,5] | [0-0,5] | [0-0,5] | [0-0,5] |
| Total | [12-17] | [12-17] | [12-17] | [12-17] | [12-17] | [12-17] | [12-17] | [12-17] | [12-17] | [12-17] |
| Costs per departing passenger |
| Promotional contribution | 0,92 | 0,00 | 0,00 | 0,00 | 0,00 | 0,00 | 0,00 | 0,00 | 0,00 | 0,00 |
| Duty free shop purchases | | | | | | | | | | |
| Environment fund | | | | | | | | | | |
| Other goods and services | [1,5-2,5] | [1,5-2,5] | [1,5-2,5] | [1,5-2,5] | [1,5-2,5] | [1,5-2,5] | [1,5-2,5] | [1,5-2,5] | [1,5-2,5] | [1,5-2,5] |
| Wages and social security contributions | [4-5] | [4-5] | [4-5] | [4-5] | [4-5] | [4-5] | [4-5] | [4-5] | [4-5] | [4-5] |
| Launch costs | 0,05 | | | | | | | | | |
| Sub-Total | [5,5-7,5] | [5,5-7,5] | [5,5-7,5] | [5,5-7,5] | [5,5-7,5] | [5,5-7,5] | [5,5-7,5] | [5,5-7,5] | [5,5-7,5] | [5,5-7,5] |
| Fixed costs per passenger | [0-0,1] | 0,00 | 0,00 | 0,00 | 0,00 | 0,00 | 0,00 | 0,00 | 0,00 | 0,00 |
| Total costs per departing passenger | [5,5-7,5] | [5,5-7,5] | [5,5-7,5] | [5,5-7,5] | [5,5-7,5] | [5,5-7,5] | [5,5-7,5] | [5,5-7,5] | [5,5-7,5] | [5,5-7,5] |
| Total incremental contribution per Ryanair departing passenger before investment (EUR) | [5-10] | [5-10] | [5-10] | [5-10] | [5-10] | [5-10] | [5-10] | [5-10] | [5-10] | [5-10] |
| Total incremental contribution of Ryanair before investment (EUR million) | [6-17] | [6-17] | [6-17] | [6-17] | [6-17] | [6-17] | [6-17] | [6-17] | [6-17] | [6-17] |

(556)

Based on those assumptions, the Commission has determined that the relevant cash flows for analysing the profitability of the 2005 measure are as follows:

Table 25

Table 25

Expected cash flows due to the 2005 measure

Expected cash flows due to the 2005 measure

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

Number of Ryanair departing passengers

1 155 498

1 258 976

1 499 999

1 749 999

1 749 999

1 749 999

1 749 999

1 749 999

1 749 999

1 749 999

Total number of departing passengers

1 226 732

1 381 415

1 644 635

1 894 635

1 894 635

1 894 635

1 894 635

1 894 635

1 894 635

1 894 635

Revenue per departing passenger

Passenger fee

2,33

0,00

0,00

0,00

0,00

0,00

0,00

0,00

0,00

0,00

Landing fee

[1-1,2]

[1-1,2]

[1-1,2]

[1-1,2]

[1-1,2]

[1-1,2]

[1-1,2]

[1-1,2]

[1-1,2]

[1-1,2]

Commercial concessions

[6-10]

[6-10]

[6-10]

[6-10]

[6-10]

[6-10]

[6-10]

[6-10]

[6-10]

[6-10]

Handling

[3-6]

[3-6]

[3-6]

[3-6]

[3-6]

[3-6]

[3-6]

[3-6]

[3-6]

[3-6]

Fuel

[0,05-0,15]

[0,05-0,15]

[0,05-0,15]

[0,05-0,15]

[0,05-0,15]

[0,05-0,15]

[0,05-0,15]

[0,05-0,15]

[0,05-0,15]

[0,05-0,15]

Infrastructure access charge

[0-0,5]

[0-0,5]

[0-0,5]

[0-0,5]

[0-0,5]

[0-0,5]

[0-0,5]

[0-0,5]

[0-0,5]

[0-0,5]

Total

[12-17]

[12-17]

[12-17]

[12-17]

[12-17]

[12-17]

[12-17]

[12-17]

[12-17]

[12-17]

Costs per departing passenger

Promotional contribution

0,92

0,00

0,00

0,00

0,00

0,00

0,00

0,00

0,00

0,00

Duty free shop purchases

Environment fund

Other goods and services

[1,5-2,5]

[1,5-2,5]

[1,5-2,5]

[1,5-2,5]

[1,5-2,5]

[1,5-2,5]

[1,5-2,5]

[1,5-2,5]

[1,5-2,5]

[1,5-2,5]

Wages and social security contributions

[4-5]

[4-5]

[4-5]

[4-5]

[4-5]

[4-5]

[4-5]

[4-5]

[4-5]

[4-5]

Launch costs

0,05

Sub-Total

[5,5-7,5]

[5,5-7,5]

[5,5-7,5]

[5,5-7,5]

[5,5-7,5]

[5,5-7,5]

[5,5-7,5]

[5,5-7,5]

[5,5-7,5]

[5,5-7,5]

Fixed costs per passenger

[0-0,1]

0,00

0,00

0,00

0,00

0,00

0,00

0,00

0,00

0,00

Total costs per departing passenger

[5,5-7,5]

[5,5-7,5]

[5,5-7,5]

[5,5-7,5]

[5,5-7,5]

[5,5-7,5]

[5,5-7,5]

[5,5-7,5]

[5,5-7,5]

[5,5-7,5]

Total incremental contribution per Ryanair departing passenger before investment (EUR)

[5-10]

[5-10]

[5-10]

[5-10]

[5-10]

[5-10]

[5-10]

[5-10]

[5-10]

[5-10]

Total incremental contribution of Ryanair before investment (EUR million)

[6-17]

[6-17]

[6-17]

[6-17]

[6-17]

[6-17]

[6-17]

[6-17]

[6-17]

[6-17]

| (557) | These flows reveal a positive incremental contribution by Ryanair for all the years concerned. Accordingly, the 2005 contract necessarily has a positive net present value, regardless of the weighted average cost of capital chosen. |
| --- | --- |

(557)

These flows reveal a positive incremental contribution by Ryanair for all the years concerned. Accordingly, the 2005 contract necessarily has a positive net present value, regardless of the weighted average cost of capital chosen.

| (558) | However, by way of illustration, in order to calculate the NPV of the 2005 measure, the Commission has determined the discount rate to be used. This rate is the weighted average cost of capital of the entity granting the aid at the moment when the aid is granted. As indicated in recital 538, the Commission has used BSCA's weighted average cost of capital. Based on the following assumptions, the Commission has estimated that this rate was 9,3 %:






  — | financing solely through equity, |
| --- | --- | --- |

(558)

However, by way of illustration, in order to calculate the NPV of the 2005 measure, the Commission has determined the discount rate to be used. This rate is the weighted average cost of capital of the entity granting the aid at the moment when the aid is granted. As indicated in recital 538, the Commission has used BSCA's weighted average cost of capital. Based on the following assumptions, the Commission has estimated that this rate was 9,3 %:

—

financing solely through equity,

| — | a risk premium of 5,74 % (205), |
| --- | --- |

—

a risk premium of 5,74 % (205),

205

| — | a beta of 0,97 (205), |
| --- | --- |

—

a beta of 0,97 (205),

205

| — | a pre-tax cost of capital invested without risk between 3,5 % and 3,9 %. |
| --- | --- |

—

a pre-tax cost of capital invested without risk between 3,5 % and 3,9 %.

| (559) | The following table gives the result of the net present value calculation for the 2005 contract, based on a discount rate of 9,3 %.

  Table 26


  Net present value (NPV) of the 2005 measure







  (EUR million) |
| --- | --- |
| | Discount rate of 9,3 % |
| NPV | 80,6 |

(559)

The following table gives the result of the net present value calculation for the 2005 contract, based on a discount rate of 9,3 %.

Table 26

Table 26

Net present value (NPV) of the 2005 measure

Net present value (NPV) of the 2005 measure

(EUR million)

Discount rate of 9,3 %

NPV

80,6

This positive NPV shows that the 2005 contract could be expected to increase the profitability of the Region-SOWAER-BSCA.

| (560) | As regards the condition stipulated by point 66 of the aviation guidelines, according to which the agreement must form part of an overall strategy expected to lead the airport to profitability, a note of 8 December 2005, intended to present BSCA's commercial proposal to Ryanair to BSCA's Board of Directors, indicates that the proposal is based on a business plan for 2006-2015. The Board of Directors is asked to ensure that this plan results in an acceptable level of profitability that is sufficient to absorb the fluctuations expected in the future due to budget forecasts (a footnote indicates that the business plan has been prepared using approximate estimates of costs and revenues). BSCA points out that the charges applied for ground handling services ‘must cover the costs and ensure a reasonable profit margin’. Later on in the note, BSCA states that the ‘costs associated with ground handling services and their control represent the key to the proposal made to Ryanair. A significant part of these costs is fixed or semi-variable and the cost per passenger is therefore linked to the volume of passengers handled. A minimum number of rotations is specified in the commercial proposal (with Ryanair) and failure to meet this minimum would undoubtedly lead to a loss in the ground handling services for BSCA. Penalties are specified in order to overcome this loss’. The Commission concludes from this information that, although BSCA's commercial proposal to Ryanair entailed certain risks in the eyes of BSCA — particularly the risk that the level of profitability would be insufficient if Ryanair's traffic was less than expected — this proposal was, however, based on a development strategy through which BSCA intended, due to the traffic provided by Ryanair, to reduce its costs per passenger and thus ensure a sufficient profit margin. |
| --- | --- |

(560)

As regards the condition stipulated by point 66 of the aviation guidelines, according to which the agreement must form part of an overall strategy expected to lead the airport to profitability, a note of 8 December 2005, intended to present BSCA's commercial proposal to Ryanair to BSCA's Board of Directors, indicates that the proposal is based on a business plan for 2006-2015. The Board of Directors is asked to ensure that this plan results in an acceptable level of profitability that is sufficient to absorb the fluctuations expected in the future due to budget forecasts (a footnote indicates that the business plan has been prepared using approximate estimates of costs and revenues). BSCA points out that the charges applied for ground handling services ‘must cover the costs and ensure a reasonable profit margin’. Later on in the note, BSCA states that the ‘costs associated with ground handling services and their control represent the key to the proposal made to Ryanair. A significant part of these costs is fixed or semi-variable and the cost per passenger is therefore linked to the volume of passengers handled. A minimum number of rotations is specified in the commercial proposal (with Ryanair) and failure to meet this minimum would undoubtedly lead to a loss in the ground handling services for BSCA. Penalties are specified in order to overcome this loss’. The Commission concludes from this information that, although BSCA's commercial proposal to Ryanair entailed certain risks in the eyes of BSCA — particularly the risk that the level of profitability would be insufficient if Ryanair's traffic was less than expected — this proposal was, however, based on a development strategy through which BSCA intended, due to the traffic provided by Ryanair, to reduce its costs per passenger and thus ensure a sufficient profit margin.

| (561) | As the market economy operator test is satisfied, the 2005 contract does not constitute State aid. |
| --- | --- |

(561)

As the market economy operator test is satisfied, the 2005 contract does not constitute State aid.

(iv)   Sale of BSCA shares in Promocy to Ryanair

| (562) | On 31 March 2010 BSCA sold its 50 % holding in Promocy to Ryanair. BSCA sold the shares at their book value (i.e. EUR 100 per share) for a total amount of EUR 31 100. All BSCA's risks and obligations as a Promocy shareholder were transferred to Ryanair. |
| --- | --- |

(562)

On 31 March 2010 BSCA sold its 50 % holding in Promocy to Ryanair. BSCA sold the shares at their book value (i.e. EUR 100 per share) for a total amount of EUR 31 100. All BSCA's risks and obligations as a Promocy shareholder were transferred to Ryanair.

| (563) | At the time of this sale, Promocy's cash resources totalled EUR 261 073 (balance of the assets, having deducted the capital and statutory reserve) (206). BSCA therefore sold its shares in Promocy to Ryanair for an amount that was EUR 99 436 less than half of Promocy's cash resources at the time of the sale. |
| --- | --- |

(563)

At the time of this sale, Promocy's cash resources totalled EUR 261 073 (balance of the assets, having deducted the capital and statutory reserve) (206). BSCA therefore sold its shares in Promocy to Ryanair for an amount that was EUR 99 436 less than half of Promocy's cash resources at the time of the sale.

206

| (564) | However, Belgium stresses that there was a tax dispute ongoing at the time of the sale. BSCA would have had to assume half of this liability if it had retained its shares in Promocy. That is why, according to Belgium, BSCA decided to sell its shares at their book value. |
| --- | --- |

(564)

However, Belgium stresses that there was a tax dispute ongoing at the time of the sale. BSCA would have had to assume half of this liability if it had retained its shares in Promocy. That is why, according to Belgium, BSCA decided to sell its shares at their book value.

| (565) | Belgium sent a memorandum on 24 February 2010 to BSCA's Finance Director, for the attention of the Board of Directors, recommending that it approve the sale by BSCA of its shares in Promocy at their book value. This memorandum highlighted that Promocy had ceased its activities on the conclusion in 2005 of the new contract with Ryanair. Following the opening of an investigation and then legal proceedings in relation to the aforementioned dispute, it had been decided to leave Promocy dormant at that time. Subsequently, given the lack of development in the legal case, BSCA and Ryanair had decided to wind up Promocy. According to the memorandum, BSCA therefore proposed to Ryanair to split the net assets, which at the time were worth approximately EUR 350 000. Ryanair indicated that it would prefer to ‘empty’ the net assets through some final marketing operations. Given the existence of the legal proceedings, BSCA was opposed to resuming marketing operations. In order to break the deadlock, BSCA proposed to Ryanair that it would sell the latter its shares at their book value, i.e. EUR 31 100, based on a signed agreement, with BSCA's immediate resignation as a director of Promocy. The memorandum indicated that BSCA's auditors and legal advisers had given their agreement, ‘aware, as we all are, that this undoubtedly is the only way out’. The author of the memorandum recommended that the Board of Directors approve the sale, which it did unanimously. |
| --- | --- |

(565)

Belgium sent a memorandum on 24 February 2010 to BSCA's Finance Director, for the attention of the Board of Directors, recommending that it approve the sale by BSCA of its shares in Promocy at their book value. This memorandum highlighted that Promocy had ceased its activities on the conclusion in 2005 of the new contract with Ryanair. Following the opening of an investigation and then legal proceedings in relation to the aforementioned dispute, it had been decided to leave Promocy dormant at that time. Subsequently, given the lack of development in the legal case, BSCA and Ryanair had decided to wind up Promocy. According to the memorandum, BSCA therefore proposed to Ryanair to split the net assets, which at the time were worth approximately EUR 350 000. Ryanair indicated that it would prefer to ‘empty’ the net assets through some final marketing operations. Given the existence of the legal proceedings, BSCA was opposed to resuming marketing operations. In order to break the deadlock, BSCA proposed to Ryanair that it would sell the latter its shares at their book value, i.e. EUR 31 100, based on a signed agreement, with BSCA's immediate resignation as a director of Promocy. The memorandum indicated that BSCA's auditors and legal advisers had given their agreement, ‘aware, as we all are, that this undoubtedly is the only way out’. The author of the memorandum recommended that the Board of Directors approve the sale, which it did unanimously.

| (566) | The Commission considers that Belgium has provided sufficient information concerning the existence and extent of the dispute, having sent the Commission the tax correction notices (207). |
| --- | --- |

(566)

The Commission considers that Belgium has provided sufficient information concerning the existence and extent of the dispute, having sent the Commission the tax correction notices (207).

207

| (567) | As a result, the Commission takes the view that BSCA acted as a market economy operator by opposing the resumption of marketing operations and by proposing to sell to Ryanair its shares at their book value in order to break the deadlock. The measure does not therefore constitute State aid. |
| --- | --- |

(567)

As a result, the Commission takes the view that BSCA acted as a market economy operator by opposing the resumption of marketing operations and by proposing to sell to Ryanair its shares at their book value in order to break the deadlock. The measure does not therefore constitute State aid.

(v)   2010 amendment

| (568) | In Section 6.2.1, the Commission showed that, when the 2010 amendment was concluded, BSCA's resources were not public resources and that, in addition, BSCA's decision to conclude the 2010 amendment was not imputable to the State. |
| --- | --- |

(568)

In Section 6.2.1, the Commission showed that, when the 2010 amendment was concluded, BSCA's resources were not public resources and that, in addition, BSCA's decision to conclude the 2010 amendment was not imputable to the State.

| (569) | However, if it were to be considered that this Commission conclusion is not founded, that the 2010 amendment was in fact granted through State resources, and that the decision to grant the 2010 amendment was imputable to the State, it should be examined whether the 2010 amendment gave an advantage to Ryanair. |
| --- | --- |

(569)

However, if it were to be considered that this Commission conclusion is not founded, that the 2010 amendment was in fact granted through State resources, and that the decision to grant the 2010 amendment was imputable to the State, it should be examined whether the 2010 amendment gave an advantage to Ryanair.

| (570) | In this case, it would be relevant to consider that the entity granting the measure is the Region-SOWAER-BSCA. It should therefore be examined whether the Region-SOWAER-BSCA acted as market economy operators by concluding the 2010 amendment. |
| --- | --- |

(570)

In this case, it would be relevant to consider that the entity granting the measure is the Region-SOWAER-BSCA. It should therefore be examined whether the Region-SOWAER-BSCA acted as market economy operators by concluding the 2010 amendment.

| (571) | The 2010 amendment stipulates:






  — | a general exemption from the fee for passengers with reduced mobility (hereinafter ‘PRM’), under which Ryanair will pay [10-30] euro cents per passenger for the year from 1 February 2009 to 31 January 2010; moreover, the terms of indexation of the PRM fee provide for a reduction in this fee proportional to the increase in traffic generated by Ryanair (208); |
| --- | --- | --- |

(571)

The 2010 amendment stipulates:

—

a general exemption from the fee for passengers with reduced mobility (hereinafter ‘PRM’), under which Ryanair will pay [10-30] euro cents per passenger for the year from 1 February 2009 to 31 January 2010; moreover, the terms of indexation of the PRM fee provide for a reduction in this fee proportional to the increase in traffic generated by Ryanair (208);

208

| — | a reduction of [10-50] euro cents per Ryanair passenger in the ground handling fee. |
| --- | --- |

—

a reduction of [10-50] euro cents per Ryanair passenger in the ground handling fee.

| (572) | According to Belgium, this amendment was the result of negotiations between BSCA and Ryanair following the reduction for BSCA in the costs of ground handling services due to the introduction by Ryanair of new procedures, such as charges for hold baggage (which considerably reduced the number of bags to be checked in) and compulsory online check-in of bags. According to Belgium, BSCA decided to share with Ryanair the benefit of this cost reduction in return for Ryanair's commitment to base four additional aircraft at Charleroi airport. |
| --- | --- |

(572)

According to Belgium, this amendment was the result of negotiations between BSCA and Ryanair following the reduction for BSCA in the costs of ground handling services due to the introduction by Ryanair of new procedures, such as charges for hold baggage (which considerably reduced the number of bags to be checked in) and compulsory online check-in of bags. According to Belgium, BSCA decided to share with Ryanair the benefit of this cost reduction in return for Ryanair's commitment to base four additional aircraft at Charleroi airport.

| (573) | The signature of the amendment of 6 December 2010 stemmed from the following circumstances:






  — | Ryanair introduced new procedures, such as compulsory online check-in and charges for hold baggage, thus reducing the number of bags to be checked in and allowing BSCA to make savings. |
| --- | --- | --- |

(573)

The signature of the amendment of 6 December 2010 stemmed from the following circumstances:

—

Ryanair introduced new procedures, such as compulsory online check-in and charges for hold baggage, thus reducing the number of bags to be checked in and allowing BSCA to make savings.

| — | In May 2009 BSCA discussed with Ryanair a possible increase in the number of aircraft and a reduction in the ground handling fee following Ryanair's introduction of the new procedures. |
| --- | --- |

—

In May 2009 BSCA discussed with Ryanair a possible increase in the number of aircraft and a reduction in the ground handling fee following Ryanair's introduction of the new procedures.

| — | On 30 November 2009 Ryanair wrote to BSCA (209) proposing to conclude an agreement on a reduction in the ground handling fee of [10-50] euro cents, corresponding to half the savings made by BSCA following Ryanair's introduction of the new procedures. Ryanair also indicated that it did not want to pay anything for PRMs. In addition, Ryanair confirmed its desire to expand at Charleroi. |
| --- | --- |

—

On 30 November 2009 Ryanair wrote to BSCA (209) proposing to conclude an agreement on a reduction in the ground handling fee of [10-50] euro cents, corresponding to half the savings made by BSCA following Ryanair's introduction of the new procedures. Ryanair also indicated that it did not want to pay anything for PRMs. In addition, Ryanair confirmed its desire to expand at Charleroi.

209

| — | On 2 December 2009 the Chairman of BSCA wrote to Ryanair stating that, before examining whether Ryanair could be allocated new slots, he would submit, to BSCA's Board of Directors, Ryanair's request for a reduction in the ground handling fee. |
| --- | --- |

—

On 2 December 2009 the Chairman of BSCA wrote to Ryanair stating that, before examining whether Ryanair could be allocated new slots, he would submit, to BSCA's Board of Directors, Ryanair's request for a reduction in the ground handling fee.

| — | According to Belgium, this resulted in an oral agreement on the expansion and cost reduction (Belgium indicates that there was no written contract at this stage, given the need to submit the matter to the Board of Directors and the ongoing discussions on PRMs). |
| --- | --- |

—

According to Belgium, this resulted in an oral agreement on the expansion and cost reduction (Belgium indicates that there was no written contract at this stage, given the need to submit the matter to the Board of Directors and the ongoing discussions on PRMs).

| — | On 8 January 2010 BSCA's Finance Director presented the Board of Directors with an internal note and financial documents aimed at proving the merits of accommodating four additional aircraft under the agreed conditions (i.e. a reduction of [10-50] euro cents per passenger for handling). These documents consisted of:






  — | a projected income statement showing the impact on BSCA's results of Ryanair basing four additional aircraft at Charleroi; |
| --- | --- | --- |

—

On 8 January 2010 BSCA's Finance Director presented the Board of Directors with an internal note and financial documents aimed at proving the merits of accommodating four additional aircraft under the agreed conditions (i.e. a reduction of [10-50] euro cents per passenger for handling). These documents consisted of:

—

a projected income statement showing the impact on BSCA's results of Ryanair basing four additional aircraft at Charleroi;

| — | a spreadsheet enabling BSCA to determine its room for negotiation in granting an additional discount to Ryanair on the ground handling fee, while ensuring a sufficient level of profitability for the ground handling services and increased revenue from non-aviation activities (Duty Free Shop, Horeca, car parks, bus, etc.). |
| --- | --- |

—

a spreadsheet enabling BSCA to determine its room for negotiation in granting an additional discount to Ryanair on the ground handling fee, while ensuring a sufficient level of profitability for the ground handling services and increased revenue from non-aviation activities (Duty Free Shop, Horeca, car parks, bus, etc.).

| — | On 24 February 2010 Ryanair finally agreed to pay a PRM fee of [10-30] euro cents per departing passenger, subject to this sum being reduced in subsequent years in proportion to the growth in Ryanair's traffic at Charleroi. |
| --- | --- |

—

On 24 February 2010 Ryanair finally agreed to pay a PRM fee of [10-30] euro cents per departing passenger, subject to this sum being reduced in subsequent years in proportion to the growth in Ryanair's traffic at Charleroi.

| — | On 29 April 2010 the draft amendment was discussed by BSCA's Board of Directors. The Chief Executive Officer of BSCA indicated that the amendment was already being applied (arrival of four aircraft for the summer 2010 season). |
| --- | --- |

—

On 29 April 2010 the draft amendment was discussed by BSCA's Board of Directors. The Chief Executive Officer of BSCA indicated that the amendment was already being applied (arrival of four aircraft for the summer 2010 season).

| — | On 6 December 2010 BSCA and Ryanair endorsed the 2010 amendment, which was already being applied. |
| --- | --- |

—

On 6 December 2010 BSCA and Ryanair endorsed the 2010 amendment, which was already being applied.

1.   With regard to the reduction of [10-50] euro cents in the ground handling fee, granted by BSCA

| (574) | Firstly, the Commission stresses that this reduction represented only half of the savings made by BSCA due to the procedures introduced by Ryanair. The Commission also notes that Ryanair knew (210) the extent of the savings made by BSCA, which made the negotiations more difficult for BSCA. |
| --- | --- |

(574)

Firstly, the Commission stresses that this reduction represented only half of the savings made by BSCA due to the procedures introduced by Ryanair. The Commission also notes that Ryanair knew (210) the extent of the savings made by BSCA, which made the negotiations more difficult for BSCA.

210

| (575) | Secondly, the Commission admits that it was even more difficult for BSCA to refuse this reduction given that Ryanair was planning to base four additional aircraft at Charleroi. Knowing that the Ryanair traffic accounted for 3 289 725 passengers in 2009 and assuming that half of those passengers were departing passengers, the reduction of [10-50] euro cents per departing passenger represented a loss of revenue for BSCA of EUR [500 000-2 000 000], i.e. well below the increase in the EBIT (211) of EUR [3-7] million that could be expected from the four additional aircraft according to BSCA's calculations (212). |
| --- | --- |

(575)

Secondly, the Commission admits that it was even more difficult for BSCA to refuse this reduction given that Ryanair was planning to base four additional aircraft at Charleroi. Knowing that the Ryanair traffic accounted for 3 289 725 passengers in 2009 and assuming that half of those passengers were departing passengers, the reduction of [10-50] euro cents per departing passenger represented a loss of revenue for BSCA of EUR [500 000-2 000 000], i.e. well below the increase in the EBIT (211) of EUR [3-7] million that could be expected from the four additional aircraft according to BSCA's calculations (212).

211

212

2.   With regard to the reduction of the PRM fee to [10-30] euro cents, granted to Ryanair

| (576) | Belgium maintains that Regulation (EC) No 1107/2006 of the European Parliament and of the Council (213) provides for the possibility (and not the obligation) of applying a PRM fee to recover the costs generated for airports (214). According to Belgium, it was extremely difficult for BSCA to impose this fee on airlines. BSCA tried to obtain a contribution from Ryanair towards the cost of organising the PRM service, but Ryanair always refused to pay the fee envisaged by BSCA, because it disputed the amount for a number of reasons (215). According to Belgium, the 2010 amendment finally enabled an agreement to be reached with Ryanair on the payment of a PRM fee, albeit at a lower amount than the standard fee, but at least not zero. |
| --- | --- |

(576)

Belgium maintains that Regulation (EC) No 1107/2006 of the European Parliament and of the Council (213) provides for the possibility (and not the obligation) of applying a PRM fee to recover the costs generated for airports (214). According to Belgium, it was extremely difficult for BSCA to impose this fee on airlines. BSCA tried to obtain a contribution from Ryanair towards the cost of organising the PRM service, but Ryanair always refused to pay the fee envisaged by BSCA, because it disputed the amount for a number of reasons (215). According to Belgium, the 2010 amendment finally enabled an agreement to be reached with Ryanair on the payment of a PRM fee, albeit at a lower amount than the standard fee, but at least not zero.

213

214

215

| (577) | The Commission notes that Ryanair did not pay the PRM fee before 2010 and that BSCA seemed incapable of imposing the payment of this fee on Ryanair. An agreement in this respect, albeit for a reduced amount, therefore improved BSCA's profitability. |
| --- | --- |

(577)

The Commission notes that Ryanair did not pay the PRM fee before 2010 and that BSCA seemed incapable of imposing the payment of this fee on Ryanair. An agreement in this respect, albeit for a reduced amount, therefore improved BSCA's profitability.

| (578) | The Commission also notes that a reduction to [10-30] euro cents per departing passenger represented a loss of revenue for BSCA of approximately EUR [100 000-300 000] (216). Added to the reduction of [10-50] euro cents per departing passenger in the ground handling fee, BSCA's total loss of revenue amounted to approximately EUR [0,6-2,3] million, i.e. well below the increase in the EBIT (217) of EUR [3-7] million that could be expected from the four additional aircraft according to BSCA's calculations (218). |
| --- | --- |

(578)

The Commission also notes that a reduction to [10-30] euro cents per departing passenger represented a loss of revenue for BSCA of approximately EUR [100 000-300 000] (216). Added to the reduction of [10-50] euro cents per departing passenger in the ground handling fee, BSCA's total loss of revenue amounted to approximately EUR [0,6-2,3] million, i.e. well below the increase in the EBIT (217) of EUR [3-7] million that could be expected from the four additional aircraft according to BSCA's calculations (218).

216

217

218

| (579) | With regard to the condition stipulated by point 66 of the aviation guidelines, according to which the agreement must form part of an overall strategy expected to lead the airport to profitability, the 2010 amendment appears to be a relatively limited adjustment to the 2005 agreement — and not a reworking of that agreement — that was itself based on a development strategy through which BSCA, due to the traffic provided by Ryanair, expected to increase its aviation and non-aviation revenue, while reducing its costs per passenger, thus ensuring a sufficient profit margin in the more or less long term. |
| --- | --- |

(579)

With regard to the condition stipulated by point 66 of the aviation guidelines, according to which the agreement must form part of an overall strategy expected to lead the airport to profitability, the 2010 amendment appears to be a relatively limited adjustment to the 2005 agreement — and not a reworking of that agreement — that was itself based on a development strategy through which BSCA, due to the traffic provided by Ryanair, expected to increase its aviation and non-aviation revenue, while reducing its costs per passenger, thus ensuring a sufficient profit margin in the more or less long term.

| (580) | If it were to be considered that the 2010 amendment was granted through State resources and that the decision to grant the 2010 amendment was imputable to the State, then it should be concluded that the Region-SOWAER-BSCA acted as market economy operators in concluding the 2010 amendment and that the latter does not constitute State aid. |
| --- | --- |

(580)

If it were to be considered that the 2010 amendment was granted through State resources and that the decision to grant the 2010 amendment was imputable to the State, then it should be concluded that the Region-SOWAER-BSCA acted as market economy operators in concluding the 2010 amendment and that the latter does not constitute State aid.

6.2.3.   
  Conclusion on the existence of State aid granted to Ryanair

Conclusion on the existence of State aid granted to Ryanair

| (581) | The Commission concludes that:






  — | the 2010 amendment was not granted through State resources and that the decision to grant the 2010 amendment was not imputable to the State, |
| --- | --- | --- |

(581)

The Commission concludes that:

—

the 2010 amendment was not granted through State resources and that the decision to grant the 2010 amendment was not imputable to the State,

| — | (i) the 2001 agreements, (ii) the Ministerial Order of 11 June 2004 and the BSCA letter of 24 June 2004, (iii) the 2005 amendment and (iv) the sale by BSCA of its shares in Promocy satisfy the market economy operator test. |
| --- | --- |

—

(i) the 2001 agreements, (ii) the Ministerial Order of 11 June 2004 and the BSCA letter of 24 June 2004, (iii) the 2005 amendment and (iv) the sale by BSCA of its shares in Promocy satisfy the market economy operator test.

The measures granted to Ryanair do not therefore constitute State aid.

6.3.   Compatibility with the internal market of the aid granted to BSCA

Compatibility with the internal market of the aid granted to BSCA

| (582) | As concluded in recital 487, the 2002 agreements and the 2003 investment decision constitute State aid granted to BSCA. This aid stems from the fact that the 2002 agreements and the 2003 investment decision provide for a concession fee that it is too low with regard to the infrastructure placed at BSCA's disposal by the Region-SOWAER, the services provided and the subsidies granted. This situation will apply until the expiry of the property sub-concession granted to BSCA, i.e. 2040. This aid therefore enables BSCA to reduce its operating costs, in this case the concession fee. It consequently constitutes operating aid, which has been received since 2002 and will continue to be received until 2040 unless corrective measures are adopted to alter the methods for calculating the concession fee. It should also be noted, in order to rule out the argument that this aid may constitute investment aid, that it is SOWAER, and not BSCA, that is responsible for implementing and financing the investment programme annexed to the SOWAER/BSCA agreement and that SOWAER owns the buildings and infrastructure in which these investments are made. The aid identified by the Commission does not therefore lessen the investment costs that BSCA should normally incur and does not therefore constitute investment aid, but rather operating aid. |
| --- | --- |

(582)

As concluded in recital 487, the 2002 agreements and the 2003 investment decision constitute State aid granted to BSCA. This aid stems from the fact that the 2002 agreements and the 2003 investment decision provide for a concession fee that it is too low with regard to the infrastructure placed at BSCA's disposal by the Region-SOWAER, the services provided and the subsidies granted. This situation will apply until the expiry of the property sub-concession granted to BSCA, i.e. 2040. This aid therefore enables BSCA to reduce its operating costs, in this case the concession fee. It consequently constitutes operating aid, which has been received since 2002 and will continue to be received until 2040 unless corrective measures are adopted to alter the methods for calculating the concession fee. It should also be noted, in order to rule out the argument that this aid may constitute investment aid, that it is SOWAER, and not BSCA, that is responsible for implementing and financing the investment programme annexed to the SOWAER/BSCA agreement and that SOWAER owns the buildings and infrastructure in which these investments are made. The aid identified by the Commission does not therefore lessen the investment costs that BSCA should normally incur and does not therefore constitute investment aid, but rather operating aid.

| (583) | The aim of this section is to determine whether this operating aid granted to BSCA may be compatible with the internal market. Furthermore, as concluded in recital 487, the Commission cannot rule out that BSCA's capital increase subscribed by SOWAER in 2002 may also constitute State aid granted to BSCA. As this involves a capital increase, if this measure does constitute aid, it is also operating aid. The Commission will therefore include this capital increase in its compatibility analysis, based on the assumption that it does constitute aid. |
| --- | --- |

(583)

The aim of this section is to determine whether this operating aid granted to BSCA may be compatible with the internal market. Furthermore, as concluded in recital 487, the Commission cannot rule out that BSCA's capital increase subscribed by SOWAER in 2002 may also constitute State aid granted to BSCA. As this involves a capital increase, if this measure does constitute aid, it is also operating aid. The Commission will therefore include this capital increase in its compatibility analysis, based on the assumption that it does constitute aid.

6.3.1.   Compatibility on the basis of Article 106(2) TFEU.

Compatibility on the basis of Article 106(2) TFEU.

| (584) | According to Belgium (see Section 5.1.2.2), the subsidy paid by the Region for certain services associated with the airport activities, assuming that the Commission considers that this constitutes aid, is in any event compatible with the internal market on the basis of Article 106(2) TFEU. |
| --- | --- |

(584)

According to Belgium (see Section 5.1.2.2), the subsidy paid by the Region for certain services associated with the airport activities, assuming that the Commission considers that this constitutes aid, is in any event compatible with the internal market on the basis of Article 106(2) TFEU.

| (585) | In recital 410, the Commission set out the reasons why it considers that the economic services for which the Region pays a subsidy cannot be qualified as services of general economic interest. |
| --- | --- |

(585)

In recital 410, the Commission set out the reasons why it considers that the economic services for which the Region pays a subsidy cannot be qualified as services of general economic interest.

| (586) | Moreover, the Commission considers that the compatibility of the measure resulting from the 2002 agreements should be examined as a whole (namely, the concession fee below market price, given the subsidies paid by the Region to BSCA), and not just the compatibility of the Region's subsidy. |
| --- | --- |

(586)

Moreover, the Commission considers that the compatibility of the measure resulting from the 2002 agreements should be examined as a whole (namely, the concession fee below market price, given the subsidies paid by the Region to BSCA), and not just the compatibility of the Region's subsidy.

| (587) | The Commission concludes that the measures granted to BSCA cannot be regarded as compatible with the internal market on the basis of Article 106(2) TFEU or on the basis of the decisions and frameworks based on Article 106(2) TFEU. |
| --- | --- |

(587)

The Commission concludes that the measures granted to BSCA cannot be regarded as compatible with the internal market on the basis of Article 106(2) TFEU or on the basis of the decisions and frameworks based on Article 106(2) TFEU.

6.3.2.   Compatibility on the basis of Article 107(3) TFEU.

Compatibility on the basis of Article 107(3) TFEU.

| (588) | In accordance with Article 107(3)(c) TFEU, aid to facilitate the development of certain economic activities or of certain economic areas, where such aid does not adversely affect trading conditions to an extent contrary to the common interest, may be considered to be compatible with the internal market. |
| --- | --- |

(588)

In accordance with Article 107(3)(c) TFEU, aid to facilitate the development of certain economic activities or of certain economic areas, where such aid does not adversely affect trading conditions to an extent contrary to the common interest, may be considered to be compatible with the internal market.

| (589) | Under point 172 of the aviation guidelines, which came into force on 4 April 2014, the Commission ‘will apply the principles set out in these guidelines to all cases concerning operating aid (pending notifications and unlawful non-notified aid) to airports even if the aid was granted before 4 April 2014 and the beginning of the transitional period’. |
| --- | --- |

(589)

Under point 172 of the aviation guidelines, which came into force on 4 April 2014, the Commission ‘will apply the principles set out in these guidelines to all cases concerning operating aid (pending notifications and unlawful non-notified aid) to airports even if the aid was granted before 4 April 2014 and the beginning of the transitional period’.

| (590) | According to certain parties, the application of the aviation guidelines to aid granted before said guidelines entered into force would be contrary to the general principles of law (see Section 4.1.2(b)). |
| --- | --- |

(590)

According to certain parties, the application of the aviation guidelines to aid granted before said guidelines entered into force would be contrary to the general principles of law (see Section 4.1.2(b)).

| (591) | In this respect, the Commission stresses that the Court of Justice observed, in its Vizcaya judgment (219):






  — | that the application of new rules to aid that was implemented without having been notified does not count as application to a previous situation but to a current situation, |
| --- | --- | --- |

(591)

In this respect, the Commission stresses that the Court of Justice observed, in its Vizcaya judgment (219):

Vizcaya

219

—

that the application of new rules to aid that was implemented without having been notified does not count as application to a previous situation but to a current situation,

| — | that the effective application of Union rules means that the Commission must be able, at any time, to adapt its assessment to the needs of this policy, and |
| --- | --- |

—

that the effective application of Union rules means that the Commission must be able, at any time, to adapt its assessment to the needs of this policy, and

| — | that a Member State not having notified an aid scheme to the Commission cannot reasonably expect this scheme to be assessed according to the rules applicable at the time of its adoption. |
| --- | --- |

—

that a Member State not having notified an aid scheme to the Commission cannot reasonably expect this scheme to be assessed according to the rules applicable at the time of its adoption.

The Court therefore concludes that, in the case in question, the Commission did not breach the principle of non-retroactivity or the principle of legal certainty by applying new rules when assessing the compatibility of aid implemented without having been notified.

| (592) | The Commission observes that, as in the Vizcaya case, the aid granted to BSCA was implemented without having been notified. It takes the view that the application of point 172 of the aviation guidelines to the measures in question is not contrary to the general principles of law. |
| --- | --- |

(592)

The Commission observes that, as in the Vizcaya case, the aid granted to BSCA was implemented without having been notified. It takes the view that the application of point 172 of the aviation guidelines to the measures in question is not contrary to the general principles of law.

Vizcaya

| (593) | Under point 137 of the aviation guidelines, ‘Operating aid granted before the beginning of the transitional period (including aid paid before 4 April 2014) may be declared compatible to the full extent of uncovered operating costs provided that the conditions in section 5.1.2 are met, with the exception of points 115, 119, 121, 122, 123, 126 to 130, 132, 133 and 134. In particular, when assessing the compatibility of operating aid granted before 4 April 2014, the Commission will take account of the distortions of competition’. |
| --- | --- |

(593)

Under point 137 of the aviation guidelines, ‘Operating aid granted before the beginning of the transitional period (including aid paid before 4 April 2014) may be declared compatible to the full extent of uncovered operating costs provided that the conditions in section 5.1.2 are met, with the exception of points 115, 119, 121, 122, 123, 126 to 130, 132, 133 and 134. In particular, when assessing the compatibility of operating aid granted before 4 April 2014, the Commission will take account of the distortions of competition’.

| (594) | In order to encourage the aviation sector to develop, the aviation guidelines therefore distinguish between aid granted before the beginning of the transitional period (including aid paid before 4 April 2014) and aid granted subsequently. |
| --- | --- |

(594)

In order to encourage the aviation sector to develop, the aviation guidelines therefore distinguish between aid granted before the beginning of the transitional period (including aid paid before 4 April 2014) and aid granted subsequently.

| (595) | The conditions set out in Section 5.1.2 of the aviation guidelines are as follows:






  — | contribution to a well-defined objective of common interest, |
| --- | --- | --- |

(595)

The conditions set out in Section 5.1.2 of the aviation guidelines are as follows:

—

contribution to a well-defined objective of common interest,

| — | need for State intervention, |
| --- | --- |

—

need for State intervention,

| — | appropriateness of State aid as a policy instrument, |
| --- | --- |

—

appropriateness of State aid as a policy instrument,

| — | existence of incentive effect, |
| --- | --- |

—

existence of incentive effect,

| — | proportionality of the aid amount (aid limited to the minimum necessary), |
| --- | --- |

—

proportionality of the aid amount (aid limited to the minimum necessary),

| — | avoidance of undue negative effects on competition and trade. |
| --- | --- |

—

avoidance of undue negative effects on competition and trade.

| (596) | The Commission will therefore examine whether the aid granted to BSCA, namely the 2002 agreements, the investment decision and the BSCA capital increase subscribed by SOWAER (on the basis hereinafter that the latter measure constitutes State aid), meet each of these conditions. |
| --- | --- |

(596)

The Commission will therefore examine whether the aid granted to BSCA, namely the 2002 agreements, the investment decision and the BSCA capital increase subscribed by SOWAER (on the basis hereinafter that the latter measure constitutes State aid), meet each of these conditions.

6.3.2.1.   
  Contribution to a well-defined objective of common interest

Contribution to a well-defined objective of common interest

| (597) | Point 113 of the aviation guidelines cites the following objectives of common interest:






  ‘(a) | increases the mobility of Union citizens and the connectivity of the regions by establishing access points for intra-Union flights; or |
| --- | --- | --- |

(597)

Point 113 of the aviation guidelines cites the following objectives of common interest:

‘(a)

increases the mobility of Union citizens and the connectivity of the regions by establishing access points for intra-Union flights; or

| (b) | combats air traffic congestion at major Union hub airports; or |
| --- | --- |

(b)

combats air traffic congestion at major Union hub airports; or

| (c) | facilitates regional development’. |
| --- | --- |

(c)

facilitates regional development’.

| (598) | In the present case, the aid was granted to facilitate regional development. The reports supplied in support of the Walloon Government's decisions justify the need for these investments aimed at developing the airport through the positive impact of the airport's development on the economy and employment situation in Charleroi and its region (220). Faced with the problem of restructuring the former industrial basin of the Charleroi region, the airport site is identified in those reports as a new centre for development encompassing research and development, cutting-edge sectors and opening up of the European economy. The note from the minister to the government states: ‘In its regional policy declaration approved on 15 July 1999, the Walloon Parliament recognised that the regional airports constitute important centres of economic development and job creation for the Walloon Region, which should be taken into account as much in economic and environmental terms as in terms of transport. The main objectives are to:






  — | provide specific support to the development of economic activities that preferably dovetail with the airport activities ... so that the public mission of infrastructure building is taken over by employment-generating private initiative, |
| --- | --- | --- |

(598)

In the present case, the aid was granted to facilitate regional development. The reports supplied in support of the Walloon Government's decisions justify the need for these investments aimed at developing the airport through the positive impact of the airport's development on the economy and employment situation in Charleroi and its region (220). Faced with the problem of restructuring the former industrial basin of the Charleroi region, the airport site is identified in those reports as a new centre for development encompassing research and development, cutting-edge sectors and opening up of the European economy. The note from the minister to the government states: ‘In its regional policy declaration approved on 15 July 1999, the Walloon Parliament recognised that the regional airports constitute important centres of economic development and job creation for the Walloon Region, which should be taken into account as much in economic and environmental terms as in terms of transport. The main objectives are to:

220

—

provide specific support to the development of economic activities that preferably dovetail with the airport activities ... so that the public mission of infrastructure building is taken over by employment-generating private initiative,

| — | work towards the strategic integration of airport activities with other passenger and goods transport systems, |
| --- | --- |

—

work towards the strategic integration of airport activities with other passenger and goods transport systems,

| — | ... |
| --- | --- |

—

...

| — | step up environmental protection and the fight against noise pollution. |
| --- | --- |

—

step up environmental protection and the fight against noise pollution.

... It is therefore vital, in order to allow the airport to play its role as a regional economic lever, to equip it with a complete infrastructure in the context of a comprehensive development plan’.

| (599) | The aforementioned note also summarises the results of several studies carried out in order to guide the Walloon airport development policy. The study carried out by Tractebel provides an assessment of the economic benefits and new jobs resulting from targets of 1 million and 2 million passengers. This reveals that 1 million passengers would generate 6 364 jobs and that 2 million passengers would generate 8 090 jobs. |
| --- | --- |

(599)

The aforementioned note also summarises the results of several studies carried out in order to guide the Walloon airport development policy. The study carried out by Tractebel provides an assessment of the economic benefits and new jobs resulting from targets of 1 million and 2 million passengers. This reveals that 1 million passengers would generate 6 364 jobs and that 2 million passengers would generate 8 090 jobs.

| (600) | Assuming that the capital increase subscribed by SOWAER does constitute aid, this capital increase was intended to enable BSCA to avoid possible bankruptcy, so that it could continue operating and thus achieve the objective of common interest described in the previous recital. |
| --- | --- |

(600)

Assuming that the capital increase subscribed by SOWAER does constitute aid, this capital increase was intended to enable BSCA to avoid possible bankruptcy, so that it could continue operating and thus achieve the objective of common interest described in the previous recital.

| (601) | Based on the information currently available, the Commission finds that the aid effectively facilitated the development of the Charleroi region, by enabling a modest airport to transform into a major regional airport with nearly 7 million passengers per year, thus creating significant economic activity both within and around the airport. In terms of jobs, according to a study by the Banque nationale de Belgique based on 2009 figures, Charleroi airport has enabled the direct creation of 1 323 full-time equivalent jobs and the indirect creation of 1 525 full-time equivalent jobs. |
| --- | --- |

(601)

Based on the information currently available, the Commission finds that the aid effectively facilitated the development of the Charleroi region, by enabling a modest airport to transform into a major regional airport with nearly 7 million passengers per year, thus creating significant economic activity both within and around the airport. In terms of jobs, according to a study by the Banque nationale de Belgique based on 2009 figures, Charleroi airport has enabled the direct creation of 1 323 full-time equivalent jobs and the indirect creation of 1 525 full-time equivalent jobs.

| (602) | The Commission considers that the aid has contributed to a well-defined objective of common interest, namely the economic development of Charleroi and its region. |
| --- | --- |

(602)

The Commission considers that the aid has contributed to a well-defined objective of common interest, namely the economic development of Charleroi and its region.

| (603) | However, it must be verified, in accordance with point 114 of the aviation guidelines, that the aid has not encouraged the duplication of unprofitable airports. |
| --- | --- |

(603)

However, it must be verified, in accordance with point 114 of the aviation guidelines, that the aid has not encouraged the duplication of unprofitable airports.

| (604) | In this case, the Commission considers that the prospects for use of the airport, as established by the studies carried out in 2000-2001 (221), i.e. just before the measures were adopted, were sufficient to justify these investments. It is in fact clear from these studies that demand existed for Charleroi airport, particularly in the low-cost segment, in which Brussels airport was not active at the time. The development of Charleroi airport and the profitability of its manager BSCA confirm a posteriori the existence of these development prospects. Accordingly, at the end of 2013 BSCA had a pre-tax operating profit of EUR 14,86 million, i.e. more than the amount of State aid that it received in that year (the aid amounts are indicated in Table 34). |
| --- | --- |

(604)

In this case, the Commission considers that the prospects for use of the airport, as established by the studies carried out in 2000-2001 (221), i.e. just before the measures were adopted, were sufficient to justify these investments. It is in fact clear from these studies that demand existed for Charleroi airport, particularly in the low-cost segment, in which Brussels airport was not active at the time. The development of Charleroi airport and the profitability of its manager BSCA confirm a posteriori the existence of these development prospects. Accordingly, at the end of 2013 BSCA had a pre-tax operating profit of EUR 14,86 million, i.e. more than the amount of State aid that it received in that year (the aid amounts are indicated in Table 34).

221

| (605) | Undoubtedly, as indicated in recital 484 and developed in recital 626, the catchment area of Charleroi airport substantially overlaps with the catchment area of Brussels airport. As proven in recitals 627 to 641, the aid significantly distorted competition by affecting the growth in the number of passengers at Brussels airport in the short- and medium-haul point-to-point segment. Brussels airport therefore has spare capacity (according to Brussels Airport Company, manager of Brussels airport, this airport has a capacity of 28 million passengers). |
| --- | --- |

(605)

Undoubtedly, as indicated in recital 484 and developed in recital 626, the catchment area of Charleroi airport substantially overlaps with the catchment area of Brussels airport. As proven in recitals 627 to 641, the aid significantly distorted competition by affecting the growth in the number of passengers at Brussels airport in the short- and medium-haul point-to-point segment. Brussels airport therefore has spare capacity (according to Brussels Airport Company, manager of Brussels airport, this airport has a capacity of 28 million passengers).

| (606) | However, despite the aid granted to BSCA in 2002 and 2003, traffic at Brussels airport has always remained in excess of 14 million passengers, i.e. half of its theoretical capacity. Since 2002 (222), this traffic has been growing (except in 2009), even though this growth has been modest compared with that of Charleroi airport.

  Table 27


  Development in the number of passengers at Brussels and Charleroi airports


















  (million) |
| --- | --- |
| | 2002 | 2003 | 2004 | 2005 | 2006 | 2007 | 2008 | 2009 | 2010 | 2011 | 2012 | 2013 |
| Brussels | 14,4 | 15,2 | 15,6 | 16,1 | 16,7 | 17,8 | 18,5 | 17 | 17,1 | 18,8 | 18,9 | 19,1 |
| Charleroi | 1,3 | 1,8 | 2,0 | 1,9 | 2,2 | 2,5 | 3,0 | 3,9 | 5,2 | 5,9 | 6,5 | 6,8 |
| Sources: brusselsairport.be and charleroi-airport.com |

(606)

However, despite the aid granted to BSCA in 2002 and 2003, traffic at Brussels airport has always remained in excess of 14 million passengers, i.e. half of its theoretical capacity. Since 2002 (222), this traffic has been growing (except in 2009), even though this growth has been modest compared with that of Charleroi airport.

222

Table 27

Table 27

Development in the number of passengers at Brussels and Charleroi airports

Development in the number of passengers at Brussels and Charleroi airports

(million)

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

Brussels

14,4

15,2

15,6

16,1

16,7

17,8

18,5

17

17,1

18,8

18,9

19,1

Charleroi

1,3

1,8

2,0

1,9

2,2

2,5

3,0

3,9

5,2

5,9

6,5

6,8

Sources: brusselsairport.be and charleroi-airport.com

Sources:

The EBIT (223) of BAC has been positive at least since 2006 [...].

223

| (607) | The Commission therefore finds that, although the aid granted to BSCA has affected growth in passenger traffic at Brussels airport and, due to the existence of economies of scale, has reduced BAC's profitability, it has not, however, led to a duplication of unprofitable airports. This is particularly explained by the high population density (224) and high demand for air services (225) in the catchment areas of Charleroi and Brussels airports, which enable both airports to be profitable. |
| --- | --- |

(607)

The Commission therefore finds that, although the aid granted to BSCA has affected growth in passenger traffic at Brussels airport and, due to the existence of economies of scale, has reduced BAC's profitability, it has not, however, led to a duplication of unprofitable airports. This is particularly explained by the high population density (224) and high demand for air services (225) in the catchment areas of Charleroi and Brussels airports, which enable both airports to be profitable.

224

225

6.3.2.2.   
  Need for State intervention

Need for State intervention

| (608) | As stipulated in points 116 and 118 of the aviation guidelines, ‘State aid should be targeted towards situations where such aid can bring about a material improvement that the market itself cannot deliver ... Under current market conditions, the need for public funding to finance operating costs will, due to high fixed costs, vary according to the size of an airport and will normally be proportionately greater for smaller airports.’ The Commission considers that airports with between 1 and 3 million passengers per year ‘should, on average, be able to cover the majority of their operating costs’ and that airports with more than 3 million passengers per year ‘are usually profitable at operating level and should be able to cover their operating costs’. |
| --- | --- |

(608)

As stipulated in points 116 and 118 of the aviation guidelines, ‘State aid should be targeted towards situations where such aid can bring about a material improvement that the market itself cannot deliver ... Under current market conditions, the need for public funding to finance operating costs will, due to high fixed costs, vary according to the size of an airport and will normally be proportionately greater for smaller airports.’ The Commission considers that airports with between 1 and 3 million passengers per year ‘should, on average, be able to cover the majority of their operating costs’ and that airports with more than 3 million passengers per year ‘are usually profitable at operating level and should be able to cover their operating costs’.

| (609) | However, the Commission notes that point 119 of the aviation guidelines, according to which ‘Therefore, the Commission considers that in order to be eligible for operating aid, the annual traffic of the airport must not exceed 3 million passengers (226)’, does not apply to aid granted before 4 April 2014. |
| --- | --- |

(609)

However, the Commission notes that point 119 of the aviation guidelines, according to which ‘Therefore, the Commission considers that in order to be eligible for operating aid, the annual traffic of the airport must not exceed 3 million passengers (226)’, does not apply to aid granted before 4 April 2014.

226

| (610) | At the time when the measures were decided in 2002 and 2003, traffic at Charleroi airport was between 1 and 2 million passengers. BSCA's 2002 business plan forecast that traffic would exceed 3 million passengers in 2011. |
| --- | --- |

(610)

At the time when the measures were decided in 2002 and 2003, traffic at Charleroi airport was between 1 and 2 million passengers. BSCA's 2002 business plan forecast that traffic would exceed 3 million passengers in 2011.

| (611) | BSCA's 2002 business plan forecast that, even with the aid, BSCA would not become profitable until 2005 (BSCA in fact became profitable in 2004). Accordingly, if the concession fee had been set at market price, the Region and SOWAER could have expected BSCA to accumulate operating losses, at least during the initial years, and to find itself in financial difficulty, which would have threatened the operation and development of Charleroi airport, and therefore the achievement of the economic development objective of the aid. Likewise, in the absence of the 2002 capital increase, BSCA would have faced financial difficulties likely to compromise the operation and development of Charleroi airport. Moreover, in the absence of aid, BSCA would have had to demand much higher airport charges from Ryanair and other airlines, in order to ensure its own financial balance. In this scenario, it is possible that Ryanair, BSCA's main customer, would have decided to transfer its base from Charleroi to another airport, or to significantly reduce its activities at Charleroi, which would also have compromised the airport's development and the benefits expected by the Region in terms of economic development. |
| --- | --- |

(611)

BSCA's 2002 business plan forecast that, even with the aid, BSCA would not become profitable until 2005 (BSCA in fact became profitable in 2004). Accordingly, if the concession fee had been set at market price, the Region and SOWAER could have expected BSCA to accumulate operating losses, at least during the initial years, and to find itself in financial difficulty, which would have threatened the operation and development of Charleroi airport, and therefore the achievement of the economic development objective of the aid. Likewise, in the absence of the 2002 capital increase, BSCA would have faced financial difficulties likely to compromise the operation and development of Charleroi airport. Moreover, in the absence of aid, BSCA would have had to demand much higher airport charges from Ryanair and other airlines, in order to ensure its own financial balance. In this scenario, it is possible that Ryanair, BSCA's main customer, would have decided to transfer its base from Charleroi to another airport, or to significantly reduce its activities at Charleroi, which would also have compromised the airport's development and the benefits expected by the Region in terms of economic development.

| (612) | Based on the 2002 business plan, the Commission takes the view that the 2002 and 2003 aid was necessary. |
| --- | --- |

(612)

Based on the 2002 business plan, the Commission takes the view that the 2002 and 2003 aid was necessary.

6.3.2.3.   
  Appropriateness of State aid as a policy instrument

Appropriateness of State aid as a policy instrument

| (613) | Point 120 of the aviation guidelines states that ‘The Member States must demonstrate that the aid is appropriate to achieve the intended objective or resolve the problems intended to be addressed by the aid. An aid measure will not be considered compatible with the internal market if other less distortive policy instruments or aid instruments allow the same objective to be reached’. |
| --- | --- |

(613)

Point 120 of the aviation guidelines states that ‘The Member States must demonstrate that the aid is appropriate to achieve the intended objective or resolve the problems intended to be addressed by the aid. An aid measure will not be considered compatible with the internal market if other less distortive policy instruments or aid instruments allow the same objective to be reached’.

| (614) | In the spirit of points 121 to 123 of the aviation guidelines — and although those points do not formally apply to the present case — we can examine whether there would be a policy instrument allowing the same objective to be achieved, which would better encourage efficient management of the airport. Instruments that establish ex ante the aid amount covering the expected funding gap are examples of instruments encouraging efficient management of an airport. |
| --- | --- |

(614)

In the spirit of points 121 to 123 of the aviation guidelines — and although those points do not formally apply to the present case — we can examine whether there would be a policy instrument allowing the same objective to be achieved, which would better encourage efficient management of the airport. Instruments that establish ex ante the aid amount covering the expected funding gap are examples of instruments encouraging efficient management of an airport.

ex ante

| (615) | The concession fee paid by BSCA is established ex ante and therefore encourages BSCA to manage the airport efficiently. While it is true, however, that the subsidy paid by the Region for services depends on the costs incurred and is not a fixed sum established ex ante, the part of this subsidy for economic services is relatively small. Likewise, the 2002 capital increase is a one-off intervention, which is not therefore a fixed sum established ex ante. However, it does involve a relatively limited amount compared to the aid amounts resulting from the 2002 agreements and the 2003 investment decision. The Commission therefore concludes that the aid granted to BSCA encourages the latter to manage the airport efficiently and constitutes an appropriate policy instrument. |
| --- | --- |

(615)

The concession fee paid by BSCA is established ex ante and therefore encourages BSCA to manage the airport efficiently. While it is true, however, that the subsidy paid by the Region for services depends on the costs incurred and is not a fixed sum established ex ante, the part of this subsidy for economic services is relatively small. Likewise, the 2002 capital increase is a one-off intervention, which is not therefore a fixed sum established ex ante. However, it does involve a relatively limited amount compared to the aid amounts resulting from the 2002 agreements and the 2003 investment decision. The Commission therefore concludes that the aid granted to BSCA encourages the latter to manage the airport efficiently and constitutes an appropriate policy instrument.

ex ante

ex ante

ex ante

6.3.2.4.   
  Existence of incentive effect

Existence of incentive effect

| (616) | Point 124 of the aviation guidelines states that ‘Operating aid has an incentive effect if it is likely that, in the absence of the operating aid, and taking into account the possible presence of investment aid and the level of traffic, the level of economic activity of the airport concerned would be significantly reduced’. |
| --- | --- |

(616)

Point 124 of the aviation guidelines states that ‘Operating aid has an incentive effect if it is likely that, in the absence of the operating aid, and taking into account the possible presence of investment aid and the level of traffic, the level of economic activity of the airport concerned would be significantly reduced’.

| (617) | The aid granted to BSCA has enabled Charleroi airport to be modernised and its capacity to be increased, while maintaining BSCA's operating costs at a level allowing it to offer and maintain conditions attractive to the airlines using the airport, particularly Ryanair, without experiencing any major financial difficulties. As indicated in recital 611, in the absence of aid, BSCA would have had to demand much higher airport charges from Ryanair and other airlines. In this scenario, it is possible that Ryanair, BSCA's main customer, would have decided to transfer its base from Charleroi to another airport, or to significantly reduce its activities at Charleroi. |
| --- | --- |

(617)

The aid granted to BSCA has enabled Charleroi airport to be modernised and its capacity to be increased, while maintaining BSCA's operating costs at a level allowing it to offer and maintain conditions attractive to the airlines using the airport, particularly Ryanair, without experiencing any major financial difficulties. As indicated in recital 611, in the absence of aid, BSCA would have had to demand much higher airport charges from Ryanair and other airlines. In this scenario, it is possible that Ryanair, BSCA's main customer, would have decided to transfer its base from Charleroi to another airport, or to significantly reduce its activities at Charleroi.

| (618) | The Commission therefore concludes that, in the absence of aid, the level of economic activity of Charleroi airport would probably have been significantly reduced. The Commission therefore takes the view that the aid has had an incentive effect. |
| --- | --- |

(618)

The Commission therefore concludes that, in the absence of aid, the level of economic activity of Charleroi airport would probably have been significantly reduced. The Commission therefore takes the view that the aid has had an incentive effect.

6.3.2.5.   
  Proportionality of the aid amount (aid limited to the minimum necessary)

Proportionality of the aid amount (aid limited to the minimum necessary)

| (619) | Point 125 of the aviation guidelines states that ‘In order to be proportionate, operating aid to airports must be limited to the minimum necessary for the aided activity to take place’. |
| --- | --- |

(619)

Point 125 of the aviation guidelines states that ‘In order to be proportionate, operating aid to airports must be limited to the minimum necessary for the aided activity to take place’.

| (620) | In order to determine whether the aid is proportionate, it must be examined whether BSCA's business plan (incorporating the aid) allowed BSCA to expect a profit not exceeding a reasonable profit. |
| --- | --- |

(620)

In order to determine whether the aid is proportionate, it must be examined whether BSCA's business plan (incorporating the aid) allowed BSCA to expect a profit not exceeding a reasonable profit.

| (621) | BSCA's 2002 business plan forecast a return on equity over the period 2002-2015 of 8,3 % and a return on capital employed of 9,6 %. Given that, in order to apply the market economy operator test, the Commission estimated that a rate of return on equity of 9 % could have been expected in 2002 (227), it concludes that the profit expected ex ante did not exceed a reasonable level. Insofar as the aid was intended to allow BSCA to cover these costs and achieve a profit not exceeding a reasonable level, the 2002 and 2003 aid may be regarded as proportionate. |
| --- | --- |

(621)

BSCA's 2002 business plan forecast a return on equity over the period 2002-2015 of 8,3 % and a return on capital employed of 9,6 %. Given that, in order to apply the market economy operator test, the Commission estimated that a rate of return on equity of 9 % could have been expected in 2002 (227), it concludes that the profit expected ex ante did not exceed a reasonable level. Insofar as the aid was intended to allow BSCA to cover these costs and achieve a profit not exceeding a reasonable level, the 2002 and 2003 aid may be regarded as proportionate.

227

ex ante

6.3.2.6.   
  Avoidance of undue negative effects on competition and trade

Avoidance of undue negative effects on competition and trade

| (622) | Point 137 of the aviation guidelines underlines the importance of assessing the effects of the aid in terms of distortions of competition for aid granted before 4 April 2014. It states that ‘In particular, when assessing the compatibility of operating aid granted before 4 April 2014, the Commission will take account of the distortions of competition’. |
| --- | --- |

(622)

Point 137 of the aviation guidelines underlines the importance of assessing the effects of the aid in terms of distortions of competition for aid granted before 4 April 2014. It states that ‘In particular, when assessing the compatibility of operating aid granted before 4 April 2014, the Commission will take account of the distortions of competition’.

| (623) | Furthermore, point 131 of the aviation guidelines states that ‘When assessing the compatibility of operating aid the Commission will take account of the distortions of competition and the effects on trade. Where an airport is located in the same catchment area as another airport with spare capacity, the business plan, based on sound passenger and freight traffic forecasts, must identify the likely effect on the traffic of the other airports located in that catchment area.’ |
| --- | --- |

(623)

Furthermore, point 131 of the aviation guidelines states that ‘When assessing the compatibility of operating aid the Commission will take account of the distortions of competition and the effects on trade. Where an airport is located in the same catchment area as another airport with spare capacity, the business plan, based on sound passenger and freight traffic forecasts, must identify the likely effect on the traffic of the other airports located in that catchment area.’

(a)   Identification of the catchment area and competing airports

| (624) | According to Belgium, the catchment area of Charleroi airport is two hours by road from the airport and contains 15 million people who could be customers of low-cost airlines. This area includes Belgium, northern France, southern Netherlands, northern Luxembourg and the far west of Germany. |
| --- | --- |

(624)

According to Belgium, the catchment area of Charleroi airport is two hours by road from the airport and contains 15 million people who could be customers of low-cost airlines. This area includes Belgium, northern France, southern Netherlands, northern Luxembourg and the far west of Germany.

| (625) | There are several airports close to Charleroi with catchment areas that overlap with Charleroi's: Liege (49 minutes by road and 78 km away, although it should be noted that Liège airport focuses on cargo), Lille (1 hour 12 minutes, 121 km) and particularly Brussels (46 minutes, 69 km (228)) (229). |
| --- | --- |

(625)

There are several airports close to Charleroi with catchment areas that overlap with Charleroi's: Liege (49 minutes by road and 78 km away, although it should be noted that Liège airport focuses on cargo), Lille (1 hour 12 minutes, 121 km) and particularly Brussels (46 minutes, 69 km (228)) (229).

228

229

| (626) | The catchment area of Charleroi airport substantially overlaps with the catchment area of Brussels airport. The area of overlap notably includes the Brussels-Capital Region, which is the most densely populated area within the area of overlap, with 1.2 million inhabitants. Although Charleroi airport is further away from Brussels than Brussels airport, the journey time by road from the centre of Brussels to Charleroi is only around 30 minutes longer than the journey time to Brussels airport.

  Table 28


  Distances and journey times between the centre of Brussels and the airports of Charleroi and Brussels








  From the centre of Brussels to ... | Charleroi | Brussels |
| --- | --- | --- | --- |
| Distance | 46 km | 12 km |
| Car | 45 min. | 16 min. |
| Bus | 45 min. | 18 min. |
| Train | 50 min. (via Charleroi Sud) | 17 min. |
| Source: Commission decision on Ryanair/Aer Lingus of 27 February 2013 |

(626)

The catchment area of Charleroi airport substantially overlaps with the catchment area of Brussels airport. The area of overlap notably includes the Brussels-Capital Region, which is the most densely populated area within the area of overlap, with 1.2 million inhabitants. Although Charleroi airport is further away from Brussels than Brussels airport, the journey time by road from the centre of Brussels to Charleroi is only around 30 minutes longer than the journey time to Brussels airport.

Table 28

Table 28

Distances and journey times between the centre of Brussels and the airports of Charleroi and Brussels

Distances and journey times between the centre of Brussels and the airports of Charleroi and Brussels

From the centre of Brussels to ...

Charleroi

Brussels

Distance

46 km

12 km

Car

45 min.

16 min.

Bus

45 min.

18 min.

Train

50 min. (via Charleroi Sud)

via Charleroi Sud

17 min.

Source: Commission decision on Ryanair/Aer Lingus of 27 February 2013

Source:

(b)   Analysis of the distortions of competition caused by the aid

| (627) | The distortions of competition caused by the aid may stem from the fact that:






  — | BSCA attracts to Charleroi airlines that this airport would not have been able to attract without the aid and that would have been likely to base their resources (aircraft, crew) at other airports, particularly the closest ones such as Brussels airport, |
| --- | --- | --- |

(627)

The distortions of competition caused by the aid may stem from the fact that:

—

BSCA attracts to Charleroi airlines that this airport would not have been able to attract without the aid and that would have been likely to base their resources (aircraft, crew) at other airports, particularly the closest ones such as Brussels airport,

| — | the aid may influence the behaviour of certain passengers who, given their origin and destination requirements, are able to choose between a service from or to Charleroi and a service from or to Brussels. These passengers may in fact be attracted by the low fares offered by the airlines operating from Charleroi (fares which may have been higher in the absence of aid being granted to BSCA) to the detriment of airlines operating from Brussels. |
| --- | --- |

—

the aid may influence the behaviour of certain passengers who, given their origin and destination requirements, are able to choose between a service from or to Charleroi and a service from or to Brussels. These passengers may in fact be attracted by the low fares offered by the airlines operating from Charleroi (fares which may have been higher in the absence of aid being granted to BSCA) to the detriment of airlines operating from Brussels.

(i)   Examination of the substitutability of the service offers of Charleroi and Brussels airports

| (628) | According to Belgium, as regards the absence or avoidance of negative effects on competition, the Commission must refer back to the time when the public financing was granted in order to assess whether this condition is met. Still according to Belgium, the development of Charleroi airport stems from the creation of a new market in a specific segment that was not being developed at all or only to a very limited extent at Brussels airport at the time when the aid was granted, i.e. the low-cost segment. Moreover, two studies carried out by independent experts, Roland Berger International Management Consultant and GTM, revealed the imminent saturation of Brussels airport and the lack of any overlap in terms of customers between the two airports. At the time the airlines operating at Brussels airport had no interest in Charleroi airport, whilst Ryanair, the main user of Charleroi airport, had no plans to base itself at the main airports. In 2000 Charleroi airport had a very poor image, as confirmed by the GTM and Roland Berger International Management Consultant studies. The infrastructure was cramped, limited and little-used. The airport offered only one scheduled service and a number of charter flights in the summer. As a result, according to Belgium, it could not have been considered at the time that Charleroi airport was in a position to compete with Brussels airport. Lastly, Brussels airport was at an advantage in terms of infrastructure (several terminals, several runways, etc.) and accessibility due to its location close to the capital and the rail link that Charleroi airport lacked. |
| --- | --- |

(628)

According to Belgium, as regards the absence or avoidance of negative effects on competition, the Commission must refer back to the time when the public financing was granted in order to assess whether this condition is met. Still according to Belgium, the development of Charleroi airport stems from the creation of a new market in a specific segment that was not being developed at all or only to a very limited extent at Brussels airport at the time when the aid was granted, i.e. the low-cost segment. Moreover, two studies carried out by independent experts, Roland Berger International Management Consultant and GTM, revealed the imminent saturation of Brussels airport and the lack of any overlap in terms of customers between the two airports. At the time the airlines operating at Brussels airport had no interest in Charleroi airport, whilst Ryanair, the main user of Charleroi airport, had no plans to base itself at the main airports. In 2000 Charleroi airport had a very poor image, as confirmed by the GTM and Roland Berger International Management Consultant studies. The infrastructure was cramped, limited and little-used. The airport offered only one scheduled service and a number of charter flights in the summer. As a result, according to Belgium, it could not have been considered at the time that Charleroi airport was in a position to compete with Brussels airport. Lastly, Brussels airport was at an advantage in terms of infrastructure (several terminals, several runways, etc.) and accessibility due to its location close to the capital and the rail link that Charleroi airport lacked.

| (629) | With regard to these observations by Belgium, the Commission would make the following comments:






  — | Even if, for the purposes of the compatibility analysis, the aid's effects in terms of distortions of competition must be examined in relation to the time when the aid was granted, the aid's effects in the short and long term should, however, be taken into account, such as they could have been predicted at the time when the aid was granted. At that time, it could have been predicted that the aid would enable BSCA to offer very favourable rates for the services that it would be in a position to provide, in particular as a result of the investments made by SOWAER, with these investments having the effect of considerably increasing the capacity of Charleroi airport. In this respect, it may be recalled that the 2002 business plan forecast a significant increase in traffic at Charleroi airport, from 1,2 million passengers in 2002 to nearly 3 million passengers in 2010. It was therefore clear at the time when the aid was granted to BSCA that this aid would enable BSCA to grow strongly and that it could not be ruled out that this growth would partly occur to the detriment of competing airports, particularly Brussels airport. |
| --- | --- | --- |

(629)

With regard to these observations by Belgium, the Commission would make the following comments:

—

Even if, for the purposes of the compatibility analysis, the aid's effects in terms of distortions of competition must be examined in relation to the time when the aid was granted, the aid's effects in the short and long term should, however, be taken into account, such as they could have been predicted at the time when the aid was granted. At that time, it could have been predicted that the aid would enable BSCA to offer very favourable rates for the services that it would be in a position to provide, in particular as a result of the investments made by SOWAER, with these investments having the effect of considerably increasing the capacity of Charleroi airport. In this respect, it may be recalled that the 2002 business plan forecast a significant increase in traffic at Charleroi airport, from 1,2 million passengers in 2002 to nearly 3 million passengers in 2010. It was therefore clear at the time when the aid was granted to BSCA that this aid would enable BSCA to grow strongly and that it could not be ruled out that this growth would partly occur to the detriment of competing airports, particularly Brussels airport.

| — | Belgium indicates that, at the time when the Roland Berger International Management Consultant and GTM studies were carried out, Brussels airport was close to saturation. However, the Commission notes that, at the time when the measures were granted, i.e. in April 2002 and April 2003, the airline Sabena had gone bankrupt and traffic at Brussels airport was already being significantly affected by this bankruptcy, falling from 19,7 million passengers in 2001 to 14,4 million passengers in 2002. At the time when the measures were granted, Brussels airport was therefore not close to saturation. |
| --- | --- |

—

Belgium indicates that, at the time when the Roland Berger International Management Consultant and GTM studies were carried out, Brussels airport was close to saturation. However, the Commission notes that, at the time when the measures were granted, i.e. in April 2002 and April 2003, the airline Sabena had gone bankrupt and traffic at Brussels airport was already being significantly affected by this bankruptcy, falling from 19,7 million passengers in 2001 to 14,4 million passengers in 2002. At the time when the measures were granted, Brussels airport was therefore not close to saturation.

| (630) | As regards the question of the substitutability of the service offers of Charleroi and Brussels airports, the Commission recognises that the two airports are not entirely substitutable:






  — | Due to Charleroi's relative distance from the heart of the Brussels conurbation and its low-cost profile (given both its infrastructure and also the airlines using it and the services that it offers), Charleroi airport does not constitute an alternative to Brussels airport for certain categories of passengers (particularly time-sensitive business travellers). |
| --- | --- | --- |

(630)

As regards the question of the substitutability of the service offers of Charleroi and Brussels airports, the Commission recognises that the two airports are not entirely substitutable:

—

Due to Charleroi's relative distance from the heart of the Brussels conurbation and its low-cost profile (given both its infrastructure and also the airlines using it and the services that it offers), Charleroi airport does not constitute an alternative to Brussels airport for certain categories of passengers (particularly time-sensitive business travellers).

| — | Charleroi airport has a ‘point-to-point’ profile limited to short-haul flights, which prevents it from being a viable alternative to Brussels airport for airlines such as Brussels Airlines, which operates long-haul flights and/or relies on a ‘hub-and-spoke’ model, whereby a ‘hub’ airport feeds a long-haul network with transit passengers carried to the hub via a short- and medium-haul network. |
| --- | --- |

—

Charleroi airport has a ‘point-to-point’ profile limited to short-haul flights, which prevents it from being a viable alternative to Brussels airport for airlines such as Brussels Airlines, which operates long-haul flights and/or relies on a ‘hub-and-spoke’ model, whereby a ‘hub’ airport feeds a long-haul network with transit passengers carried to the hub via a short- and medium-haul network.

| — | Brussels airport is unlikely to constitute a credible alternative to Charleroi airport for certain categories of price-sensitive passengers. |
| --- | --- |

—

Brussels airport is unlikely to constitute a credible alternative to Charleroi airport for certain categories of price-sensitive passengers.

| (631) | Nonetheless, the offers of the two airports partly overlap. Whilst it is true that this overlap was limited at the time when the aid was granted, it still existed. Moreover, it could have been predicted that, due to the aid, competition would increase between the offers of the two airports. Accordingly, Charleroi airport offers flights that may be of interest to some of Brussels airport's short- and medium-haul customers. The following figures show the development in the number of links operated from Charleroi airport, including those where a link from Brussels airport was offered to the same destination.

  Table 29


  Links from Charleroi airport, including those where the same destination is served from Brussels airport | 2001 | 2002 | 2003 | 2004 | 2005 | 2006 | 2007 | 2008 | 2009 | 2010 | 2011 | 2012 | 2013 |
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| Number of links from Charleroi airport | 7 | 9 | 11 | 17 | 14 | 26 | 33 | 52 | 67 | 84 | 91 | 97 | 102 |
| of which links where the same destination is served from Brussels airport | 5 | 5 | 7 | 9 | 9 | 16 | 21 | 32 | 38 | 53 | 60 | 63 | 63 |
| Source: Annex 11 to the letter from Belgium sent on 7 February 2014 |

(631)

Nonetheless, the offers of the two airports partly overlap. Whilst it is true that this overlap was limited at the time when the aid was granted, it still existed. Moreover, it could have been predicted that, due to the aid, competition would increase between the offers of the two airports. Accordingly, Charleroi airport offers flights that may be of interest to some of Brussels airport's short- and medium-haul customers. The following figures show the development in the number of links operated from Charleroi airport, including those where a link from Brussels airport was offered to the same destination.

Table 29

Table 29

Links from Charleroi airport, including those where the same destination is served from Brussels airport

Links from Charleroi airport, including those where the same destination is served from Brussels airport

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

Number of links from Charleroi airport

7

9

11

17

14

26

33

52

67

84

91

97

102

of which links where the same destination is served from Brussels airport

5

5

7

9

9

16

21

32

38

53

60

63

63

Source: Annex 11 to the letter from Belgium sent on 7 February 2014

Source:

| (632) | The number of equivalent links offered by Charleroi airport and Brussels airport has therefore significantly increased (from 5 in 2002 to 63 in 2013), thus exerting considerable competitive pressure on Brussels airport. |
| --- | --- |

(632)

The number of equivalent links offered by Charleroi airport and Brussels airport has therefore significantly increased (from 5 in 2002 to 63 in 2013), thus exerting considerable competitive pressure on Brussels airport.

(ii)   Examination of the effects of the aid

| (633) | According to the Brussels airport manager (BAC), given this significant overlap between the links operated from Charleroi airport and the destinations served from Brussels airport, the aid, which enables BSCA to offer particularly attractive rates to airlines, allegedly has a considerable impact on Brussels airport. The distortion of competition is apparently particularly severe in terms of short-haul flights, because the fee has a greater relative impact on the price of such flights than on the price of long-haul flights. |
| --- | --- |

(633)

According to the Brussels airport manager (BAC), given this significant overlap between the links operated from Charleroi airport and the destinations served from Brussels airport, the aid, which enables BSCA to offer particularly attractive rates to airlines, allegedly has a considerable impact on Brussels airport. The distortion of competition is apparently particularly severe in terms of short-haul flights, because the fee has a greater relative impact on the price of such flights than on the price of long-haul flights.

| (634) | Table 30 shows the development in the number of passengers taking short-haul flights from and to Charleroi and Brussels airports (Charleroi and Brussels airports are not in competition for long-haul flights as these are not offered at Charleroi).

  Table 30


  Development in the number of passengers (in millions) taking short-haul flights from and to Brussels (BRU) and Charleroi (CRL) airports | BRU | CRL | BRU + CRL |
| --- | --- | --- | --- | --- |
| | Market for short-haul flights from and to BRU (number of passengers - million) | Annual change (%) | Market for short-haul flights from and to CRL (number of passengers - million) | Annual change (%) | Market for short-haul flights from and to BRU and CRL (number of passengers - million) | Annual change (%) |
| 2004 | 11,8 | | 2,0 | | 13,8 | |
| 2005 | 12,2 | 4 | 1,9 | – 5 | 14,1 | 2 |
| 2006 | 12,5 | 3 | 2,2 | 16 | 14,7 | 4 |
| 2007 | 13,4 | 8 | 2,4 | 9 | 15,8 | 7 |
| 2008 | 13,2 | – 1 | 2,9 | 21 | 16,1 | 2 |
| 2009 | 11,7 | – 11 | 3,9 | 35 | 15,6 | – 3 |
| 2010 | 11,3 | – 3 | 5,2 | 33 | 16,5 | 6 |
| 2011 | 12,2 | 7 | 5,9 | 14 | 18,1 | 9 |
| 2012 | 12,1 | – 1 | 6,5 | 10 | 18,6 | 3 |
| 2013 | 12,4 | 3 | 6,8 | 4 | 19,2 | 3 |
| Source: BAC comments — 8 May 2014 |

(634)

Table 30 shows the development in the number of passengers taking short-haul flights from and to Charleroi and Brussels airports (Charleroi and Brussels airports are not in competition for long-haul flights as these are not offered at Charleroi).

Table 30

Table 30

Development in the number of passengers (in millions) taking short-haul flights from and to Brussels (BRU) and Charleroi (CRL) airports

Development in the number of passengers (in millions) taking short-haul flights from and to Brussels (BRU) and Charleroi (CRL) airports

BRU

CRL

BRU + CRL

Market for short-haul flights from and to BRU (number of passengers - million)

Annual change (%)

Market for short-haul flights from and to CRL (number of passengers - million)

Annual change (%)

Market for short-haul flights from and to BRU and CRL (number of passengers - million)

Annual change (%)

2004

11,8

2,0

13,8

2005

12,2

4

1,9

– 5

14,1

2

2006

12,5

3

2,2

16

14,7

4

2007

13,4

8

2,4

9

15,8

7

2008

13,2

– 1

2,9

21

16,1

2

2009

11,7

– 11

3,9

35

15,6

– 3

2010

11,3

– 3

5,2

33

16,5

6

2011

12,2

7

5,9

14

18,1

9

2012

12,1

– 1

6,5

10

18,6

3

2013

12,4

3

6,8

4

19,2

3

Source: BAC comments — 8 May 2014

Source

| (635) | The table in recital 634 shows that, whereas in 2004 traffic in the short-haul segment at Charleroi was only 17 % of the same traffic at Brussels, in 2013 the figure was nearly 55 %. Growth at Charleroi airport was particularly strong in the years 2008 to 2010, whereas the short-haul traffic at Brussels airport fell over the same period. This considerable development of Charleroi airport in the years 2008 to 2010 is partly explained by the opening of the new terminal in 2008, financed by SOWAER, for which this decision has determined that BSCA did not pay market price. |
| --- | --- |

(635)

The table in recital 634 shows that, whereas in 2004 traffic in the short-haul segment at Charleroi was only 17 % of the same traffic at Brussels, in 2013 the figure was nearly 55 %. Growth at Charleroi airport was particularly strong in the years 2008 to 2010, whereas the short-haul traffic at Brussels airport fell over the same period. This considerable development of Charleroi airport in the years 2008 to 2010 is partly explained by the opening of the new terminal in 2008, financed by SOWAER, for which this decision has determined that BSCA did not pay market price.

| (636) | According to BAC, this situation has resulted in the loss of 2,5 million passengers, which represents an annual loss of revenue of EUR 50 million. BAC estimates that, out of the 4 million additional passengers at Charleroi airport in 2011 compared to 2005, it is likely that only 1,5 million are new customers, with the remaining 2,5 million being passengers who in other circumstances would have come to or remained at Brussels airport. |
| --- | --- |

(636)

According to BAC, this situation has resulted in the loss of 2,5 million passengers, which represents an annual loss of revenue of EUR 50 million. BAC estimates that, out of the 4 million additional passengers at Charleroi airport in 2011 compared to 2005, it is likely that only 1,5 million are new customers, with the remaining 2,5 million being passengers who in other circumstances would have come to or remained at Brussels airport.

(iii)   Conclusion

| (637) | The Commission finds that:






  — | Charleroi and Brussels airports are in competition for certain point-to-point short- and medium-haul flights and for certain users, |
| --- | --- | --- |

(637)

The Commission finds that:

—

Charleroi and Brussels airports are in competition for certain point-to-point short- and medium-haul flights and for certain users,

| — | Brussels airport is not congested, |
| --- | --- |

—

Brussels airport is not congested,

| — | the aid has enabled BSCA to offer particularly attractive rates to airlines for its airport services. The Commission takes the view that, without this aid, BSCA would definitely not have been in a position to get Ryanair to base a large number of flights at Charleroi airport. The development of Charleroi airport has been boosted by the Region's decision to invest significantly in the airport and thus increase its capacity: the airport has therefore gone from a theoretical capacity of 1 million passengers before the investments made through the 2002 and 2003 measures to a theoretical capacity of 3 million passengers after the investments (we note that the actual capacity is in fact higher, as proven by the traffic figures for Charleroi airport, given that it is generally possible to exceed the nominal capacity of a terminal by reducing the level of passenger comfort and/or making certain changes that do not require massive investment). |
| --- | --- |

—

the aid has enabled BSCA to offer particularly attractive rates to airlines for its airport services. The Commission takes the view that, without this aid, BSCA would definitely not have been in a position to get Ryanair to base a large number of flights at Charleroi airport. The development of Charleroi airport has been boosted by the Region's decision to invest significantly in the airport and thus increase its capacity: the airport has therefore gone from a theoretical capacity of 1 million passengers before the investments made through the 2002 and 2003 measures to a theoretical capacity of 3 million passengers after the investments (we note that the actual capacity is in fact higher, as proven by the traffic figures for Charleroi airport, given that it is generally possible to exceed the nominal capacity of a terminal by reducing the level of passenger comfort and/or making certain changes that do not require massive investment).

| (638) | The Commission therefore concludes that the aid has considerably distorted competition to the detriment of those airports competing with Charleroi airport, primarily Brussels airport. With regard to the 2002 capital increase, if this does constitute aid, it has contributed to these distortions insofar as it has enabled BSCA to avoid financial difficulties and proceed with the development of Charleroi airport. However, this contribution to the distortions of competition is modest, insofar as this involves a one-off intervention of a limited amount compared to the aid amounts resulting from the other measures covered by this examination. Moreover, it occurred at the start of the airport development phase, when the airport's traffic was still relatively modest compared to that of Brussels airport. |
| --- | --- |

(638)

The Commission therefore concludes that the aid has considerably distorted competition to the detriment of those airports competing with Charleroi airport, primarily Brussels airport. With regard to the 2002 capital increase, if this does constitute aid, it has contributed to these distortions insofar as it has enabled BSCA to avoid financial difficulties and proceed with the development of Charleroi airport. However, this contribution to the distortions of competition is modest, insofar as this involves a one-off intervention of a limited amount compared to the aid amounts resulting from the other measures covered by this examination. Moreover, it occurred at the start of the airport development phase, when the airport's traffic was still relatively modest compared to that of Brussels airport.

| (639) | The Commission notes that traffic at Charleroi airport has increased more than fivefold since the aid was granted (230) (this growth is much higher than the average growth of airports), whereas traffic at Brussels airport in the point-to-point short- and medium-haul segment has stagnated since 2004. This confirms a posteriori that part of the growth at Charleroi airport has occurred to the detriment of growth at Brussels airport. The Commission also notes that the competitive impact of Charleroi airport has been especially significant since 2008 due to the increase in its capacity, which was particularly enabled by the investments made by SOWAER. |
| --- | --- |

(639)

The Commission notes that traffic at Charleroi airport has increased more than fivefold since the aid was granted (230) (this growth is much higher than the average growth of airports), whereas traffic at Brussels airport in the point-to-point short- and medium-haul segment has stagnated since 2004. This confirms a posteriori that part of the growth at Charleroi airport has occurred to the detriment of growth at Brussels airport. The Commission also notes that the competitive impact of Charleroi airport has been especially significant since 2008 due to the increase in its capacity, which was particularly enabled by the investments made by SOWAER.

230

| (640) | The Commission further notes that, since the beginning of 2014, Ryanair has been operating from Brussels airport, which is developing in the low-cost segment. Vueling was already operating from this airport. Competition between the two airports may therefore increase further in the future, as they are both likely to attract the same airlines and the same customer segments. |
| --- | --- |

(640)

The Commission further notes that, since the beginning of 2014, Ryanair has been operating from Brussels airport, which is developing in the low-cost segment. Vueling was already operating from this airport. Competition between the two airports may therefore increase further in the future, as they are both likely to attract the same airlines and the same customer segments.

| (641) | Based on this information, the Commission concludes that the aid has significantly distorted competition by reducing BSCA's operating costs through abnormally low concession fees. These distortions were certainly limited in the initial years after the measures in question were granted, i.e. in 2002 and 2003, given that the investments had not been made in full at that stage and that Charleroi airport's traffic was still limited, but they have increased subsequently and are now very significant. |
| --- | --- |

(641)

Based on this information, the Commission concludes that the aid has significantly distorted competition by reducing BSCA's operating costs through abnormally low concession fees. These distortions were certainly limited in the initial years after the measures in question were granted, i.e. in 2002 and 2003, given that the investments had not been made in full at that stage and that Charleroi airport's traffic was still limited, but they have increased subsequently and are now very significant.

6.3.2.7.   
  Conclusion on the compatibility of the aid granted to BSCA on the basis of Article 107(3) TFEU

Conclusion on the compatibility of the aid granted to BSCA on the basis of Article 107(3) TFEU

| (642) | The Commission concludes that the aid granted to BSCA has contributed to regional economic development, but that it has had significant and increasing effects on the airports competing with Charleroi airport, and particularly on Brussels airport. |
| --- | --- |

(642)

The Commission concludes that the aid granted to BSCA has contributed to regional economic development, but that it has had significant and increasing effects on the airports competing with Charleroi airport, and particularly on Brussels airport.

| (643) | The Commission notes that, if the aid had been granted after the aviation guidelines entered into force, i.e. after 4 April 2014, it could not have been declared compatible with the internal market. Point 119 of the aviation guidelines in fact states that ‘in order to be eligible for operating aid, the annual traffic of the airport must not exceed 3 million passengers’. |
| --- | --- |

(643)

The Commission notes that, if the aid had been granted after the aviation guidelines entered into force, i.e. after 4 April 2014, it could not have been declared compatible with the internal market. Point 119 of the aviation guidelines in fact states that ‘in order to be eligible for operating aid, the annual traffic of the airport must not exceed 3 million passengers’.

| (644) | This aid was granted before 4 April 2014 and point 119 of the aviation guidelines does not therefore apply. However, according to the aviation guidelines, the Commission must assess the unlawful operating aid granted to airports by taking account of the distortions of competition caused by this aid (231). According to the Commission, this requirement means that it must give an opinion on the aid in question in the light, on the one hand, of its positive effects in terms of the objective of common interest pursued and, on the other hand, of its negative effects on competition and trade. In the present case, it has been established that the aid has had a significant positive effect on the economic development of Charleroi and its region, which may be recognised as an objective of common interest justifying operating aid, while also having negative effects, which have increased over time and become very significant. |
| --- | --- |

(644)

This aid was granted before 4 April 2014 and point 119 of the aviation guidelines does not therefore apply. However, according to the aviation guidelines, the Commission must assess the unlawful operating aid granted to airports by taking account of the distortions of competition caused by this aid (231). According to the Commission, this requirement means that it must give an opinion on the aid in question in the light, on the one hand, of its positive effects in terms of the objective of common interest pursued and, on the other hand, of its negative effects on competition and trade. In the present case, it has been established that the aid has had a significant positive effect on the economic development of Charleroi and its region, which may be recognised as an objective of common interest justifying operating aid, while also having negative effects, which have increased over time and become very significant.

231

| (645) | In this instance, given that the negative effects of the aid, which were initially limited, have constantly increased over time until they have become too significant, the Commission takes the view that the Region-SOWAER should have, from a certain date, required BSCA to pay a concession fee in line with the level that would have been determined when the measures in question were granted, in 2002 and 2003, if the Region-SOWAER had acted towards BSCA as a market economy operator placing its infrastructure at BSCA's disposal with a view to profitability. BSCA would therefore have benefited from operating aid in the form of an extra low concession fee up to the date in question, on a transitional basis, and not beyond. |
| --- | --- |

(645)

In this instance, given that the negative effects of the aid, which were initially limited, have constantly increased over time until they have become too significant, the Commission takes the view that the Region-SOWAER should have, from a certain date, required BSCA to pay a concession fee in line with the level that would have been determined when the measures in question were granted, in 2002 and 2003, if the Region-SOWAER had acted towards BSCA as a market economy operator placing its infrastructure at BSCA's disposal with a view to profitability. BSCA would therefore have benefited from operating aid in the form of an extra low concession fee up to the date in question, on a transitional basis, and not beyond.

| (646) | The Commission takes the view that, in order to reduce the negative effects of the aid on competition and trade to an acceptable level, so that the aid is compatible with the internal market, this approach must be implemented a posteriori, in the form of (i) the recovery from BSCA of the aid amounts received after the date in question, and (ii) an adjustment to the methods for calculating the concession fee for the period after the adoption of this decision up to the expiry of the concession from which BSCA benefits, such that, over this period, BSCA pays the Region-SOWAER a concession fee in line with the level that would have been determined when the measures in question were granted, in 2002 and 2003, if the Region-SOWAER had acted towards BSCA as a market economy operator. |
| --- | --- |

(646)

The Commission takes the view that, in order to reduce the negative effects of the aid on competition and trade to an acceptable level, so that the aid is compatible with the internal market, this approach must be implemented a posteriori, in the form of (i) the recovery from BSCA of the aid amounts received after the date in question, and (ii) an adjustment to the methods for calculating the concession fee for the period after the adoption of this decision up to the expiry of the concession from which BSCA benefits, such that, over this period, BSCA pays the Region-SOWAER a concession fee in line with the level that would have been determined when the measures in question were granted, in 2002 and 2003, if the Region-SOWAER had acted towards BSCA as a market economy operator.

| (647) | As the date in question must be determined by weighing up the positive effects on regional economic development and the negative effects on competition, it cannot be determined solely by applying a method of economic analysis, but necessarily requires the Commission to use its wide margin of discretion in terms of the compatibility of State aid with the internal market. |
| --- | --- |

(647)

As the date in question must be determined by weighing up the positive effects on regional economic development and the negative effects on competition, it cannot be determined solely by applying a method of economic analysis, but necessarily requires the Commission to use its wide margin of discretion in terms of the compatibility of State aid with the internal market.

| (648) | In this respect, the Commission notes that the entry into force of the aviation guidelines on 4 April 2014 is an important turning point in terms of public support for airports as, according to the aviation guidelines, from that date Member States may no longer grant new operating aid to airports with more than 3 million passengers. The aim of said provision is clearly to limit, from 4 April 2014, the negative effects of operating aid granted to airports. The Commission takes the view that this date also forms an appropriate benchmark in the present case, and that it can be regarded as the moment from which BSCA should have ceased to pay an extra low concession fee under the 2002 and 2003 measures. With regard to the 2002 capital increase, in the light of the findings made in recital 638 and due to the fact that this measure was granted before 4 April 2014, the Commission takes the view that, if this measure does constitute State aid, it is compatible with the internal market. |
| --- | --- |

(648)

In this respect, the Commission notes that the entry into force of the aviation guidelines on 4 April 2014 is an important turning point in terms of public support for airports as, according to the aviation guidelines, from that date Member States may no longer grant new operating aid to airports with more than 3 million passengers. The aim of said provision is clearly to limit, from 4 April 2014, the negative effects of operating aid granted to airports. The Commission takes the view that this date also forms an appropriate benchmark in the present case, and that it can be regarded as the moment from which BSCA should have ceased to pay an extra low concession fee under the 2002 and 2003 measures. With regard to the 2002 capital increase, in the light of the findings made in recital 638 and due to the fact that this measure was granted before 4 April 2014, the Commission takes the view that, if this measure does constitute State aid, it is compatible with the internal market.

| (649) | In conclusion, the Commission takes the view that:






  — | the measures granted by Belgium to BSCA under the 2002 agreements and the 2003 investment decision constitute State aid compatible with the internal market on the basis of Article 107(3)(c) TFEU up to 3 April 2014 and State aid incompatible with the internal market from 4 April 2014, |
| --- | --- | --- |

(649)

In conclusion, the Commission takes the view that:

—

the measures granted by Belgium to BSCA under the 2002 agreements and the 2003 investment decision constitute State aid compatible with the internal market on the basis of Article 107(3)(c) TFEU up to 3 April 2014 and State aid incompatible with the internal market from 4 April 2014,

| — | assuming that it does constitute State aid within the meaning of Article 107(1) TFEU, the capital increase in BSCA subscribed on 3 December 2002 by SOWAER is State aid compatible with the internal market on the basis of Article 107(3)(c) TFEU. |
| --- | --- |

—

assuming that it does constitute State aid within the meaning of Article 107(1) TFEU, the capital increase in BSCA subscribed on 3 December 2002 by SOWAER is State aid compatible with the internal market on the basis of Article 107(3)(c) TFEU.

6.4.   Applicability of the limitation period to the aid granted to BSCA

Applicability of the limitation period to the aid granted to BSCA

| (650) | Article 15 of the Procedural Regulation stipulates that the recovery of State aid shall be subject to a limitation period of 10 years. The limitation period shall begin on the day on which the unlawful aid is awarded to the beneficiary. |
| --- | --- |

(650)

Article 15 of the Procedural Regulation stipulates that the recovery of State aid shall be subject to a limitation period of 10 years. The limitation period shall begin on the day on which the unlawful aid is awarded to the beneficiary.

| (651) | According to Belgium, the subsidy paid by the Region to BSCA for certain services associated with the airport activities benefits from the limitation period stipulated by Article 15 of the Procedural Regulation. Belgium asserts that this subsidy was granted on 9 July 1991, which was the date of conclusion of the Region/BSCA agreement and annexed schedule of conditions. According to Belgium, since that date, notwithstanding the adoption of various provisions without any impact on the principle of compulsory compensation payable by the Region for these costs, the Region has been responsible for paying this subsidy. Only a few non-economic services set out in Amendment No 6 of 15 January 2008 are apparently not covered by this limitation period. |
| --- | --- |

(651)

According to Belgium, the subsidy paid by the Region to BSCA for certain services associated with the airport activities benefits from the limitation period stipulated by Article 15 of the Procedural Regulation. Belgium asserts that this subsidy was granted on 9 July 1991, which was the date of conclusion of the Region/BSCA agreement and annexed schedule of conditions. According to Belgium, since that date, notwithstanding the adoption of various provisions without any impact on the principle of compulsory compensation payable by the Region for these costs, the Region has been responsible for paying this subsidy. Only a few non-economic services set out in Amendment No 6 of 15 January 2008 are apparently not covered by this limitation period.

| (652) | First of all, the Commission notes that it considered in recital 415 that it must examine the subsidy for certain services associated with the airport activities in conjunction with the other economics of the concession (provision of the infrastructure and concession fee). |
| --- | --- |

(652)

First of all, the Commission notes that it considered in recital 415 that it must examine the subsidy for certain services associated with the airport activities in conjunction with the other economics of the concession (provision of the infrastructure and concession fee).

| (653) | Even if the subsidy paid by the Region for certain services associated with the airport activities may be examined separately from the SOWAER/BSCA agreement, the Commission refutes, however, the assessment according to which the measure granting this subsidy has not been substantially amended. On the contrary, the Commission takes the view that each of the following three amendments has substantially amended the measure: |
| --- | --- |

(653)

Even if the subsidy paid by the Region for certain services associated with the airport activities may be examined separately from the SOWAER/BSCA agreement, the Commission refutes, however, the assessment according to which the measure granting this subsidy has not been substantially amended. On the contrary, the Commission takes the view that each of the following three amendments has substantially amended the measure:

6.4.1.   Amendment No 3 of 29 March 2002

Amendment No 3 of 29 March 2002

| (654) | The Commission notes that, under Article 25 of the schedule of conditions annexed to the Region/BSCA agreement of 9 July 1991, the Region was to cover the cost of the fire and maintenance services for a transitional period only. |
| --- | --- |

(654)

The Commission notes that, under Article 25 of the schedule of conditions annexed to the Region/BSCA agreement of 9 July 1991, the Region was to cover the cost of the fire and maintenance services for a transitional period only.

| (655) | This transitional period was extended until 1 January 2000 under Amendment No 2 to the schedule of conditions annexed to the agreement. |
| --- | --- |

(655)

This transitional period was extended until 1 January 2000 under Amendment No 2 to the schedule of conditions annexed to the agreement.

| (656) | For the years 2000 and 2001, subsidies for the ‘fire and maintenance’ costs were paid by the Region to BSCA on legal bases other than the Region/BSCA agreement (232), with the acts in question not committing the Region to pay the subsidies to BSCA beyond the years 2000 and 2001. |
| --- | --- |

(656)

For the years 2000 and 2001, subsidies for the ‘fire and maintenance’ costs were paid by the Region to BSCA on legal bases other than the Region/BSCA agreement (232), with the acts in question not committing the Region to pay the subsidies to BSCA beyond the years 2000 and 2001.

232

| (657) | As regards the year 2002, Belgium states that, although the Region had always planned to continue granting compensation for these costs, the creation of SOWAER and the introduction of a new legal framework led to a delay in formalising the extension of this compensation. According to Belgium, the continuation of this payment was confirmed in a letter of 5 July 2001 sent by BSCA to the Walloon transport and facilities administration, detailing the main lines of the BSCA 2002 budget covering the costs of these services, following a telephone conversation during which, according to Belgium, the Region had confirmed that it would pay for these services for 2002. |
| --- | --- |

(657)

As regards the year 2002, Belgium states that, although the Region had always planned to continue granting compensation for these costs, the creation of SOWAER and the introduction of a new legal framework led to a delay in formalising the extension of this compensation. According to Belgium, the continuation of this payment was confirmed in a letter of 5 July 2001 sent by BSCA to the Walloon transport and facilities administration, detailing the main lines of the BSCA 2002 budget covering the costs of these services, following a telephone conversation during which, according to Belgium, the Region had confirmed that it would pay for these services for 2002.

| (658) | As indicated in recitals 71 and 72, Amendment No 3 of 29 March 2002 to the Region/BSCA agreement amended Article 3.2 of this agreement and provided that the Walloon Region would reimburse the costs (expenses and investments) inherent in the fire and maintenance services. Amendment No 3 also amended Article 25 of the schedule of conditions and provided that the concession-holder would present the concession authority with the budget for the fire and maintenance services and that it would keep a separate operating account that could at any time be analysed and checked by the concession authority. |
| --- | --- |

(658)

As indicated in recitals 71 and 72, Amendment No 3 of 29 March 2002 to the Region/BSCA agreement amended Article 3.2 of this agreement and provided that the Walloon Region would reimburse the costs (expenses and investments) inherent in the fire and maintenance services. Amendment No 3 also amended Article 25 of the schedule of conditions and provided that the concession-holder would present the concession authority with the budget for the fire and maintenance services and that it would keep a separate operating account that could at any time be analysed and checked by the concession authority.

| (659) | The Commission takes the view that Amendment No 3 of 29 March 2002 to the Region/BSCA agreement substantially affected the measure. Amendment No 3 in fact introduced a written undertaking on the part of the Region to cover the costs associated with the fire and maintenance services, when there was no longer any written undertaking on the part of the Region with regard to the costs incurred by BSCA from 1 January 2002. |
| --- | --- |

(659)

The Commission takes the view that Amendment No 3 of 29 March 2002 to the Region/BSCA agreement substantially affected the measure. Amendment No 3 in fact introduced a written undertaking on the part of the Region to cover the costs associated with the fire and maintenance services, when there was no longer any written undertaking on the part of the Region with regard to the costs incurred by BSCA from 1 January 2002.

| (660) | Moreover, Amendment No 3 amended Article 3.2 of the Region/BSCA agreement and provided that the Region would reimburse the costs (expenses and investments) inherent in the fire and maintenance services. It also amended Article 25 of the schedule of conditions and provided that the concession-holder would present the concession authority with the budget for the fire and maintenance services and that it would keep a separate operating account that could at any time be analysed and checked by the concession authority. In this respect, the Commission stresses that Amendment No 3 stipulated that this operating account would include the investment costs and/or investment depreciation costs, even though this had not previously been the case. |
| --- | --- |

(660)

Moreover, Amendment No 3 amended Article 3.2 of the Region/BSCA agreement and provided that the Region would reimburse the costs (expenses and investments) inherent in the fire and maintenance services. It also amended Article 25 of the schedule of conditions and provided that the concession-holder would present the concession authority with the budget for the fire and maintenance services and that it would keep a separate operating account that could at any time be analysed and checked by the concession authority. In this respect, the Commission stresses that Amendment No 3 stipulated that this operating account would include the investment costs and/or investment depreciation costs, even though this had not previously been the case.

| (661) | Based on these points, the Commission takes the view that the subsidy paid by the Region to BSCA for certain services associated with the airport activities was introduced, or in any event substantially amended, by Amendment No 3 of 29 March 2002 to the Region/BSCA agreement. |
| --- | --- |

(661)

Based on these points, the Commission takes the view that the subsidy paid by the Region to BSCA for certain services associated with the airport activities was introduced, or in any event substantially amended, by Amendment No 3 of 29 March 2002 to the Region/BSCA agreement.

6.4.2.   Amendment No 5 of 10 March 2006 to the Region/BSCA agreement

Amendment No 5 of 10 March 2006 to the Region/BSCA agreement

| (662) | Through the following provisions, Amendment No 5 of 10 March 2006 to the Region/BSCA agreement substantially amended Amendment No 3:






  — | Under Article 3.2.2 of the Region/BSCA agreement, as amended by Amendment No 5, the costs incurred by BSCA for ‘the fire protection and ground traffic and airport site safety services’ were to be compensated by the Region, whereas previously the Region had compensated the costs incurred by BSCA for the ‘fire and maintenance’ services. According to Belgium, this new wording aimed to define more precisely the costs assumed by the Region, but did not substantially alter the scope of the services covered. However, the Commission notes that, even if the change in wording of the services for which BSCA receives compensation is ignored, the details of the costs covered under Article 25 of the schedule of conditions, as amended by Amendment No 5, differ in that they include certain costs that were not previously mentioned, namely ‘the ground traffic and airport site safety services include routine maintenance of the airport site, ... minor surfacing work, routine maintenance and repair of the runway and accesses, operational maintenance and servicing of the general lighting and runway lighting, mowing services, rubber removal from the runway and its markings, snow clearance and any other services ensuring the safety of ground traffic, airport site and infrastructures, except for commercial areas of the airport zone’. |
| --- | --- | --- |

(662)

Through the following provisions, Amendment No 5 of 10 March 2006 to the Region/BSCA agreement substantially amended Amendment No 3:

—

Under Article 3.2.2 of the Region/BSCA agreement, as amended by Amendment No 5, the costs incurred by BSCA for ‘the fire protection and ground traffic and airport site safety services’ were to be compensated by the Region, whereas previously the Region had compensated the costs incurred by BSCA for the ‘fire and maintenance’ services. According to Belgium, this new wording aimed to define more precisely the costs assumed by the Region, but did not substantially alter the scope of the services covered. However, the Commission notes that, even if the change in wording of the services for which BSCA receives compensation is ignored, the details of the costs covered under Article 25 of the schedule of conditions, as amended by Amendment No 5, differ in that they include certain costs that were not previously mentioned, namely ‘the ground traffic and airport site safety services include routine maintenance of the airport site, ... minor surfacing work, routine maintenance and repair of the runway and accesses, operational maintenance and servicing of the general lighting and runway lighting, mowing services, rubber removal from the runway and its markings, snow clearance and any other services ensuring the safety of ground traffic, airport site and infrastructures, except for commercial areas of the airport zone’.

| — | The subsidy was capped, whereas it had not been previously. This cap applied from the initial entry into force of Amendment No 5 and therefore had an impact on the amount of the subsidy paid by the Region to BSCA from the first year. |
| --- | --- |

—

The subsidy was capped, whereas it had not been previously. This cap applied from the initial entry into force of Amendment No 5 and therefore had an impact on the amount of the subsidy paid by the Region to BSCA from the first year.

| — | The amount of the subsidy had to be revised before July 2009 (233). |
| --- | --- |

—

The amount of the subsidy had to be revised before July 2009 (233).

233

| (663) | Based on these points, the Commission takes the view that the measure was substantially affected by the adoption of Amendment No 5 of 10 March 2006 to the Region/BSCA agreement. |
| --- | --- |

(663)

Based on these points, the Commission takes the view that the measure was substantially affected by the adoption of Amendment No 5 of 10 March 2006 to the Region/BSCA agreement.

6.4.3.   Amendment No 6 of 15 January 2008 to the Region/BSCA agreement

Amendment No 6 of 15 January 2008 to the Region/BSCA agreement

| (664) | Amendment No 6 of 15 January 2008 to the Region/BSCA agreement substantially amended Amendment No 5 by significantly extending the scope of the services for which the Region paid a subsidy to BSCA, as those services subsequently included flight tracking and recording, provisional flight planning, marshalling and security. As set out in Section 6.1.1, the Commission takes the view that these services, except for the security services, constitute economic services. |
| --- | --- |

(664)

Amendment No 6 of 15 January 2008 to the Region/BSCA agreement substantially amended Amendment No 5 by significantly extending the scope of the services for which the Region paid a subsidy to BSCA, as those services subsequently included flight tracking and recording, provisional flight planning, marshalling and security. As set out in Section 6.1.1, the Commission takes the view that these services, except for the security services, constitute economic services.

6.4.4.   Conclusion

Conclusion

| (665) | The Commission therefore concludes that the subsidy paid by the Region to BSCA for certain services associated with the airport activities cannot be regarded as a measure having been continuously in force and not having been substantially amended since 1991. The payment of this subsidy is based on several new measures applicable in succession. Those examined in this decision are: (a) Amendment No 3 of 29 March 2002 to the Region/BSCA agreement; (b) Amendment No 5 of 10 March 2006 to the Region/BSCA agreement; and (c) Amendment No 6 of 15 January 2008 to the Region/BSCA agreement. |
| --- | --- |

(665)

The Commission therefore concludes that the subsidy paid by the Region to BSCA for certain services associated with the airport activities cannot be regarded as a measure having been continuously in force and not having been substantially amended since 1991. The payment of this subsidy is based on several new measures applicable in succession. Those examined in this decision are: (a) Amendment No 3 of 29 March 2002 to the Region/BSCA agreement; (b) Amendment No 5 of 10 March 2006 to the Region/BSCA agreement; and (c) Amendment No 6 of 15 January 2008 to the Region/BSCA agreement.

| (666) | Measures (a) to (c) cannot benefit from the 10-year limitation period as there were less than 10 years between the date when they were granted and 20 April 2011, which was the date when the Commission sent its first request for information to Belgium on the subject of the aid granted to BSCA. As stipulated by Article 15 of the Procedural Regulation, any action taken by the Commission or by a Member State, acting at the request of the Commission, with regard to the unlawful aid shall interrupt the limitation period. The Commission therefore concludes that the limitation period laid down by Article 15 of the Procedural Regulation does not apply to the aid granted to BSCA and examined in this decision. |
| --- | --- |

(666)

Measures (a) to (c) cannot benefit from the 10-year limitation period as there were less than 10 years between the date when they were granted and 20 April 2011, which was the date when the Commission sent its first request for information to Belgium on the subject of the aid granted to BSCA. As stipulated by Article 15 of the Procedural Regulation, any action taken by the Commission or by a Member State, acting at the request of the Commission, with regard to the unlawful aid shall interrupt the limitation period. The Commission therefore concludes that the limitation period laid down by Article 15 of the Procedural Regulation does not apply to the aid granted to BSCA and examined in this decision.

6.5.   Applicability of the principle of legitimate expectations to the subsidy paid by the Region for certain services associated with the airport activities

Applicability of the principle of legitimate expectations to the subsidy paid by the Region for certain services associated with the airport activities

| (667) | Article 14(1) of the Procedural Regulation stipulates that ‘The Commission shall not require recovery of the aid if this would be contrary to a general principle of Community law’. In particular, the Commission cannot require recovery of aid that, although granted within the 10-year period defined in Article 15(1) of the Procedural Regulation, may be covered by the existence of a legitimate expectation — in the mind of the beneficiary of the aid — resulting from acts or positions taken by the Commission in the past. |
| --- | --- |

(667)

Article 14(1) of the Procedural Regulation stipulates that ‘The Commission shall not require recovery of the aid if this would be contrary to a general principle of Community law’. In particular, the Commission cannot require recovery of aid that, although granted within the 10-year period defined in Article 15(1) of the Procedural Regulation, may be covered by the existence of a legitimate expectation — in the mind of the beneficiary of the aid — resulting from acts or positions taken by the Commission in the past.

| (668) | As indicated in Section 5.4 of this decision, Belgium maintains that recovery of the subsidy paid by the Region for certain services associated with the airport activities would be contrary to the principle of legitimate expectations. |
| --- | --- |

(668)

As indicated in Section 5.4 of this decision, Belgium maintains that recovery of the subsidy paid by the Region for certain services associated with the airport activities would be contrary to the principle of legitimate expectations.

| (669) | However, the Court of Justice has ruled that the beneficiary of unlawful aid may not in principle invoke a legitimate expectation (234). The beneficiary should in fact have checked that the aid granted had been notified to and approved by the Commission. In this respect, the Commission notes that the aid granted to BSCA was not notified to the Commission. |
| --- | --- |

(669)

However, the Court of Justice has ruled that the beneficiary of unlawful aid may not in principle invoke a legitimate expectation (234). The beneficiary should in fact have checked that the aid granted had been notified to and approved by the Commission. In this respect, the Commission notes that the aid granted to BSCA was not notified to the Commission.

234

6.5.1.   Absence of precise assurances

Absence of precise assurances

| (670) | Moreover, as clarified by the Court of Justice (235), a person may not plead infringement of the principle of legitimate expectations ‘unless he has been given precise assurances by the administration’. |
| --- | --- |

(670)

Moreover, as clarified by the Court of Justice (235), a person may not plead infringement of the principle of legitimate expectations ‘unless he has been given precise assurances by the administration’.

235

| (671) | Belgium maintains that, given the lack of a complaint by the Commission in its 2004 decision, BSCA did receive precise assurances that the subsidy was not likely to constitute State aid. Belgium in particular relies on recital 214 of the 2004 decision, in which the Commission stated that it ‘does not dispute the legitimate possibility of the Walloon authorities continuing to bear the cost of the fire and maintenance services’. It indicates that this legitimate expectation has been reinforced by the settled decision-making practice of the Commission on the distinction between economic activities and non-economic activities, as reiterated in the Commission decision on Leipzig/Halle airport. |
| --- | --- |

(671)

Belgium maintains that, given the lack of a complaint by the Commission in its 2004 decision, BSCA did receive precise assurances that the subsidy was not likely to constitute State aid. Belgium in particular relies on recital 214 of the 2004 decision, in which the Commission stated that it ‘does not dispute the legitimate possibility of the Walloon authorities continuing to bear the cost of the fire and maintenance services’. It indicates that this legitimate expectation has been reinforced by the settled decision-making practice of the Commission on the distinction between economic activities and non-economic activities, as reiterated in the Commission decision on Leipzig/Halle airport.

| (672) | The Commission takes the view that the lack of a complaint about the aid granted to BSCA in its 2004 decision cannot constitute a ‘precise assurance’. The Commission notes that neither the 2002 opening decision nor the 2004 final decision concerned the measures granted to BSCA. As regards recital 214 of the 2004 decision, the Commission stresses that this recital must be read in context. It would appear that, in said context, the recital in question cannot be regarded as approving the measure with regard to the State aid rules, but only as explaining the reason why it is not the conformity of this measure with the State aid rules that is being examined by the Commission, but rather the uncertainty about the funding by the Region of certain services within the BSCA business plan, for the purposes of applying the market economy operator test to the 2001 contracts. |
| --- | --- |

(672)

The Commission takes the view that the lack of a complaint about the aid granted to BSCA in its 2004 decision cannot constitute a ‘precise assurance’. The Commission notes that neither the 2002 opening decision nor the 2004 final decision concerned the measures granted to BSCA. As regards recital 214 of the 2004 decision, the Commission stresses that this recital must be read in context. It would appear that, in said context, the recital in question cannot be regarded as approving the measure with regard to the State aid rules, but only as explaining the reason why it is not the conformity of this measure with the State aid rules that is being examined by the Commission, but rather the uncertainty about the funding by the Region of certain services within the BSCA business plan, for the purposes of applying the market economy operator test to the 2001 contracts.

| (673) | As stated in recitals 397 to 399 of this decision, the Commission disputes that it can be concluded from recitals 182 and 183 of the decision on Leipzig/Halle airport that the Commission has in the past taken the view that tasks comparable to maintenance and traffic safety, as defined in the Region/BSCA agreement, fall within the public policy remit. |
| --- | --- |

(673)

As stated in recitals 397 to 399 of this decision, the Commission disputes that it can be concluded from recitals 182 and 183 of the decision on Leipzig/Halle airport that the Commission has in the past taken the view that tasks comparable to maintenance and traffic safety, as defined in the Region/BSCA agreement, fall within the public policy remit.

6.5.2.   Foreseeability of the change to the pattern of conduct

Foreseeability of the change to the pattern of conduct

| (674) | As stated by the Court of Justice (236), ‘if a prudent and alert economic operator could have foreseen the adoption of a Community measure likely to affect his interests, he cannot plead that principle if the measure is adopted (237)’. |
| --- | --- |

(674)

As stated by the Court of Justice (236), ‘if a prudent and alert economic operator could have foreseen the adoption of a Community measure likely to affect his interests, he cannot plead that principle if the measure is adopted (237)’.

236

237

| (675) | According to Belgium, there was nothing to indicate to BSCA that the Commission was going to re-examine, in 2012, a measure on which it had not expressed any reservations in 2004, and which the General Court did not question in 2008. |
| --- | --- |

(675)

According to Belgium, there was nothing to indicate to BSCA that the Commission was going to re-examine, in 2012, a measure on which it had not expressed any reservations in 2004, and which the General Court did not question in 2008.

| (676) | The Commission refutes having adopted a position on the measures granted to BSCA by adopting the 2004 decision. As a result, the 2012 decision does not constitute a change to its pattern of conduct. |
| --- | --- |

(676)

The Commission refutes having adopted a position on the measures granted to BSCA by adopting the 2004 decision. As a result, the 2012 decision does not constitute a change to its pattern of conduct.

| (677) | The Commission also refutes that the present decision constitutes a change to its decision-making practice concerning the distinction between economic activities and non-economic activities. As regards the decision on Leipzig/Halle airport cited by Belgium to prove the alleged change to the Commission's pattern of conduct, the Commission refutes that it can concluded from that decision that it has in the past taken the view that tasks comparable to maintenance and traffic safety fall within the public policy remit (see recitals 397 to 399). |
| --- | --- |

(677)

The Commission also refutes that the present decision constitutes a change to its decision-making practice concerning the distinction between economic activities and non-economic activities. As regards the decision on Leipzig/Halle airport cited by Belgium to prove the alleged change to the Commission's pattern of conduct, the Commission refutes that it can concluded from that decision that it has in the past taken the view that tasks comparable to maintenance and traffic safety fall within the public policy remit (see recitals 397 to 399).

| (678) | In conclusion, the Commission takes the view that recovery of the unlawful and incompatible aid granted to BSCA is not contrary to the principle of legitimate expectations. |
| --- | --- |

(678)

In conclusion, the Commission takes the view that recovery of the unlawful and incompatible aid granted to BSCA is not contrary to the principle of legitimate expectations.

7.   CONCLUSION AND QUANTIFICATION OF THE AID TO BE RECOVERED FROM BSCA

CONCLUSION AND QUANTIFICATION OF THE AID TO BE RECOVERED FROM BSCA

7.1.   Aid unlawfully granted to BSCA

Aid unlawfully granted to BSCA

| (679) | The Commission finds that, by adopting the 2002 agreements and the 2003 investment decision, Belgium unlawfully granted aid to BSCA in breach of Article 108(3) TFEU. This aid consists of the difference between the fee that a market economy operator would have required (hereinafter ‘the market price fee’) and the fees actually paid by BSCA to the Region-SOWAER. |
| --- | --- |

(679)

The Commission finds that, by adopting the 2002 agreements and the 2003 investment decision, Belgium unlawfully granted aid to BSCA in breach of Article 108(3) TFEU. This aid consists of the difference between the fee that a market economy operator would have required (hereinafter ‘the market price fee’) and the fees actually paid by BSCA to the Region-SOWAER.

| (680) | The market price fee is the fee that BSCA should have paid so that each of the two measures (the 2002 agreements and the 2003 investment decision) has a zero net present value for the Region-SOWAER. The Commission has determined the market price fee in line with the reasoning given in Section 6.1.2.2, which has shown that the 2002 agreements and the 2003 investment decision resulted in a concession fee below what a market economy operator guided by profitability prospects would have required. |
| --- | --- |

(680)

The market price fee is the fee that BSCA should have paid so that each of the two measures (the 2002 agreements and the 2003 investment decision) has a zero net present value for the Region-SOWAER. The Commission has determined the market price fee in line with the reasoning given in Section 6.1.2.2, which has shown that the 2002 agreements and the 2003 investment decision resulted in a concession fee below what a market economy operator guided by profitability prospects would have required.

| (681) | The Commission has taken into account that, on the signature of the 2002 SOWAER/BSCA agreement, a prudent operator would not have required BSCA to pay a fee reflecting the investments that SOWAER undertook to make under that agreement until the investments had been made and BSCA was earning the expected revenue from those investments. A prudent operator would have agreed to the fee increasing only when the new investments could be used by the airport manager. Otherwise, the airport manager might experience cash flow difficulties during the years when it was not yet able to earn operating revenue from the new infrastructure. The Commission also finds that the 2002 SOWAER/BSCA agreement provided for an increase in the concession fee in 2007, i.e. two years after the planned commissioning of the new terminal (2005). Consequently, the Commission takes the view that a prudent operator would have agreed to BSCA paying the fee set by the 2002 SOWAER/BSCA agreement up to two years after the end of the year of commissioning of the new terminal (i.e. in 2007), but would have required BSCA to pay a market price fee after that date, i.e. a fee allowing the entity Region-SOWAER to achieve a zero net present value over the whole period. |
| --- | --- |

(681)

The Commission has taken into account that, on the signature of the 2002 SOWAER/BSCA agreement, a prudent operator would not have required BSCA to pay a fee reflecting the investments that SOWAER undertook to make under that agreement until the investments had been made and BSCA was earning the expected revenue from those investments. A prudent operator would have agreed to the fee increasing only when the new investments could be used by the airport manager. Otherwise, the airport manager might experience cash flow difficulties during the years when it was not yet able to earn operating revenue from the new infrastructure. The Commission also finds that the 2002 SOWAER/BSCA agreement provided for an increase in the concession fee in 2007, i.e. two years after the planned commissioning of the new terminal (2005). Consequently, the Commission takes the view that a prudent operator would have agreed to BSCA paying the fee set by the 2002 SOWAER/BSCA agreement up to two years after the end of the year of commissioning of the new terminal (i.e. in 2007), but would have required BSCA to pay a market price fee after that date, i.e. a fee allowing the entity Region-SOWAER to achieve a zero net present value over the whole period.

| (682) | Table 31 shows: | (a) the variable concession fees expected from BSCA under the provisions in force at the time when the 2002 measure was granted (238); |
| --- | --- | --- |

(682)

Table 31 shows:

(a) the variable concession fees expected from BSCA under the provisions in force at the time when the 2002 measure was granted (238);

238

| | (b) the additional concession fee, conceived as an annual fixed amount indexed at a rate of 2 % per year reflecting inflation (239), which BSCA should have paid from 2007 so that the concession fees payable by BSCA correspond to the market price concession fee in return for the 2002 agreements (240); |
| --- | --- |

(b) the additional concession fee, conceived as an annual fixed amount indexed at a rate of 2 % per year reflecting inflation (239), which BSCA should have paid from 2007 so that the concession fees payable by BSCA correspond to the market price concession fee in return for the 2002 agreements (240);

239

240

| | (c) the additional concession fee, conceived as an annual fixed amount indexed at a rate of 2 % per year reflecting inflation, which BSCA should have paid from 2008 so that the concession fees payable by BSCA correspond to the market price concession fee in return for the 2003 investment decision (241); |
| --- | --- |

(c) the additional concession fee, conceived as an annual fixed amount indexed at a rate of 2 % per year reflecting inflation, which BSCA should have paid from 2008 so that the concession fees payable by BSCA correspond to the market price concession fee in return for the 2003 investment decision (241);

241

| | (a + b + c) represents the expected market price concession fees: their amounts are such that the net present value of the 2002 agreements and the 2003 investment decision is zero. |
| --- | --- |

(a + b + c) represents the expected market price concession fees: their amounts are such that the net present value of the 2002 agreements and the 2003 investment decision is zero.

Table 31

Table 31

Expected market price concession fees

Expected market price concession fees

| (EUR) |
| --- |
| | (a) Concession fees expected from BSCA at the time when the 2002 measure was granted | (b) Concession fees to be added to (a) so that the NPV of the 2002 measure equals 0 | (c) Concession fees to be added so that the NPV of the 2003 investment decision equals 0 | (a + b + c) Market price concession fees |
| 2002 | 883 689 | 0 | 0 | 883 689 |
| 2003 | 901 363 | 0 | 0 | 901 363 |
| 2004 | 919 390 | 0 | 0 | 919 390 |
| 2005 | 937 778 | 0 | 0 | 937 778 |
| 2006 | 956 533 | 0 | 0 | 956 533 |
| 2007 | 2 651 067 | 8 301 157 | 0 | 10 952 224 |
| 2008 | 2 704 088 | 8 467 180 | 2 391 141 | 13 562 409 |
| 2009 | 2 758 170 | 8 636 524 | 2 438 964 | 13 833 658 |
| 2010 | 2 813 334 | 8 809 254 | 2 487 743 | 14 110 331 |
| 2011 | 2 869 600 | 8 985 440 | 2 537 498 | 14 392 538 |
| 2012 | 2 926 992 | 9 165 148 | 2 588 248 | 14 680 388 |
| 2013 | 2 985 532 | 9 348 451 | 2 640 013 | 14 973 996 |
| 2014 | 3 045 243 | 9 535 420 | 2 692 814 | 15 273 477 |
| 2015 | 3 106 148 | 9 726 129 | 2 746 670 | 15 578 947 |

(EUR)

(a) Concession fees expected from BSCA at the time when the 2002 measure was granted

(b) Concession fees to be added to (a) so that the NPV of the 2002 measure equals 0

(c) Concession fees to be added so that the NPV of the 2003 investment decision equals 0

(a + b + c) Market price concession fees

2002

883 689

0

0

883 689

2003

901 363

0

0

901 363

2004

919 390

0

0

919 390

2005

937 778

0

0

937 778

2006

956 533

0

0

956 533

2007

2 651 067

8 301 157

0

10 952 224

2008

2 704 088

8 467 180

2 391 141

13 562 409

2009

2 758 170

8 636 524

2 438 964

13 833 658

2010

2 813 334

8 809 254

2 487 743

14 110 331

2011

2 869 600

8 985 440

2 537 498

14 392 538

2012

2 926 992

9 165 148

2 588 248

14 680 388

2013

2 985 532

9 348 451

2 640 013

14 973 996

2014

3 045 243

9 535 420

2 692 814

15 273 477

2015

3 106 148

9 726 129

2 746 670

15 578 947

| (683) | As the work was delayed and the terminal was finally commissioned in 2007, the Commission takes the view that BSCA should have paid a market price fee from the end of 2009, i.e. from 1 January 2010. The Commission has decided that the two-year delay in the work should be covered by the Region and SOWAER, and not by BSCA, as those entities were responsible for making the investments. As a result, the Commission has taken the view that BSCA should have paid the market price concession fee from the end of 2009 only, without, however, this concession fee being increased as it should have been from the end of 2007, as stipulated by the 2002 SOWAER/BSCA agreement. |
| --- | --- |

(683)

As the work was delayed and the terminal was finally commissioned in 2007, the Commission takes the view that BSCA should have paid a market price fee from the end of 2009, i.e. from 1 January 2010. The Commission has decided that the two-year delay in the work should be covered by the Region and SOWAER, and not by BSCA, as those entities were responsible for making the investments. As a result, the Commission has taken the view that BSCA should have paid the market price concession fee from the end of 2009 only, without, however, this concession fee being increased as it should have been from the end of 2007, as stipulated by the 2002 SOWAER/BSCA agreement.

| (684) | It is the variable fees actually payable by BSCA (to which fees (b) and (c) shown in Table 31 should be added) that must be used to determine the market price concession fees that BSCA should have paid and that it shall pay in the future. It turns out that, even though traffic has proven to be much higher than predicted in 2002, the fees actually payable (shown in column (a) of Table 32) correspond to the expected variable concession fees (shown in column (a) of Table 31) due to the cap on the variable concession fee stipulated in 2002. |
| --- | --- |

(684)

It is the variable fees actually payable by BSCA (to which fees (b) and (c) shown in Table 31 should be added) that must be used to determine the market price concession fees that BSCA should have paid and that it shall pay in the future. It turns out that, even though traffic has proven to be much higher than predicted in 2002, the fees actually payable (shown in column (a) of Table 32) correspond to the expected variable concession fees (shown in column (a) of Table 31) due to the cap on the variable concession fee stipulated in 2002.

| (685) | Table 32 shows the elements making up the market price concession fee:

  Table 32


  Market price concession fees taking into account the delay in the work
   (242)










  (EUR) |
| --- | --- |
| | (a) Concession fees expected from BSCA at the time when the 2002 measure was granted | (b) Concession fees to be added to (a) so that the NPV of the 2002 measure equals 0 | (c) Concession fees to be added so that the NPV of the 2003 investment decision equals 0 | (a + b + c) Market price concession fees |
| 2002 | 883 689 | 0 | 0 | 883 689 |
| 2003 | 901 363 | 0 | 0 | 901 363 |
| 2004 | 919 390 | 0 | 0 | 919 390 |
| 2005 | 937 778 | 0 | 0 | 937 778 |
| 2006 | 956 533 | 0 | 0 | 956 533 |
| 2007 | 2 651 067 | 0 | 0 | 2 651 067 |
| 2008 | 2 704 088 | 0 | 0 | 2 704 088 |
| 2009 | 2 758 170 | 0 | 0 | 2 758 170 |
| 2010 | 2 813 334 | 8 809 254 | 2 487 743 | 14 110 331 |
| 2011 | 2 869 600 | 8 985 440 | 2 537 498 | 14 392 538 |
| 2012 | 2 926 992 | 9 165 148 | 2 588 248 | 14 680 388 |
| 2013 | 2 985 532 | 9 348 451 | 2 640 013 | 14 973 996 |
| 2014 | 3 045 243 | 9 535 420 | 2 692 814 | 15 273 477 |
| 2015 | 3 106 148 | 9 726 129 | 2 746 670 | 15 578 947 |

(685)

Table 32 shows the elements making up the market price concession fee:

Table 32

Table 32

Market price concession fees taking into account the delay in the work
   (242)

Market price concession fees taking into account the delay in the work

242

(EUR)

(a) Concession fees expected from BSCA at the time when the 2002 measure was granted

(b) Concession fees to be added to (a) so that the NPV of the 2002 measure equals 0

(c) Concession fees to be added so that the NPV of the 2003 investment decision equals 0

(a + b + c) Market price concession fees

2002

883 689

0

0

883 689

2003

901 363

0

0

901 363

2004

919 390

0

0

919 390

2005

937 778

0

0

937 778

2006

956 533

0

0

956 533

2007

2 651 067

0

0

2 651 067

2008

2 704 088

0

0

2 704 088

2009

2 758 170

0

0

2 758 170

2010

2 813 334

8 809 254

2 487 743

14 110 331

2011

2 869 600

8 985 440

2 537 498

14 392 538

2012

2 926 992

9 165 148

2 588 248

14 680 388

2013

2 985 532

9 348 451

2 640 013

14 973 996

2014

3 045 243

9 535 420

2 692 814

15 273 477

2015

3 106 148

9 726 129

2 746 670

15 578 947

| (686) | More generally, beyond 2013, for example for year (2013 + n), the market price concession fee will be: (a) + (9 348 451 + 2 640 013) × (1,02)n, i.e. (a) + 11 988 464 × (1,02)n, where (a) is the variable part of the concession fee payable by BSCA for the year (2013 + n). As explained at the end of recital 685, for the years 2014 and 2015, part (a) will probably be capped. In these calculations of the net present value and market price concession fee for the 2002 and 2003 measures, the Commission has assumed that there will be no cap after 2015. From 2016, part (a) of the market price concession fee will therefore be 35 % of the aviation revenue. |
| --- | --- |

(686)

More generally, beyond 2013, for example for year (2013 + n), the market price concession fee will be: (a) + (9 348 451 + 2 640 013) × (1,02)n, i.e. (a) + 11 988 464 × (1,02)n, where (a) is the variable part of the concession fee payable by BSCA for the year (2013 + n). As explained at the end of recital 685, for the years 2014 and 2015, part (a) will probably be capped. In these calculations of the net present value and market price concession fee for the 2002 and 2003 measures, the Commission has assumed that there will be no cap after 2015. From 2016, part (a) of the market price concession fee will therefore be 35 % of the aviation revenue.

n

n

| (687) | Based on the assumptions and methods described above and if the concession fee paid by BSCA remains unchanged, the Commission concludes that, due to the 2002 agreements and the 2003 investment decision, BSCA has received and will receive up to 31 December 2015 the aid amounts (excluding interest) corresponding to the sum of columns (b) and (c) in Table 32. These aid amounts are indicated in the following table:

  Table 33


  Aid amounts received by BSCA up to 31 December 2015 — excluding interest — if the BSCA concession fee remains unchanged up to 31 December 2015









  (EUR) |
| --- | --- |
| | Aid associated with the 2002 measure (excluding interest) | Aid associated with the 2003 measure (excluding interest) | Total aid (excluding interest) |
| 2002 | 0 | 0 | 0 |
| 2003 | 0 | 0 | 0 |
| 2004 | 0 | 0 | 0 |
| 2005 | 0 | 0 | 0 |
| 2006 | 0 | 0 | 0 |
| 2007 | 0 | 0 | 0 |
| 2008 | 0 | 0 | 0 |
| 2009 | 0 | 0 | 0 |
| 2010 | 8 809 254 | 2 487 743 | 11 296 997 |
| 2011 | 8 985 440 | 2 537 498 | 11 522 938 |
| 2012 | 9 165 148 | 2 588 248 | 11 753 396 |
| 2013 | 9 348 451 | 2 640 013 | 11 988 464 |
| 2014 | 9 535 420 | 2 692 814 | 12 228 234 |
| 2015 | 9 726 129 | 2 746 670 | 12 472 799 |
| Total | 55 569 842 | 15 692 986 | 71 262 828 |

(687)

Based on the assumptions and methods described above and if the concession fee paid by BSCA remains unchanged, the Commission concludes that, due to the 2002 agreements and the 2003 investment decision, BSCA has received and will receive up to 31 December 2015 the aid amounts (excluding interest) corresponding to the sum of columns (b) and (c) in Table 32. These aid amounts are indicated in the following table:

Table 33

Table 33

Aid amounts received by BSCA up to 31 December 2015 — excluding interest — if the BSCA concession fee remains unchanged up to 31 December 2015

Aid amounts received by BSCA up to 31 December 2015 — excluding interest — if the BSCA concession fee remains unchanged up to 31 December 2015

(EUR)

Aid associated with the 2002 measure (excluding interest)

Aid associated with the 2003 measure (excluding interest)

Total aid (excluding interest)

2002

0

0

0

2003

0

0

0

2004

0

0

0

2005

0

0

0

2006

0

0

0

2007

0

0

0

2008

0

0

0

2009

0

0

0

2010

8 809 254

2 487 743

11 296 997

2011

8 985 440

2 537 498

11 522 938

2012

9 165 148

2 588 248

11 753 396

2013

9 348 451

2 640 013

11 988 464

2014

9 535 420

2 692 814

12 228 234

2015

9 726 129

2 746 670

12 472 799

Total

55 569 842

15 692 986

71 262 828

| (688) | As at 1 October 2014, date of this decision, BSCA has received, due to the 2002 agreements and the 2003 investment decision, the following aid amounts (243) (excluding interest):

  Table 34


  Aid amounts received by BSCA up to 30 September 2014 — excluding interest









  (EUR) |
| --- | --- |
| | Aid associated with the 2002 measure (excluding interest) received as at 30 September 2014 | Aid associated with the 2003 measure (excluding interest) received as at 30 September 2014 | Total aid (excluding interest) received as at 30 September 2014 |
| 2002 | 0 | 0 | 0 |
| 2003 | 0 | 0 | 0 |
| 2004 | 0 | 0 | 0 |
| 2005 | 0 | 0 | 0 |
| 2006 | 0 | 0 | 0 |
| 2007 | 0 | 0 | 0 |
| 2008 | 0 | 0 | 0 |
| 2009 | 0 | 0 | 0 |
| 2010 | 8 809 254 | 2 487 743 | 11 296 997 |
| 2011 | 8 985 440 | 2 537 498 | 11 522 938 |
| 2012 | 9 165 148 | 2 588 248 | 11 753 396 |
| 2013 | 9 348 451 | 2 640 013 | 11 988 464 |
| 30.9.2014 | 7 131 972 | 2 014 077 | 9 146 049 |
| Total | 43 440 265 | 12 267 579 | 55 707 844 |

(688)

As at 1 October 2014, date of this decision, BSCA has received, due to the 2002 agreements and the 2003 investment decision, the following aid amounts (243) (excluding interest):

243

Table 34

Table 34

Aid amounts received by BSCA up to 30 September 2014 — excluding interest

Aid amounts received by BSCA up to 30 September 2014 — excluding interest

(EUR)

Aid associated with the 2002 measure (excluding interest) received as at 30 September 2014

Aid associated with the 2003 measure (excluding interest) received as at 30 September 2014

Total aid (excluding interest) received as at 30 September 2014

2002

0

0

0

2003

0

0

0

2004

0

0

0

2005

0

0

0

2006

0

0

0

2007

0

0

0

2008

0

0

0

2009

0

0

0

2010

8 809 254

2 487 743

11 296 997

2011

8 985 440

2 537 498

11 522 938

2012

9 165 148

2 588 248

11 753 396

2013

9 348 451

2 640 013

11 988 464

30.9.2014

7 131 972

2 014 077

9 146 049

Total

43 440 265

12 267 579

55 707 844

7.2.   Aid to be recovered

Aid to be recovered

| (689) | Given the conclusions in Section 6.3.2 on the compatibility of the aid granted to BSCA, only the difference between the market price fee — calculated according to the methods described in recitals 680 to 683 — and the fee paid by BSCA since 4 April 2014 constitutes aid to be recovered. |
| --- | --- |

(689)

Given the conclusions in Section 6.3.2 on the compatibility of the aid granted to BSCA, only the difference between the market price fee — calculated according to the methods described in recitals 680 to 683 — and the fee paid by BSCA since 4 April 2014 constitutes aid to be recovered.

| (690) | As the period from 4 April to 1 October 2014 consists of 180 days, the aid to be recovered (excluding interest) on the date of 1 October 2014 is (180/365) × EUR 12 228 234, i.e. EUR 6 030 362. |
| --- | --- |

(690)

As the period from 4 April to 1 October 2014 consists of 180 days, the aid to be recovered (excluding interest) on the date of 1 October 2014 is (180/365) × EUR 12 228 234, i.e. EUR 6 030 362.

| (691) | In addition, until the concession fee payable by BSCA is increased to the level of the market price fee, BSCA will continue to receive unlawful and incompatible aid, the amounts of which shall be recovered. |
| --- | --- |

(691)

In addition, until the concession fee payable by BSCA is increased to the level of the market price fee, BSCA will continue to receive unlawful and incompatible aid, the amounts of which shall be recovered.

| (692) | If the concession fee paid by BSCA is increased during 2014 to the level of the market price concession fee indicated in Table 32, the aid amount to be recovered — excluding interest — will be calculated according to the following formula:
  Where N is the number of days between 4 April 2014 and the date on which the concession fee paid by BSCA is increased to the level of the market price concession fee,
  Aid amount to be recovered (excluding interest) = (N/365) × aid amount for 2014
  = (N/365) × EUR 12 228 234 |
| --- | --- |

(692)

If the concession fee paid by BSCA is increased during 2014 to the level of the market price concession fee indicated in Table 32, the aid amount to be recovered — excluding interest — will be calculated according to the following formula:

Where N is the number of days between 4 April 2014 and the date on which the concession fee paid by BSCA is increased to the level of the market price concession fee,

Aid amount to be recovered (excluding interest) = (N/365) × aid amount for 2014

= (N/365) × EUR 12 228 234

| (693) | If the concession fee paid by BSCA is increased during 2015 to the level of the market price concession fee indicated in Table 32, the aid amount to be recovered — excluding interest — will be calculated according to the following formula:
  Where N′ is the number of days between 1 January 2015 and the date on which the concession fee paid by BSCA is increased to the level of the market price concession fee,
  Aid amount to be recovered (excluding interest)
  = aid amount to be recovered for 2014 (excluding interest) + aid amount to be recovered for 2015 (excluding interest)
  = ((number of days from 4 April to 31 December 2014)/365) × aid amount for 2014 + (N′/365) × aid amount for 2015
  = (272/365) × 12 228 234 + (N′/365) × 12 472 799

  = EUR 9 112 547 + N′ × EUR 34 172 |
| --- | --- |

(693)

If the concession fee paid by BSCA is increased during 2015 to the level of the market price concession fee indicated in Table 32, the aid amount to be recovered — excluding interest — will be calculated according to the following formula:

Where N′ is the number of days between 1 January 2015 and the date on which the concession fee paid by BSCA is increased to the level of the market price concession fee,

Aid amount to be recovered (excluding interest)

= aid amount to be recovered for 2014 (excluding interest) + aid amount to be recovered for 2015 (excluding interest)

= ((number of days from 4 April to 31 December 2014)/365) × aid amount for 2014 + (N′/365) × aid amount for 2015

= (272/365) × 12 228 234 + (N′/365) × 12 472 799

= EUR 9 112 547 + N′ × EUR 34 172

| (694) | The Belgian authorities must recover the amount calculated in accordance with the formulas given in recitals 692 and 693 within four months of the date of notification of this decision. |
| --- | --- |

(694)

The Belgian authorities must recover the amount calculated in accordance with the formulas given in recitals 692 and 693 within four months of the date of notification of this decision.

| (695) | The Belgian authorities must add recovery interest to the amount to be recovered, which shall be calculated from the date on which the aid in question was at the disposal of the undertakings, namely on each effective date of granting of the aid, until the date of its effective recovery (244), in accordance with Chapter V of Commission Regulation (EC) No 794/2004 (245). The Commission considers that the date of disposal of the aid corresponds to the payment dates of the fees below market price, as set by the SOWAER/BSCA agreements in force at the time of the payments in question. |
| --- | --- |

(695)

The Belgian authorities must add recovery interest to the amount to be recovered, which shall be calculated from the date on which the aid in question was at the disposal of the undertakings, namely on each effective date of granting of the aid, until the date of its effective recovery (244), in accordance with Chapter V of Commission Regulation (EC) No 794/2004 (245). The Commission considers that the date of disposal of the aid corresponds to the payment dates of the fees below market price, as set by the SOWAER/BSCA agreements in force at the time of the payments in question.

244

245

| (696) | This decision is without prejudice to the recovery of any other State aid granted to BSCA that is not covered by this decision. |
| --- | --- |

(696)

This decision is without prejudice to the recovery of any other State aid granted to BSCA that is not covered by this decision.

| (697) | In a letter of 7 May 2014, Belgium accepted that, in this case and given the undertaking made by the Commission services to provide it as soon as possible with a Dutch translation of the decision, the Commission could exceptionally notify the decision in French under Article 297 TFEU. Belgium accepted that only the French version of the decision would be authentic and that the decision would take effect on its notification in French, |
| --- | --- |

(697)

In a letter of 7 May 2014, Belgium accepted that, in this case and given the undertaking made by the Commission services to provide it as soon as possible with a Dutch translation of the decision, the Commission could exceptionally notify the decision in French under Article 297 TFEU. Belgium accepted that only the French version of the decision would be authentic and that the decision would take effect on its notification in French,

HAS ADOPTED THIS DECISION:

Article 1

1.   The aid measures granted to Ryanair Ltd (hereinafter ‘Ryanair’), namely the undertaking of the Walloon Government to Ryanair of 6 November 2001, the contract between BSCA and Ryanair of 2 December 2001, the Promocy agreement of 12 December 2001, the contract between Promocy and Leading Verge of 31 January 2002, the Ministerial Order of 11 June 2004, the letter from BSCA to Ryanair of 24 June 2004, the commercial agreement between BSCA and Ryanair of 9 December 2005, the amendment of 6 December 2010 to the contract between BSCA and Ryanair, and the sale of BSCA's shares in Promocy on 31 March 2010, do not constitute State aid to Ryanair under Article 107(1) of the Treaty on the Functioning of the European Union.

2.   The aid measures granted to Brussels South Charleroi Airport (hereinafter ‘BSCA’), consisting of the agreement between the Société wallonne des aéroports (hereinafter ‘SOWAER’) and BSCA of 4 April 2006, Amendment No 5 to the agreement between the Walloon Region and BSCA of 10 March 2006, and Amendment No 6 to the agreement between the Walloon Region and BSCA of 15 January 2008, do not constitute State aid to BSCA under Article 107(1) of the Treaty on the Functioning of the European Union.

Article 2

1.   The aid measures unlawfully granted by Belgium, in breach of Article 108(3) of the Treaty on the Functioning of the European Union, to BSCA under the sub-concession agreement of 15 April 2002 between SOWAER and BSCA and Amendment No 3 of 29 March 2002 to the agreement between the Walloon Region and BSCA, and also under the investment decision of the Walloon Region of 3 April 2003, constitute State aid compatible with the internal market on the basis of Article 107(3)(c) of the Treaty on the Functioning of the European Union up to 3 April 2014.

2.   Assuming that it does constitute State aid within the meaning of Article 107(1) of the Treaty on the Functioning of the European Union, the capital increase in BSCA subscribed on 3 December 2002 by SOWAER is State aid compatible with the internal market on the basis of Article 107(3)(c) of the Treaty on the Functioning of the European Union.

Article 3

The aid measures unlawfully granted by Belgium, in breach of Article 108(3) of the Treaty on the Functioning of the European Union, to BSCA under the sub-concession agreement of 15 April 2002 between SOWAER and BSCA and Amendment No 3 of 29 March 2002 to the agreement between the Walloon Region and BSCA, and also under the investment decision of the Walloon Region of 3 April 2003, constitute State aid incompatible with the internal market on the basis of Article 107(1) of said Treaty from 4 April 2014.

Article 4

1.   Belgium shall put an end to the aid measures referred to in Article 3 by increasing the concession fee payable by BSCA at least to the level of the market price concession fee and by recovering from the beneficiary the aid amounts received under the aid measures referred to in Article 3 as from 4 April 2014.

2.   The amounts to be recovered shall bear interest from the date on which they were placed at the disposal of the beneficiary to the date of their effective recovery.

3.   The interest shall be calculated on a compound basis in accordance with Chapter V of Regulation (EC) No 794/2004.

4.   Belgium shall cancel all pending payments with regard to the aid measures referred to in Article 3 from the date of adoption of this decision.

Article 5

1.   The recovery of the aid referred to in Article 3 shall be immediate and effective.

2.   Belgium shall ensure that this decision is implemented within four months of the date of its notification.

Article 6

1.   Belgium shall submit the following information to the Commission within two months of the notification of this decision:

| (a) | the dates on which BSCA has paid the concession fees in 2014 and the calculation of the recovery interest; |
| --- | --- |

(a)

the dates on which BSCA has paid the concession fees in 2014 and the calculation of the recovery interest;

| (b) | a detailed description of the measures already adopted and planned for the purpose of complying with this decision; |
| --- | --- |

(b)

a detailed description of the measures already adopted and planned for the purpose of complying with this decision;

| (c) | the documents proving that the beneficiary has been ordered to repay the aid. |
| --- | --- |

(c)

the documents proving that the beneficiary has been ordered to repay the aid.

2.   Belgium shall keep the Commission informed of the progress of the national measures adopted pursuant to this decision until the recovery of the aid referred to in Article 3 has been concluded. At the Commission's request, it shall immediately submit information on the measures already adopted and planned for the purpose of complying with this decision. It shall also provide detailed information on the aid amounts and interest already recovered from the beneficiary.

Article 7

This decision is addressed to the Kingdom of Belgium.

Done at Brussels, 1 October 2014.

For the Commission

Joaquín ALMUNIA

Vice-President

---

(1)  With effect from 1 December 2009, Articles 87 and 88 of the Treaty establishing the European Community (‘TEC’) have become Articles 107 and 108, respectively, of the Treaty on the Functioning of the European Union (‘TFEU’). The two sets of provisions are, in substance, identical. For the purposes of this Decision, references to Articles 107 and 108 of the TFEU should be understood as references to Articles 87 and 88, respectively, of the EC Treaty. The TFEU also introduced certain changes in terminology, such as replacing ‘Community’ with ‘Union’, ‘common market’ with ‘internal market’, and ‘Court of First Instance’ with ‘General Court’. The terminology of the TFEU is used throughout this Decision.

1

(2)  
  OJ C 248, 17.8.2012, p. 1.

2

(3)  SG(2002) D/233141.

3

(4)  
  OJ C 18, 25.1.2003, p. 3.

4

(5)  Commission Decision 2004/393/EC of 12 February 2004 concerning advantages granted by the Walloon Region and Brussels South Charleroi Airport to the airline Ryanair in connection with its establishment at Charleroi (OJ L 137, 30.4.2004, p. 1).

5

(6)  Judgment of 17 December 2008 in Case T-196/04 Ryanair Ltd v Commission of the European Communities [2008] ECR II-3646, ECLI:EU:T:2008:585.

6

Ryanair Ltd

Commission of the European Communities

(7)  See footnote 2.

7

(8)  
  OJ C 99, 4.4.2014, p. 3.

8

(9)  Note from Belgium of 24 February 2014.

9

(10)  Article 3.2 of the Region/BSCA agreement.

10

(11)  Under Article 12 of the schedule of conditions, the fire service is defined by reference to the standards of the International Civil Aviation Organisation.

11

(12)  Under Articles 12 and 19 of the schedule of conditions, the maintenance service is defined as ‘technical maintenance services for buildings, runways, surrounding areas, vehicle fleet, etc.’, and as ‘maintenance of land, buildings and building facilities, and equipment forming part of the concession or placed at the disposal of the concession, such that they are always fit for their intended purpose’.

12

(13)  Article 10.1 of the Region/BSCA agreement.

13

(14)  Under Article 13.2 of the Region/BSCA agreement, BSCA is responsible for cleaning and maintaining the concession area. It must also carry out all major or minor repairs required. However, Amendment No 1 to the agreement limits BSCA's responsibility solely to those major repairs caused by a lack of urgent maintenance.

14

(15)  Article 22 of the schedule of conditions annexed to the Region/BSCA agreement.

15

(16)  Article 18 of the Region/BSCA agreement.

16

(17)  Under the Decree of 16 December 1999 containing the general expenditure budget of the Walloon Region for the budget year 2000, and the Order of 27 September 2000 of the Walloon Government granting an operating subsidy to BSCA intended to cover the costs of the fire and maintenance services at Charleroi airport for the year 2000.

17

(18)  Under the Decree of 14 December 2000 containing the general expenditure budget of the Walloon Region for the budget year 2001, and the Order of 4 October 2001 of the Walloon Government granting an operating subsidy to BSCA intended to cover the costs of the fire and maintenance services at Charleroi airport for the year 2001.

18

(19)  This study concerned the development plan for Brussels South Charleroi Airport over the medium term (5 years) and long term (20 years). It made reference to the project for a new north terminal and contained a precise description of the proposed investments.

19

(20)  This study highlighted the potential niche markets for Charleroi airport, including the possibility of a low-cost airline base, with Ryanair being mentioned. It calculated the investments to be made in order to develop the airport: runway system, compulsory purchases, drainage and other networks, excavation and backfill work, new terminal, service car park and private access to the airport, public road access and other aspects (fuel, control tower, vehicle fleet, etc.).

20

(21)  This study confirmed the development segment for Charleroi airport, i.e. low-cost, regional and charter airlines. It confirmed that Ryanair represented an opportunity for the rapid development of traffic in the short term, with five aircraft based at the airport. It also analysed the technical conditions for the arrival of the easyJet and Go airlines, as well as regional and charter airlines.

21

(22)  These technical constraints were linked to the need for a Category III ILS (Instrument Landing System) to allow aircraft to land in poor visibility. This system is vital for handling airlines with aircraft based at the airport and also scheduled airlines. At the time, the initial version of the ‘Aéropôle’ airport business park project extended much further to the south, which would have made it impossible to develop any airport infrastructures.

22

(23)  A financial contribution from the Société Régionale Wallonne du Transport (SRWT) was envisaged at the time, but abandoned in the end. The aforementioned note therefore indicates that ‘the existing texts (concession agreement, schedule of conditions and related protocols) will therefore need to be adapted in line with the new arrangements to be made for financing the investments’.

23

(24)  Sent as Annex 19 to the letter from Belgium of 26 August 2003.

24

(25)  Sent as Annex 2 to the letter from Belgium of 24 February 2014.

25

(26)  Article 3.2.2 of Amendment No 3 of 29 March 2002 to the Region/BSCA agreement.

26

(27)  This task covers (i) the collection of all information on aircraft movements; (ii) the collection of various aircraft documents; and (iii) the planning and management of aircraft parking stands.

27

(28)  Guidance of aircraft to the parking stand.

28

(29)  The security services include ‘screening, remote surveillance, security rounds and patrols, access control and issue of visitor badges’. The security tasks have been delegated to BSCA Security, a company that is 51 % owned by the Region and 49 % by BSCA.

29

(30)  The safety and security tasks within Charleroi airport were entrusted to BSCA under the Decree of 19 December 2007 amending the Decree of 23 June 1994 on the creation and operation of airports and aerodromes located in the Walloon Region. Also under this Decree, the security tasks were delegated by BSCA to BSCA Security, a public limited company created for this purpose and owned 49 % by BSCA and 51 % by the Region.

30

(*1)  Information covered by professional secrecy

*1

(31)  Sambrinvest is a venture capitalist active in the Charleroi-Thuin region. Its object is to support and develop SMEs. Up to 2012, Sambrinvest was 50 % owned by the Walloon Region.

31

(32)  Igretec is the Intercommunal Body for the Management and Conduct of Technical and Economic Studies (Intercommunale pour la Gestion et la Réalisation d'Etudes Techniques et Economiques). It is participating in the development and restructuring of Charleroi through the development of the airport, the neighbouring airport business park, and industrial areas. Igretec involves 68 communes, mainly in the province of Hainaut. It is chaired by the Prime Minister of the Walloon Region.

32

Intercommunale pour la Gestion et la Réalisation d'Etudes Techniques et Economiques

(33)  The Société Wallonne de Gestion et de Participation (Sogepa) is the preferred financial arm of the Walloon Region for assistance given to restructuring businesses. It acts through either loans or capital, and manages the holdings, obligations, advances or interests of the Walloon Region or itself in such companies, through tasks delegated by the government.

33

(34)  Decision of 23 May 2001 entitled ‘Development of airports, establishment of a financial mechanism and creation of a specialised company’. It was through this decision that the Walloon Government approved SOWAER's articles of association, financial plan, budget forecasts and management structure. It invited Sogepa to form SOWAER and stipulated that ‘the financing of environmental measures, excluding insulation, shall be examined by SOWAER in consultation with the concession-holders’.

34

(35)  Letters from the Belgian authorities of 21 September 2011 and 6 February 2014.

35

(36)  This company was liquidated in 2011.

36

(37)  This programme is identical to the programme mentioned in recital 41.

37

(38)  According to the SOWAER note of 3 April 2003 to the Walloon Government, due to this revision, the investment programme increased from EUR 93 million to EUR 150,8 million, i.e. an increase of EUR 57,8 million, of which:

38

| (a) | EUR 33 million was for the extension of the passenger terminal beyond that originally planned; |
| --- | --- |

(a)

EUR 33 million was for the extension of the passenger terminal beyond that originally planned;

| (b) | EUR 3 million was for the second phase of construction of the control tower; |
| --- | --- |

(b)

EUR 3 million was for the second phase of construction of the control tower;

| (c) | EUR 2 million was for the security programme; |
| --- | --- |

(c)

EUR 2 million was for the security programme;

| (d) | EUR 1,6 million was for SOWAER to cover the budget liabilities; |
| --- | --- |

(d)

EUR 1,6 million was for SOWAER to cover the budget liabilities;

| (e) | EUR 1,5 million was due to recosting the purchases of land around the airport; |
| --- | --- |

(e)

EUR 1,5 million was due to recosting the purchases of land around the airport;

| (f) | EUR 12 million was to make provision for any deductions and adjustments; |
| --- | --- |

(f)

EUR 12 million was to make provision for any deductions and adjustments;

| (g) | EUR 4,8 million was described as a ‘variation’. |
| --- | --- |

(g)

EUR 4,8 million was described as a ‘variation’.

(39)  See note from Belgium of 6 February 2014.

39

(40)  This amount excludes the compulsory additional investment programme (which is not examined in this decision) and the investments financed solely by BSCA.

40

(41)  Article 11 of the 2002 SOWAER/BSCA agreement.

41

(42)  
  Idem.

42

Idem

(43)  Article 11.3 of the 2002 SOWAER/BSCA agreement stipulates that ‘BSCA shall be exempt from paying the fixed fee in the amount of the subsidy from the Walloon Region that it has not received or will no longer receive for a reason that is not attributable to BSCA or that is outside its control’.

43

(44)  Article 12 of the 2006 SOWAER/BSCA agreement.

44

(45)  The indexation is annual from 2007. It is calculated using the Belgian consumer price index.

45

(46)  The cap of EUR 956 533 corresponds to the cap of EUR 883 689 (stipulated in the 2002 SOWAER/BSCA agreement) plus 2 % per year.

46

(47)  According to this amendment, the Region's financial compensation to BSCA is no longer intended to cover solely the ‘costs associated with using the airport land, buildings and infrastructure placed at its disposal by SOWAER in order to provide the fire protection and ground traffic and airport site safety services’. Amounts are therefore included in the Region's budget under the heading of ‘BSCA subsidy allowing it to perform the public service tasks forming part of the operation of airports’.

47

(48)  Article 12.3 of the 2006 SOWAER/BSCA agreement stipulates that ‘BSCA shall be exempt from paying the price for the services in the amount of the financial compensation from the Walloon Region that it has not received or will no longer receive for a reason that is not attributable to BSCA or that is outside its control’.

48

(49)  This amount is indexed at 2 % per year. It applies to the surface areas included within the sub-concession from the date of their acquisition by SOWAER.

49

(50)  Annex 2 to the letter from Belgium of 24 February 2014.

50

(51)  Annex 2 to the letter from Belgium of 24 February 2014.

51

(52)  Article 12 of the schedule of conditions.

52

(53)  
  Idem.

53

Idem

(54)  Article 19 of the schedule of conditions.

54

(55)  Investment costs and/or investment depreciation costs were not mentioned in the earlier texts.

55

(56)  The fire protection and ground traffic and airport site safety services.

56

(57)  Annex 10 to the letter from Belgium of 5 February 2014 contains the articles of association of BSCA Security.

57

(58)  The paragraph in question also refers to the ground traffic and airport site safety services.

58

(59)  The security subsidy is paid to BSCA Security.

59

(60)  The financial plan indicates that ‘the development envisaged for BSCA and SAB will require significant capital increases (in addition to external financing) and therefore monitoring by SOWAER’.

60

(61)  The other shares resulting from the capital increase were subscribed, in the total amount of approximately EUR 133 000, by certain minor shareholders: the companies SONACA, Carolo Parking and Igretec.

61

(62)  On 6 July 2012 BSCA concluded a new agreement with Ryanair. As this agreement is not included within either the measures identified in the opening decision or those identified in the 2012 extension decision, it is not examined in this decision.

62

(63)  Information provided during the meeting on 24 June 2003 between the Commission and the Belgian authorities.

63

(64)  While the landing fee was calculated according to the tonnage weight of aircraft under the general system applicable to all airlines, it was calculated on a different basis for Ryanair and collected for each departing passenger.

64

(65)  Point 1.3 of the contract between BSCA and Ryanair of 2 December 2001.

65

(66)  Point 1.5 of the contract between BSCA and Ryanair of 2 December 2001.

66

(67)  Point 4 of Annex C to the contract between BSCA and Ryanair of 2 December 2001.

67

(68)  Point 1.6 of and Annex C to the contract between BSCA and Ryanair of 2 December 2001.

68

(69)  Fees per departing passenger, according to the figures provided in the response from the Belgian authorities of 14 July 2011. The fees for the years 2001 to 2003 are the same as those for 2004.

69

(70)  Article 2 of the 2001 contract.

70

(71)  Letter sent to the Commission in a letter from the Belgian authorities of 13 September 2004. This letter followed on from a Memorandum of Intent (MOI) concluded on 8 April 2004.

71

(72)  Point 3b of the letter of 24 June 2004.

72

(73)  The total number of passengers having used the airport in 2004 was 2 034 140 (see Table 1).

73

(74)  Articles 35 and 36 of the Decree of 3 February 2005 on economic recovery and administrative simplification. These provisions were applied to Charleroi airport through Amendment No 4 to the 1991 concession agreement between the Region and BSCA, which provided in Article 1 that ‘the concession-holder shall set and collect from users the amount of the airport charges payable for using the airport that it manages’.

74

(75)  Letter from the Belgian authorities of 14 July 2011 and http://www.charleroi-airport.com/en/b2b/airport-charges/regularcharter-flights/index.html

75

(76)  Fees per departing passenger, according to the figures provided in the response from the Belgian authorities of 14 July 2011.

76

(77)  The Region's projections do not take account of the annual indexation of the landing fees nor of the increase in the number of Ryanair passengers above 1,75 million. These two corrections have an opposite impact on the actual amount of the fees per passenger paid by Ryanair.

77

(78)  Regulation (EC) No 1107/2006 of the European Parliament and of the Council of 5 July 2006 concerning the rights of disabled persons and persons with reduced mobility when travelling by air (OJ L 204, 26.7.2006, p. 1).

78

(79)  This amount is annually indexed, see http://www.charleroi-airport.com/en/b2b/airport-charges/regularcharter-flights/index.html

79

(80)  PRM fee year N + 1 = EUR [0,10-0,30] × Ryanair passengers in 2009/Ryanair passengers in year N. The number of Ryanair passengers in 2009 was 3 289 725.

80

(81)  Promocy was the joint venture between BSCA and Ryanair, which was formed under the 2001 agreements.

81

(82)  Response from Belgium sent on 18 March 2014 to the Commission, entitled ‘response to the Commission's request for information of 7 February 2014
  ’ (answer to question 18).

82

(83)  BAC submits that a private investor would expect a return on investment of at least EUR 14 million (5 %) based on the EUR 281 million investment made by SOWAER in the BSCA infrastructure. However, SOWAER received a return of only 0,66 % after corporation tax in 2009, and neither the Region nor SOWAER benefited from other revenues, such as dividends, between 2002 and 2007. Between 2007 and 2009 the dividend paid was less than EUR 400 000, and in 2010 the Region received a EUR 4,66 million dividend. In addition, the BSCA infrastructure costs accounted for only 6,7 % of revenues in 2009, whereas these would normally be expected to be one of the airport's most significant costs. Accordingly, BAC's annual depreciation costs amount to 30 % of annual revenues.

83

(84)  See footnote 8.

84

(85)  Decision 2004/393/EC, recital 300.

85

(86)  Direct costs per aircraft and per rotation out of Brussels airport, including landing, passenger, ground handling and other fees. Based on a forecast volume of 1 700 000 passengers in 2003, the cost difference is EUR 23 million.

86

(87)  Council Directive 96/67/EC of 15 October 1996 on access to the groundhandling market at Community airports (OJ L 272, 25.10.1996, p. 36). Directive last amended by Regulation (EC) No 1882/2003 of the European Parliament and of the Council of 29 September 2003 adapting to Council Decision 1999/468/EC the provisions relating to committees which assist the Commission in the exercise of its implementing powers laid down in instruments subject to the procedure referred to in Article 251 of the EC Treaty (OJ L 284, 31.10.2003, p. 1).

87

(88)  The company cites the example of Shannon in Ireland. Shannon granted advantages to Ryanair for a time, but they were not renewed. Ryanair decided to transfer its operations to another airport and Shannon did not achieve the expected reasonable return on investment.

88

(89)  Judgment of 22 March 1977 in Case 78/76 Steinike & Weinlig v Federal Republic of Germany [1977] ECR 595, ECLI:EU:C:1977:52: ‘Any breach by a Member State of an obligation under the Treaty in connexion with the prohibition laid down in Article 92 cannot be justified by the fact that other Member States are also failing to fulfil this obligation. The effects of more than one distortion of competition on trade between Member States do not cancel one another out but accumulate and the damaging consequences to the common market are increased’ (paragraph 24).

89

Steinike & Weinlig

Federal Republic of Germany

(90)  At Frankfurt-Hahn and London Stansted airports, the charges are allegedly higher and the reductions lower, despite which Ryanair operates 49 destinations from London and 15 from Frankfurt-Hahn, compared with 9 from Charleroi.

90

(91)  Judgment of 12 December 2000 in Case T-128/98 Aéroports de Paris v Commission of the European Communities [2000] ECR II-3929, ECLI:EU:C:2000:290.

91

Aéroports de Paris

Commission of the European Communities

(92)  Judgment of 14 January 2004 in Case T-109/01 Fleuren Compost BV v Commission of the European Communities [2004] ECR II-127, ECLI:EU:T:2004:4, paragraph 18.

92

Fleuren Compost BV

Commission of the European Communities

(93)  Commission Decision 2008/948/EC of 23 July 2008 on measures by Germany to assist DHL and Leipzig Halle Airport C 48/06 (ex N 227/06) (OJ L 346, 23.12.2008, p. 1), recital 291.

93

(94)  See Annex 3 to the comments from Belgium submitted on 23 May 2012.

94

(95)  Decision 2008/948/EC, recital 182.

95

(96)  Judgment of 24 March 2011 in Cases T-443/08 and T-455/08 Freistaat Sachsen and Land Sachsen-Anhalt (T-443/08) and Mitteldeutsche Flughafen AG and Flughafen Leipzig-Halle GmbH (T-455/08) v European Commission [2011] ECR II 1311, paragraph 225.

96

Freistaat Sachsen and Land Sachsen-Anhalt (T-443/08) and Mitteldeutsche Flughafen AG and Flughafen Leipzig-Halle GmbH (T-455/08)

European Commission

(97)  See footnote 89.

97

(98)  Judgment of 24 July 2003 in Case C-280/00 Altmark Trans GmbH and Regierungspräsidium Magdeburg v Nahverkehrsgesellschaft Altmark GmbH, and Oberbundesanwalt beim Bundesverwaltungsgericht [2003] ECR I-7447, ECLI:EU:C:2003:415.

98

Altmark Trans GmbH and Regierungspräsidium Magdeburg

Nahverkehrsgesellschaft Altmark GmbH, and Oberbundesanwalt beim Bundesverwaltungsgericht

(99)  Article 6(1)(X)(7o) of the Institutional Reform Act (Belgian Official Gazette, 15 August 1980, p. 9434).

99

o

(100)  Now Belgocontrol.

100

(101)  Belgian Official Gazette, 9 March 1990, p. 4439.

101

(102)  Council Directive 96/82/EC of 9 December 1996 on the control of major-accident hazards involving dangerous substances (OJ L 10, 14.1.1997, p. 13), known as the Seveso Directive.

102

(103)  Which is not the case with airports.

103

(104)  Recital 182.

104

(105)  Regulation (EC) No 2320/2002 of the European Parliament and of the Council of 16 December 2002 establishing common rules in the field of civil aviation security (OJ L 355, 30.12.2002, p. 1).

105

(106)  Article 5.1.

106

(107)  Annex 15 to the letter from Belgium of 24 February 2014.

107

(108)  Note approved by the Walloon Government on 8 November 2000, p. 2.

108

(109)  Commission Decision 2005/842/EC of 28 November 2005 on the application of Article 86(2) of the EC Treaty to State aid in the form of public service compensation granted to certain undertakings entrusted with the operation of services of general economic interest (OJ L 312, 29.11.2005, p. 67).

109

(110)  Commission Decision of 28 October 2009 on the financing of public hospitals in the IRIS network in the Brussels-Capital Region, State aid case NN 54/2009, obtained from the Europa website.

110

Europa

(111)  See footnote 103.

111

(112)  Commission Staff Working Document, frequently asked questions in relation with Commission Decision of 28 November 2005 on the application of Article 86(2) of the EC Treaty to State aid in the form of public service compensation granted to certain undertakings entrusted with the operation of services of general economic interest, and of the Community Framework for State aid in the form of public service compensation (SEC(2007) 1516 final, p. 6).

112

(113)  Council Regulation (EC) No 659/1999 of 22 March 1999 laying down detailed rules for the application of Article 93 of the EC Treaty (OJ L 83, 27.3.1999, p. 1).

113

(114)  See recital 10 of Commission Regulation (EC) No 1998/2006 of 15 December 2006 on the application of Articles 87 and 88 of the Treaty to de minimis aid (OJ L 379, 28.12.2006, p. 5).

114

de minimis

(115)  Decision of the Commission of 1 August 2006 on the Guidelines on closure of assistance (2000-2006) from the Structural Funds, COM (2006) 3424 final, not published, obtained from the Europa website.

115

Europa

(116)  Judgment of 14 January 2004 in Case T-109/01 Fleuren Compost BV v Commission of the European Communities [2004] ECR II-127, ECLI:EU:T:2004:4, paragraph 74.

116

Fleuren Compost BV

Commission of the European Communities

(117)  Judgment of 15 February 2001 in Case C-99/98 Republic of Austria v Commission of the European Communities [2001] ECR I-1101, ECLI:EU:C:2001:94, paragraphs 34, 35 and 38.

117

Republic of Austria

Commission of the European Communities

(118)  Recital 214 of the 2004 decision.

118

(119)  Judgment of 12 September 2000 in Joined Cases C-180/98 to C-184/98 Pavel Pavlov and Others v Stichting Pensioenfonds Medische Specialisten [2000] ECR I-6451, ECLI:EU:C:2000:428.

119

Pavel Pavlov and Others

Stichting Pensioenfonds Medische Specialisten

(120)  Judgment of 16 June 1987 in Case 118/85 Commission of the European Communities v Italian Republic [1987] ECR 2599, ECLI:EU:C:1987:283, paragraph 7; judgment of 18 June 1998 in Case C-35/96 Commission of the European Communities v Italian Republic [1998] ECR I-3851, ECLI:EU:C:1998:303, paragraph 36; judgment of 12 September 2000 in Joined Cases C-180/98 to C-184/98 Pavel Pavlov and Others v Stichting Pensioenfonds Medische Specialisten [2000] ECR I-6451, ECLI:EU:C:2000:428, paragraph 75.

120

Commission of the European Communities

Italian Republic

Commission of the European Communities

Italian Republic

Pavel Pavlov and Others

Stichting Pensioenfonds Medische Specialisten

(121)  Judgment in Leipzig-Halle, paragraph 102 et seq.

121

Leipzig-Halle

(122)  Judgment of 24 March 2011 in Joined Cases T-455/08 Flughafen Leipzig-Halle GmbH and Mitteldeutsche Flughafen AG v European Commission ECLI:EU:T:2011:117 and T-443/08 Freistaat Sachsen and Land Sachsen-Anhalt v European Commission (hereinafter ‘
  Leipzig-Halle judgment’) [2011] ECR I-1311, paragraphs 93, 95, 100 and 119. See also ADP judgment, confirmed by the judgment of the Court of Justice of 24 October 2002 in Case C-82/01P Aéroports de Paris v Commission of the European Communities [2002] ECR I-9297, ECLI:EU:C:2002:617, and by judgment of 17 December 2008 in Case T-196/04 Ryanair Ltd v Commission of the European Communities [2008] ECR II-3643, ECLI:EU:T:2008:585, paragraph 88.

122

Flughafen Leipzig-Halle GmbH and Mitteldeutsche Flughafen AG

European Commission

Freistaat Sachsen and Land Sachsen-Anhalt

European Commission

Leipzig-Halle

ADP

Aéroports de Paris

Commission of the European Communities

Ryanair Ltd

Commission of the European Communities

(123)  Judgment of 17 February 1993 in Joined Cases C-159/91 and C-160/91 Christian Poucet v Assurances Générales de France and Caisse Mutuelle Régionale du Languedoc-Roussillon [1993] ECR I-637, ECLI:EU:C:1993:63.

123

Christian Poucet

Assurances Générales de France and Caisse Mutuelle Régionale du Languedoc-Roussillon

(124)  
  Idem.

124

Idem

(125)  
  ADP judgment.

125

ADP

(126)  See footnote 8.

126

(127)  Judgment of 10 January 1994 in Case C-364/92 SAT Fluggesellschaft mbH v Eurocontrol[1994] ECR I-43, ECLI:EU:C:1994:7, paragraph 30, and judgment of 26 March 2009 in Case C-113/07 SELEX Sistemi Integrati SpA v Commission of the European Communities and Organisation européenne pour la sécurité de la navigation aérienne (Eurocontrol) [2009] ECR I-2207, ECLI:EU:C:2009:191, paragraph 71.

127

SAT Fluggesellschaft mbH

Eurocontrol

SELEX Sistemi Integrati SpA

Commission of the European Communities and Organisation européenne pour la sécurité de la navigation aérienne (Eurocontrol)

(128)  Footnote 29 of the aviation guidelines. See also judgment of 12 December 1996 in Case T-358/94 Compagnie Nationale Air France v Commission [1996] ECR II-2109, ECLI:EU:T:1996:194, paragraph 79, judgment of 14 January 2004 in Case T-109/01 Fleuren Compost BV v Commission [2004] ECR II-127, ECLI:EU:T:2004:4, paragraph 74, judgment of 2 December 2008 in Joined Cases T-362/05 and T-363/05 Nuova Agricast v Commission [2008] ECR II-297, ECLI:EU:T:2008:541, paragraph 80, and judgment of 30 November 2009 in Joined Cases T-427/04 and T-17/05 France and France Télécom v Commission [2009] ECR II-4315, ECLI:EU:T:2009:474, paragraph 321.

128

Compagnie Nationale Air France

Commission

Fleuren Compost BV

Commission

Nuova Agricast

Commission

France and France Télécom

Commission

(129)  See recital 228 of this decision.

129

(130)  See footnote 37.

130

(131)  See footnote 121.

131

(132)  Point 35 of the aviation guidelines.

132

(133)  Radio navigation system providing landing assistance during bad weather.

133

(134)  Commission Decision EU) 2016/1698 of 20 February 2014 concerning measures SA.22932 (11/C) (ex NN 37/07) implemented by France in favour of Marseille Provence Airport and airlines using the airport (notified under document C(2014) 870) .(OJ L 260, 27.9.2016, p. 1).

134

(135)  Judgment of 18 March 1997 in Case C-343/95 Diego Calì & Figli Srl v Servizi ecologici porto di Genova SpA (SEPG) [1997] ECR I-1547, ECLI:EU:C:1997:160; Commission Decision N309/2002 of 19 March 2003, and Commission Decision N438/2002 of 16 October 2002, Aid in support of the public authority functions in the Belgian port sector.

135

Diego Calì & Figli Srl

Servizi ecologici porto di Genova SpA (SEPG)

(136)  In accordance with Regulation (EC) No 2320/2002, ‘
  “aviation security” shall mean the combination of measures and human and natural resources intended to safeguard civil aviation against acts of unlawful interference’. The common basic standards on aviation security measures are based on the recommendations of European Civil Aviation Conference (ECAC) Document 30 and are laid down in the Annex to Regulation (EC) No 2320/2002.

136

(137)  See footnote 129.

137

(138)  Annex forming an integral part of Amendment No 6 to the Region/BSCA agreement.

138

(139)  Article 25.2 of the schedule of conditions, as amended by Amendment No 6 of 15 January 2008 to the Region/BSCA agreement.

139

(140)  See footnote 50.

140

(141)  See footnote 52.

141

(142)  See footnote 89.

142

(143)  See footnote 90.

143

(144)  Flight tracking and recording involves adding information on flights (number of passengers, aircraft registration, name of pilot, type of aircraft, nature of flight, origin, weight of aircraft, etc.) to the database of the Walloon administration.

144

(145)  Flight planning involves communications, flight plans, slots, radio announcements and management of aircraft parking stands.

145

(146)  Marshalling consists of two tasks: (i) marshalling on stand, which is carried out by the area coordinator when an aircraft arrives, and (ii) follow me marshalling, which involves guiding the aircraft with a vehicle. This service is used only for pilots who are unfamiliar with the airport (business aviation) or for Category D large aircraft.

146

(147)  See footnote 85.

147

(148)  Judgment of 11 July 1996 in Case C-39/94 Syndicat français de l'Express international (SFEI) and others v La Poste and others [1996] ECR I-3547, ECLI:EU:C:1996:285, paragraph 60; judgment of 29 April 1999 in Case C-342/96 Kingdom of Spain v Commission of the European Communities [1999] ECR I-2459, ECLI:EU:C:1999:210, paragraph 41.

148

Syndicat français de l'Express international (SFEI) and others

La Poste and others

Kingdom of Spain

Commission of the European Communities

(149)  See footnote 92.

149

(150)  See footnote 92.

150

(151)  
  OJ C 8, 11.1.2012, p. 4.

151

(152)  Commission Decision 2013/664/EU of 25 July 2012 on measure SA.23324 — C 25/07 (ex NN 26/07) — Finland Finavia, Airpro and Ryanair at Tampere-Pirkkala airport (OJ L 309, 19.11.2013, p. 27).

152

(153)  See note of 8 November 2000 from the minister with responsibility for the economy in the Walloon Government.

153

(154)  Judgment of 21 January 1999 in Joined Cases T-129/95, T-2/96 and T-97/96 Neue Maxhütte Stahlwerke GmbH and Lech-Stahlwerke GmbH v Commission of the European Communities [1999] ECR II-17, ECLI:EU:T:1999:7, paragraph 120.

154

Neue Maxhütte Stahlwerke GmbH and Lech-Stahlwerke GmbH

Commission of the European Communities

(155)  The 2 % growth rate is in fact used in the successive agreements between the Region/SOWAER and BSCA, for example for the growth rate of the variable fee cap.

155

(156)  Judgment of 11 July 1996 in Case C-39/94 Syndicat français de l'Express international (SFEI) and others v La Poste and others [1996] ECR I-3547, ECLI:EU:C:1996:285, paragraphs 60 and 61.

156

Syndicat français de l'Express international (SFEI) and others

La Poste and others

(157)  As indicated in the investment programme planned for Charleroi airport, annexed to the SOWAER/BSCA agreement of 15 April 2002.

157

(158)  As indicated by BSCA.

158

(159)  See page 10 of the SOWAER business plan annexed to the Region's decision of 23 May 2001.

159

(160)  See end of recital 431.

160

(161)  This stems from an ex post analysis based on the SOWAER balance sheet for 2002. The average debt/equity ratio for airlines is 35 % according to Damodaran: ‘Risk Premiums for Other Markets’ 2001 (http://pages.stern.nyu.edu/~ADAMODAR/).

161

ex post

(162)

162

Source: Damodaran: ‘Risk Premiums for Other Markets’ 2001 (http://pages.stern.nyu.edu/~ADAMODAR/).

Source

(163)  The beta coefficient is a key factor in the capital asset pricing model. It measures the relative cost-effectiveness of an asset compared to the market.

163

(164)  See footnote 156.

164

(165)  Interest rate on 10-year Belgian bonds in April 2002.

165

(166)  Note from Belgium entitled ‘Wallonia's response to the request for information of 14 February 2014
  ’ (question 13), received by the Commission on 7 February 2014.

166

(167)  Belgium refers to these services as ‘non-economic services’.

167

(168)  Judgment of 2 July 1974 Case 173/73 Italian Republic v Commission of the European Communities [1974] ECR 709, ECLI:EU:C:1974:71.

168

Italian Republic

Commission of the European Communities

(169)  See footnote 155.

169

(170)  See footnote 156.

170

(171)  Interest rate on 10-year Belgian bonds in April 2003.

171

(172)  While increasing, for example, the handling charges in order to maintain its total revenue.

172

(173)  Decree of 19 December 2007 amending the Decree of 23 June 1994 on the creation and operation of airports and aerodromes located in the Walloon Region.

173

(174)  Report presented on behalf of the Planning, Transport, Energy and Housing Committee of the Walloon Parliament by Mr E. Stoffels on 6 December 2007 on the draft decree amending the Decree of 23 June 1994 on the creation and operation of airports and aerodromes located in the Walloon Region.

174

(175)  Coordinated management means giving airport operators total control over customer handling, including security and safety tasks.

175

(176)  According to the Deloitte & Touche report, ‘it is clear from this analysis that the average annual profitability of the funds invested on the basis of the amended business plan and over an estimated period of 10 years is 27 %’, and that ‘this rate of return must be compared to a rate for the market risk for this type of activity of 15 % per year’.

176

(177)  Judgment of 12 May 2011 in Joined Cases T-267/08 and T-279/08 Région Nord-Pas-de-Calais (T-267/08) and Communauté d'agglomération du Douaisis (T-279/08) v European Commission [2011] ECR II-1999, ECLI:EU:T:2011:209, paragraph 108.

177

Région Nord-Pas-de-Calais (T-267/08) and Communauté d'agglomération du Douaisis (T-279/08)

European Commission

(178)  
  Idem.

178

Idem

(179)  Judgment of 16 May 2002 in Case C-482/99 French Republic v Commission of the European Communities (Stardust Marine) [2002] ECR I-4397, ECLI:EU:C:2002:294.

179

French Republic

Commission of the European Communities (Stardust Marine)

(180)  Note from Belgium of 21 September 2011 (question 2).

180

(181)  The financial plan indicates that ‘the development envisaged for BSCA and SAB will require significant capital increases (in addition to external financing) and therefore monitoring by SOWAER’.

181

(182)  Distances indicated by the website https://www.google.com/maps

182

(183)  http://www.charleroi-airport.com/en/the-airport/location-and-catchment-area/index.html

183

(184)  See footnote 174.

184

(185)  See note from Belgium of 13 May 2014 (answer to question 1).

185

(186)  Article 11 of BSCA's Articles of Association dated 10 December 2009.

186

(187)  Article 5 of the Articles of Association stipulates that ‘Category A shareholders may be only the Walloon Region, or any specialised companies formed by the latter, the limited company Sambrinvest, Sogepa or Igretec’.

187

(188)  Article 5 of the Articles of Association stipulates that ‘Category C shareholders may be only Belgian Airports and entities to which Belgian Airports may freely transfer its shares’.

188

(189)  See, in particular, judgment of 29 April 1999 in Case C-342/96 Kingdom of Spain v Commission of the European Communities [1999] ECR I-2459, ECLI:EU:C:1999:210, paragraph 41.

189

Kingdom of Spain

Commission of the European Communities

(190)  In particular, BSCA was a public undertaking at the time when these measures were granted.

190

(191)  See footnote 8.

191

(192)  See the Commission Decision 2011/60/EU of 27 January 2010 on State aid C 12/08 (ex NN 74/07) — Slovakia — Agreement between Bratislava Airport and Ryanair (OJ L 27, 1.2.2011, p. 24), recitals 88 and 89.

192

(193)  In other words, if the incremental profitability expected from this transaction is positive.

193

(194)  The footnotes have not been reproduced.

194

(195)  Point 66.

195

(196)  With regard to the incremental operating costs (staff, other purchases), the Commission used the total cost figures from the business plans and a regression allowing the way in which these cost items develop in line with traffic to be assessed.

196

(197)

197

Source: note of the Walloon Government annexed to the minutes of the Walloon Government meeting of 8 November 2000.

Source

(198)  See footnote 22.

198

(199)  See footnote 156.

199

(200)  IATA, Roland Berger International, study commissioned by Grands Travaux de Marseille.

200

(201)  Including both departing and arriving passengers.

201

(202)  Response from Belgium sent on 18 March 2014 to the Commission (answer to question 10).

202

(203)  See footnote 156.

203

(204)  See footnote 198.

204

(205)  See footnote 156.

205

(206)  See footnote 76.

206

(207)  The tax correction notices were sent to the Commission by Belgium on 22 July 2014. They were received by Promocy after the sale. They concern the 2003, 2004, 2005 and 2006 financial years and involve a total amount of approximately EUR 15 million.

207

(208)  See footnote 74.

208

(209)  Letter from Ryanair to BSCA of 30 November 2009, provided by Belgium on 22 July 2014.

209

(210)  See Ryanair letter of 30 November 2009.

210

(211)  Earnings before interest and taxes.

211

(212)  See projected income statement presented to BSCA's Board of Directors.

212

(213)  Regulation (EC) No 1107/2006 of the European Parliament and of the Council of 5 July 2006 concerning the rights of disabled persons and persons with reduced mobility when travelling by air (OJ L 204, 26.7.2006, p. 1).

213

(214)  Article 8(3) of Regulation (EC) No 1107/2006 states that ‘The managing body of an airport may, on a non-discriminatory basis, levy a specific charge on airport users for the purpose of funding this assistance’.

214

(215)  These reasons are fourfold:

215

| — | The number of PRMs on board is limited to four for Ryanair (based on the authorisations issued by the Irish safety authorities for the type of aircraft operated), whereas other airlines operating at Charleroi airport have not set a maximum number of PRMs per flight. |
| --- | --- |

—

The number of PRMs on board is limited to four for Ryanair (based on the authorisations issued by the Irish safety authorities for the type of aircraft operated), whereas other airlines operating at Charleroi airport have not set a maximum number of PRMs per flight.

| — | Ryanair requires the presence of a PRM on board to be notified 48 hours in advance, failing which the service is not provided. Other airlines do not impose any such requirement, which means that responsibility must be assumed by BSCA, despite the failure to provide advance notice, and leads to additional costs for BSCA. |
| --- | --- |

—

Ryanair requires the presence of a PRM on board to be notified 48 hours in advance, failing which the service is not provided. Other airlines do not impose any such requirement, which means that responsibility must be assumed by BSCA, despite the failure to provide advance notice, and leads to additional costs for BSCA.

| — | Ryanair's meeting of arrival and departure times allows this service to be organised more efficiently. |
| --- | --- |

—

Ryanair's meeting of arrival and departure times allows this service to be organised more efficiently.

| — | The clear procedure generally applied by Ryanair for PRMs (they are asked to arrive at the airport at least 1 hour and 40 minutes before the flight departs) allows this service to be optimised for BSCA and therefore reduces the costs compared to other airlines. |
| --- | --- |

—

The clear procedure generally applied by Ryanair for PRMs (they are asked to arrive at the airport at least 1 hour and 40 minutes before the flight departs) allows this service to be optimised for BSCA and therefore reduces the costs compared to other airlines.

(216)  Knowing that the Ryanair traffic accounted for 3 289 725 passengers in 2009 and assuming that half of those passengers were departing passengers.

216

(217)  See footnote 209.

217

(218)  See footnote 210.

218

(219)  Judgment of 9 June 2011 in Joined Cases C-465/09 Ρ to C-470/09 Ρ Diputación Foral de Vizcaya and others v European Commission [2011] ECR I-83*, ECLI:EU:C:2011:372.

219

Diputación Foral de Vizcaya and others

European Commission

(220)  See, for example, the note to the Walloon Government annexed to the Decision of 8 November 2000, page 9 et seq.

220

(221)  Tractebel strategic development study on Charleroi airport completed in April 2000. Roland Berger study in July 2000 on the development of an airport strategy for Wallonia. Study commissioned by Grands Travaux de Marseille on the potential development of Charleroi airport.

221

(222)  Following the failure of Sabena at the end of 2001, traffic at Brussels airport fell from 19,7 million in 2001 to 14,4 million in 2002.

222

(223)  See footnote 209.

223

(224)  The catchment areas of both airports include the Brussels-Capital Region, which has 1,2 million inhabitants and a population density of 7 250 inhabitants per km2. The population density of Belgium (which obviously does not correspond exactly to the catchment areas of the two airports) is one of the highest in the world at 364 inhabitants per km2.

224

2

2

(225)  The catchment areas of both airports include the Brussels-Capital Region. This is the seat of European institutions, international organisations and multinational companies, thus creating strong demand for air services. In addition, the Gross Domestic Product per capita in Belgium (which obviously does not correspond exactly to the catchment areas of the two airports), expressed in purchasing power standards, is 20 % higher than the European Union average (source: Eurostat).

225

source

(226)  Actual average annual passenger traffic during the two financial years preceding that in which the aid is notified or actually granted or paid in the case of non-notified aid. In the case of a newly created passenger airport the forecasted average annual passenger traffic during the two financial years after the beginning of the operation of commercial passenger air traffic should be considered. These thresholds refer to a one-way count. This means a passenger flying for example to the airport and back would be counted twice; it applies to individual routes. If an airport is part of a group of airports, the passenger volume is established on the basis of each individual airport.

226

(227)  More specifically, a discount rate of 9 % was used (see recital 437). This was based on a weighted average cost of capital of 9 %, which was itself based on a rate of return on equity of 9 %, given that SOWAER had no debts.

227

(228)  In comparison, the distance between Frankfurt Hahn airport and the main Frankfurt airport is 120 km.

228

(229)  Times and distances indicated by the website https://www.google.com/maps

229

(230)  See Table 4: Annual traffic statistics for Charleroi airport.

230

(231)  See points 131 and 137 of the aviation guidelines.

231

(232)  For the year 2000: Decree of 16 December 1999 containing the general expenditure budget of the Walloon Region for the budget year 2000, and Order of 27 September 2000 of the Walloon Government granting an operating subsidy to BSCA intended to cover the costs of the fire and maintenance services at Charleroi airport for the year 2000.

232

For the year 2001: Decree of 14 December 2000 containing the general expenditure budget of the Walloon Region for the budget year 2001, and Order of 4 October 2001 of the Walloon Government granting an operating subsidy to BSCA intended to cover the costs of the fire and maintenance services at Charleroi airport for the year 2001.

(233)  In the end, this revision did not take place until 2013. However, the introduction of a revision date still significantly amended the measure.

233

(234)  Judgment of 20 September 1990 in Case C-5/89 Commission of the European Communities v Federal Republic of Germany [1990] ECR I-3437, ECLI:EU:C:1990:320, paragraph 14; judgment of 14 January 1997 in Case C-169/95 Kingdom of Spain v Commission of the European Communities [1997] ECR I-135, ECLI:EU:C:1997:10, paragraph 51; judgment of 15 December 2005 in Case C-148/04 Unicredito Italiano SpA v Agenzia delle Entrate, Ufficio Genova 1 [2005] ECR I-11137, ECLI:EU:C:2005:774, paragraph 104.

234

Commission of the European Communities

Federal Republic of Germany

Kingdom of Spain

Commission of the European Communities

Unicredito Italiano SpA

Agenzia delle Entrate, Ufficio Genova 1

(235)  Judgment of 22 June 2006 in Joined Cases C-182/03 and C-217/03 Kingdom of Belgium (C-182/03) and Forum 187 ASBL (C-217/03) v Commission of the European Communities [2006] ECR I-5479, ECLI:EU:C:2006:416, paragraph 147.

235

Kingdom of Belgium (C-182/03) and Forum 187 ASBL (C-217/03)

Commission of the European Communities

(236)  
  Idem.

236

Idem.

(237)  Case 265/85 Van den Bergh en Jurgens and Van Dijk Food Products Lopik v Commission [1987] ECR 1155, paragraph 44.

237

Van den Bergh en Jurgens and Van Dijk Food Products Lopik

Commission

(238)  These fees correspond to the variable part of the concession fee, as the fixed part to be paid by BSCA is compensated by a payment from the Region to BSCA.

238

(239)  2 % is the inflation target of the European Central Bank.

239

(240)  These additional concession fees have been calculated by assuming that they increased by 2 % per year.

240

(241)  
  Idem.

241

Idem

(242)  The table is based on the assumption that traffic at Charleroi airport will be such that the variable concession fee (a) will continue to be capped in 2014 and 2015 under the applicable provisions. If this does not prove to be the case, the amounts indicated in column (a) for 2014 and 2015 should be replaced by the amounts payable by BSCA under the variable concession fee. This does not affect columns (b) and (c).

242

(243)  These amounts are the same as those in the previous table up to 2013 inclusive. For 2014, a ratio of (273/365) has been applied, as the period from 1 January to 30 September consists of 273 days.

243

(244)  See Article 14(2) of Regulation (EC) No 659/1999 (op. cit.).

244

(245)  Commission Regulation (EC) No 794/2004 of 21 April 2004 implementing Council Regulation (EC)No 2015/1589 laying down detailed rules for the application of Article 108 of the Treaty on the Functioning of the European Union (OJ L 140, 30.4.2004, p. 1).

245

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ANNEX

Information on amounts received, to be recovered and already recovered

| Identity of the beneficiary | Total amount of the aid received (*1) | Total amount of the aid to be recovered (*1)

  (Principal) | Total amount already repaid (*1) |
| --- | --- | --- | --- |
| Principal | Interest |
| | | | | |
| | | | | |
| | | | | |
| | | | | |
| | | | | |
| | | | | |
| | | | | |

Identity of the beneficiary

Total amount of the aid received (*1)

Total amount of the aid to be recovered (*1)

(Principal)

Total amount already repaid (*1)

Principal

Interest

---

(*1)  EUR Million

---