EN Official Journal of the European Union L 34/68

COMMISSION DECISION (EU) 2016/152

of 1 October 2014

on State aid SA 27339 (12/C) (ex 11/NN) implemented by Germany for Zweibrücken airport and airlines using the airport

(notified under document C(2014) 5063)

(Only the English text is authentic)

(Text with EEA relevance)

THE EUROPEAN COMMISSION,

Having regard to the Treaty on the Functioning of the European Union, and in particular the first subparagraph of Article 108(2) thereof (1),

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

Having called on interested parties to submit their comments pursuant to the provision(s) cited above (2) and having regard to their comments,

Whereas:

1. PROCEDURE

(1) In a parliamentary question of December 2008, MEP Hiltrud Breyer raised the issue of the public financing of Zweibrücken Airport (3). She alleged that in the period 2005-2006, the Land Rhineland-Palatinate (‘Land’) had funded the Flugplatz GmbH Aeroville Zweibrücken (‘FGAZ’) with EUR 2,4 million, which FGAZ in turned used to fund its 100 % subsidiary, the Flughafen Zweibrücken GmbH (‘FZG’). She further alleged that during the same period, construction works on the airport costing EUR 6,96 million were fully paid for by the Land.

(2) The parliamentary question was answered by Commissioner Tajani on 6 January 2009. In addition, it was registered as a complaint under CP 5/2009. On 22 January 2009, 24 September 2010, and 15 March 2011, the Commission requested further information from Germany, which it provided by letters dated 23 March 2009, 27 January 2011, and 19 May 2011.

(3) On 8 April 2008, the Commission also requested further information from the airline Ryanair, which was provided on 15 July 2011. A German translation of Ryanair's submission was forwarded to Germany on 18 August 2011, and Germany declared on 26 September 2011 that it did not intend to comment on Ryanair's submission at that time.

(4) By letter dated 22 February 2012, the Commission informed Germany that it had decided to initiate the procedure laid down in Article 108(2) of the Treaty (‘the opening decision’) in respect of the public funding of the operator of Zweibrücken Airport and incentives in favour of airlines using the airport.

(5) By letter dated 24 February 2012, the Commission requested further information after the opening decision. Germany submitted its comments on the opening decision on 4 May 2012 and responded to the Commission's request for further information on 16 April 2012.

(6) The Commission decision to initiate the procedure was published in the Official Journal of the European Union (4). The Commission invited interested parties to submit their comments on the alleged aid.

(7) The Commission received comments from four interested parties, namely Ryanair, Airport Marketing Services (‘AMS’), Germanwings and TUIFly. It forwarded them to Germany, which was given the opportunity to react within one month; its comments were received by letter dated 26 October 2012.

(8) In addition, the Commission received further comments from Ryanair on 20 December 2013, 17 January 2014 and 31 January 2014. Those submissions were forwarded to Germany, which did not wish to comment on them.

(9) By letters dated 6 November 2013, 14 March 2014, and 2 April 2014 the Commission requested further information. Germany responded to the Commission's requests for further information on 16 December 2013, 15 January 2014, 5 April 2014, 15 April 2014, 24 April 2014, 11 June 2014 and 27 June 2014.

(10) By a letter dated 25 February 2014, the Commission informed Germany of the adoption of the 2014 Aviation Guidelines (5) on 20 February 2014, of the fact that those guidelines would become applicable to the case at hand from the moment of their publication in the Official Journal of the European Union, and gave Germany the opportunity to comment on the guidelines and their application within 20 working days of their publication in the Official Journal.

(11) By letters dated 24 February 2014, the Commission also informed the third parties of the adoption of the 2014 Aviation Guidelines on 20 February 2014, of the fact that those guidelines would become applicable to the case at hand from the moment of their publication in the Official Journal of the European Union, and gave the third parties the opportunity to comment on those guidelines and their application within 20 working days of their publication in the Official Journal.

(12) The 2014 Aviation Guidelines were published in the Official Journal of the European Union on 4 April 2014. They replaced the 1994 Aviation Guidelines (6) as well as the 2005 Aviation Guidelines (7).

(13) On 15 April 2014 a notice was published in the Official Journal of the European Union inviting Member States and interested parties to submit comments on the application of the 2014 Aviation Guidelines in this case within one month of their publication date (8).

(14) Comments on the application of the 2014 Guidelines were received from Germany on 8 May 2014. Germany agreed with the application of the 2014 Aviation Guidelines in this case. The third parties did not submit any comments.

(15) By letter dated 17 July 2014, Germany agreed exceptionally to waive its rights deriving from Article 342 of the Treaty in conjunction with Article 3 of Regulation (EC) No 1/1958 (9) and to have this Decision adopted and notified pursuant to Article 297 of the Treaty in English.

2. BACKGROUND TO THE INVESTIGATION AND CONTEXT OF THE MEASURES

2.1. HISTORY AND DEVELOPMENT OF ZWEIBRÜCKEN AIRPORT

(16) Zweibrücken Airport was a military airfield until 1991, when it was abandoned by the U.S. military. From 1992 until 1999, the airfield was the object of a conversion project co-financed by the Union (10). The Union funding was used to render the airfield available for civilian aviation, and the necessary measures encompassed the eradication of obstacles, the modernisation and installation of a tower and the drainage of the runway. The private investors of the project also envisaged the subsequent creation of a business park, a multimedia park and leisure installations.

(17) From 2000 until 2006, the airfield was not generally used for commercial aviation. It was used by military planes, private planes, leisure flights and only occasional commercial flights. The majority of the passengers flying from and to Zweibrücken Airport were transported by military flights, whilst the remainder used company-owned planes or taxi flights. Attempts to attract commercial operators failed. Part of the reason was the existence of a NATO air combat training zone (POLYGONE), which severely restricted the ability of civilian operators to reach or leave Zweibrücken during the training zone's operating hours.

(18) It was only after the establishment of a control zone (CTR Zweibrücken), regulating the use of the airspace by civilian and military aircraft, that a commercial operator could be attracted. Commercial traffic with scheduled and charter flights started with Germanwings' inaugural flight to Berlin on 15 September 2006. Charter operator TUIFly commenced operations on 30 March 2007. Ryanair operated its only route from Zweibrücken (to London-Stansted) in the period between 28 October 2008 and 22 September 2009, thereafter ceasing its services at Zweibrücken airport.

(19) The annual capacity of Zweibrücken Airport is currently around 700 000 passengers, but could reach up to 1 million passengers in view of the capacity of the runway and handling areas.

(20) Table 1 indicates the development of Zweibrücken Airport in terms of passenger numbers and aircraft movements from 2006 to 2012. Table 1 Passenger Numbers 2006-2012 (11) Year Passengers Aircraft Movements 2006 78 000 23 160 2007 288 000 26 474 2008 327 000 27 000 2009 338 000 21 000 2010 265 000 16 000 2011 224 000 14 500 2012 242 880 13 230

2.2. GEOGRAPHIC SITUATION OF ZWEIBRÜCKEN AIRPORT

(21) Zweibrücken Airport is situated 4 km south-east of the City of Zweibrücken in the German Land Rhineland-Palatinate. The nearest (12) other airports are: (a) Saarbrücken Airport (approximately 39 km, or approximately 29 minutes by car) (b) Frankfurt-Hahn Airport (approximately 128 km, or approximately 84 minutes by car) (c) Frankfurt (Main) Airport (approximately 163 km, or approximately 91 minutes by car) (d) Luxembourg Airport (approximately 145 km, or approximately 86 minutes by car) (e) Karlsruhe/Baden-Baden Airport (approximately 105 km, or approximately 88 minutes by car) (f) Metz-Nancy Airport (approximately 129 km, or approximately 78 minutes by car) (g) Strasbourg Airport (approximately 113 km, or approximately 87 minutes by car)

(22) According to the study provided by ‘Desel Consulting’ and the ‘Airport Research GmbH’ in 2009 (13), on average about 15 % of passengers per year originate from other Member States (Luxembourg and France). The remaining passengers originate from within Germany, mostly from the region of Kreis South-West Saarpfalz, the City of Saarbrücken, the City of Saarlouis, and the region of Saarpfalz-Kreis.

2.3. LEGAL AND ECONOMIC SET-UP OF ZWEIBRÜCKEN AIRPORT

(23) Zweibrücken Airport is owned and operated by FZG. FZG is a 100 % subsidiary of FGAZ, with whom it has concluded a profit and loss transfer agreement (‘P&L Agreement’). The P&L Agreement ensures that all of FZG's losses will be covered by and all profits transferred to FGAZ.

(24) FGAZ, in turn, is in shared ownership. The Land Rhineland-Palatinate owns 50 % of the shares, while the remaining 50 % are owned by the Zweckverband Entwicklungsgebiet Flugplatz Zweibrücken (‘ZEF’), an association of public territorial entities in Rhineland-Palatinate. The public owners of FGAZ cover its financing needs by providing annual capital injections. According to Germany, FGAZ does not itself carry out any activities related to aviation. As far as aviation is concerned, FGAZ simply passes the public funding on to FZG. FGAZ does, however, carry out some activities related to marketing plots of land in the vicinity of the airport.

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

(25) The Commission investigated several measures involving Zweibrücken Airport. The Commission assessed whether those measures constituted State aid and whether any State aid could be considered compatible with the internal market.

(26) The following measures were investigated as potentially constituting State aid to FGAZ and FZG: (a) direct public financing by Land Rhineland-Palatinate and ZEF of Zweibrücken Airport's costs as regards: — infrastructure investments (2000-2009) — operating costs (2000-2009); (b) a bank loan and participation in the Land Rhineland-Palatinate's internal cash pool.

(27) The following measures were investigated as potentially constituting State aid to the airlines operating from Zweibrücken: (a) discounts on airport charges for various airlines (Germanwings, TUIFly, and Ryanair); (b) the marketing contracts with Ryanair.

3.1. PUBLIC FINANCING BY LAND RHINELAND-PALATINATE AND ZEF OF ZWEIBRÜCKEN AIRPORT

3.1.1. DETAILED DESCRIPTION OF THE MEASURE

(28) The public financing of Zweibrücken Airport took place in two different forms. First, the Land Rhineland-Palatinate and the ZEF supported specific infrastructure investments of FZG with direct grants. Secondly, the owners of FGAZ annually injected capital into FGAZ. The purpose of these capital injections, which cover FGAZ's own losses, is to allow FGAZ to comply with its obligations under the P&L Agreement, according to which FGAZ has to cover the losses of FZG.

(29) The direct grants supporting specific infrastructure investments made between 2000 and 2005 and between 2006 and 2009 are listed in Tables 2 and 3. Table 2 Infrastructure Investments 2000-2005 Zuwendungs-bescheid vom Maßnahmen Gesamtkosten der Investitions-maßnahmen Landesmittel Mittel des Trägers Ausgezahlte Mittel insgesamt Davon Landesmittel für Baumaßnahmen 2000 5.6.2000 Wendehämmer, Bodengeräte, usw. […] (14) […] […] […] […] 30.11.2000 Flugzeughalle 25 × 25 […] […] […] […] […] 30.11.2000 Flugzeughalle 56 × 18 […] […] […] […] […] 24.11.2000 Renovierung Halle 360 […] […] […] […] […] 1.12.2000 Renovierung Halle 370 […] […] […] […] […] Gesamt 2000 […] […] […] […] […] 2001 23.7.2001 TODA 1. Phase […] […] […] […] […] 22.11.2001 Umorg. Sicherheitsbereich […] […] […] […] […] Gesamt 2001 […] […] […] […] […] 2002 16.7.2002 außerord. Rep. Start- u. Landebahn […] […] […] […] […] Gesamt 2002 […] […] […] […] […] 2003 14.4.2003 Überarb. Markierungen Flugbetr. fläche […] […] […] […] […] 15.9.2003 2. Phase TODA […] […] […] […] […] Gesamt 2003 […] […] […] […] […] 2004 26.1.2004 Gebäude 320 […] […] […] […] […] 1.11.2004 Luftsicherheitsmaßn. […] […] […] […] […] Gesamt 2004 […] […] […] […] […] 2005 4.8.2005 Feuerlöschfahrzeug […] […] […] […] […] 13.12.2005 Feuerlöschfahrzeug […] […] […] […] […] Gesamt 2005 […] […] […] […] […]

Table 3 Infrastructure Investments 2006-2009 Zuwendungsbescheid vom Maßnahme Gesamtkosten der Investitionsmaßnahme Landesmittel Mittel des ZEF Mittel des Trägers ausgezahlte Mittel des Landes ausgezahlte Mittel des ZEF Davon Landesmittel für Baumaßnahme 2006 22.11.2006 Trinkwasseranlage […] […] […] […] 21.11.2006 Verbesserung Verkehrssicherheit […] […] […] […] […] […] […] 13.12.2006 Erweiterung des Terminals […] […] […] […] […] […] […] Gesamt 2006 […] […] […] […] […] 2007 23.11.2007 Erweiterung Terminal, Mehrkosten […] […] […] […] […] […] […] 30.1.2007 Ausrüstung Abfertigung von Luftfahrz. […] […] […] […] […] […] […] 30.9.2007 Sicherheitsmaßnahmen […] […] […] […] […] […] […] 27.9.2007 Verbesserung der Verkehrssicherheit […] […] […] […] […] […] […] 31.10.2007 LFZ-Enteisungsfahrzeug […] […] […] […] […] […] […] 9.12.2007 Luftsicherheitsgeräte […] […] […] […] […] […] […] Gesamt 2007 […] […] […] […] […] 2008 23.11.2007 Erweiterung Terminal, Mehrkosten […] […] […] […] […] […] […] 28.3.2008 Erweiterung Terminal, Mehrkosten […] […] […] […] […] […] […] 17.6.2008 Sicherheit Vorfeld 1 […] […] […] […] […] […] […] 9.8.2008 Schlepper, Funk […] […] […] […] […] […] […] 21.10.2008 Vorfeldbeleuchtung […] […] […] […] […] […] […] 27.10.2008 Heizgerät […] […] […] […] […] […] […] 9.11.2008 Sanierung Landebahn […] […] […] […] […] […] […] 31.10.2008 Umbau Terminal […] […] […] […] […] […] […] 24.11.2008 Wetterbeobachtungssystem […] […] […] […] […] […] […] 24.11.2008 Geräte, Fahrzeuge […] […] […] […] […] […] […] Gesamt 2008 […] […] […] […] […] 2009 12.8.2009 Landebahnsanierung […] […] […] […] […] […] […] 2.9.2009 Erstellung DES […] […] […] […] […] […] […] 16.10.2009 Guard Lights […] […] […] […] […] […] […] 19.10.2009 Flugzeugschlepper, Förderband […] […] […] […] […] […] […] Gesamt 2009 […] […] […] […] […] […] […]

(30) The total investment amount between 2000 and 2009 amounted to EUR 27 987 281, whereas the total amount of grants from the Land amounted to EUR 21 588 534. The biggest single investments were the extension of the runway in 2001/2003 (EUR […]), the modernisation of the terminal in 2006 (EUR […]), and the modernisation of the runway in 2008/2009 (EUR […]).

(31) As far as the capital injections by the Land Rhineland-Palatinate/ZEF into FGAZ and the coverage of FZG's losses by FGAZ are concerned, Table 4 provides the relevant data.

(32) It must furthermore be noted that while Land and ZEF both held 50 % of the shares in FGAZ between 2000 and 2009 and in principle provided equal parts of the capital injections, the Land in reality subsidised ZEF's share. Until the end of 2005, the Land covered, in addition to its own share of 50 % of the required capital injections, 90 % of ZEF's share as well. Afterwards, the Land reduced that latter percentage, first to 80 % in 2006 and then to 60 % from 2007 onward. In consequence, the Land covered between 95 % (until 2005) and 80 % (from 2007 onward) of the annual losses of FGAZ. Table 4 Capital Injections and Results of Business Activities Year Capital Injections of Land Rhineland-Palatinate/ZEF into FGAZ Annual result FGAZ Annual results FZG EBITDA FZG 2000 […] […] […] […] 2001 […] […] […] […] 2002 […] […] […] […] 2003 […] […] […] […] 2004 […] […] […] […] 2005 […] […] […] […] 2006 […] […] […] […] 2007 […] […] […] […] 2008 […] […] […] […] 2009 […] […] […] […] Total […] […] […] […]

3.1.2. REASONS FOR OPENING THE FORMAL INVESTIGATION PROCEDURE

(33) The opening decision distinguishes between public financing of investments in the infrastructure of Zweibrücken Airport and public financing of its operating costs.

3.1.2.1. Infrastructure investments

Existence of aid

(34) The opening decision first noted that as regards investments into the airport infrastructure, FZG is an undertaking for the purposes of Article 107(1) of the Treaty. It recalled that in the Leipzig/Halle judgment (15), the General Court confirmed that an entity which constructs and operates airport infrastructure while levying a charge on the users is carrying out an economic activity. The only exception would be certain activities that could be qualified as an exercise of public power; those activities would be qualified as non-economic in nature, and therefore not subject to State aid rules. The opening decision also asked Germany to submit further information on which activities could be qualified as being non-economic in nature.

(35) The opening decision also observed that FGAZ did not carry out any airport-related activities itself, but merely passed on the public funding it received to FZG. However, it noted that FGAZ did carry out some economic activities with respect to plots of land located in the vicinity of the airport. Because of those activities, the opening decision considered that FGAZ also constituted an undertaking for the purposes of Article 107(1) of the Treaty.

(36) Considering that the direct grants for investment projects were financed from the Land's budget, and that the capital injections in favour of FGAZ (and ultimately FZG) stemmed from the public budget of the Land and ZEF, the opening decision concluded that the measures were financed through public resources.

(37) As regards the question of whether FGAZ and FZG received an advantage, the opening decision observed that public funding does not constitute an advantage where the public body granting the funding acted like a Market Economy Operator (‘MEO’). The opening decision noted that Germany had not presented any evidence that in granting the public funding, it acted like a MEO. Rather, it was apparent that, unlike a private investor, in granting the funding the public authorities had regional and social policy considerations in mind. As it could, therefore, not be concluded that the public authorities acted like a MEO, the opening decision reached the preliminary conclusion that the public funding provided an advantage to FGAZ/FZG.

(38) The opening decision next noted that the public funding was only granted to FGAZ/FZG, meaning that it was selective in nature.

(39) Finally, the opening decision explained that because there was increasing competition between regional airports, any advantage granted to Zweibrücken Airport was liable to distort competition. It particularly referred to Saarbrücken Airport, located only 39 kilometres by road away from Zweibrücken Airport. Noting further the traffic development forecasts for Zweibrücken Airport, the opening decision also observed that the advantage would probably have an effect on trade between Member States.

(40) In conclusion, the opening decision found that since all required elements were fulfilled, the public financing of infrastructure investments at Zweibrücken Airport constituted State aid.

Compatibility

(41) The opening decision observed that the 2005 Aviation Guidelines provide the framework against which to assess the compatibility of the public financing of infrastructure investments. They set out a number of criteria, which the Commission has to take into account for the assessment of compatibility pursuant to Article 107(3)(c) of the Treaty. Pursuant to point 61 of the 2005 Aviation Guidelines, such public financing is compatible where: (a) the construction and operation of the infrastructure meets a clearly defined objective of common interest (regional development, accessibility, etc.); (b) the infrastructure is necessary and proportional to the objective which has been set; (c) the infrastructure has satisfactory medium-term prospects for use, in particular as regards the use of existing infrastructure; (d) all potential users of the infrastructure have access to it in an equal and non-discriminatory manner; and (e) the development of trade is not affected to an extent contrary to the Union interest.

(42) In addition, State aid to airports — as any other State aid measure — should have an incentive effect and should be necessary and proportional in relation to the targeted legitimate objective in order to be compatible.

(43) As regards the question whether the construction and operation of the infrastructure meets a clearly defined objective of common interest, the opening decision noted that Zweibrücken Airport serves to improve the accessibility of the part of Land Rhineland-Palatinate in which it is located. It furthermore recalled the German submission that the Airport promotes the economic development of the region. However, the opening decision also recalled that the airport only commenced its commercial aviation services in 2006, and that other airports, above all Saarbrücken Airport, are located in its vicinity and provide connectivity to the region. On the basis of the latter finding, the opening decision expressed doubts as to whether the public funding of Zweibrücken's infrastructure served an objective of common interest or merely duplicates the already available infrastructure in the region.

(44) With respect to the necessity and proportionality of the infrastructure, Germany had submitted that only those investments had been undertaken that were necessary to ensure the compliance of the Airport with all relevant safety standards. The opening decision, however, noted that Zweibrücken Airport was located in such close vicinity to Saarbrücken Airport that it had to be presumed to be in competition with it. Other airports might also stand in direct competition with Zweibrücken Airport, in particular as regards freight or leisure travel. Under these circumstances, the opening decision expressed doubts as to whether the infrastructure at Zweibrücken was necessary and proportionate as regards the stated objective.

(45) As regards the infrastructure's prospects, the opening decision recalled Germany's submission that the passenger numbers were expected to increase to approximately 335 000 in 2015 and possibly to more than 1 000 000 by 2025. Germany had also submitted that it expected Zweibrücken to become profitable by 2015. However, the opening decision observed that Zweibrücken Airport had generated increasing losses since the start of commercial aviation in 2006, which casts doubt on the ability of the Airport to generate profits in the future. These doubts are reaffirmed by the proximity of Saarbrücken Airport, which could be in competition with Zweibrücken for the same passengers. In the light of this, the opening decision expressed doubts as to the medium-term prospects for use of the airport infrastructure.

(46) The opening decision finally expressed doubts as to whether all potential users had access to the infrastructure in an equal and non-discriminatory manner. It also raised the question of whether the development of trade would be affected to an extent contrary to the Union's interest, notably in the light of its vicinity to Saarbrücken Airport.

3.1.2.2. Operating aid

Existence of aid

(47) The opening decision first recalled its previous conclusion that both the FGAZ and FZG are undertakings for the purposes of Article 107(1) of the Treaty. It also recalled that since the capital injections stemmed directly from public authorities, they constitute a transfer of State resources and are imputable to the State. Considering further that operating aid relieves the beneficiary of some of the expenditure connected to its business, the capital injections granted FGAZ and FZG an economic advantage which they would not have obtained under normal market conditions. Finally, it recalled that operating aid is liable to distort competition and affect trade between Member States in the same way that public financing of infrastructure investments is. It concluded that the operating aid in the form of capital injections to the benefit of FGAZ and FZG constituted State aid.

Compatibility — SGEI Decision

(48) Germany had argued that Zweibrücken Airport was entrusted with providing a service of general economic interest (‘SGEI’) and that operating aid was exempted from notification and compatible with the internal market on the basis of the 2005 SGEI Decision (16). After observing that Zweibrücken Airport served less than 1 000 000 passengers per year and therefore complied with the condition of Article 2(1)(d) of the 2005 SGEI Decision, the opening decision expressed doubts whether the operation of the Airport constitutes an SGEI.

(49) More particularly, the opening decision rejected Germany's argument that a contribution to the regional and economic development of the region was sufficient to classify the entire operation of the airport as an SGEI. The opening decision stressed that the region was already well served by other airports and that it was therefore not apparent why it would be necessary to entrust Zweibrücken Airport with an SGEI to provide airport services.

(50) The opening decision also explained that on the basis of the available information it was not clear whether the conditions of Article 4 of the 2005 SGEI Decision were met. The general obligation to operate the airport, contained in §45 Luftverkehrs-Zulassungs-Ordnung (Air Traffic Licensing Regulation, ‘LuftVZO’), did not fulfil the conditions listed in Article 4 of the 2005 SGEI Decision, and this obligation would in any event disappear if it were decided to close the airport. It was further observed that due to missing data, the Commission had not been able to assess compliance with Article 5 of the 2005 SGEI Decision.

(51) The opening decision finally observed that since the 2012 SGEI Decision (17) only exempted State aid for airports with less than 200 000 passengers from notification, any aid to Zweibrücken Airport would have to be notified to the Commission for the period from 31 January 2014 onward, even if it could be considered to comply with the 2005 SGEI Decision.

Compatibility — 2005 Aviation Guidelines

(52) The opening decision recalled that operating aid is generally not compatible with the internal market, and that it can only exceptionally be declared compatible under strict conditions. According to point 27 of the 2005 Aviation Guidelines, operating aid can only be declared compatible for airports located in the most disadvantaged regions of the Union, that is to say, those falling under Article 107(3)(a) of the Treaty as well as the most remote regions and sparsely populated areas. It observed that Zweibrücken Airport was located in any of those areas, so that the aid could not be considered compatible under point 27 of the guidelines.

(53) As regards the possibility of declaring the operating aid compatible pursuant to Section 4.2 of the 2005 Aviation Guidelines, the opening decision pointed out that the compatibility criteria in that section are similar to those listed in the 2005 SGEI Decision. As the Commission had reached the preliminary conclusion that the l conditions of the 2005 SGEI Decision were not fulfilled, it reached the same conclusion as regards the conditions of the 2005 Aviation Guidelines.

(54) The opening decision finally also noted that, since 31 January 2012, the rules contained in Section 4.2 of the 2005 Aviation Guidelines are supplemented by the provisions of the 2012 SGEI Framework (18). This means that any public funding that is covered by the 2005 SGEI Decision, but not the 2012 SGEI Decision, would, from 31 January 2014 onward, need to fulfil both the requirements laid down in Section 4.2 of the 2005 Aviation Guidelines and the provisions of the 2012 SGEI Framework.

Compatibility — Rescue & Restructuring Guidelines

(55) The opening decision finally commented on the possible compatibility of the capital injections pursuant to the Rescue & Restructuring Guidelines (19). It observed that since the airport only commenced its commercial operation in 2006, it could be considered to constitute a ‘new undertaking’ in the sense of the Rescue & Restructuring Guidelines, excluding therefore their application. It also noted that no restructuring plan had been presented on the basis of which the aid could have been granted.

(56) Accordingly, on the basis of the available information, it was concluded that the operating aid to FZG/FGAZ could not be declared compatible with the internal market.

3.2. POTENTIAL AID IN CONNECTION WITH A BANK LOAN AND PARTICIPATION IN THE LAND RHINELAND-PALATINATE'S INTERNAL CASH POOL

3.2.1. DETAILED DESCRIPTION OF THE MEASURE

(57) On 20 October 2009, the FZG obtained a loan of […] million from Sparkasse Südwestpfalz. The interest rate was set at 2,05 % per annum until 15 October 2012, after which the parties could renegotiate the conditions. The Land Rhineland-Palatinate granted FZG a 100 % guarantee of the loan, without demanding any remuneration or collateral in return.

(58) Since 26 February 2003, FGAZ has also been entitled to participate in a ‘cash-pool’ (that is to say, a financing pool) established by Land Rhineland-Palatinate's Ministry of Finance. The cash-pool is a refinancing mechanism open to undertakings in which the Land holds at least 50 % of the shares.

(59) The maximum loan amount that FGAZ could draw from the cash-pool was set at EUR 3,5 million from 16 January 2009 onward and raised to EUR 6 million on 1 October 2009. FGAZ does not have to provide collateral, the interest rates are set at call money rate, and the loans are repaid whenever FGAZ has liquidity available.

(60) Germany explained that the cash-pool functions as follows: the FGAZ requests funds from the cash-pool to ensure its liquidity, and the Land provides those funds from the cash-pool. The interest rates charged are market-based call money rates. If the balance of the cash-pool itself is negative, the Land replenishes it by taking up loans on the market in its own name. Germany further explained that the Land essentially passes on the conditions it obtains on the capital market to the participants in the cash-pool, thereby allowing the participants — the undertakings in which the Land holds a majority of the shares — to refinance themselves under the same conditions as the Land itself.

(61) Germany submitted that until May 2006, the FGAZ's balance with the cash-pool was always positive, and only thereafter started to be negative. Germany provided the data set out in Table 5 on the FGAZ's balance with the cash-pool between 2006 and 2009. Table 5 FGAZ's balance with the cash-pool between 2006 and 2009 Year Deposits Withdrawals Balance on 31.12. 2006 […] […] […] 2007 […] […] […] 2008 […] […] […] 2009 […] […] […]

3.2.2. REASONS FOR OPENING THE FORMAL INVESTIGATION PROCEDURE

3.2.2.1. Existence of aid

(62) The opening decision first stated that FZG and FGAZ constitute undertakings for the purposes of Article 107(1) of the Treaty. It next observed that it was clear that the guarantee and the cash-pool were imputable to the State and granted from public resources. As regards the loan itself, however, the opening decision asked for further information from Germany on the question of whether the grant of the loan by Sparkasse Südwestpfalz, a public bank, was imputable to the State.

(63) The opening decision applied the MEO test to determine whether the loan, the guarantee, or the cash-pool had provided an advantage to FZG/FGAZ. It noted that as regards the loan and the cash-pool, it had to assess whether both complied with the conditions set out in the 2008 Reference Rate Communication (20). As no information on the relevant reference interest rate had been provided, the Commission asked Germany to provide all the information necessary to assess whether the loan and cash-pool complied with the conditions set out in the 2008 Reference Rate Communication.

(64) With respect to the guarantee granted by the Land Rhineland-Palatinate, the opening decision observed that whether or not the guarantee constituted State aid had to be assessed pursuant to the Guarantee Notice (21). Noting that sufficient information was not available, the opening decision requested Germany to supply all information necessary to assess the guarantee under the Guarantee Notice.

(65) Considering next that the loan, the guarantee, and the cash-pool were only available to FGAZ/FZG, the opening decision found that they were selective. It also considered that — as was the case regarding the public financing of infrastructure and operating aid — it could not be excluded that the loan, guarantee, and cash-pool distorted competition.

(66) On the basis of the available information, the opening decision accordingly concluded that the loan, the public guarantee, and the cash-pool constituted State aid within the meaning of Article 107(1) of the Treaty. The possible compatibility of those measures was not assessed.

3.3. DISCOUNTS ON AIRPORT CHARGES FOR RYANAIR, GERMANWINGS AND TUIFly

3.3.1. DETAILED DESCRIPTION OF THE MEASURE

(67) The schedule of charges presented by Germany entered into force on 1 October 2005. According to that schedule, the landing charges are determined by reference to the aircraft's maximum take-off weight (‘MTOW’) and the number of passengers on board. For scheduled flights with more than 50 passengers, however, a lump sum of EUR 6 per passenger is envisaged. That lump sum covers all airport charges, including the security charge of EUR 3,58.

(68) A series of discounts are available where certain conditions are fulfilled: (a) New scheduled connections: the Airport grants a 100 % discount on landing, handling and passenger charges for a period of 12 months for any airline operating a new route from Zweibrücken, as long as the new destination is served daily during the summer schedule and at least three times per week during the winter schedule. If the airline bases an aircraft at the airport, the 100 % discount can be extended for an additional six months. (b) New charter connections: the Airport grants a 100 % discount on landing, handling and passenger charges for any airline newly operating from Zweibrücken until a threshold of 100 000 passengers is reached; consequently, for these first 100 000 passengers, no landing, handling or passenger charges have to be paid. The airline has to serve the new destination daily during the summer schedule and at least three times per week during the winter schedule. Airlines fulfilling certain further conditions — such as increasing the frequency of their services by 50-100 % in two consecutive summer schedules and reaching a certain passenger-threshold — are granted a further 100 % discount for an additional 50 000-100 000 passengers.

3.3.1.1. Charges paid by Germanwings

(69) In August/September 2006, Germanwings and FZG concluded an agreement regarding the establishment of the route Zweibrücken — Berlin-Schönefeld, starting in September 2006. That contract envisaged charges of EUR […] per passenger, covering landing, parking, passenger and security charges. The charges were discounted by […] for the first year of operation. From 16 September 2007 onward, Germanwings paid EUR […] per passenger, while from 1 January 2008 onward that payment was reduced to EUR […] per passenger. On 9 January 2011, Germanwings discontinued its service to and from Zweibrücken.

3.3.1.2. Charges paid by TUIFly

(70) Germany provided a contract between FZG and TUIFly, according to which TUIFly had to pay a lump sum of EUR […] per passenger, covering all relevant charges. Nevertheless, it further submitted that TUIFly was exempted from all charges for the first […] passengers. After that passenger number was reached on 1 August 2010, TUIFly paid a lump sum of […] per passenger.

3.3.1.3. Charges paid by Ryanair

(71) Ryanair served the route Zweibrücken — London-Stansted between 28 October 2008 and 22 September 2009. For the first year of operation, FZG and Ryanair had agreed on […]. In return, Ryanair committed to reach at least […] passengers per year. According to Germany, Ryanair paid […].

3.3.1.4. Services received by Germanwings, TUIFly and Ryanair

(72) The contracts between FZG and the various airlines all contain a section on additional services and charges. Table 6 contains a comparison of the most important additional services and the prices charged to those airlines. Table 6 Additional Services and Charges Service Price TUIFly Price Germanwings Price Ryanair Air Starter Unit […] […] […] Ground Power Unit […] […] […] Aircraft cleaning (standard) […] […] […] Aircraft cleaning (overnight stop) […] […] […] Aircraft De-icing […] […] […] De-icing Fluid and Water […] […] […] Empty Wall Space for Advertising […] […] […] Car Rental Till […] […] […] Hangar Access for ad hoc Technical Maintenance […] […] […] At least 4 Press Conference per year […] […] […] Two Journeys for Journalists per year, organised by airport […] […] […] PC, Printers, Phones, Fax and SITA-Equipment […] […] […]

3.3.2. REASONS FOR OPENING THE FORMAL INVESTIGATION PROCEDURE

3.3.2.1. Existence of aid

(73) The opening decision first observed that since FZG, which granted the discounts on the airport charges to the various airlines, was entirely owned and controlled by the State, those discounts had to be considered to have been granted by foregoing State resources. It was further considered that the State was very likely to have been involved in the actual conclusion of the contracts with the various airlines, and that the relevant public supervisory authority had to approve the airport's schedule of charges, with the consequence that the granting of discounts on the airport charges to various airlines was imputable to the State.

(74) In order to answer the question of whether the discounts provided an advantage to the respective airlines, the opening decision recalled that it had to be assessed whether FZG acted like a MEO in granting the discounts. To comply with the MEO test, it was necessary to demonstrate that the decision to grant the discounts was based on sound economic logic and improved the airport's profitability. In addition, the revenue generated by the Airport in connection with a contract with a particular airline could not be lower than the costs of providing airport services to that airline.

(75) The opening decision noted that there was no indication that Germany had compared expected costs and revenues over the duration of the respective airline contracts. Germany had only provided a medium-term business plan covering the period 2011-2015. In this light, the opening decision considered it to be doubtful whether the revenues generated from the agreements with the airlines were sufficient to cover the costs related to providing them with airport services. It noted that since it commenced its commercial operations, FZG had generated increasing losses, and that the agreements did not include clause, common in other agreements, allowing FZG to recover the discounts in case the airlines decided to terminate their operations from Zweibrücken.

(76) The opening decision also considered that if Zweibrücken Airport had acted like a MEO, it would have had to consider whether closing the airport was less costly than continuing its operation. It requested Germany to provide information regarding the costs of closure of the airport in comparison to the costs of continuing its operation. Finally, the opening decision noted that the discounts seemed to include the security charges which FZG had to pay to the security service. It observed that any price charged to the airlines which did not allow FZG to recover those costs would constitute an advantage to the airlines. In conclusion, the opening decision expressed serious doubts as regards the compliance of the discounts granted to various airlines with the MEO principle.

(77) Considering, finally, that the airlines operated on a competitive market and that any advantage granted to them would allow them to strengthen their position on that market, the opening decision found that the discount granted on the charges was likely to affect trade between Member States and to distort or threaten to distort competition.

(78) The opening decision reached the preliminary conclusion that the discounted charges constituted State aid to the respective airlines (Germanwings, TUIFly, and Ryanair).

3.3.2.2. Compatibility

(79) The opening decision assessed whether the discounted charges could be considered to constitute compatible start-up aid pursuant to Section 5 of the 2005 Aviation Guidelines. In its assessment, the Commission expressed doubts as to whether the various conditions for the compatibility of start-up aid were fulfilled.

(80) In particular, the opening decision observed that: (a) it was doubtful whether the discounted charges fulfilled the conditions of point 79(c) of the 2005 Aviation Guidelines, since it was not clear whether and how the discounts were tied to an increase in passenger numbers; (b) it was doubtful whether the discounted charges fulfilled the conditions of point 79(d) of the 2005 Aviation Guidelines, since it was not clear whether the discounts were degressive and limited in duration; (c) it was doubtful whether the discounted charges fulfilled the conditions of point 79(e) of the 2005 Aviation Guidelines, since it was not clear which costs were covered by the discounted charges; (d) it was doubtful whether the discounted charges fulfilled the conditions of point 79(f) of the 2005 Aviation Guidelines, since the measure did not appear to be linked to the eligible costs; (e) it was doubtful whether the discounted charges fulfilled the conditions of point 79(h) of the 2005 Aviation Guidelines, since there was no indication that FZG made its intention to grant the discounts public and offered them to other airlines as well; (f) it was doubtful whether the discounted charges fulfilled the conditions of point 79(i) of the 2005 Aviation Guidelines, since no business plans on the profitability of the benefiting routes had been made available and it was not clear whether there had been any impact on competing routes; (g) it was doubtful whether the discounted charges fulfilled the conditions of point 79(j) of the 2005 Aviation Guidelines, since there was no indication that the required list had been produced; (h) it was doubtful whether the discounted charges fulfilled the conditions of points 79(k) and 79(l) of the 2005 Aviation Guidelines; and (i) it was doubtful whether the discounted charges fulfilled the conditions of point 80 of the 2005 Aviation Guidelines, since it was not clear whether the discounted charges were cumulated with other types of aid.

(81) In conclusion, the Commission reached the preliminary conclusion that the discounted charges could not be considered compatible start-up aid, since they do not fulfil all the conditions listed in Section 5 of the 2005 Aviation Guidelines.

3.4. THE MARKETING CONTRACTS WITH RYANAIR AND AMS

3.4.1. DETAILED DESCRIPTION OF THE MEASURE

(82) Two marketing services agreements were concluded with Ryanair and its subsidiary AMS. Under a first contract, concluded between Ryanair and FZG, the latter paid EUR […] to Ryanair for various marketing activities carried out by Ryanair.

(83) A second contract was concluded on 6 October 2008 between the Land Rhineland-Palatinate, represented by the Ministry of Economics, Traffic, Agriculture and Viticulture, and AMS. Neither FGAZ nor FZG are parties to that contract. Under the contract, AMS provided various marketing activities, such as placing links to websites determined by the Land on Ryanair's website and including short texts about Land Rhineland-Palatinate on Ryanair's website. During the first year, the Land paid AMS a total of EUR […], while for the second year the services were to be reduced and the Land would have had to pay EUR […].

(84) As Ryanair discontinued its services to and from Zweibrücken after less than one year, the marketing services agreement for the second year was eventually cancelled and the price for the first year was reduced to […] of the agreed upon price. In practice, the Land Rhineland-Palatinate then paid a total of EUR 320 833 to AMS for marketing services. It appears that AMS carried out all the agreed activities.

3.4.2. REASONS FOR OPENING THE FORMAL INVESTIGATION PROCEDURE

3.4.2.1. Existence of aid

(85) The opening decision first observed that the payments by the Land Rhineland-Palatinate to AMS/Ryanair involve State resources and are imputable to the State. To the extent that the price paid by Rhineland-Palatinate exceeded the economic value of the services rendered by AMS/Ryanair, they constitute a loss of State resources.

(86) To assess whether the marketing services agreements granted AMS/Ryanair an advantage, the Commission again had to apply the MEO principle. It observed that at Zweibrücken Airport, only Ryanair had received marketing support to such an extent, that the payments were apparently not conditional on the marketing measures having a measurable impact (such as an increase in the number of passengers), and that it was not known whether Land Rhineland-Palatinate had any control over the provision of the marketing services by AMS/Ryanair. The opening decision noted further that the marketing services agreement was clearly tied to the route Zweibrücken — London-Stansted, so that it could be considered an incentive for that new route established by Ryanair in October 2008. Considering that Ryanair directly profited from the marketing activities, it was concluded that Ryanair should have covered at least a part of the related costs. In conclusion, the Commission doubted whether Land Rhineland-Palatinate had behaved like a MEO, thereby granting an advantage to AMS/Ryanair.

(87) As the marketing support was only granted to AMS/Ryanair, it was clear that the measure was selective. For the same reasons as outlined with respect to the discounted airport charges, the opening decision also found that the measure affected trade between Member States and distorted or threatened to distort competition. It accordingly concluded that the marketing support constituted State aid within the meaning of Article 107(1) of the Treaty.

3.4.2.2. Compatibility

(88) The opening decision assessed whether the marketing support granted to AMS/Ryanair could be considered to constitute compatible start up aid pursuant to Section 5 of the 2005 Aviation Guidelines. In its assessment, the Commission expressed its doubts as to whether the various conditions for the compatibility of start-up aid were fulfilled. The reasons were essentially the same as those listed in recital 80 of this Decision regarding the compatibility of the discounted charges. Accordingly, it reached the conclusion that the marketing support does not constitute compatible start-up aid.

4. COMMENTS FROM GERMANY

4.1. PUBLIC FINANCING BY LAND RHINELAND-PALATINATE/ZEF OF ZWEIBRÜCKEN AIRPORT

4.1.1. INFRASTRUCTURE

4.1.1.1. Existence of aid

Economic activity and advantage

(89) The German authorities first recalled that they did not agree with the Commission's position that the construction of airport infrastructure constitutes an economic activity. Pointing out that the Commission mainly referred to the General Court's judgment in the Leipzig-Halle case, Germany noted that an appeal against that judgment was still pending before the Court of Justice, reserving its position until the Court of Justice has decided.

(90) Secondly, the German authorities asserted that none of the infrastructure investments made before 2006, when Zweibrücken Airport commenced its commercial operations, were subject to State aid rules. Until 2006 the airport served only for general aviation and military aviation purposes, and the German authorities claimed that providing airport services for those purposes did not constitute an economic activity. In any event, it was asserted that because of the small scale of the operations at Zweibrücken Airport until 2006 (there were never more than 30 000 passengers per year until 2006), any public funding did not distort or threaten to distort competition and had no effect on trade between Member States.

(91) Thirdly, the German authorities submitted that the majority of investments supported with public grants fell within the public policy remit. It was emphasised that most investments were necessary in order to guarantee the safety of operations at the airport (in particular following an order from the relevant safety supervisory authority and complaints by the pilot association ‘Cockpit’). All of the measures connected to ensuring the safety of operations at the airport were therefore regarded as falling under the public policy remit.

(92) Germany strongly objected to the notion that any measures falling within the public policy remit might, if only partially, confer an advantage on the airport in question if that funding was not granted on a non-discriminatory basis to all other airports in the Member State. Germany contended that funding for measures falling within the public policy remit did not constitute State aid, independent of the question whether one or all airports have to bear the costs for such measures. In this regard, there should be a uniform interpretation of the concept of ‘public policy remit’, especially in the light of the different ways in which Member States define the concept.

(93) Germany submitted a list of investments which were made in relation to the public policy remit between 2006 and 2009 (for comparison, the total investment during that period amounted to EUR 22 476 812). Table 7 Overview of costs falling into the public policy remit submitted by Germany (22) Measures Costs Total costs 2006 […] […] […] 2007 […] […] […] […] […] […] […] […] […] 2008 […] […] […] […] […] […] […] […] […] […] […] 2009 […] […] […] […] […] Grand total EUR 19 707 315

(94) Germany stated that it considers the provision of airport security measures pursuant to §8 Luftsicherheitsgesetz (Air Security Law), measures assuring operational safety, air control and air safety measures pursuant to §27c(2) Luftverkehrsgesetz (Air Traffic Law), meteorological services, and fire brigade services to fall within the public policy remit, whether as investments or operating expenses.

(95) Germany argued that as regards air control and air safety measures, the financing of those activities has to be seen in the light of §27c(2) Luftverkehrsgesetz. Under that provision, a distinction is made between certain airports where the financing of those safety measures at federal level is regarded as being essential for reasons of safety and transport policy, and other, regional airports where such measures are not regarded as strictly necessary from a federal perspective. This is why it is justified that the Land publicly finances air control and safety measures at regional airports such as Zweibrücken, since otherwise the airport would have to bear those costs itself. Therefore, the funding of air control and air safety measures, whether financed directly by the State on the federal level or by the Länder, is considered by Germany to be part of public policy in all cases.

(96) Furthermore, according to Germany, costs for the fire brigade are not regulated on the federal level, but fall within the competence of the Länder, which is why the fire brigade is not financed by the State at all airports. Germany argued that the difference in treatment is rooted in historical as well as objective reasons. Mainly, it lies in the nature of the airport business that smaller regional airports cannot bear the high fixed costs which a fire brigade creates, and that therefore these will be borne by the respective Land.

(97) Concerning the renovation of the runway, Germany submitted that the related measures fall within the public policy remit as they were urgently needed in order to guarantee the safe utilisation of Zweibrücken Airport. Germany argued in this regard that use even for military purposes would not have been possible without those measures. Therefore, the renovation was necessary to ensure that military use and general aviation would be possible at all. Germany therefore claims that the costs for renovation are not exclusively connected to commercial aviation.

(98) In this regard, Germany stated that the type of renovation and the costs connected with it were necessitated by the military history of the airport. According to Germany, the works entailed certain dangers, since the presence of unexploded bombs from the war could not be excluded. In fact, two unexploded bombs were apparently removed in the course of the renovation.

(99) Otherwise, the renovation works included, inter alia, adapting the runway to modern standards regarding width, renewal of drainage, navigation lights and guard lights, signs, emergency power supply with network parallelism, and extension of the fence and the taxiway. The renovations concerning lights, signs and the lifting of the taxiway had been requested in complaints by the pilot association ‘Cockpit’. Another substantial part of the renovation was the reorganisation of airport security, including new fences, doors, video supervision and intercom, installation of sliding doors, cable channels, etc.

(100) Germany, finally, argued that closing Zweibrücken Airport was never considered a viable option, as the continuous operation of the airport was necessitated by the military and general aviation purposes it serves. In this regard, Germany furthermore argued that a closure and deconstruction of the airport would be associated with unjustifiable costs surpassing by far the costs invested. Germany did not, however, present any estimate of the costs related to a closure, or a comparison of those costs with continuing operations.

(101) In this light, Germany submitted that providing airport services to commercial aviation makes economic sense. Germany argued that the great majority of costs would need to be incurred in any event in order to provide airport services to military and general aviation users (infrastructure etc.), so that also serving commercial aviation only causes limited additional costs while creating additional revenue.

Distortion of competition and effect on trade

(102) Germany asserted that the public financing of Zweibrücken Airport's infrastructure does not distort competition and has no effect on trade between Member States. Germany submitted further that neither a distortion of competition nor an effect on trade could be deduced from the mere fact that other airports are located in the vicinity of Zweibrücken. Germany argued that Zweibrücken Airport is not in competition with the airports listed in the opening decision, above all not with Saarbrücken Airport.

(103) With regard to the relationship between Zweibrücken and Saarbrücken Airports, Germany stated that the two airports complement each other, rather than being in competition. Germany explained that the two airports have different profiles, stemming from their different infrastructure: Saarbrücken Airport has higher quality passenger infrastructure (such as a modern terminal building), and concentrates on scheduled flights and business travellers; Zweibrücken Airport, on the other hand, has a longer runway with a higher weight capacity, making it more suitable for heavier aircraft flying long distance or transporting freight. According to Germany, Zweibrücken Airport therefore concentrates on charter flights and freight.

(104) Building on the perceived complementarity between Zweibrücken and Saarbrücken airports, Germany declared that a closer cooperation between the two airports is envisaged. Germany submitted further that the respective regional governments have already decided to cooperate more closely in the future, envisaging the creation of a joint airport (‘Saar-Palatinate-Airport’) with two locations (Saarbrücken and Zweibrücken). According to Germany, the cooperation should lead to synergies and save funds. Finally, Germany emphasised that demand for aviation services in the region (the two airports taken together already have 750 000 passengers), maintaining that only Saarbrücken and Zweibrücken together can properly satisfy this demand, in particular because the other neighbouring airports cannot serve as substitutes. According to Germany, the new ‘Saar-Palatinate-Airport’ would therefore not be in competition with the neighbouring airports, such as Luxembourg, Metz-Nancy-Lorraine, and Frankfurt-Hahn.

4.1.1.2. Compatibility

(105) Germany explained that, even if the public financing of infrastructure measures was considered to constitute State aid, it would be compatible with the internal market as it complies with the conditions set out in point 61 of the 2005 Aviation Guidelines. Before discussing each required element, Germany stressed that the infrastructure investments made in Zweibrücken were relatively minor compared to those found to be compatible with the internal market at other publicly funded regional airports and only served to convert existing military infrastructure for civilian use.

Construction and operation of the infrastructure meets a clearly defined objective of common interest

(106) First of all, Germany submitted that the public support for infrastructure investments meets a clearly defined objective of common interest: the infrastructure investments were made in a C-assisted region with the objective of improving regional economic structures. Germany pointed out that Union funding (which was provided from 1991 onwards through the programmes Konver I, Konver II and PERIFRA) was used to convert the military infrastructure for civilian use, financing for example the modernisation and installation of a tower and the drainage of the runway. Germany claimed that it cannot understand why the Commission has doubts as to the objective of common interest after having participated in the financing of the conversion of the former military airfield.

(107) Providing historical context, Germany explained that the withdrawal of US armed forces from the Zweibrücken airfield in 1991 caused significant structural problems in the Zweibrücken region, such as an unemployment rate of 20 % in the city of Zweibrücken. Germany stated that converting the airfield into a civilian airport therefore served the purpose of creating jobs and improving the regional economic infrastructure. Germany submitted further that the services provided by the airport are indispensable for the region and that the regional economy is highly dependent on easily accessible aviation infrastructure.

(108) Germany claimed that the Commission's only reason for doubting compliance with that criterion again appears to be the proximity and perceived competition with Saarbrücken Airport. In response, Germany again referred to the complementarity of the two airports, excluding any competition between them. In addition, it further argued that proximity to other regional airports was not of importance as regards the question of whether the subsidised infrastructure meets an objective of common interest. Germany stated further that the only relevant factor was the interest of the Land Rhineland-Palatinate, as it was concerned with serving the common interests in its own territory and not having to rely on infrastructure located in other regions.

The infrastructure is necessary and proportional to the objective

(109) Germany explained that the infrastructure is necessary and proportional to the objective which has been set. According to Germany, the infrastructure investments were always limited to complementing and extending existing infrastructure, without creating unnecessarily elaborate or expensive additional facilities. It emphasised that no new airport was created in Zweibrücken, but that a former military airport was simply converted to civilian use. Germany also stressed that the infrastructure is necessary to create jobs. According to Germany, throughout Land Rhineland-Palatinate, about 5 000 jobs were directly or indirectly created in connection with the existence of Zweibrücken Airport. Out of those 5 000 jobs, 2 708 were created directly and indirectly at the airport or the surrounding conversion area until 2011. Those jobs also helped save social costs (EUR 25 million per year) and create tax income. Germany stated further that jobs are especially important in this area with an unemployment rate which is currently 2 % above the average of the Land. Germany submitted that two expert opinions underline the importance of the airport for the regional economy (23).

(110) Germany again emphasised that the proximity to Saarbrücken Airport does not undermine the necessity and proportionality of the infrastructure in Zweibrücken. According to Germany, the infrastructure in Zweibrücken is necessary for large and heavy aircraft because they can only land in Zweibrücken, since the runway at Saarbrücken does not provide the necessary length. Germany submits further that Zweibrücken also offers the possibility of night-flights, which is important for freight flights.

The infrastructure has satisfactory medium-term prospects for use

(111) Germany stated that the infrastructure has satisfactory medium-term prospects for use Germany emphasised that passenger numbers for Zweibrücken Airport increased from only 17 732 passengers in 2005 to 223 165 passengers in 2011. It explained that under that criterion only the projected passenger numbers are relevant, and that the relevant projections demonstrate an increasing demand in the region. Referring to the forecast study provided by ‘Desel Consulting’ and the ‘Airport Research GmbH’ in 2009, Germany argued that by 2025 an increase to at least 1 350 000 passengers at Zweibrücken Airport could be expected.

(112) Germany once more asserted that the proximity of Saarbrücken Airport did not diminish Zweibrücken's medium-term prospects for use. It submitted forecasts showing that Saarbrücken Airport could also expect increasing passenger numbers and that the envisaged cooperation between the two airports would ensure that they will not compete for the same passengers in the future.

Equal and non-discriminatory access to the infrastructure

(113) Germany stated that all potential users of the infrastructure have access to it in an equal and non-discriminatory manner. The schedule of charges from 2005 in principle applies uniformly to all users of the airport under the same conditions. While Germany submitted that some deviations from the official schedule of charges were agreed upon in practice for scheduled and charter flights, it maintained that reduced charges for the first year and discounts were offered to all airline companies on a non-discriminatory basis, with comparable quotas.

The development of trade is not affected to an extent contrary to the Union interest; the general principles of necessity and proportionality

(114) Germany explained that the development of trade is not affected to an extent contrary to the common interest based on the arguments already made. According to Germany, the measures were necessary because Zweibrücken Airport cannot be substituted by Saarbrücken Airport. Germany stated further that the infrastructure investments were limited to measures necessary to ensure the operational safety of the airport. It stressed, in this context, that the modernisation of the runway would have been necessary even if the Airport had not been made available for commercial aviation.

4.1.2. OPERATING AID

4.1.2.1. Existence of aid

(115) As regards the question of whether operating an airport is an economic activity, Germany repeated that until the Airport started providing services for commercial aviation in 2006, it merely served general aviation and military aviation purposes. In this respect, Germany submitted that financing the operation of the airport with respect to those activities did not constitute an economic activity.

(116) Germany further argued that the majority of the losses of FZG that are covered by FGAZ via the P&L Agreement stem from FZG performing tasks falling within the public policy remit. According to Germany, covering costs related to the performance of public powers cannot constitute State aid.

(117) As regards the remaining elements of the definition of State aid in Article 107(1) of the Treaty, Germany referred to the arguments it submitted in this regard with respect to the infrastructure investment measures, holding that they equally apply here.

4.1.2.2. Compatibility

2005 SGEI Decision

(118) Germany argued that the annual payments covering the losses of FZG comply with the principles of the 2005 SGEI Decision. Germany asserted that the Airport's operating license, which imposes a duty to operate, constitutes the entrustment act. In addition, German stated that the Airport has been at least ‘in fact’ entrusted with the provision of an SGEI. According to Germany, even if, however, the Commission were to find that no entrustment act existed, the operating aid to the Airport would nevertheless comply with the principles of the SGEI rules and would therefore have to be considered to be compatible with the internal market.

(119) Germany furthermore rejected the Commission's suggestion that the duty to operate pursuant to the airport's operating licence would automatically come to an end if the airport was to cease its operations. It asserted that the financial support granted to the airport serves to enable the airport to continue operating and thereby to fulfil its duty to operate, that is to say, to provide the SGEI with which it has been entrusted. Germany argued further that preventing the closure of the facility is the essence of the duty to operate.

(120) Referring to the wide discretion of Member States to define what constitutes a SGEI, Germany pointed out that it had discretion to determine the necessity and extent of entrusting the airport with an SGEI. In as far as the Commission had referred to the proximity to Saarbrücken Airport, Germany again stressed that without the two airports the region would suffer from a severe under-supply of airport services, necessitating the entrustment of both airports with an SGEI.

Sections 4.2 and 4.3 of the 2005 Aviation Guidelines

(121) Germany asserted that even if the operating aid were to be considered not to have been exempted from notification under the 2005 SGEI Decision, it would be compatible pursuant to the 2005 Aviation Guidelines.

(122) At the outset, Germany stressed that a large part of the losses covered result from the Airport performing activities falling within the public policy remit. In addition, it pointed out that the P&L Agreement does not cover costs that an airport operator ‘normally’ would have to bear. It argued in this context that a large part of the costs not related to the performance of activities falling within the public policy remit stem from the particular history of Zweibrücken airport and are, in this sense, not ‘normal costs’. Germany submitted that the Airport has the obligation to cater to general aviation and had to incur costs to convert the existing military infrastructure.

(123) In any event, Germany asserted that the conditions of Sections 4.2 and 4.3 of the 2005 Aviation Guidelines were fulfilled ‘in fact’. In particular, Germany stated that, as only the actual losses are covered, the presence of overcompensation can be excluded.

4.2. POTENTIAL AID IN CONNECTION WITH A BANK LOAN AND PARTICIPATION IN THE LAND RHINELAND-PALATINATE'S INTERNAL CASH POOL

(124) With respect to the bank loan, Germany submitted that the Sparkasse Südwestpfalz, which granted the loan, operates as a normal commercial bank and acted as such in granting the loan, so that the decision to grant the loan is not imputable to the State. Germany stated further that when taking up the loan, the FZG compared offers from various banks, and the Sparkasse loan complied with market terms.

(125) As regards the 100 % guarantee of the loan granted by the Land, Germany submitted that it is normal commercial practice for a shareholder to guarantee the loans taken out by its subsidiaries. In any event, Germany argued that the loan was used exclusively for the modernisation of the runway, necessitated by safety concerns and thus falling within the public policy remit. As the measure financed by the loan was thus not subject to State aid rules, it argued that the guarantee granted by the Land does not constitute aid either. Finally, Germany asserted that even if the guarantee were to be considered to be subject to State aid rules, no advantage was conferred on FZG, since the interest rate on the guaranteed loan was still higher than comparable loans granted to FGAZ that were not secured by a guarantee.

(126) Concerning the internal cash pool, Germany claimed that the Land's internal cash-pool is a normal financing mechanism used in the relationship between mother companies and subsidiaries. Germany stated that the cash-pool is a financial instrument which was established by the Land in 2002. The Land's institutions and foundations and all undertakings governed by private law of which the Land owns more than 50 %, can participate in the cash pooling facility. Germany explained that the daily account balance of the cash pool is managed by the ‘Landeshauptkasse’ of the Land.

(127) According to Germany, the cash pool is not financed directly out of the budget of the Land, but from the surplus cash of the participants. Germany explains further that any surplus of cash in the cash pool is invested on the capital markets; in the same way, a deficit is balanced by loans obtained on the capital market. Thus, Germany was of the opinion that any financial support from the cash-pooling facility is not granted through State resources, and is also not imputable to the State.

(128) Germany pointed out that even though no collateral is required from the undertakings benefiting from the cash-pool, they are under the Land's supervision and as majority shareholder of FGAZ the Land could always request securities.

(129) In Germany's opinion it makes economic sense that the mother company enables its subsidiaries to finance themselves at rates comparable to those available to the mother company — in this case the Land Rhineland-Palatinate — itself. According to Germany, the financing derived from the cash pool could therefore not be compared to a classical loan. Germany finally asserted that the Land has never injected resources from its regular budget into the cash-pool, but has rather taken up capital on the market where necessary.

(130) Asserting that the loan, the guarantee and the cash-pool do not constitute State aid, Germany did not submit any arguments concerning their compatibility.

4.3. DISCOUNTS ON AIRPORT CHARGES FOR RYANAIR, GERMANWINGS AND TUIFly

(131) Germany submitted that the contracts between Zweibrücken Airport and the various airlines did not contain any State aid, as they were not imputable to the State in the first place. It asserted that the negotiation and conclusion of those agreements was the responsibility of FZG, falling within the scope of its purely commercial tasks. According to Germany, while the contracts were discussed with FZG's supervisory board, the Land Rhineland-Palatinate was only indirectly involved via its representatives on the supervisory board of FGAZ. Germany stated further that the Land did not directly participate in any negotiations on discounts with the airlines. Germany submitted that imputability could, finally, not stem from the fact that the schedule of charges had to be approved by a public supervisory authority according to § 43a LuftVZO, which is a general regulatory requirement applying to public and private airports alike.

(132) Germany was further of the opinion that the discounts granted to various airlines did not confer any selective advantage upon them, as the discounts were equally available to all interested airlines. It submitted that the discounts would only have granted a selective advantage if they had not been available on a non-discriminatory basis and if one airline had paid higher or lower charges than others, without there being any objective reason for this differentiation.

(133) According to Germany, at the same time, granting the discounts is said to have made economic sense for FZG, as it allowed the airlines to establish themselves at an airport that was new to commercial aviation. Germany submitted that by granting the discounts, the Airport distributed the risk involved in establishing a new route between itself and the airlines, while also allowing both sides to profit from increasing passenger numbers. Germany asserted that without the discounts, the airlines would not have been willing to establish themselves in Zweibrücken.

(134) Germany stated that the rebates for the airlines have to be regarded as a possibility to generate additional income for FZG, as the fixed costs for operating the airport had to be incurred in any event (to serve general and military aviation) while the establishment of new airlines only causes very marginal additional variable costs. According to Germany, because serving new airlines did not lead to noticeable incremental costs, it was not necessary to prepare ex ante business plans to determine whether a contract with an airline would be incrementally profitable.

(135) According to Germany the reduced airport fees are not selective because they were granted on a non-discriminatory basis. Therefore, Germany was of the opinion that there was no distortion of competition. Germany asserted that the airlines were not able to create a stronger position on the market based on these fees.

(136) Asserting that the discounts to various airlines do not constitute State aid, Germany did not submit any arguments concerning their compatibility.

4.4. THE MARKETING CONTRACTS WITH RYANAIR AND AMS

(137) Germany stressed that the marketing contracts concluded between the Land and AMS are independent from FZG. German asserted that the objective of the marketing contracts was to buy marketing services at market price that would primarily promote Land Rhineland-Palatinate as a destination for tourism and economic activities. According to Germany, as the marketing services agreement was not directed specifically at promoting the airport, there was no link between the marketing measures and passenger numbers. Germany stated that the marketing measures incidentally also aimed at promoting Zweibrücken Airport.

(138) Stressing that by concluding the marketing services agreement the Land simply purchased marketing services at market price, Germany submitted that the marketing contract did not contain State aid and did not have to be assessed as an aid measure benefiting an airline pursuant to the 2005 Aviation Guidelines.

5. COMMENTS FROM INTERESTED PARTIES

5.1. RYANAIR

5.1.1. DISCOUNTED AIRPORT CHARGES

(139) Ryanair asserted that the discounts granted to various airlines by FZG did not contain State aid, as they complied with the MEO principle. First, Ryanair argued that in applying the MEO principle to the relationship between airport and airlines, it should only be asked whether the contract was incrementally profitable for the airport. Ryanair considered that all infrastructure and fixed operating costs should be treated as sunk costs. According to Ryanair, when assessing whether the contract complied with the MEO principle, the Commission should thus only take the incremental costs of the airport, which are directly related to providing airport services to the airline in question, into account, and examine whether the total revenue derived from the contract outweighs those incremental costs. In this context, Ryanair emphasised that none of the infrastructure costs were incurred in connection with the agreement between Ryanair and FZG, and they could thus not count as incremental costs connected to that agreement.

(140) In assessing the revenue, on the other hand, Ryanair asserted that the Commission must also take account of network externalities that would have been expected to materialise when FZG and Ryanair concluded the services contract in 2008. Ryanair stated that the fact that those network externalities did not materialise, in the end, could not have been foreseen and is therefore of no relevance.

(141) Ryanair further explained that the discount did not selectively favour Ryanair. Ryanair asserted that the discount available for the first year of operations was offered in recognition of the significant commercial risk it took when establishing scheduled year-round operations to an airport that was unknown at that time. According to Ryanair, in the case of Zweibrücken it would have made no sense for Ryanair to accept such a commercial risk without an incentive scheme.

(142) Ryanair furthermore stated that a similar arrangement was open to any other airline, that is to say, the discount on airport services fees for the first year of operation was available to all airlines starting new routes from Zweibrücken. In particular, Ryanair stressed that its contract with FZG contained a clause providing that ‘[t]his Agreement is entered into on a non-exclusive basis. The Parties agree that the conditions granted to Ryanair according to the Agreement are also available, on a transparent and non-discriminatory basis, to any other airline that would commit itself to an equivalent volume of airline activity at the Airport’ (24).

(143) In any event, Ryanair put forward that the agreements between itself and FZG cannot contain State aid as they are not imputable to the State. Ryanair claimed that the evidence used by the Commission in order to show imputability to the State is not sufficient, as it may reflect the public authorities' interest in the airport's commercial relations and future, but does not show any actual involvement of any of the public authorities in FZG's negotiations and agreements with Ryanair.

(144) Furthermore, Ryanair submitted a series of notes prepared by Oxera, and an analysis prepared by Professor Damien P. McLoughlin.

Oxera Note 1 — Identifying the market benchmark in comparator analysis for MEO tests. Ryanair State aid cases, prepared for Ryanair by Oxera, 9 April 2013

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

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

(147) This is because: (a) comparator analyses are widely used for MEO tests outside of the field of State aid; (b) companies affect each other's pricing decisions only to the extent that their products are substitutes or complements; (c) airports in the same catchment area do not necessarily compete with each other, and the comparator airports used in the reports submitted face only limited competition from State-owned airports within their respective catchment areas (less than 1/3 of commercial airports within the catchment areas of the comparator airports are fully State owned, and none of them were subject to State aid investigations (as of April 2013)); (d) even where comparator airports face competition from State-owned airports within the same catchment area, there may be 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); (e) MEO airports will not set prices below incremental cost.

Oxera Note 2 — Principles underlying profitability analysis for MEO tests. Ryanair State aid cases, prepared for Ryanair by Oxera, 9 April 2013

(148) Oxera argued 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.

(149) The principles underlying the profitability analysis are: (a) the assessment is undertaken on an incremental basis; (b) an ex ante business plan is not necessarily required; (c) for an uncongested airport, the single till approach is the appropriate pricing methodology; (d) only those revenues associated with the economic activity of the operating airport should be considered; (e) the entire duration of the agreement, including any extensions, should be considered; (f) future financial flows should be discounted in order to assess profitability of the agreements; (g) 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) measures.

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

(150) The paper aimed to set out the commercial logic underlying regional airports' decisions to buy advertising on Ryanair.com from AMS.

(151) The paper argued 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 expand 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.

Oxera Notes 3 and 4 — How should AMS Agreements be treated within the profitability analysis as part of the market operator test?, 17 and 31 January 2014

(152) Ryanair submitted further reports by its consultant Oxera. In these reports, Oxera discussed 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 (25). Ryanair emphasised 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.

(153) The reports indicated 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 suggested 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.

(154) The reports emphasised 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.

(155) Furthermore, Ryanair is of the opinion that a terminal value would have 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.

(156) To supplement this approach, the reports presented 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 stated 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.

(157) The reports lastly indicated 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) (26). 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.

5.1.2. MARKETING SERVICES AGREEMENTS

(158) Ryanair stressed that AMS' marketing services agreements are separate from Ryanair's agreements with airports and should be assessed separately, since they cannot be considered a single beneficiary. The agreements were negotiated independently, related to different services, and were not subject to any linkage that would justify their consideration as a single alleged State aid measure. The conclusion of a marketing services agreement with AMS is not a condition for the operation of routes by Ryanair to and from an airport. Ryanair stressed that the marketing services agreement of AMS was concluded with the Ministry, the co-owner of the airport, and it benefitted the airport but was not intended to improve the load factor or yield on Ryanair routes.

(159) As to the value of marketing, Ryanair claimed that marketing space on Ryanair's website is a scarce resource and demand for that space is high, including from businesses other than airports. According to Ryanair, even legacy airlines now realise the value of their websites for marketing and advertising. Ryanair submitted that airports choose to build a brand by advertising on Ryanair.com or on other airline websites. Ryanair stated further that this increased brand recognition can benefit the airports in a number of mutually reinforcing and complementary ways. Zweibrücken Airport is far less renowned internationally than either Aéroport de Paris or Heathrow Airport, and it therefore needs to invest in advertising to improve its brand recognition and maximise the number of inbound passengers. Ryanair concluded that the Land had a double motivation to conclude the marketing services agreement with AMS: first, a purely commercial one, as a 50 % co-owner of the operator of the Zweibrücken Airport; secondly, as part of its duty to promote tourism and business opportunities in the Land. Ryanair is therefore of the opinion that the Land purchased valuable marketing services at market price.

5.2. AIRPORT MARKETING SERVICES (AMS)

(160) AMS submitted that the Commission should not, contrary to what is suggested in the opening decision, treat FZG's agreement with Ryanair and the Land's marketing services agreement with AMS as connected, but rather as two separate business transactions. AMS stated that it is a subsidiary of Ryanair with a real commercial purpose of its own, created in order to develop an activity that does not belong to the core business of Ryanair. AMS clarified that it is used by Ryanair as an intermediary to sell advertising space on its website. AMS submitted further that, in principle, AMS' marketing services agreements with airports are negotiated and concluded separately from Ryanair's agreements with the same airports. AMS claimed that the agreement between AMS and the Land does not grant any advantage to Ryanair; Ryanair does not pressure its partners to conclude marketing services agreements with AMS and Ryanair's route performance is generally the same on routes to airports with an AMS marketing services agreement and to those without such an agreement.

(161) AMS further submitted that in purchasing marketing services, FZG acted in line with the MEO principle, as advertising on Ryanair.com is said to represent a high real value for the Land and that the price charged by AMS was the market price for these services. AMS argued that the prices at which advertising space is provided by AMS, and the volumes in which it is acquired, do not discriminate between public and private advertisers. AMS stated further that public and private bodies are said to compete for access to the limited space to advertise on Ryanair.com. This means, according to AMS, that no State aid can be contained in AMS' arrangements with public airports, as AMS could just as easily sell the website space to a private company, at a comparable price.

(162) AMS also emphasised that it makes inherent sense for a small regional airport to purchase marketing services from AMS. AMS asserted that those airports typically have a need to increase their brand recognition and that advertising on an airline website can increase the number of more profitable foreign passengers (foreign passengers generate more non-aeronautical revenue than outbound passengers originating from the region where the airport is located). AMS stressed that the Land acted not only as the co-owner of the airport's operator, with a direct interest in the enhancement of its brand image and revenues, but also as the authority entrusted with the task of promoting tourism and business opportunities in Land Rhineland-Palatinate through various means including, in particular, advertising.

5.3. GERMANWINGS

(163) By way of background, Germanwings briefly explained why it first decided to take up operations from Zweibrücken. It indicated that it chose Zweibrücken over Saarbrücken because of the better runway in Zweibrücken, pointing out that the topography of the runway in Saarbrücken was difficult. It also explains that in 2006, when Germanwings decided to fly from Zweibrücken, Zweibrücken was better equipped for instrument landing (CAT system) and the flying time to Berlin was slightly shorter. Germanwings asserted that due to unprofitability of the Berlin route it decided to discontinue its services from Zweibrücken in 2011.

(164) Germanwings first asserted that its contracts with FZG do not contain State aid because it is not imputable to the State. It claimed that various press releases by politicians cannot demonstrate that the State was involved in negotiating or concluding these contracts, and that the obligation to have a schedule of charges approved by the supervisory authority pursuant to § 43a LuftVZO did not apply to individual agreements.

(165) Secondly, Germanwings claimed that in concluding the various agreements FZG acted like a MEO. It stressed that the MEO principle does not require that an investor makes no losses in the short term, but that doing so may be a normal business strategy to be profitable in the medium to long term. The idea that an airport cannot impose charges that do not cover its costs, which Germanwings finds reflected in the opening decision, is said to stem from Article 102 of the Treaty and to only be applicable in the antitrust context, so that it should not be applied in State aid cases.

5.4. TUIFly

(166) By way of background, TUIFly explained why it first moved its operations from Saarbrücken Airport to Zweibrücken Airport. TUIFly stated that it moved to Zweibrücken Airport because of safety concerns at Saarbrücken Airport. TUIFly asserted that during bad weather, the infrastructure and topographical features of Saarbrücken Airport meant that a fully-loaded TUIFly aircraft of type B737-800 could not properly land at the airport, thereby forcing those airplanes to divert to Zweibrücken Airport even before it had commenced its commercial operations. According to TUIFly, apart from causing delays and inconveniences for passengers, those diversions were associated with additional costs and organisational issues for the airline. TUIFly maintained that the severe safety concerns at Saarbrücken Airport made its operations there unsustainable and a move to Zweibrücken Airport unavoidable. In addition, it noted that the short runway in Saarbrücken meant that some fully loaded planes could not start, with the consequence that medium distance flights (such as to the Canary Islands) had to start with half-empty tanks and stop for refuelling in Spain or Portugal.

(167) TUIFly claimed that its agreement with FZG did not contain any State aid, and that the charges paid by TUIFly conformed to market rates. It asserted that the conditions at Zweibrücken Airport and in the surrounding region are such that, in order for an airline to operate profitably from Zweibrücken, low airport charges are necessary. In particular, TUIFly referred to the state of the passenger infrastructure at Zweibrücken Airport, the lack of suitable public transportation (railway) to and from the airport, the Airport's location in a region with low purchasing power, the initially bad state of the runway, the absence of crew accommodation, etc. TUIFly also claimed that unlike Saarbrücken Airport (or any other airport where TUIFly operates), Zweibrücken Airport does not have the status of a ‘customs airport’, with the consequence that TUIFly is obliged to pay a ‘custom charge’ of between EUR […] and EUR […] per flight. According to TUIFly, this represents an additional cost of approximately EUR […] per passenger and increases TUIFly's total operating costs by more than EUR […] per year.

6. COMMENTS FROM GERMANY ON THIRD PARTY COMMENTS

6.1. COMMENTS ON RYANAIR'S COMMENTS

(168) Germany welcomed the fact that Ryanair's submissions confirm Germany's position that neither Zweibrücken Airport, nor the airlines operating from Zweibrücken, have received State aid. It also agreed that the contract between the Land Rhineland-Palatinate and AMS has to be assessed separately from the contract between FZG and Ryanair, that the former had real value for the Land, and that it was concluded at market price. Germany stressed, in particular, the importance of tourism for the region, maintaining that the agreement with AMS served to promote tourism.

6.2. COMMENTS ON AMS'S COMMENTS

(169) As AMS confirmed Germany's position that the contract between AMS and the Land Rhineland-Palatinate did not contain any State aid, Germany refrained from commenting on individual submissions in detail.

6.3. COMMENTS ON GERMANWINGS' COMMENTS

(170) Germany limited its response to Germanwings' submission to commenting on a number of factual suggestions put forward by Germanwings. In particular, it stressed that contrary to what Germanwings appears to suggest, there was no competition between Zweibrücken and Saarbrücken, but that the two airports always considered themselves to complement each other. Germany asserted that the choice of an airline to serve one airport or another is the result of a strategic decision of that airline, on which Germany could not comment.

7. ASSESSMENT

(171) By virtue of Article 107(1) of the Treaty ‘…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.’

(172) The criteria in Article 107(1) of the Treaty are cumulative. Therefore, in order to determine whether the measure in question constitutes aid within the meaning of Article 107(1) of the Treaty all of the following conditions need to be fulfilled. Namely, the financial support must: (a) be granted by the State or through State resources; (b) favour certain undertakings or the production of certain goods; (c) distort or threaten to distort competition; and (d) affect trade between Member States.

7.1. PUBLIC FINANCING BY LAND RHINELAND-PALATINATE/ZEF OF ZWEIBRÜCKEN AIRPORT

7.1.1. EXISTENCE OF AID

7.1.1.1. Economic activity and notion of undertaking

(173) According to settled case law, the Commission must first establish whether the FGAZ and FZG are undertakings within the meaning of Article 107(1) of the Treaty. 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 (27). Any activity consisting in offering goods or services on a given market is an economic activity (28).

(174) In its Leipzig/Halle Airport judgment the Court of Justice confirmed that the operation of an airport for commercial purpose and the construction of the airport infrastructure constitute an economic activity (29). 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) of the Treaty, 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 (30).

(175) Regarding the moment in time from which on 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 recognized 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