EN Official Journal of the European Union L 107/1

COMMISSION DECISION (EU) 2018/628

of 11 November 2016

on State aid SA.24221(2011/C) (ex 2011/NN) implemented by Austria for the Klagenfurt airport, Ryanair and other airlines using the airport

(notified under document C(2016) 7131)

(Only the German version 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 called on interested parties to submit their comments pursuant to the provision(s) cited above (1), and having regard to their comments,

Whereas:

1. PROCEDURE

(1) By letter of 5 October 2007 a competitor of the Irish Airline Ryanair plc (hereinafter: ‘Ryanair’) on the European air passenger transport market, who requested not to have its identity disclosed, lodged a complaint with the Commission alleging that Ryanair has been granted unlawful State aid by the Federal State of Carinthia, the City of Klagenfurt, Kärnten Werbung Marketing & Innovationsmanagement GmbH (hereafter: ‘Kärnten Werbung’) and the Airport of Klagenfurt (hereinafter ‘KLU’) via its operating company Kärntner Flughafen Betriebsgesellschaft mbH (hereinafter ‘KFBG’).

(2) By letter of 11 October 2007 the Commission forwarded the complaint to Austria and requested information. The Austrian authorities responded by letter dated 2 January 2008.

(3) The Commission requested additional information from the Austrian authorities by letters dated 15 November 2010 and 24 March 2011. The Austrian authorities responded by letters dated 28 January 2011 and 30 May 2011.

(4) On 8 April 2011 the Commission invited Ryanair to provide certain information. Ryanair submitted the information by letter dated 4 July 2011. On 15 July 2011 the Commission forwarded the submission of Ryanair to the Austrian authorities, which provided their comments by letter of 20 September 2011.

(5) After having examined the information supplied by the Austrian authorities, the Commission decided on 22 February 2012 to open the investigation procedure laid down in Article 108(2) of the Treaty on the Functioning of the European Union (‘TFEU’). The decision to open the formal investigation procedure (hereinafter ‘the opening decision’) was transmitted to Austria on the same date and was subsequently published in the Official Journal of the European Union. The Commission invited interested parties to submit their comments on the measure (2).

(6) By letter dated 13 March 2012 Austria requested the Commission to extend the deadline to submit its observations about the Commission's opening decision. The Commission granted an extension of the deadline by letter of 19 April 2012. Austria submitted its observations on 16 May, 11 June and 31 August 2012.

(7) By letters dated 20 June 2012, 5 October 2012, 3 May 2013 and 28 May 2014 the Commission forwarded interested parties' observations to Austria.

(8) By letter dated 24 February 2014 the Commission informed Austria and the interested parties to the procedure that the Commission guidelines on State aid to airports and airlines (3) (hereinafter ‘the 2014 Aviation Guidelines’) were adopted on 20 February 2014 and invited them to submit comments on the application of the new EU Guidelines on State aid to Airport and Airlines to this investigation. Austria replied by letter of 20 March 2014.

(9) The 2014 Aviation Guidelines were published in the Official Journal of the European Union on 4 April 2014. They replaced the 2005 Community guidelines on financing of airports and start-up aid to airlines departing from regional airports (4) (hereinafter ‘the 2005 Aviation Guidelines’).

(10) By letter of 28 May 2014 the Commission requested further information from Austria regarding a marketing contract between the KLU and Ryanair signed on 22 January 2002. The Commission had previously learned from this contract by a submission of an interested party (Ryanair). By letter of 11 June 2014 Austria replied to this request.

(11) After having examined the information supplied by the Austrian authorities, the Commission decided on 23 July 2014 to extend the investigation procedure. The decision to extend the formal investigation procedure (5) (hereinafter ‘the extension decision’) was transmitted to Austria on the same date and was subsequently published in the Official Journal of the European Union. The Commission invited interested parties to submit their comments on the measure.

(12) Austria submitted its observations on the measure which was the object of the extension decision by letter dated 20 August 2014. The Commission received comments from interested parties. It forwarded them to Austria, which was given the opportunity to react; its comments were received by letter dated 17 December 2014.

(13) By letters dated 1 December 2014, 5 February 2015, 24 April 2015 and 11 December 2015 the Commission forwarded interested parties' observations to Austria.

(14) The Commission requested additional information from the Austrian authorities by letters dated 15 December 2014, 13 January 2015, 5 February 2015, 19 March 2015 and 25 September 2015. The Austrian authorities responded by letters dated 28 January 2015, 12 February 2015, 31 March 2015, 14 April 2015 and 11 November 2015.

2. DESCRIPTION OF THE MEASURES AND GROUNDS FOR INITIATING THE PROCEDURE

2.1. Introduction

(15) This case deals with several measures that concern KLU as well as different airlines operating at KLU: — KLU has been financed by its shareholders from 2000 to 2010, — KLU operated an incentive scheme as of 2005 to the benefit of several airlines, — KLU entered into several agreements with Ryanair, Leading Verge.com Limited (hereinafter ‘LV’), Airport Marketing Services (Jersey) Limited (hereinafter ‘AMS’), Hapag Lloyd Express, Tuifly, Air Berlin and Austrian Airlines (hereinafter ‘AUA’).

2.2. General presentation of Klagenfurt Airport

(16) KLU is located at the outskirts of the city of Klagenfurt, which is the capital of the Austrian Federal State Carinthia (Bundesland Kärnten). Carinthia is a mountainous region in the south of Austria.

(17) KLU was founded in 1915 as a military air base. Soon after that it was used for both military and civil purposes and this dual utilisation continues until today.

(18) KLU is owned and operated since 1939 by KFBG which is held by several shareholders. Until 2003 the shares were held by the Republic of Austria (60 %), the State of Carinthia (20 %) and Klagenfurt city (20 %). In April 2003 the State of Carinthia took over the shares of the Republic of Austria, committing itself to keep the airport open for military purposes. Since 2003 the shares were therefore held by the State of Carinthia (80 %) and Klagenfurt city (20 %). In November 2008 the 80 % share of the State of Carinthia in the Airport were transferred to Kärntner Landes- und Hypothekenbank-Holding.

(19) The airport has a main runway of 2 720 metres, which remained unchanged since 2000. Its terminal has a maximum capacity of 600 000 passengers. The passenger numbers have evolved as follows: Table 1 Traffic figures at KLU Year Total passengers Movements Freight in kg 2000 235 503 8 325 78 931 2001 226 701 7 133 67 159 2002 259 717 6 894 29 939 2003 313 557 6 979 47 347 2004 486 274 8 810 57 881 2005 522 697 8 907 53 212 2006 409 004 7 718 41 563 2007 469 033 8 103 34 894 2008 429 889 7 679 23 935 2009 410 512 7 785 30 153 2010 425 933 7 482 13 443 2011 375 307 6 451 206 2012 279 045 4 576 0 2013 258 421 4 262 0 2014 224 846 3 920 0 2015 227 625 3 922 0

(20) KLU is located in Carinthia, the southernmost state of Austria. As Carinthia is situated within the Eastern Alps it is known for its mountains, such as the Hohe Tauern Range, Carnic Alps and Karawanken and tourism is one of the major industries. Due to this alpine situation, Carinthia has a continental climate with long harsh winters.

(21) KLU is situated at the following distances/travelling time by car to other airports. It has to be noted however that these indications for travelling time can only be met under best conditions, and will often take longer due to blocked roads and congested tunnels because of adverse weather conditions and too much traffic volume for the tunnels. — Ljubljana airport (Slovenia): 80 km, 1 h 30 — Graz airport (Austria): 128 km, 1 h 10 — Maribor airport (Slovenia): 137 km, 1 h 47 — Trieste airport (Italy): 203 km, 1 h 51 — Salzburg airport (Austria): 223 km, 2 h — Venezia airport (Italy): 282 km, 2 h 34 — Treviso airport (Italy): 290 km, 2 h 43

2.3. Entities involved in the measures at Klagenfurt Airport

2.3.1. Destinations Management GmbH

(22) Destinations Management GmbH (hereafter: ‘DMG’) is a 100 % subsidiary of KFBG. DMG is provider of different services to KLU in the aerospace sector, such as travel agency services, event manager and consultant to attract airlines to the destination of Klagenfurt.

2.3.2. Kärnten Werbung, Marketing & Innovationsmanagement GmbH

(23) Kärnten Werbung is owned by Kärntner Landes- und Hypothekenbank-Holding (until November 2008 by the State of Carinthia) (60 %), the Chamber of Economy of Carinthia (30 %) and the Chamber of Employees (10 %). The purpose of the company is marketing activities for the tourism in Carinthia. Kärnten Werbung is financed by its shareholders, i.e. by the Kärntner Landes- und Hypothekenbank-Holding, the Chamber of Economy of Carinthia and the Chamber of Employees. It is controlled by the supervisory board which is nominated by the shareholders.

2.3.3. Kärntner Landes- und Hypothekenbank-Holding

(24) Kärntner Landes- und Hypothekenbank-Holding (hereafter: ‘KLH’) was a legal person governed by public law and established in 1990 by the Kärntner Landesholding-Gesetz (KLH-G) (6). The KLH was a legal person sui generis and holder of special rights. KLH was not a corporation under commercial law. KLH was however registered in the Commercial Register under a company number. KLH also did not publish balance sheets or annual accounts, but rather, in accordance with § 28 KLH-G, made them available to the government of the State of Carinthia. KLH acted as owner company (holding), i.e. State assets agency for the shares which the State of Carinthia holds in the former regional mortgage bank of Carinthia (Kärntner Landes Hypothekenbank) and other companies, such as the Land Kärnten Beteiligungen GmbH, the Kärntner Vermögensverwaltungs GmbH et al. KLH owns 80 % of the shares of KFBG.

(25) According to its statutes, the purpose of KLH was to acquire, hold, administer and divest assets, in particular shares in companies, and to found companies. KLH was to carry out a strategic holding policy for all its companies to guarantee synergy effects, clear competences and carry out a centralised controlling. KLH had to carry out its business in the interest of the State of Carinthia. The operative business was carried out by the companies themselves. For the direct and indirect financing and support of projects by KLH a special fund called ‘Zukunft Kärnten’ was established by the State of Carinthia. The core of the fund consisted of EUR 500 million.

(26) The board of KLH was appointed by the supervisory board of KLH. The supervisory board on its part was appointed by the government of the State of Carinthia. It is stipulated in the statutes that the members of the supervisory board shall represent the proportions of the political parties represented in the government of the State of Carinthia. Moreover, the supervisory board had to agree with any investment decision of the board above the amount of EUR 50 000. According to § 5 of the statutes of KLH, KLH was under a constant supervision by the government of the State of Carinthia. The government of Carinthia had to ensure that all decisions of KLH were in the interest of the State of Carinthia.

2.3.4. Leading Verge.Com Limited

(27) LV is a 100 % subsidiary of Ryanair and is active as marketing company for Ryanair.

2.3.5. Airport Marketing Services (Jersey) Limited

(28) AMS is a 100 % subsidiary of Ryanair. Its main activity is to sell advertising space on the Ryanair website. AMS has the exclusive license to offer marketing services on the website www.ryanair.com of Ryanair.

2.4. Financing of Klagenfurt Airport by the City of Klagenfurt, the State of Carinthia and other entities

(29) In the period between 2000 and 2010 KLU received from its shareholders as well as the Federal Ministry for the Interior and the Federal Ministry of Finances financial contributions. These different contributions to KFBG and DMG are represented in the following table. Table 2 Financial contributions to KFBG Year of contribution State of Carinthia to KFBG City of Klagenfurt to KFBG KLH to DMG KLH (Zukunfts-fonds) to DMG State of Carinthia to DMG Federal Ministries to KFBG 2000 36 336 0 0 0 0 24 000 2001 145 349 0 0 0 0 24 000 2002 90 840 + 180 000 + 134 500 90 840 0 0 1 000 000 27 000 2003 377 964 + 96 850 + 88 500 181 680 0 0 0 553 000 2004 1 424 100 + 120 000 + 25 000 + 5 280 181 680 0 0 0 878 000 2005 1 193 579 151 400 0 0 0 642 000 2006 1 149 887 0 0 0 0 791 000 2007 459 855 104 000 0 0 0 824 000 2008 800 000 247 000 570 000 0 0 1 134 000 2009 800 000 93 000 615 000 115 969 0 682 000 2010 473 600 300 000 0 346 179 0 896 000 2011 800 000 304 000 0 473 925 0 0

2.5. The Airport Incentive Scheme of Kärntner Flughafen Betriebs GmbH of 2005

(30) The schedule of charges of KLU is approved every year by the Federal Ministry for Transport and consists of Part I ‘Tarifordnung’ and Part II ‘Entgeltordnung’. Part I deals with the following tariffs: landing fee (per turnaround), passenger fee (per departing passenger), parking fee (per turnaround) and infrastructure fee (airside: per turnaround, landside: per passenger). The infrastructure fee is for the use of the airport central infrastructure and applies when a ramp/traffic handling service is provided. It consists of the air side infrastructure tariff which depends on the maximum take-off weight (hereafter ‘MTOW’) of the aircraft and the number of seats and a landside infrastructure tariff per departing passenger.

(31) Part II (‘Entgeltordnung’) deals with the ground handling services. The fees for ground handling services are divided into two groups: services which have to be paid for independently of the range of the use; traffic handling charge (‘THC’) and ramp handling charge (‘RHC’) and individual services which have to be paid only with respect to the individual use. The amount of the THC and RHC depends on the MTOW of the aircraft. The THC is between EUR 337 and 3 886, the RHC is between EUR 226 and 2 404.

(32) In 2005 KFBG introduced an incentive scheme (hereinafter ‘2005 incentive scheme’) for airlines with and from destination of Klagenfurt airport with the objective to enhance the creation of new flight destinations (hereinafter ‘destinations incentive’), to intensify existing flight connections (hereinafter ‘frequency incentive’) and to strengthen and secure existing flight connections (hereinafter ‘passenger incentive’). The scheme entered into force 1 September 2005 and ended 31 December 2008. In December 2008 the incentive scheme was extended until 2013.

(33) The destinations and frequency incentive scheme granted incentives as a percentage rebate on certain airport charges (landing fee, infrastructure fee airside, ramp handling charge) which are laid down in the schedule of charges of KLU.

(34) The passenger incentive scheme was an absolute amount paid per passenger of a departing flight from KLU fixed for the whole duration of the scheme. The incentive was deducted from the same fees as for the destinations and frequency incentive. The amount was indicated as a maximum amount. If the flights were increased or decreased the amount was adapted respectively but not above the maximum amount.

(35) A combination of the destinations and frequency incentive with the passenger incentive was possible insofar as all forms of incentives could be combined but not cumulated for the same passengers. This means that the passenger numbers on which are based the destinations and frequency incentives were deducted from the overall passenger number when calculating the passenger incentive.

(36) The incentive scheme was published on the website of KLU and was open to all airlines operating on KLU but applied only for scheduled flights, charter flights were excluded. The application had to be based on a prior agreement between KFBG and the airline on the planned frequencies and routes.

(37) The incentive was refunded by KFBG at the end of a calendar year. At that moment the airline had to prove the number of passengers and flights from and to the destination of KLU. Table 3 Incentives at KLU since 2005 Year Destinations incentive on Landetarif, luftseitiger Infrastrukturtarif and Vorfeldabfertigungsentgelt Frequencies incentive on Landetarif, luftseitiger Infrastrukturtarif and Vorfeldabfertigungsentgelt Passenger incentive (maximum) per departing passenger (EUR) 2005-2008 1st year: 70 % 1st year: 60 % 7,62 2009 2nd year: 60 % 2nd year: 50 % 5,06 2010 3rd year: 50 % 3rd year: 40 % 4,85 2011 4,85 Table 4 Overview of the amounts of incentives paid to airlines at KLU since 2005 (in thousand EUR) 2013 2012 2011 2010 2009 2008 2007 2006 2003-2005 Passenger-Incentive: Austrian Airlines Group […] (*1) […] […] […] […] […] […] […] […] (7) Ryanair […] […] […] […] […] […] […] […] TUIFIy (HLX) […] […] Airberlin […] […] […] Lufthansa […] […] Germanwings […] […] Destinations-Incentive: Lufthansa […] […] […] […] Robin Hood […] Ryanair […] […] […] […] TUIFIy (HLX) […] […] […] Airberlin […] […] Condor […] […] […] Frequency-Incentive: Austrian Airlines Group Germanwings […] […] […] […] SUM […] […] […] […] […] […] […] […] […] Table 5 Application of incentives since 2005 Passenger-Incentive Destination-Incentive Frequency Incentive Austrian Airlines 1.1.-31.12.2002 (8) 1.1.2003 (8)-26.10.2013 Lufthansa 1.1.-31.12.2002 1.1.2003-31.12.2003 and 1.1.2004-29.3.2008 and 30.3.2011-31.1.2012 30.3.2008-29.3.2011 Lufthansa Air Alps 1.1.-24.1.2002 Air Direct 4.3.-10.6.2002 Styrian Spirit 17.12.2005-15.3.2006 Robin Hood 9.9.2009-1.10.2009 Ryanair 27.6.2002-29.10.2005 19.12.2006-5.11.2013 27.10.2008-31.3.2011 Tuifly 30.8.2003-31.3.2008 1.4.2008-24.10.2009 14.12.2006-30.3.2008 Air Berlin 25.10.2009-31.10.2011 4.11.2010-31.10.2011 Germanwings 25.10.2012-26.10.2013 25.10.2009-24.10.2012 Condor 16.12.2011-31.3.2013

2.6. The agreements with Ryanair, LV and AMS

2.6.1. The 2002 agreements

(38) In November 2001 DMG opened a tender for a scheduled flight connection between London and Klagenfurt. The tender was published in the Official Journal of 14 November 2001, p. 219, and in the official procurement journal of the Federal Ministry of Economy and Labour. The tender offered a contract for a direct daily scheduled flight London-Klagenfurt and back for at least 100 000 passengers per year from a central London airport with a duration of 3 years and an option to extend for 5 years. As a reward DMG offered: — A contribution to the marketing activities of the airline with a fixed amount of ATS 2 million (EUR 145 345,67), the marketing support has to be used for the publicity and marketing of the flight connection, the use has to be proved every half year. — A 97 % refunding of the turnaround fees (airport charges, station and ground handling fees and the air traffic control fee) of Klagenfurt airport. These fees arise when landing in KLU.

(39) The tender foresaw also an alternative offer with 4 flights a week and 60 000 passengers from London In this case the reward offered was a marketing support of ATS 1 million (EUR 72 672,82) and a 97 % refunding of the turnaround fees.

(40) The public tender did not result in any offer and was withdrawn consequently. In the following a negotiated procedure without previous publication was carried out and resulted in a contract with Ryanair.

2.6.1.1. The airport services agreement between KFBG and Ryanair of 22 January 2002

(41) On 22 January 2002 KFBG and Ryanair concluded an agreement which entered into force on 27 June 2002 for a period of 5 years with an automatic renewal for further 5 years provided that Ryanair fully complies with its obligations under that agreement.

(42) Ryanair was obliged under the agreement to operate passenger air services between KLU and London-Stansted Airport (hereafter: ‘STN’) commencing around the date of entering into force of the Agreement utilising a B737 aircraft on at least a daily basis with low fares and 348 rotations per year or 87 rotations per calendar quarter.

(43) According to the agreement, Ryanair pays KFBG an all-inclusive fee of EUR […] per rotation in respect of landing and take-off fees, lighting charges, noise and night fees, ramp and passenger handling, infrastructure charge, local Air Traffic Control and charges for the services at KLU.

(44) Ryanair collects on the passenger tickets an amount of EUR […] per departing passenger as a passenger services charge for the Airport. Ryanair also collects on the passenger tickets an amount of EUR […] (fixed by the Austrian Government) per departing passenger as a security fee for the Airport.

(45) Ryanair produces in conjunction with DMG a periodic marketing plan for the flight connections for KLU. Ryanair has complete discretion in the application of the marketing support received with the only condition that it has to link the appropriate tourist websites to Ryanair's website and to incorporate appropriate logos wherever feasible.

(46) KFBG is obliged to provide airport terminal and handling services for the services of Ryanair (including free branding space at the ticketing and check-in desks and boarding gates), to provide public relations functions such as local press conferences to announce new destinations, to procure the payment by DMG to LV of an amount of EUR […] per year in respect of the daily rotation commencing on 27 June 2002, payable quarterly in advance at EUR […]. To the extent that this amount is not paid by DMG to LV, KFBG has to pay the shortfall to Ryanair.

2.6.1.2. The marketing agreement between DMG and LV of 22 January 2002 (the first marketing agreement)

(47) On 22 January 2002 DMG and LV concluded an agreement which entered into force on the same date with a duration until 26 June 2007 with an automatic renewal for further 5 years provided that LV fully complied with its obligations under that agreement.

(48) According to the agreement, DMG appoints LV to initiate marketing measures aimed at making the province of Carinthia better known in the English speaking world and to arrange for legally licensed air carriers of Ryanair to provide new scheduled passenger air services from locations within the United Kingdom and/or continental Europe to KLU using aircraft with a capacity of not less than 140 seats (‘the Services’).

(49) The convened ‘Services’ should continue to be 348 rotations per annum (87 rotations per quarter) — the marketing agreement referred to the rotations as mentioned in the airport services agreement between KFBG and Ryanair. LV undertakes to procure the introduction and continuation of the ‘Services’ and to generate a promotional plan and web links to DMG's homepage and other promotion of promoting the ‘Services’ including links between tourist websites to LV's air operator client's websites.

(50) DMG pays EUR […] per year in respect of the daily rotation payable quarterly in advance at a rate of EUR […] (this payment is also mentioned in the contract between KFBG and Ryanair of 22 January 2002). This amount is also mentioned in the contract between KFBG and Ryanair, there it is stipulated that KFBG has to ‘procure’ the payment of DMG to LV.

2.6.1.3. The marketing agreement between DMG and AMS of 22 January 2002 (the second marketing agreement)

(51) On 22 January 2002 DMG and AMS concluded an additional marketing agreement which entered into force the same date for duration of 5 years with a possible extension for additional 5 years.

(52) According to this agreement, DMG appoints AMS to establish, on or before 1 May 2002, and operate two links on www.ryanair.com to websites chosen by DMG, which profile the attractions of the Federal State of Carinthia. AMS will provide additional services if the parties so decide according to Articles 5.1 and 5.2 of the agreement.

(53) DMG pays for the described services of AMS EUR […] per annum.

2.6.1.4. The side letter of the marketing agreement between DMG and LV of 22 January 2002 (the third marketing agreement)

(54) This agreement is a side letter to the marketing agreement between DMG and LV of 22 January 2002 (the first marketing agreement) and was signed by both parties on 22 January 2002 and entered into force on the same day.

(55) It was agreed between the parties that ‘in relation to the contract between LV and DMG dated 22 January 2002 a further marketing payment for additional and intensified marketing measures within the duration of contract, in the amount of EUR […] will be payable by DMG to LV on 1 May 2002.’

2.6.1.5. Summary of the payments under the different agreements with Ryanair and its subsidiaries

Table 6

Payments of KFBG to Ryanair 2002-2005 in EUR according to the marketing agreements

Year 2002 2003 2004 2005 Refunding of turnaround fees […] […] […] […] Payments under the first marketing agreement […] […] […] […] Payments under the second marketing agreement […] […] […] […] Payments under the third marketing agreement (the side letter to first marketing agreement) […]

(56) All 2002 agreements between KFBG, DMG, Ryanair, LV and AMS ended on 29 October 2005, when Ryanair stopped to operate the passenger air services between KLU and STN due to economic reasons.

2.6.2. The 2006 agreements

2.6.2.1. The airport services agreement between KFBG and Ryanair of 23 August 2006

(57) On 23 August 2006 KFBG and Ryanair concluded an agreement which entered into force the same day for a 3-a-week-service operated from 19 December 2006 until 21 April 2007. The agreement was based on the published tariffs of KLU and the incentive scheme introduced in September 2005.

(58) Ryanair was obliged to establish and operate STN-KLU-STN with a 3-a-week-service which would generate at least 8 000 departing passengers for the term of the contract. Ryanair was obliged to pay the official charges of KLU. The incentive scheme granted Ryanair an incentive of EUR 7,62 per departing passenger on the new scheduled service.

(59) The Agreement contained the possibility to be extended for a period of 5 years from 22 April 2007 to 21 April 2012.

2.6.2.2. The marketing agreement between DMG and AMS of 21 December 2006

(60) On 21 December 2006 DMG and AMS concluded a marketing agreement which entered into force the 28 February 2007. The Agreement was linked to Ryanair's commitment to operate a route between STN and KLU for the period 19 December 2006 to 21 April 2007 (ref. para 61).

(61) AMS was obliged under the agreement to provide a package of marketing services per year with the value of EUR […] according to the current AMS rates. These marketing services included a link from www.ryanair.com to a website designated by DMG, a content designated by DMG on the Klagenfurt/Carinthia destination page and email offers advertising the region of Klagenfurt/Carinthia sent to subscribers of the website. Additional marketing services exceeding that amount could be decided by the two parties according to Article 5 of the agreement. The websites designated by DMG could not provide flights, car rental, accommodation and any services that in future might be offered by www.ryanair.com but they could present tourist attractions and business opportunities of Klagenfurt/Carinthia.

(62) DMG was obliged to pay for the marketing services the EUR […] in monthly instalments on the basis of invoices.

(63) The agreement contained the option to be extended for a period of 5 years from 22 April 2007 to 21 April 2012. The basis of the Agreement was a year-round, 3-a-week-service STN-KLU-STN. The yearly package of marketing in its content and rates were to be adapted amicably each year.

2.7. The agreements with Hapag Lloyd Express (HLX) and Tuifly

(64) In November 2002 DMG opened a second tender for a scheduled flight connection between Klagenfurt and another European city (London and cities with less than 500 km distance being excluded). The tender was published in the Official Journal of the European Union of 11 December 2002, p. 240, and in the official procurement journal of the Austrian Federal Ministry of Economy and Labour. The tender offered a contract for a direct daily scheduled flight Klagenfurt — a European City and back with 348 flights (rotations) per year with duration of 5 years and an option to extend for 5 years. As a reward DMG offered: (a) A contribution to the marketing activities of the airline with a fixed amount of EUR 145 000, the marketing support had to be used for the publicity and marketing of the flight connection, the use has to be proved every half year. (b) A 95 % refunding of the turnaround fees (airport charges, station and ground handling fees and the air traffic control fee) of KLU. These fees arise when landing in KLU.

(65) The second public tender did not result in any offer and was withdrawn consequently. In the following a negotiated procedure without previous publication was carried out and resulted in an agreement with HLX.

(66) According to the information submitted by Austria, the cooperation agreement between KFBG and HLX started on 30 August 2003 and continued until 31 March 2008. It was concluded in written form only by contracts signed on 24 May 2004 and 4 June 2004. The agreement included the possibility to be prolonged by both parties.

(67) HLX was obliged to establish and operate Klagenfurt-Köln/Bonn with a 6-a-week-service, as well as Klagenfurt-Hannover with a 3-a-week-service. HLX was obliged to pay for these air services the official charges of KLU as set out in the schedule of charges of KLU.

(68) HLX was also obliged to provide a package of marketing services for KLU, such as commercials for the new destinations in local, regional and national medias, as well as in the internet and with billboard advertising in the public. HLX was obliged to feature a positive presentation of KLU on its website as well as a direct link to the website of KLU.

(69) KFBG was obliged to pay for the costs of initiating the new services and the marketing services connected with the new air service the one-off amount of EUR […]. In addition KFBG was obliged to pay for each of the new destinations a monthly amount for marketing services of EUR […] as of 1 October 2003 and a monthly amount of EUR […] as of 1 May 2004 until 31 March 2008.

(70) A third tender was opened by DMG in December 2003 for a scheduled flight connection between Klagenfurt and another European city (London and cities with less than 500 km distance being excluded). The tender was published in the Official Journal of the European Union and in the official procurement journal of the Federal Ministry of Economy and Labour on 30 December 2003. The tender offered a contract for a direct daily scheduled flight Klagenfurt — a European City and return with 3-7 flights (rotations) per week with duration of 5 years. As a reward DMG offered: (a) A contribution to the marketing activities of the airline with a fixed amount of EUR 29,90 per departing passenger. (b) A 98 % refunding of the turnaround fees (airport charges, station and ground handling fees and the air traffic control fee) of KLU. These fees arise when landing in KLU.

(71) The third public tender did not result in any offer and was withdrawn consequently. In the following a negotiation procedure without previous publication was carried out and resulted in an extension of the agreement with HLX: two additional destinations, namely Hamburg and Berlin, were added to the air services offered by HLX as of 1 May 2004.

(72) The Austrian authorities explained that the amounts paid to HLX for marketing services corresponded approximately to the refunding of turnaround fees as foreseen in the second and third tender made by DMG in November 2002 and December 2003 (9). According to Austria the details of the agreement with HLX corresponded to the conditions of the second and third tenders made by KFBG.

(73) In January 2007 HLX and another undertaking named ‘Hapag-Lloyd Flug’ were merged into the new undertaking TUIfly. TUIfly continued the air services of HLX. Following this merger, KFBG concluded a follow-up agreement with TUIfly on 10 December 2008. This agreement entered into force on 1 April 2008 and expired automatically on 31 March 2013.

(74) According to this agreement Tuifly was obliged to operate in the International Air Transport Association (hereinafter ‘IATA’) summer flight schedule 2008 Klagenfurt-Köln with a 7-a-week-service, Klagenfurt-Hannover with a 2-a-week-service, Klagenfurt-Berlin with a 3-a-week-service and Klagenfurt-Hamburg with a 2-a-week-service which would generate at least 50 000 departing passengers. In the IATA winter flight schedule 2008/2009 Tuifly was obliged to operate Klagenfurt-Köln with a 7-a-week-service, Klagenfurt-Hannover with a 4-a-week-service, Klagenfurt-Berlin with a 4-a-week-service and Klagenfurt-Hamburg with a 4-a-week-service which would generate at least 40 000 departing passengers.

(75) Tuifly was also obliged under the agreement to provide a comprehensive package of marketing services for KLU and the region of Carinthia. These marketing services included the presentation of Klagenfurt as tourist destination in two monthly newsletters, on a special last-minute-website, on the starting website of Tuifly, on the website for services to KLU, in on-board cards and on-board magazines, in the respective summer and winter schedule of the Tuifly services, in a special video in the on-board TV programme, aircraft branding and various press events.

(76) KFBG was obliged to pay for these marketing services a yearly amount of EUR […] as well as the one-off amount of EUR […] for the aircraft branding.

2.8. The agreement with Air Berlin

(77) Starting with the IATA winter flight schedule 2009/2010 Air Berlin took over the city flights network of Tuifly. Following this takeover, KFBG and Tuifly signed on 28 October 2009 a contract to terminate their agreement of 10 December 2008 with effect on 25 October 2009. DMG concluded a follow-up agreement with Air Berlin for the period 25 October 2009 to 31 March 2013. This agreement was signed on different dates, i.e. on 8 July 2010, 13 October 2010 and 25 October 2010. The agreement included the possibility to be prolonged by both parties.

(78) According to this agreement Air Berlin was obliged to operate in the IATA winter flight schedule 2009/2010 Klagenfurt-Köln with a 4-7-a-week-service (a minimum of 4 services and a maximum of 7 services per week to be decided by Air Berlin), Klagenfurt-Berlin with a 5-6-a-week-service, Klagenfurt-Hannover with a 2-a-week-service and Klagenfurt-Hamburg with a 5-6-a-week-service which would generate in that summer flight schedule at least 31 000 departing passengers in total. Air Berlin was obliged to operate in the IATA summer flight schedule 2010 Klagenfurt-Köln with a 5-6-a-week-service, Klagenfurt-Berlin with a 4-5-a-week-service, Klagenfurt-Hannover with a 2-a-week-service and Klagenfurt-Hamburg with a 3-4-a-week-service which would generate in that winter flight schedule at least 42 000 departing passengers in total.

(79) Air Berlin was obliged to operate in the IATA winter flight schedule 2010/2011 Klagenfurt-Düsseldorf with a 2-3-a-week-service, Klagenfurt-Berlin with a 3-a-week-service, and Klagenfurt-Hamburg with a 2-3-a-week-service which would generate at least 19 000 departing passengers. Air Berlin was obliged to operate in the IATA summer flight schedule 2011 Klagenfurt-Düsseldorf with a 2-3-a-week-service, Klagenfurt-Berlin with a 3-4-a-week-service, and Klagenfurt-Hamburg with a 2-a-week-service which would generate at least 28 000 departing passengers.

(80) Air Berlin was also obliged under the agreement to provide a comprehensive package of marketing services for KLU and the region of Carinthia such as the presentation of Klagenfurt on the main website of Air Berlin, in the German and Dutch newsletters, at the web-check in, the boarding pass receipts, as screensavers in various print and TV media on board of the aircrafts and at regional press events.

(81) DMG was obliged to pay for these marketing services for the flight schedule 2009/2010 the amount of EUR […], for the flight schedule 2010/2011 the amount of EUR […].

2.9. The agreement with Austrian Airlines of 20 October 2005

(82) Since 1 October 2003 AUA unilaterally reduced its payments for the turnaround fees due at that time at KLU. On 17 November 2003 KFBG brought against AUA a civil law action at the local district court concerning the airport fees still due. AUA submitted on 7 January 2004 a defence plea in this proceeding. In addition AUA filed on 17 October 2004 an application at the national cartel court under national competition law because of abuse of a dominant position by KFBG.

(83) On 20 October 2005 KFBG and AUA signed a settlement agreement concerning the period of 1 October 2003 until 20 October 2005. In this settlement agreement the two parties agreed to end the two litigations at the local district court and the national cartel court.

(84) AUA agreed to pay EUR […] to KFBG.

(85) Both parties agreed that the incentive scheme of KFBG of 1 September 2005 became part of the settlement agreement and was to be applied for AUA as of 1 October 2003.

2.10. Grounds for initiating the procedure in February 2012 and extending the procedure in July 2014

(86) In its opening decision and extension decision, the Commission raised doubts regarding the following measures:

2.10.1. Financing of Klagenfurt Airport by the City of Klagenfurt, the State of Carinthia and other entities

(87) The Commission expressed doubts whether public payments made by the shareholders of KFBG as well as the Federal Ministry for the Interior and the Federal Ministry of Finances for the financing of KLU in the period between 2000 and 2010 constitute State aid and, if this is the case, whether this State aid is compatible with the internal market.

2.10.2. The Airport Incentive Scheme of Kärntner Flughafen Betriebs GmbH of 2005

(88) The Commission raised doubts whether the discounted airport charges under the incentive scheme of 2005 amounted to State aid and, if so, whether this State aid is compatible with the internal market.

2.10.3. The agreements with Ryanair, LV and AMS in 2002 and 2006

(89) In its opening decision, the Commission expressed doubts whether Ryanair and its subsidiary LV benefitted from State aid by concluding the agreements in 2002 with KFBG and DMG, and, if so, whether this State aid is compatible with the internal market.

(90) In its extension decision, the Commission expressed doubts whether two additional contracts concluded in 2002 between DMG and AMS as well as LV, that have to be taken into consideration for an accurate analysis of all the contracts concluded in 2002, constitute State aid, and, if this is the case, whether this State aid is compatible with the internal market.

(91) The Commission also raised doubts in its opening decision whether Ryanair and its subsidiary AMS benefitted from State aid by concluding the agreements in 2006 with KFBG and DMG, and, if this is the case, whether this State aid is compatible with the internal market.

2.10.4. The agreements with Hapag Lloyd Express (HLX) and Tuifly

(92) The Commission raised doubts whether HLX/Tuifly benefitted from State aid by concluding agreements with KFBG, and, if so, whether this State aid is compatible with the internal market.

2.10.5. The agreement with Air Berlin

(93) The Commission also expressed doubts whether Air Berlin benefitted from State aid by concluding agreements with KFBG, and, if so, whether this State aid is compatible with the internal market.

2.10.6. The agreement with Austrian Airlines of 20 October 2005

(94) The Commission raised doubts whether the settlement agreement between KFBG and AUA of 20 October 2005 constitutes State aid, and, if this is the case, whether this State aid is compatible with the internal market.

3. COST-BENEFIT ANALYSES SUBMITTED BY THE AUSTRIAN AUTHORITIES

(95) The Austrian authorities submitted that KFBG in general did not prepare ex ante cost-benefit analyses before concluding agreements with the airlines nor before introducing the incentive scheme in 2005.

(96) In order to enable the Commission to assess the measures under investigation, Austria submitted reconstructed ex ante cost-benefit analyses for all agreements concluded between KFBG/DMG and various airlines as well as for the incentive scheme of 2005.

(97) For the reconstruction of these analyses the Austrian authorities used only data and information available at moment of concluding the agreements and the incentive scheme and provided for the duration of each agreement estimated values.

4. COMMENTS FROM AUSTRIA

(98) The Austrian authorities first recalled the great public interest in operating KLU in Carinthia. KLU is not only an important link between the region of Carinthia and other regions and Member States. KLU also has to be operated because of responsibilities of public administration and military obligations. The State of Carinthia is obliged to operate KLU for military operations of the Republic of Austria.

(99) Secondly the Austrian authorities declared that it is not possible to substitute KLU with other airports, as a journey to other alternative airports (Ljubljana, Maribor, Trieste or Graz) through the alpine State of Carinthia can take with adverse weather conditions easily much more time than the same distance in non-alpine regions. The catchment area of an airport in an alpine region such as Klagenfurt should therefore be adjusted accordingly.

(100) Thirdly Austria submitted that the financing of KLU would have been profitable during the last 20 years if the costs of contracts with various airlines were not taken into account. An analysis of the costs of operating KLU should be undertaken by using an incremental cost approach.

(101) Austria agreed that all of the measures under investigation have been granted through State resources and are imputable to Austria.

(102) However, Austria fails to see the economic advantage received by KFBG through the financing of its shareholder. Austria argues that the amounts paid by the shareholders only compensated KFBG for the costs stemming from the marketing contracts with different airlines and the benefit of these marketing activities were not only for KLU, but also for the city of Klagenfurt and the State of Carinthia. Some of the costs of KLU for public administrative obligations should normally be borne by the State of Carinthia and could therefore be paid by the State of Carinthia or Federal Ministries.

(103) Moreover, Austria submitted that the operation of KLU should be qualified as a service of general economic interest (‘SGEI’), as there is a public interest and obligation for the State of Carinthia to operate KLU, given the need to guarantee accessibility of the region of Carinthia.

(104) As regards the agreements between KLU and the airlines and the incentive scheme, Austria submitted the following comments. Austria fails to see the economic advantage for the different airlines operating at KLU, as some of the contracts contained the conditions of prior public tenders of KLU and therefore seemed to have respected market conditions. Equally the incentive scheme of 2005 was in line with market conditions.

(105) Regarding the selectivity of the measures under investigation, Austria argues that all airlines could participate at the prior public tenders, so that the subsequent contract with individual airlines could not be qualified as being selective. Moreover, as KLU is not substitutable with any other airport, there is no distortion of competition or effect on trade given.

(106) The Austrian authorities have not carried out any independent evaluation of the outcome of the marketing activities provided under the various marketing agreements, but claim that there is a positive effect in the passenger numbers of KLU resulting from the permanent cooperation and the success of the flight connections

(107) With regard to the settlement agreement concluded between KFBG and AUA, Austria argues that the conclusion of that agreement reflected as well a measure motivated only by considerations of a private economic operator.

(108) Concerning the incentive scheme, the Austrian authorities submitted that KLU acted like a private economic operator when initiating the incentive scheme at KLU. The reductions of airport charges offered in the incentive scheme reflected market conditions.

5. COMMENTS FROM INTERESTED PARTIES

5.1. Austrian Airlines, Lufthansa, Germanwings

(109) AUA, Lufthansa and Germanwings submitted their comments in two common submissions. They claimed in their submissions that the opening decision included several legal faults; a lack of reasoning for the imputability to the state and the participation of public authorities, a lack of reasoning for the market economic operator test (‘MEO test’), an overly long period from the submission of a complaint in 2007 until the opening of the procedure on 22 February 2012.

(110) In addition the three airlines believed that the airport charges of KLU fulfilled the conditions of the MEO test. Concerning the financing of the airport the three airlines claim that this should not be subject to the State aid control, as they offered air services that improved the connection of the region of Carinthia with other regions and Member States. Concerning the profitability of KLU the three airlines commented that KLU could have been operated with profit without the reductions of airport charges for certain airlines and submitted their estimations with regard to the overall reductions of which certain other airlines profited.

(111) AUA, Lufthansa and Germanwings stated that the incentive scheme of KLU could not be compared to airports such as Frankfurt/Hahn or Lübeck (as commented by Austria), as these airports are marked by the fact that they are fitted to meet the needs of Ryanair. Ryanair is the predominant airline at these airports, which is not the case for KLU. The three airlines also explained their views on the calculation of the costs of the airport.

5.2. Ryanair

5.2.1. Comments made directly by Ryanair

(112) Ryanair objects against the decision of the Commission to initiate the formal investigation procedure as regards the 2002 and 2006 agreements with KLU. Ryanair stated that these agreements complied with the market economy investor principle, and hence did not involve State aid.

(113) Ryanair essentially argues that no advantage has been conferred to it since the agreements reflect normal market conditions.

(114) Concerning the issue of marketing support, Ryanair argued that the discounts granted by KLU were in line with industry practice as many privately or publicly held airports (10) applied the same or greater level of discounts for new destinations.

(115) Furthermore, Ryanair points out that the Commission seemed to apply a wrong cost-based test, as the costs for infrastructure and fixed operating costs should be considered sunk costs, and it seemed rational for KLU as a private investor to price at levels corresponding to the marginal costs.

(116) Ryanair contests that it benefitted from a selective advantage through discounts for airport charges at KLU. Ryanair received access to the infrastructures of KLU in a non-discriminatory way, as the services were publicly tendered and no other airline was interested, nor was any other airline rejected. Ryanair received the discounts in recognition of the significant commercial risk that Ryanair took when establishing scheduled operation to an airport that was unknown at the time.

(117) Concerning the contracts concluded with AMS Ryanair strongly objects to a joint assessment of Ryanair's separate agreements with KFBG together with the marketing agreements concluded with AMS. The conclusion of a marketing agreement with AMS is not a condition for the operation of routes by Ryanair to and from KLU.

(118) Ryanair stated that the Commission has ignored the value of marketing services on Ryanair's website as one of the most popular travel websites in the world.

(119) According to Ryanair, the involvement and imputability of Austrian authorities at the measures under review involving Ryanair or AMS is not demonstrated.

(120) Additionally Ryanair criticises the following shortcomings. The costs related to security should be outside the scope of an airport's economic activity. As none of the arrangements between Ryanair and KLU involved State aid, the applicability of the 2005 Aviation Guidelines is irrelevant. A lack of business plan does not exclude that a public body has acted as a commercial actor. The definition of the catchment area of KLU is incoherent with other State aid cases.

5.2.2. Reports and analyses provided by Ryanair

(121) Lastly, Ryanair submitted a series of notes prepared by the consultancy firm Oxera, as well as an analysis prepared by Professor Damien P. McLoughlin.

5.2.2.1. Oxera Note 1 — Economic MEIP (11) Assessment for Klagenfurt Airport, prepared for Ryanair by Oxera, 4 July 2011

(122) Ryanair has appointed Oxera to carry out an assessment whether the agreements between Ryanair and the fees paid by Ryanair at KLU conform to the market economy investor principle. Not included in the assessment is the Marketing Services Agreement between DMG and AMS of 21 December 2006.

(123) Oxera carries out two analyses: a comparator analysis and a profitability analysis. Oxera identifies […] and […] airports as comparator for KLU, based on a range of characteristics. Oxera compares the charges paid by Ryanair in these airports deducting the marketing support payments Ryanair receives under the 2002 agreement with DMG, but not the payments it receives under the 2006 Marketing Services Agreement. It compares the charges paid per turnaround and per passenger and comes to the conclusion that the charges at KLU have always been higher than at the two other airports.

(124) Oxera's profitability analysis is an ex ante assessment based on incremental costs and revenues and a single till approach (12) and only concerns the 2002 agreements. It comes to the conclusion that the 2002 agreements were profitable for the airport and had a positive net present value.

5.2.2.2. Oxera Note 2 — Economic MEIP Assessment for Klagenfurt Airport, prepared for Ryanair by Oxera, 31 August 2012

(125) The analysis focuses on the Airport Service Agreement between KFBG and Ryanair for the period between 2002 and 2006 as well as the marketing arrangements between DMG and LV, covering the period from 27 June 2002 to 27 June 2007. The analysis undertaken by Oxera does not consider the agreements between DMG and AMS.

(126) Oxera has compared the overall charges paid by the airline at KLU with the respective charges paid at five comparator airports between 2002/2003 and 2010/2011. In particular, the charges have been expressed in two ways, on a charge per passenger and on a charge per turnaround basis, and initially aggregated into a measure of total charges. Total charges have subsequently been converted into charges per turnaround or charges per passenger, to enable the comparison across the six airports.

(127) The results show that the overall level of charges paid by Ryanair at KLU is on average approximately five times higher than the comparable level of charges paid by the airline over the period under investigation at the comparator airports. It is understood that this is due to the higher prices typically charged by Austrian airports. This suggests that the charges paid by Ryanair at KLU are compatible with a level of charges that would have been offered to Ryanair by an airport-owning market economy investor in similar circumstances. The arrangements analysed in this report are therefore consistent with the MEIP.

5.2.2.3. Oxera Note 3 — Identifying the market benchmark in comparator analysis for MEO tests. Ryanair State aid cases, prepared for Ryanair by Oxera, 9 April 2013

(128) Oxera believes that the Commission's approach of only accepting comparator airports in the same catchment area as the airport under investigation is flawed.

(129) Oxera argues that market benchmark prices obtained from comparator airports are not polluted by State aid given to surrounding airports. Therefore, it is possible to robustly estimate a market benchmark for the MEO tests.

(130) Oxera argues that this is because: — Comparator analyses are widely used for MEO tests outside of the field of State aid. — Under standard economic theory companies affect each other's pricing decisions only to the extent that their products are substitutes or complements. If two companies compete in separate economic markets, and therefore do not compete with one another, the companies will have a negligible impact on each other's pricing decisions. Therefore, implicit in the Commission's comments about the comparator analysis is an assumption that the comparator airports, and any airports that may benefit from aid, compete with one another. — Airports in the same catchment area do not necessarily compete with each other, and the comparator airports used in the reports submitted face limited competition from State-owned airports within their catchment area (less than one third of commercial airports within the catchment area of comparator airports is fully State owned, and none of the airports within the same catchment area as comparator airports was subject to ongoing State aid concerns (as of April 2013)). — Even where comparator airports face competition from State-owned airports within the same catchment area, there are reasons to believe their behaviour is in line with the MEO principle (for example, where there is a large private ownership stake or where the airport is privately managed).

(131) MEO airports will not set prices below incremental cost.

5.2.2.4. Oxera Note 4 — Principles underlying profitability analysis for MEO tests. Ryanair State aid cases, prepared for Ryanair by Oxera, 9 April 2013

(132) Oxera argues that the profitability analysis undertaken by Oxera in its reports submitted to the Commission follows the principles that would be adopted by a rational private sector investor and reflects the approach apparent from Commission precedents.

(133) The principles underlying the profitability analysis are: — the assessment is undertaken on an incremental basis, — an ex ante business plan is not necessarily required, — for an uncongested airport, the single till approach is the appropriate pricing methodology, — only those revenues associated with the economic activity of the operating airport should be considered, — the entire duration of the agreement, including any extensions, should be considered, — future financial flows should be discounted in order to assess profitability of the agreements, — incremental profitability of Ryanair agreements to the airports should be assessed on the basis of estimates of the internal rate of return or net present value (NPV).

5.2.2.5. Analysis of Professor Damien P. McLoughlin — Brand building: why and how small brands should invest in marketing, prepared for Ryanair, 10 April 2013

(134) The paper aims to set out the commercial logic underlying regional airports' decisions to buy advertising on ryanair.com from AMS.

(135) The paper argues that there are a large number of very strong, well known, and habitually used airports. Weaker competitors must overcome static buying behaviour of consumers to grow their business. Smaller regional airports need to find a way to consistently communicate their brand message to as wide an audience as possible. Traditional forms of marketing communication require expenditure beyond their resources.

5.2.2.6. Oxera Note 5 — Are prices set by AMS in line with the market rate?, prepared for Ryanair by Oxera, 20 December 2013

(136) This note presents the results from comparing prices set by AMS for advertising on ryanair.com, with rate card (13) prices for similar advertising services of other European travel websites. The objective of this analysis is to provide an independent assessment of whether the price set by AMS for its services is in line with the market price.

(137) The analysis has been conducted for 2004 and 2005, when the AMS rate card was first introduced, and based on the rate card of November 2013. In both cases, AMS rates have been compared with a sample of website advertising prices. Only advertisements placed on the homepage of each website have been considered.

(138) The results of the analysis demonstrate that AMS rate card priced for advertising space on ryanair.com are, in both cases, below or in line with the rate card prices. Therefore, the results provide evidence that rate card prices set by AMS are market conforming and meet the MEO test.

(139) Oxera points out that these conclusions are in line with the earlier findings from Ryanair's expert marketing advisers, Mindshare (2004) and Zenobie Conseil (2011).

5.2.2.7. Oxera Notes 6 and 7 — How should AMS Agreements be treated within the profitability analysis as part of the market operator test?, prepared for Ryanair by Oxera, 17 and 31 January 2014

(140) Ryanair submitted further reports by its consultant Oxera. In these reports, Oxera discusses the principles which, according to the airline, should be taken into account as part of the MEO test in the profitability analysis of, on the one hand, airport services agreements between Ryanair and airports and, on the other hand, the marketing services agreements between AMS and the same airports. Ryanair emphasises that those reports do not in any way change its position presented earlier that the airport services agreements and the marketing services agreements should be analysed under separate MEO tests.

(141) The reports indicate that the profits generated by AMS should be included as revenues in a joint analysis regarding profitability while the expenses of AMS would have to be incorporated in the costs. To do this, the reports suggest the application of a cash-flow-based methodology to the joint profitability analysis, meaning that the expenditure by airports on AMS could be treated as incremental operating expenses.

(142) The reports emphasise that marketing activities contribute to the creation and support of the brand's value, which helps to generate effects and benefits not only for the duration of the contract, but also after its termination. This would especially be the case if, due to the fact that Ryanair has concluded an agreement with this airport, other airlines establish themselves at the airport, which will in turn attract more shops to install themselves there and therefore bring in more non aeronautical revenues for the airport. According to Ryanair, if the Commission proceeds to undertake a joint analysis of profitability, those benefits have to be taken into account by treating the expenses of AMS as incremental operating costs, net of AMS payments.

(143) Furthermore, Ryanair is of the opinion that a terminal value has to be included in the projected incremental profits at the end of the airport services agreement in order to take into account the value generated after the termination of the agreement. The terminal value could be adapted on the basis of a ‘renewal’-probability, measuring the expectation that profits will persist after the termination of the agreement with Ryanair or if similar conditions are agreed with other airlines. Ryanair considered that it would then be possible to calculate a lower limit for benefits generated jointly by the agreement with AMS and the airport services agreement, reflecting the uncertainties of incremental profits after the termination of the airport services agreement.

(144) To supplement this approach, the reports present a synthesis of the results of studies on the effects of marketing on the value of a brand. Those studies recognise that marketing can support the value of a brand and can help to build a customer base. According to the reports, in the case of an airport, marketing on ryanair.com increases the visibility of the brand in particular. The reports moreover state that smaller regional airports wishing to increase their air traffic can therefore especially increase the value of their brand by concluding marketing services agreements with AMS.

(145) The reports lastly indicate that a cash-flow-based approach is to be preferred over a capitalisation approach, in which the costs of marketing services provided by AMS would be treated as capital expenditure on an intangible asset (that is, the value of the brand). The capitalisation approach would only take into account the proportion of marketing expenditure that is attributable to the intangible assets of an airport. The marketing expenses would be treated as capital expenditure in an intangible asset, and then depreciated for the duration of the contract, taking into consideration a residual value at the foreseen termination of the airport services agreement. This approach would not take into account the incremental profits which the conclusion of the airport services agreement with Ryanair would bring in and it is also difficult to calculate the value of the intangible asset due to the expenses of the brand and the time period of use of the asset. The cash-flow method is more appropriate than a capitalisation approach, since the latter would not capture the positive benefits to the airport that are expected to arise as a result of signing the airport services agreement with Ryanair.

5.2.2.8. Oxera Note 8 — Allocation of investment costs, prepared for Ryanair, 12 September 2014

(146) The note discusses how airport infrastructure investment costs should be allocated to airline agreements, in the circumstances where it is appropriate to treat such costs as relevant to an incremental profitability assessment of an airline agreement, when applying the market economy operator principle (MEOP).

(147) Oxera states that the appropriate way to allocate investment costs is in relation to the expected share of capacity represented by a given airline agreement. Thus, the consultancy company highlights the critical difference of measuring utilisation with respect to capacity, by reporting the cases of Alghero, Västerås, Reus and Girona.

5.2.2.9. Oxera Note 9 — Evaluating the wider impact of AMS Agreements on airport traffic, prepared for Ryanair by Oxera, 26 September 2014

(148) This report sets out how to empirically test whether AMS Agreements have wider benefits in terms of enhancing an airport's brand value and generating network externalities.

(149) Oxera has underlined that the Commission has so far never concluded through an empirical analysis that the only benefits of advertising on ryanair.com are to increase levels of Ryanair traffic.

(150) Oxera discusses the possible wider benefits of the AMS agreements in light of the qualitative evidence provided by the Alghero Airport. In fact, it is understood that the increase in levels of non-Ryanair traffic operating from Alghero Airport is thought to be at least partly due to the benefits of advertising on ryanair.com. Oxera states that it is therefore plausible that advertising on ryanair.com could have a wider long-term impact on traffic levels at airports, beyond increasing levels of Ryanair traffic.

(151) However, the consultancy firm recognises that, due to information asymmetry, it is not possible to appropriately control for all the changes happening in the market at the same time. Oxera therefore highlights the need for a more robust analysis of the long-term impact of advertising on ryanair.com on traffic at the airports.

(152) Oxera suggests different statistical approaches that could be followed by the Commission to examine the impact of advertising on ryanair.com on both non-Ryanair and Ryanair traffic at airports.

(153) Oxera outlines that, if the empirical analysis demonstrates that there are wider benefits of advertising on ryanair.com, it would be important to account for these benefits appropriately within the Airport Services Agreement and the AMS ex ante profitability analysis under the Commission's approach. As a suggestion, the benefits could be included through the incorporation of the terminal value within the profitability analysis to reflect the value created by marketing activities.

5.2.2.10. Oxera Note 10 — Economic MEOP assessment: Klagenfurt Airport — profitability analysis, prepared for Ryanair by Oxera, 3 November 2014

(154) The report analyses the expected profitability of the 2006 Airport Services Agreement on an ex ante basis. The document also presents sensitivity checks on the results from the 2011 MEOP Report regarding the expected profitability of the 2002 Airport Services Agreement.

(155) Oxera has examined the expected profitability of each agreement under several scenarios around the base case. Oxera affirms that the base case aims to reflect Klagenfurt's assumptions in so far as these are verified by information from the airport, at the time of signing the Airport Services Agreements.

(156) The expected profitability of each agreement has been measured by Oxera with the Net Present Value (NPV) methodology. The NPVs of each of the agreements were expected to be positive, thus the results from the profitability analysis indicate that the 2002 Airport Services Agreement and the 2006 Airport Services Agreement were sufficiently profitable such that an MEO investor would have been likely to offer similar terms.

(157) The analysis of the expected profitability of the 2002 Airport Services Agreement presented in the report demonstrates that the overall conclusions from Oxera's 2011 report are robust to a number of sensitivity checks. These sensitivity checks include changes to the discount rate, incremental costs, non-aeronautical revenues and investment costs.

(158) Combined with the results from the comparator analysis, the provided evidence shows that the arrangements are in line with the MEOP. Furthermore the arrangements at Klagenfurt appear to be market-conform, even under a number of sensitivities regarding the assumptions underlying the analysis. The evidence indicates that, under similar circumstances, a MEO investor would have found it profitable to have offered similar arrangements to those agreed between Ryanair and KLU.

(159) Finally, Oxera refers to the cost-benefit analysis undertaken by the Austrian Authorities — covering the period from 27 June 2002 to 29 October 2005 — and claims that the analysis should not be relied on for assessing the compatibility with the MEOP since; (i) the analysis appears to model the conditions of the public tender for the operation of a direct route between Klagenfurt and London issued by DMG in November 2011, rather than the conditions in the 2002 Airport Services Agreement; (ii) the analysis does not appear to be on a fully ex ante basis, as it covers only the period during which Ryanair actually operated at the airport, rather the term specified in the 2002 Airport Services Agreement; and (iii) the implied aeronautical charges from the cost-benefit analysis submitted by the Austrian Authorities are significantly lower than those specified in the 2002 Airport Services Agreement.

5.2.2.11. Oxera Note 11 — Why is comparator analysis an important supplement to profitability analysis in MEOP assessments?, prepared for Ryanair by Oxera, 26 January 2015

(160) The note explains why comparator analysis should be relied on in MEOP assessments of airport-airline deals, at least as a cross-check of the results from the profitability analysis. In fact, Oxera highlights that, in line with the approach advocated by the Commission in its notion of aid notice (14) and in other sectors (e.g. sea ports sector), comparator analysis should play an important role in MEOP assessments of airport-airline deals.

(161) This is particularly the case when no assessment of the efficiency of the airport's costs is undertaken as part of the profitability analysis. In fact, as a market economy operator would be expected to manage their costs efficiently, in order for the MEOP assessment to deliver a robust conclusion, it is important to examine the efficiency of the airport's costs.

(162) Furthermore, Oxera argues that it is possible for an airline to pay the same level of charges at two airports with similar characteristics. However, if one of the airports is not efficient, it could be concluded that the airport-airline agreement is not in line with the MEOP.

(163) Oxera underlines that, when signing deals with the airport, Ryanair is not in a position to be able to observe the efficiency of the airport's costs, while the airport can assess whether a deal is likely to be profitable.

(164) In conclusion, it is understood that the current approach of the Commission to assess the compatibility of airport-airline deals with the MEOP, provides Ryanair with insufficient legal certainty when signing deals with airports.

5.2.2.12. Oxera Note 12 — Economic MEOP assessments: comparator analysis, including AMS, Addendum to Oxera's 2010 report, 10 April 2015

(165) The note examines the impact of undertaking a joint Airport Services Agreement and AMS comparator analysis at KLU, in light with the Commission's approach. Oxera underlines that the analysis does not prejudices Ryanair's position of treating the Airport Services Agreements and AMS agreements separately.

(166) The analysis has been based on the same set of comparator airports as in Oxera's 2012 report at KLU. The stability of the ownership and funding structure of the airports has been checked in order to ensure the accuracy of the comparison.

(167) Over the period under consideration, net charges paid by Ryanair at KLU net of marketing payments received by Ryanair and AMS have been higher than average net charges at the comparator airports, on both a per departing passenger and a per turnaround basis. This implies that a market economy operator would have been likely to have offered similar arrangements to Ryanair.

(168) The results from the joint Airport Services Agreement and AMS comparator analysis are therefore consistent with the interpretation that the arrangements between Ryanair, AMS and KLU were in line with the MEOP test and with the findings from Oxera's 2012 report.

5.2.2.13. Oxera Note 13 — The impact of Ryanair's operations on airports' non-aeronautical revenues, 4 December 2015

(169) In this report, Oxera examined the impact of Ryanair's operations on airports' non-aeronautical revenues, on a per passenger basis. Oxera considered that the start of Ryanair's operations had a significant positive impact on the level of per passenger non-aeronautical revenues of the airport. On this basis, Oxera claimed that the approach used to date in its MEOP profitability analysis as well as in the Commission's analysis (15) were conservative, as they did not include this increase in the airport revenues.

(170) Oxera undertook an empirical analysis using a sample of 57 European airports meant to be as similar as possible to the airports under State aid investigation. Oxera found that the start of Ryanair's operations (16) in 29 of these airports led to an increase of around 12,0-13,7 % in non-aeronautical revenues per departing passenger in real prices (over and above inflation), this effect being statistically significant. According to Oxera, this was likely to be due to Ryanair passengers spending more than passengers from other airlines, partly as a result of limited catering facilities provided on-board low-cost carriers, and/or as a result of the start of Ryanair's operations resulting in the development of the terminal — for example, by attracting additional retail outlets.

(171) Oxera also found that this effect held for low-cost carriers more generally. Oxera suggested that, due to the growth in the low-cost carrier industry with strong brands that carried significant levels of passenger traffic, the start of a low-cost carrier's operations at an airport could result in significant development of the airport and hence higher non-aeronautical revenues on a per-passenger basis. Based on the sample of airports considered, Oxera stated that the start of operations by full-fare carriers on the contrary did not have a significant impact on airports' non-aeronautical per passenger revenues.

(172) According to Oxera, these results highlighted the conservative nature of the approach used to date in its MEOP profitability analysis as well as in the Commission's analysis. These analyses did not assume any accelerated growth in airports' non-aeronautical revenues on a per passenger basis and hence did not capture the wider benefits of Ryanair's operations from airports, but only uprated estimates of non-aeronautical revenues per departing passenger by the much lower rate of inflation. Oxera therefore expected its MEOP analysis and the Commission's analysis to underestimate the expected profitability of Ryanair's arrangements at the airport.

5.3. AMS

(173) AMS submitted the following comments.

5.3.1. On AMS and the Ryanair website

(174) AMS claims that the Commission should not treat Ryanair and AMS as a single entity and the Marketing Services Agreements between AMS and DMG as a complement to the agreement between the Airport and Ryanair. AMS offers marketing services that are justified by their own separate purpose, priced at their market value and negotiated and concluded separately from Ryanair's agreements with the same airports.

(175) Furthermore, Ryanair's decision to engage an intermediary to sell advertising space on its website would not be unusual. AMS has been successful in promoting and selling advertising space to numerous companies throughout Europe, both private and public.

(176) Ryanair's website presents particularly desirable characteristics for marketing: it is one of the most popular travel websites in the world; the average duration of each visit to Ryanair's website is extremely long; advertising for an airport on the Ryanair website uniquely targets potential passengers to that airport, ensuring that very little or no advertising spend is wasted, contrary to advertising in newspapers, radio, TV and other less focused media targeted at the general public.

5.3.2. On the absence of advantages to AMS or Ryanair

(177) AMS concludes marketing agreements with both public and private airports, tourism bodies, car rental groups, hotel reservation websites, insurance companies and telecommunications service providers.

(178) The rates at which advertising space is provided by AMS, and the volumes in which it is acquired, do not discriminate between public and private advertisers. Thus, no State aid can arise from AMS's arrangements with public airports or their subsidiaries. AMS has concluded with several privately owned or privately controlled airports (such as […] and […]) as well as other private parties agreements on similar, non-discriminatory, terms.

(179) Concerning the commercial interest that an Airport would have to advertise on ryanair.com, AMS criticises the conclusion drawn by the Commission in the opening decision, as there is no legal basis to question the commercial rationale of DMG, as well as the Airport to advertise on Ryanair's website, in circumstances where AMS offers services at a market price.

(180) AMS presented several reasons which would justify DMG purchasing marketing services from AMS to advertise on ryanair.com, which are summarised in what follows.

(181) First, advertising on Ryanair's website is an investment in brand recognition. Airport managers of peripheral airports face significant challenges in getting their ‘brand’ recognised by passengers, airlines and non-aeronautical commercial managers, all of whom constitute potential sources of income for airports. Increased brand recognition can benefit the airports in a number of mutually inclusive and complementary ways, notably it may attract: (i) inbound passengers from the airline on whose site the airport is advertising; (ii) potential customers browsing one airline's website on which an airport is advertising to fly to that airport on another airline that has routes to the airport; (iii) another airline to fly to that airport; and (iv) commercial managers (such as, airport retail chain stores).

(182) Second, advertising on Ryanair's website increases the proportion of inbound passengers. There is a trend among airports towards generating almost half of their revenue from non-aeronautical operations. From a regional airport's perspective, inbound passengers arriving to, and then departing from, the airport are much more likely to generate non-aeronautical income for the airport than local passengers using the airport to fly to foreign destinations.

(183) Third, marketing and advertising on the website of all airlines has become a mainstream practice. Ryanair.com has exceptional value as a marketing venue for a wide range of travel-related products and services. Nevertheless, even if Ryanair has been a pioneer in this field, it would be erroneous to conclude that airports do not publicise themselves on other airline websites.

5.3.3. On the pricing of AMS' services

(184) AMS' services are claimed to be priced at their market value. To substantiate this argument, AMS alleges that (i) the fact that a number of non-airport private customers from different industries, such as […], purchase marketing services from AMS is, by itself, sufficient to demonstrate that AMS's prices are real market prices, (ii) the decision of the Tribunal Administrative of Marseille (17) and the Bratislava case (18), draw attention to the value of AMS' marketing products and the advantages that the counterpart can gain while entering into such arrangements and (iii) the prices charged by AMS are based on objective criteria (19) and transparently provided on its website (20).

(185) AMS also mentions the report of Zenobie Conseil and a study from an independent consultancy firm submitted to the Commission, in order to clarify that AMS' services are neither valueless nor overpriced, as implied by the Commission.

(186) AMS points out that the opening decision did not establish that the decisions of DMG are imputable to the State, since the Commission simply relies on an organic criterion of ultimate State ownership borrowed from its analysis of the agreement with LV (itself based on an analogy with KFBG's decisions). AMS therefore asks the Commission to provide a more robust examination.

6. COMMENTS FROM AUSTRIA ON INTERESTED PARTY COMMENTS

6.1. Austria's comments on interested party submissions by Austrian Airlines, Lufthansa, Germanwings

(187) Regarding the first and second submission of the three airlines from 23 July 2012 and 18 September 2012, the Austrian authorities state that they were in contact with KFBG and Lufthansa only with respect to legibility of certain tables in the documents under investigation.

(188) Regarding the argument that there is no State aid, Austria refers to its submission from 15 May 2012. Austria particularly agrees with Lufthansa's argumentation regarding the legal assessment of rebates.

(189) With regard to the schedule of charges covered by the Austrian authorities in its first submission from 2008, Austria reiterates that its statement merely pointed at the existence of schedules of charges at other airports. Airports Frankfurt/Hahn and Lübeck are in fact not comparable with KLU, considering their different economic structure.

(190) Concerning the claimed ‘sham tender’, Austria states that the authorities in Carinthia were planning a call for tender for the introduction of a route connecting London and Klagenfurt. In particular, the tender concerned a generic flight to London. Austria affirms that there is no evidence of a limitation of the requested services for Stansted or for any other London airport.

(191) In addition, Austria recalls that it is possible to initiate a tender, even if this is not a legal obligation. Therefore, the argument that a tender was not strictly necessary is without substance. Austria further recalls the economic function of tenders. A tender creates transparency with regards to the existence of demand and the conditions for demand. This enables the potential bidder to formulate an offer, which is indicative for the market price. The fact that no eligible bidder has made a proposal demonstrates that the demanded price was below the market price. An accurately exercised tender procedure requires that the call has been properly publicised and that potential buyers have sufficient time to formulate their proposals. The Austrian authorities stress that the notices advertised by KLU complied with these requirements.

6.2. Austria's comments on interested party submissions by Ryanair and AMS

(192) Austria underlines that, for Carinthia and KLU, advertising on ryanair.com made sense only if Ryanair served the airport. Only in that case, the targeted customers could translate their initial interest into an effective purchase. The same applies to the routes to and from London, which are designed to improve local mobility.

(193) Furthermore, Austria supports a number of statements from Ryanair: — according to Austria, no investments can be attributed to Ryanair's presence at the airport, — as demonstrated in the current case, discounts and incentives comply with the MEOP, — the lack of a business plan does not in itself contradict the fulfilment of the MEOP.

(194) Regarding AMS' comments, the Austrian authorities underline the strategic purpose underlying advertising on the internet, especially on ryanair.com. In fact, Ryanair's website target group is in line with Carinthia's and KLU's client portfolio. A private investor would therefore be willing to enter into such advertising agreements with AMS.

7. ASSESSMENT OF THE EXISTENCE OF AID

(195) The Commission has analysed whether the following measures qualify as State aid: — the financing of KFBG, — the 2005 incentive scheme, — the conclusion of the settlement agreement between KFBG and AUA with the application of the 2005 incentive scheme to AUA, — the 2002 air service agreements with Ryanair and the 2002 marketing agreements with AMS and LV, — the 2006 agreements with Ryanair and AMS, — the 2003 agreement with HLX, — the 2008 agreement with Tuifly, — the 2009 agreements with Air Berlin.

(196) 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, in so far as it affects trade between Member States, be incompatible with the internal market.

(197) The criteria in Article 107(1) TFEU are cumulative. Therefore, in order to determine whether the measure in question constitutes aid within the meaning of Article 107(1) TFEU all of the following conditions need to be fulfilled: — the beneficiary is an undertaking within the meaning of Article 107(1) TFEU, which implies that it engages in an economic activity, — the measure in question is financed by State resources and is imputable to the State, — it confers an economic advantage, — this advantage is selective, — the measure in question distorts or threatens to distort competition and may affect trade between Member States.

7.1. The financing of KFBG and DMG

(198) As further described in recitals 30 et seq. above, KFBG benefited from repeated financial support from its shareholders, the Federal Ministry of the Interior and the Federal Ministry of Finances. These financial contributions were used to cover annual operating losses of KFBG/DMG due to the costs linked to the marketing contracts of KFBG with different airlines.

7.1.1. Economic activity and notion of undertaking

(199) According to settled case law, the Commission must first establish whether KFBG and DMG are undertakings within the meaning of Article 107(1) TFEU. The concept of an undertaking covers any entity engaged in an economic activity, regardless of its legal status and the way in which it is financed (21). Any activity consisting in offering goods or services on a given market is an economic activity (22).

(200) In its Leipzig/Halle Airport judgment the General Court confirmed that the operation of an airport for commercial purpose and the construction of the airport infrastructure for commercial purpose constitute an economic activity (23). Once an airport operator engages in economic activities by offering airport services against remuneration, 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 the Treaty rules on State aid are therefore capable of applying to advantages granted by the State or through State resources to that airport operator (24).

(201) Regarding the moment in time as of which the construction and operation of an airport became an economic activity, the Commission recalls that the gradual development of market forces in the airport sector does not allow for a precise date to be determined. However, the Court of Justice of the European Union has recognised the evolution in the nature of airport activities and in its judgment in Leipzig/Halle Airport, the General Court held that from 2000 onward the application of State aid rules to the financing of airport infrastructure could no longer be excluded (25). Consequently, at least as of the date of the judgment in Aéroports de Paris, 12 December 2000 (26), the operation and construction of airport infrastructure must be considered an economic activity falling within the ambit of State aid control.

7.1.1.1. Single economic unit

(202) Before examining the nature of the activities carried out by KFBG and DMG, however, the Commission recalls that two separate legal entities may be considered to form one economic unit for the purpose of the application of State aid rules. That economic unit is then considered to be the relevant undertaking.

(203) As the Court of Justice held, ‘[i]n competition law, the term ‘undertaking’ must be understood as designating an economic unit […] even if in law that economic unit consists of several persons, natural or legal.’ (27). In this respect, the Court has ruled that several entities can be deemed to perform an economic activity together, thereby constituting an economic unit, under specific conditions.

(204) To determine whether several entities form an economic unit, the Court of Justice looks at the existence of a controlling share or functional, economic or organic links (28).

(205) In this case, the Commission considers that KFBG and DMG are so closely connected that they must be considered to constitute one single economic unit for the purposes of State aid rules. It must be recalled that DMG is a 100 % subsidiary of KFBG, giving KFBG the power to control DMG via the shareholder assembly.

(206) In practice, the available information demonstrates that important decisions regarding KLU are regularly taken at the level of KFBG, with instructions then being passed down to DMG.

(207) In conclusion, the Commission considers that the links between KFBG and DMG are sufficiently close to treat the two entities as one economic unit. In particular, DMG is economically and legally entirely dependent on KFBG and does not have a commercial will of its own. For the purpose of the application of Union State aid law, KFBG/DMG therefore form one undertaking.

7.1.1.2. Economic activity

(208) KFBG/DMG are engaged in constructing, maintaining and operating KLU. KFBG/DMG offer airport services and charge users — commercial aviation operators as well as non-commercial general aviation users — for the use of the airport infrastructure, thereby commercially exploiting the infrastructure. Following from the case law cited in recitals 200 and 201, it must be concluded that KFBG/DMG were engaged in an economic activity at least as of the date of judgment in Aéroports de Paris (that is to say, 12 December 2000) onward.

(209) It is clear from the submission of Austria that KLU had already prior to 2000 successfully attracted commercial aviation as well as general aviation.

(210) It is therefore concluded that from 12 December 2000 onward, KFBG/DMG were engaged in an economic activity and constitute, as a single economic unit, an undertaking for the purposes of Article 107(1) TFEU.

7.1.1.3. Public policy remit

(211) While KFBG/DMG must therefore be considered to constitute an undertaking for the purposes of Article 107(1) TFEU, it must be recalled that not all activities of an airport owner and operator are necessarily of an economic nature (29).

(212) The Court of Justice (30) has held that activities that normally fall under a State's responsibility in the exercise of its official powers as a public authority are not of an economic nature and do not fall within the scope of the rules on State aid. Such activities may include, for example, security, air traffic control, police, customs. The financing has to be strictly limited to compensation of the costs to which they give rise and may not be used instead to fund other economic activities (31).

(213) Therefore, the financing of activities falling within the public policy remit or of infrastructure directly related to those activities in general does not constitute State aid (32). At an airport, activities such as air traffic control, police, customs, firefighting, activities necessary to safeguard civil aviation against acts of unlawful interference and the investments relating to the infrastructure and equipment necessary to perform those activities are considered in general to be of a non-economic nature (33).

(214) However, public financing of non-economic activities necessarily linked to the carrying out of an economic activity must not lead to undue discrimination between airlines and airport managers. Indeed, it is established case law that there is an advantage when public authorities relieve undertakings of the costs inherent to their economic activities (34). Therefore, if in a given legal system it is normal that airlines or airport managers bear the costs of certain services, whereas some airlines or airport managers providing the same services do not have to bear those costs, the latter may enjoy an advantage, even if those services are considered in themselves as non-economic. Therefore, an analysis of the legal framework applicable to the airport operator is necessary in order to assess whether under that legal framework airport managers or airlines are required to bear the costs of the provision of some activities that might be non-economic in themselves but are inherent to the deployment of their economic activities.

(215) Austria submitted that the costs arising from the airport security measures pursuant to § 1, 2, 8, 9 and 13 Luftfahrtssicherheitsgesetz of 1992 (Aviation Security Law, hereinafter: ‘LSG’) are to be considered falling within the public policy remit. KFBG had received from 2000-2010 the reimbursement of the following amounts: Table 7 Reimbursement by the Federal Ministry of Interior Affairs and the Federal Ministry of Finances 2000-2010 (EUR) 2000 24 000 2001 24 000 2002 27 000 2003 553 000 2004 878 000 2005 642 000 2006 791 000 2007 824 000 2008 1 134 000 2009 682 000 2010 896 000

(216) The Commission notes, that pursuant to § 8, 9 and 13(2) LSG only the costs related to the provision and maintenance of spaces and premises necessary for the performance of the activity as described in § 1 and 2 LSG may be reimbursed. According to § 1 and 2 LSG the airport operator is obliged to guarantee the precautionary protection of civil aircrafts including the people on board or boarding the aircraft of dangerous attacks with arms, ammunition and war material and any other dangerous devices. To this end, airport operator have to carry out effective security controls. All other costs that are not related to this activity must be borne by the airport operator.

(217) The Commission is of the view that the carrying out of effective security controls to guarantee the precautionary protection of civil aviation has to be considered to be an activity of non-economic nature as explained in point 35 the 2014 Aviation Guidelines. Therefore, as regards operating expenses incurred between 2000 and 2010 for this activity, the Commission considers that those costs for which the airport operator is entitled to reimbursement pursuant to § 8, 9 and 13 LSG qualify as public policy remit costs.

(218) According to the information submitted by Austria, the practical implementation of the reimbursement procedure of the claims of the airport, that had to be documented in detail, provided a double check by the fiscal authority and the Federal Ministry of Interior. An overcompensation was therefore excluded. KFBG could separate the costs of the public policy remit from other costs with a complicated recording system that attributed the costs to the individual flights operated at KLU.

(219) The Commission also notes that the Luftfahrtssicherheitsgesetz as a federal law was applied uniformly at all Austrian airports and that there was no discrimination between airport managers.

(220) The Commission therefore concludes that the reimbursement of the operating costs incurred between 2000-2010 in relation to § 1, 2, 8, 9 and 13 LSG falls within the public policy remit and is therefore exempted from the scrutiny under State aid rules.

(221) Austria also submitted that KLU is used regularly by Austrian military forces as well as police interventions and the Christophorus-Air-Emergency. The Commission agrees that these activities can be considered responsibilities of public administration. As the Austrian authorities however have not demonstrated that KFBG has received reimbursement for the costs of these activities, the conditions for the reimbursement of public remit costs are not fulfilled.

(222) In conclusion, the Commission considers that all costs, which are not considered costs under public policy remit pursuant to § 1, 2, 8, 9 and 13 LSG, qualify as an economic activity.

7.1.2. State resources and imputability to the State

(223) In order to constitute State aid, the measures in question have to be financed from State resources and the decision to grant the measure must be imputable to the State.

(224) The concept of State aid applies to any advantage granted through State resources by the State itself or by any intermediary body acting by virtue of powers conferred on it (35). Resources of local authorities are, for the application of Article 107 TFEU, State resources (36).

(225) In this case, the relevant measures — namely financial contributions to KFBG and DMG — were granted from the budget of the local authorities. The financial contributions came directly from the State of Carinthia, the city of Klagenfurt and KLH. The financial contributions provided by the State of Carinthia and the city of Klagenfurt have to be considered State resources. The same holds for KLH: KLH was a legal person governed by public law and established in 1990 by the KLH-G, which also contains the statutes of KLH. KLH acted as owner company (holding), i.e. State assets agency for the shares which the State of Carinthia holds in different involvements. KLH managed a special fund called ‘Zukunft Kärnten’ for the direct and indirect financing of projects. This fund consisted of EUR 500 million that were provided from the budget of the State of Carinthia. Thus, all financial contributions KFBG received from KLH have to be considered State resources.

(226) Concerning imputability, in its Stardust Marine judgment the Court of Justice furthermore held that the fact that the State or a State entity is the sole or majority shareholder of an undertaking is not sufficient to find that a transfer of resources by that undertaking is imputable to its public shareholders (37). According to the Court of Justice, even if the State was in a position to control a public undertaking and to exercise a dominant influence over its operations, actual exercise of that control in a particular case could not be automatically presumed, since a public undertaking may also act with more or less independence, according to the degree of autonomy left to it by the State.

(227) According to the Court of Justice, indicators from which imputability might be inferred, are (38): — the fact that the undertaking in question could not take the contested decision without taking account of the requirements of the public authorities, — the fact that the undertaking had to take account of directives issued by public authorities, — the integration of the public undertaking into the structures of the public administration, — the nature of the public undertaking's activities and the exercise of those activities on the market in normal conditions of competition with private operators, — the legal status of the undertaking, — the intensity of the supervision exercised by the public authorities over the management of the undertaking, — any other indicator showing, in the particular case, an involvement by the public authorities in the adoption of a measure or the unlikelihood of their not being involved, having regard also to the compass of the measure, its content or the conditions which it contains.

(228) The Commission considers that the financial contributions to KFBG and DMG are imputable to the State. The relevant measures of the State of Carinthia and the city of Klagenfurt — namely the financial contributions to KFBG and DMG — were granted directly from the budget of the local and regional authorities. Thus the Commission considers that they are imputable to the State.

(229) The same holds for the financial contributions KFBG and DMG received from KLH. The State of Carinthia was not only in a position to control KLH and exercised a dominant influence over its operations, it also had actual control over the financial contributions KFBG received from KLH. The legal status of KLH shows that KLH was a legal person sui generis with the only mandate to manage the State assets in the interest of the State of Carinthia. Also the nature of KLH's activities points to the fact that its activities were solely in the interest of the State of Carinthia: KLH held 80 % of the shares of KFBG and thus actively represented the State of Carinthia's interest in the existence and maintenance of a viable and performing airport at Klagenfurt for the State of Carinthia. Also the content of the measures KLH carried out for the State of Carinthia indicated that KLH was acting for the State of Carinthia: the decision to give financial contributions was important for the existence of KLU and