Commission Decision

of 12 February 2004

concerning advantages granted by the Walloon Region and Brussels South Charleroi Airport to the airline Ryanair in connection with its establishment at Charleroi

(notified in Number C(2004) 516)

(Only the French and Dutch texts are authentic)

(Text with EEA relevance)

(2004/393/EC)

THE COMMISSION OF THE EUROPEAN COMMUNITIES,

Having regard to the Treaty establishing the European Community, and in particular the first subparagraph of Article 88(2) thereof,

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

Having called on interested parties to submit their comments pursuant to the above Articles(1), and having regard to these comments,

Whereas:

1. PROCEDURE

(1) Following information published in the Belgian press in July 2001 and the receipt of a complaint in January 2002, the Commission was informed that Belgium had granted a number of advantages to the airline Ryanair for the operation of air services at Charleroi Airport. In letters dated 21 November 2001, 13 June 2002 and 4 July 2002, and in a meeting held on 9 October 2002, Belgium transmitted information on to the Commission.

(2) In a letter dated 13 December 2002 (SG(2002) D/233141), the Commission informed Belgium of its decision to initiate the procedure provided for in Article 88(2) of the Treaty in respect of these measures. Belgium transmitted its comments on 14 February 2003 after having requested an extension until 15 February 2003 of the period for its response, which was accepted by the Commission.

(3) The Commission's decision to initiate the procedure was published in the Official Journal of the European Union(2). The Commission invited interested parties to submit their comments on the measures in question within one month of the publication date.

(4) The Commission received comments on the subject from interested parties. It transmitted the comments that did not contain confidential information to Belgium by a letter dated 19 March 2003, and followed by the other contributions, from which the confidential information had been removed, by letter dated 22 April 2003. On each occasion, Belgium was given the opportunity to respond to them within one month. The Commission received Belgium's observations by letters dated 16 and 27 May 2003.

(5) At the request of the Commission, three meetings were held with the Belgian authorities on 24 June 2003, 23 July 2003 and 25 July 2003. These meetings were followed by the dispatch of additional information, as requested by the Commission, on 27 August 2003.

(6) On 19 December 2003, Belgium sent a final letter to the Commission, containing additional information. In this letter, the Belgian authorities requested another meeting with the Commission; this meeting was held on 16 January 2004.

2. DESCRIPTION

2.1. BRIEF DESCRIPTION OF THE FACTS

(7) On 6 November 2001 the Walloon Region, the owner of the Charleroi airport infrastructure, signed an agreement with Ryanair that involved a reduction of some 50 % in the amount of the landing charge compared with the amount fixed by the government and published in the Moniteur Belge(3). This reduction was granted to Ryanair on a discretionary basis by the Walloon Minister for Transport, through a private contract and not through the adoption of a statutory measure. While the landing charge is calculated according to the tonnage weight of the aircraft under the general system applicable to all, it is calculated on a different basis for Ryanair and collected for each embarking passenger(4). In addition, the Walloon Region undertook to compensate Ryanair for the losses that the company might incur because of a possible change in the level of all airport taxes or airport opening hours during the years 2001-2016(5). These advantages were not published and were not subject to any specific obligation on the part of Ryanair towards the Walloon Region.

(8) Brussels South Charleroi Airport (BSCA) is a public sector company controlled by the Walloon Region, which has managed the airport since 1991 under a 50-year concession agreement. BSCA collects financial support from the Walloon Region in order to carry out certain tasks of general interest entrusted to it. Under this agreement, BSCA is authorised to collect air-traffic fees of up to 65 % as well as fees corresponding to any services provided(6). In a letter dated 4 July 2002, the Belgian authorities explained that the Walloon Region gives BSCA a flat 65 % of the revenue from the taxes by way of compensation: "The elements taken into account are involvement in the welcoming, embarkation, disembarkation and transfer of passengers and their luggage and the volume of increase in overheads that cannot be allocated to a specific heading, following the rapid increase in the number of passengers to be dealt with in reception facilities that are currently not adapted". The Belgian authorities specify that "these activities involve a public service task and can thus be the subject of compensation, in accordance with Articles 73 and 86(2) of the EC Treaty".

(9) This income allows BSCA to grant Ryanair a "share" in the expenditure connected with the opening of Ryanair's base in Charleroi (EUR 250000 for hotel costs and Ryanair staff subsistence; EUR 160000 for each new route opened up to a maximum of three routes for each based aircraft or a maximum of EUR 1920000; EUR 768000 for participation in the cost of recruiting and training pilots and crews assigned to the new destinations served by the airport; EUR 4000 for the purchase of office equipment; free provision of 100 m3 of office space; 100 m3 of "engineering store"; the right of access to the training room; and a minimum or zero contribution for the use of a hangar for aircraft maintenance).

(10) In addition, the price fixed for ground handling services for Ryanair is EUR 1 per passenger, a mere 10 % of the price publicised by BSCA for other users.

(11) Ryanair and BSCA have formed a joint advertising and publicity company, which finances all Ryanair's publicity and marketing in relation to its activities at Charleroi. For example, the company finances part of the price of Ryanair's promotional tickets. BSCA and Ryanair contribute in the same proportions to the Promocy operation (EUR 62500 to put together Promocy's authorised capital, and a "marketing" contribution of EUR 4 per passenger to its annual budget).

(12) In return, Ryanair undertook vis-à-vis BSCA to base a number of aircraft at Charleroi (between two and four) and to operate at least three rotations per aircraft leaving Charleroi over a 15-year period. The Irish company thus provides the airport manager with airport passenger traffic that allows it to anticipate income, either through airport taxes or through non-aeronautical activities. If Ryanair had to cease its operations at Charleroi, the company would be required to repay to BSCA the "participation" in the expenditure connected with the opening of Ryanair's base and the "marketing contribution".

2.2. INITIAL ASSESSMENT BY THE COMMISSION, APPEARING IN THE DECISION TO INITIATE THE PROCEDURE

(13) In its decision to initiate the procedure, the Commission considered first of all that the granting by the Walloon Region of a reduction in airport taxes to one airline company only, on all its flights for a period of fifteen years, in a bilateral agreement that was given no publicity and deviates from the stipulations of the law, amounts to granting a tax exemption to a company. This places the company in a more advantageous position that its competitors flying out of Charleroi. A compensation guarantee in favour of Ryanair in the event that the Walloon Region exercises its fiscal powers (by increasing taxes) or regulatory powers (by altering the airport opening times) allows it to operate in conditions and in a commercial environment that are quite stable and safe from any commercial risk; this constitutes a privilege that favours that airline company alone. The Commission also considered that the principle of a private investor in a market economy was not applicable to the action of the Walloon Region in the exercise of its regulatory and fiscal powers(7). These measures are specific, granted through State resources and likely to distort competition and intra-Community trade, and could thus be considered to constitute State aid.

(14) The Commission judged that the bearing by BSCA of certain air service running costs also had the effect of putting Ryanair in a more advantageous situation than its competitors, whether they were companies operating out of Charleroi or other companies operating out of other airports and required to finance their own publicity, pilot training, employee accommodation etc. With regard to the principle of private investor in a market economy, the Commission considered that it would be difficult to apply it to this case, as the role of the Walloon Region as a public authority and that of BSCA as an airport business were strongly intertwined. It therefore seemed difficult to determine with any certainty whether BSCA had acted like a private investor by concluding the agreements with Ryanair, an action that left doubt as to whether the public authorities and the public company BSCA, controlled by them, would have granted illegal and potentially incompatible aid to the Irish company.

(15) The Commission concluded, in the decision to initiate the procedure, that insofar as the advantages granted to Ryanair constituted State aid within the meaning of Article 87(1) of the Treaty, it doubted that this aid could be compatible with the common market on the basis of the exemptions provided for in Article 87(2) and 87(3) of the Treaty.

3. COMMENTS BY INTERESTED PARTIES

(16) The Commission received critical comments with regard to the agreements as well as contributions from third parties who defended their validity.

3.1. SUMMARY OF COMMENTS BY INTERESTED PARTIES

(17) The interested parties are less critical of the financial incentives granted to Ryanair than of the conditions under which they were provided (magnitude, absence of proportionality and phased reduction, unlimited duration, absence of transparency, discrimination and inequality of companies in relation to airport tax rates). Almost all the interested parties stress the competitive impact of the aid on other airlines and even on other modes of transport. Some third parties have also raised factual questions (payment of 65 % of airport taxes to BSCA as a public service compensation, re-capitalisation of BSCA by the Walloon Region, making the airport infrastructure available to BSCA's benefit; bearing of safety costs by the Walloon Region; opening up the ground handling market to other operators in accordance with Directive 96/67/EC).

(18) The interested parties, defending the validity of these agreements explain that they are consistent with current practices in the airport industry and that it is normal for airports to grant advantages to airlines that bring them passenger volumes and generate significant income. They consider that the Walloon Region and BSCA behaved as private investors in a market economy by negotiating agreements with Ryanair. The interested third parties stress that if the Commission were to conclude that it was tantamount to State aid, it would be practising discrimination between private and public airports, in breach of Article 295 of the Treaty. The Commission should not require the agreements negotiated between public airports and airlines to be made public, as this would put public airports at a competitive disadvantage in relation to private airports.

3.2. COMMENTS BY INTERESTED PARTIES CRITICAL OF THE AGREEMENTS

3.2.1. BRITANNIA

(19) The airline Britannia considers that it is normal for airports to be able to provide marketing support and reductions according to volumes of passengers supplied by the companies, especially in the case of airports that are not yet well established. However, these advantages must remain proportional, realistic and limited in duration. Britannia is worried by the inequality created between competing airlines in this specific case. The airport taxes are unequal and unrealistic, while the low-cost companies use the runways, terminals and security facilities in the same way as the other airlines.

3.2.2. SCANDINAVIAN AIRLINES

(20) SAS recalls that the deregulation of European airspace led to increased competition among the traditional airlines and also allowed the creation of new companies that developed new business concepts. It is of fundamental importance that this competition complies with the regulatory framework applied transparently and without discrimination.

3.2.3. KLM ROYAL DUTCH AIRLINES

(21) KLM explains that low fares airlines and traditional airlines offer different products and that each one of them has their "raison d'être" at both commercial and operational level. Low fares airlines generally avoid large airports, for which the logistics can be complicated and the utilisation costs high; they choose regional platforms that allow them to operate rapid rotations at a reduced cost. These developments should not be called into question, but they should not be based on aid. According to KLM, the advantages received by Ryanair at Charleroi go well beyond what is permitted under Article 87(1) of the Treaty, and the compensation granted by Ryanair, consisting of basing a number of aircraft at Charleroi airport, changes nothing in this state of affairs.

3.2.4. AIR FRANCE

(22) Air France considers that the reduction of Ryanair's running costs and their absorption by the Walloon Region and BSCA create a disadvantage for Ryanair's competitors who provide connections on the intra-Community market. The reduction in landing charges allows Ryanair to reduce its running costs and in fact makes it more competitive than its competitors, not only on the flights that it operates into or out of Charleroi but throughout the Ryanair network. The compensation commitment given by the Walloon Region is also regarded as an advantage that guarantees stability of operating conditions to Ryanair, while "the practice of operating any airport platform demonstrates that the commercial and regulatory environment is never rigid. Total airport taxes can thus easily rise if the manager is forced to finance specific measures with the possible aim of accommodating other carriers wishing to establish themselves at Charleroi. In addition, the development of environmental measures can alter the conditions of operation of an airport". Air France also draws a parallel between the situation at Charleroi and that obtaining in other Member States, especially in France.

3.2.5. AUSTRIAN AIRLINES

(23) According to Austrian Airlines, the arrival of low fares airlines gave rise to a subsidies race between airports and regions wishing to be served by those carriers. These developments called the principle of payment for availability of infrastructures into question, at a time when it is one of the basic rules of the civil aviation world. The aid granted is not degressive; it is independent of the success realised by Ryanair on the connections that it serves and benefits one airline only, and this generates discrimination. Austrian Airlines concludes that "cooperation" such as that observed between Ryanair and the Walloon Region leads to significant distortion of competition between airlines and is largely incompatible with the smooth operation of the internal aviation market.

3.2.6. ASSOCIATION OF RESIDENTS AND INHABITANTS OF TOWNS CLOSE TO CHARLEROI-GOSSELIES AIRPORT (ARACH)

(24) ARACH draws the Commission's attention to the fact that it had asked the competent minister for copies of the agreements between Ryanair, the Walloon Region and BSCA in accordance with the right of access to information on the environment and that it did not obtain the information. The Association is concerned that the financial aid granted to Ryanair will lead to "unbridled development of the airport" within an urban site, and that in these terms "as both citizens and taxpayers, we are concerned about the questionable government aid granted to a private company as this involves improper use of the Walloon Region's budgetary resources".

3.2.7. INTERESTED PARTY A

(25) An interested party states that it is "very concerned" at the subsidies granted by the local authorities, which affect the conditions of competition between various modes of transport. "In this way, Ryanair is benefiting in particular from public subsidies for the Charleroi-London connection, while Eurostar, operated jointly by SNCB, the British Railways and SNCF, is not benefiting from them. Both means of transport are however in direct competition on the Brussels-London link. It is up to the railway operators alone to make their communications for the link, purchase the equipment and engines, pay infrastructure and tunnel tolls, etc. The equality of treatment between competitors is therefore disrupted".

3.2.8. INTERESTED PARTY B

(26) Interested Party B points out that the advantages granted to Ryanair reduce its cost structure and enable it to apply lower fares. These practices affect the conditions of competition, whether these companies operate out of Charleroi or Brussels National Airport at Zaventem, whatever the route served. Competition between the so-called "low cost" airlines is not merely competition that has to be analysed on a route-by-route basis. For many travellers, the Venice or Barcelona destinations are wholly exchangeable. The interest aroused by low-cost flights amongst these passengers is not in the fact of travelling to a specific place, but rather in making a break in their day-to-day routine, whether it is to Venice or Barcelona. Competition therefore occurs on every route.

(27) This company explains that the direct costs out of Brussels are EUR 32,14 per passenger compared with EUR 5 for Ryanair operating out of Charleroi(8).

(28) Even though the ground handling services are more limited for Ryanair than for other airlines, the interested party points out that a considerable amount of ground handling services is necessary for all companies. The fact that the ground handling market is open to competition at Brussels National airport means that assistance costs should not normally be much higher in Brussels than at Charleroi. Assistance costs are, generally speaking, higher at small airports than at large airports, insofar as the companies generally do not manage to reach the critical size for making savings of significant scale. The interested party estimates that Ryanair saved EUR 17 million in 2003 on actual ground handling costs and landing charges. It also appears that BSCA has not taken account of Council Directive 96/67/EC dated 15 October 1996 on access to the ground handling market at Community airports(9): the airport should reach two million passengers a year quite soon and BSCA will need to apply the Directive to this threshold and open the ground handling market to other operators.

(29) BSCA would have acted not as a private investor in a market economy but for political and social reasons, on the instructions of the Walloon Region. The 15-year contract will probably not allow BSCA to establish itself as a profitable business and it is expected to continue to experience operational problems. The prospect of a return on investment could be undermined if Ryanair withdraws(10).

(30) BSCA would obtain contributions from the Walloon Region, whether from airport tax revenue at a rate of 65 % or from the free availability of the infrastructure, while the Walloon Region paid a contribution to the Walloon Airports Company (Sowaer). In principle, each payment from the Walloon Region should be limited to compensation for the costs connected to public service obligations and incumbent on BSCA, and the situation is not very clear in this regard.

(31) For this company, which acknowledges also that it benefited on occasion from "marketing" advantages for the launch of new destinations but never from reductions in airport taxes or in ground handling costs, the advantages granted to Ryanair at Charleroi go well beyond the bounds of current practice. It estimates however that it took commercial risks just as important by setting itself up at Brussels National Airport at a time when competition from Sabena was very strong.

(32) The fact that some other airport managers grant advantages to Ryanair would not be relevant in demonstrating that Charleroi Airport acted as a private investor in a market economy. The company refers to the Steinike & Weiling judgment delivered by the Court of Justice of the European Communities(11).

3.2.9. INTERESTED PARTY C

(33) According to Interested Party C, BSCA had not behaved like a private investor insofar as the magnitude of the advantages granted was different from that granted by other airports(12). The fact that Ryanair receives advantages from other airports was not relevant at all, as they could also constitute State aid.

(34) The Interested Party draws the Commission's attention to several factors that must be taken into account in the analysis of the potential profitability to BSCA and appear to exclude medium-term profits:

- BSCA benefited from a re-capitalisation from the Walloon Region, totalling EUR 4 million, in December 2002.

- It "benefits from exemption from half of the total of its fee due to the Walloon Region for the period 2001-2006. This advantage totals one million euros per year, which BSCA will however have to pay back from 2007 onwards".

- The Commission should take account of the total costs relating to the Charleroi Airport expansion project, valued at EUR 95 million, and the methods of finance. If this work is not covered by BSCA, there will be a need to verify the conditions under which the Walloon Region makes the infrastructures available to BSCA. The Interested Party doubts that given the current state of its infrastructures, the airport would be in a position to cater for sufficient passengers to ensure the financial balance of BSCA.

- The Walloon Region supplies BSCA free of charge with the equipment and staff needed for all the security operations at Charleroi Airport, namely passenger and luggage control prior to embarkation, and Interested Party C adds: "The Commission has certainly been informed that as a general rule security costs are borne by the airport users, either through a security fee payable to the airport operator or through a tax when these services are provided by the public authority".

3.3. COMMENTS BY INTERESTED PARTIES DEFENDING THE VALIDITY OF THE AGREEMENTS

3.3.1. TBI

(35) TBI is a company that has several airports across the world and provides various types of airport services. It owns and manages London Luton, Cardiff International, Belfast International and Stockholm Skavsta airports. It manages four other airports belonging to local regions and authorities. Finally, it supplies specialised airport services at 28 other airports.

(36) TBI states that negotiations were in progress with Ryanair for the use of Stockholm Skavsta at the time when the company was negotiating with Charleroi Airport and the agreements signed in Charleroi are similar to the arrangements concluded by TBI with Ryanair and other low-cost companies, especially in Stockholm Skavsta.

(37) TBI points out that the development of airports such as Charleroi should not be slowed down in relation to its private competitors by the simple fact that these are public airports.

- The act of granting reductions on landing charges and ground handling costs is a standard commercial practice aimed at attracting companies in a position to provide a significant volume of passengers. This volume guarantees trading income for the airport(13). Without these passenger volumes, the airport would be in a constant struggle to reach break-even point.

- Airports belonging to the State should be able to pay compensation in the event of an increase in regional authority taxes, as private airports can fix them for the contractual period.

- Contributions in the form of paying for hotel costs or the costs of staff training or marketing are not unusual and should be compared to the investment made and the risk taken by the carrier basing an aircraft in a little-known airport.

- Marketing contributions are common within the framework of little-used airports. Companies that use these airports have to channel a great deal of effort into marketing their flights. This marketing process benefits the airport, which enjoys an improvement in image and in passenger numbers. TBI offers this type of contribution, especially when an operator establishes a new service or increases the frequency of certain flights on a given route.

- It would be unfair to impose on public airports an obligation to publicise the agreements negotiated by them with airline companies, as this obligation would place them in a situation of competitive disadvantage in relation to private airports not subject to the obligation.

(38) TBI explains that regional airports were under-used for years because of the absence of competition between airlines before the opening-up of markets at European level, and since that date, because the traditional companies have become polarised around their hubs. The rise of companies such as Ryanair, operating point-to-point services from smaller airports, has reversed this trend and gives them a chance of reaching break-even point. The experiences of London Luton, 70 % of whose users are low-cost companies (Easyjet, Ryanair, Hapag Lloyd)(14), Cardiff, used 65 % by low-cost companies (especially Bmibaby)(15),, Belfast (Easyjet, Go), and Stockholm Skavsta(16), which became Ryanair's base in January 2003, are illustrations of this.

3.3.2. HRL MORRISON AND CO

(39) HRL Morrison and Co. is, via its subsidiary Infratil, the 67 % owner of Glasgow Prestwick, whose history it briefly retraces. When Glasgow Airport was sold by the British Airport Authority in 1992, the airport capacity was just 1 % used. In 1994, when attracting the traditional companies proved impossible, the airport decided to conclude a 15-year agreement with Ryanair for two daily rotations between Glasgow and Dublin. 114000 passengers were carried between Ireland and Scotland in the first year. Since then, Ryanair has developed several routes there and should carry 1,7 million passengers in 2003. Thanks to Ryanair, the airport has been able to develop its commercial operations, reaching critical size and break-even point.

(40) According to Morrison, a private investor could adopt the approach taken by Charleroi Airport. It would base its offer on certain determining factors: the volume of passengers that a company could bring to the airport, its willingness to commit itself long-term by means of contracts; the specific needs of the company; the aircraft movement timetable and its consistency with airport activity (existing traffic); the terminal's needs in terms of resources, and ground handling assistance. It would calculate the profits expected under the agreement with Ryanair overall (and not under the various constituent elements taken separately). The benefits of such a transaction should be envisaged over a period of some 20 years, with the services taking off after 3-5 years. When a 15-year agreement is involved, the shareholders in Morrison consider that it could be commercially acceptable if a return on investment occurs some five years after signature of the agreement.

(41) Morrison, in essence, made the same remarks as TBI with regard to reductions in fees, contributions and financial incentives, specifying that:

- It is not unusual for airports to negotiate reductions in airport taxes and ground handling costs in exchange for volumes of passengers and a long-term commitment from Ryanair, thus preventing the company from choosing another airport(17);

- Airports are in a difficult situation with regard to advertising, as the only really effective way of providing it is to promote air services that leave that airport. The fact that the name of the airport does not appear in the first line is not paramount; what counts is the benefit arising from the advertising campaign, that is, the increase in passenger numbers.

(42) The best proof of the commercial character of the agreements negotiated in Charleroi would lie in the fact that Morrison would be interested in acquiring a holding in BSCA, although it has not had access to BSCA's accounts.

(43) Morrison considers that the Commission would be wrong to oblige an airport to concede the same conditions to just any company without applying a distinction according to the volume of traffic generated. It would also be wrong to impose a publicity obligation on private commercial transactions, insofar as this would provide competing airports with sensitive information covered by professional secrecy.

3.3.3. RYANAIR

(44) By way of a general remark, Ryanair stresses the consequences of the Commission Decision on the survival of regional airports and the deregulation of air transport services in the next twenty years. By taking risks, the low-cost companies have succeeded in doing what the traditional companies failed to do: they made underused regional airports such as London Stansted, Glasgow Prestwick, London Luton, Belfast etc. viable. These airports are now in competition with major airports, forcing the old monopolies to lower their costs and improve efficiency. It is consumers who benefit from this situation as they have access to plane tickets at good prices. The Commission should not deprive continental secondary airports of the experiences of the United Kingdom airports, which also offer incentives.

(45) If the Commission were to conclude that this case involved State aid, it would do so:

- in violation of Article 295 of the Treaty, by introducing discrimination between public and private airports; the Commission cannot prejudge the ownership regime in Member States;

- by preventing a public airport from offering the same financial conditions as those offered by private airports, which would be unacceptable at political and legal level;

- by compelling an airport to publish all its charges when there are no legal obligations on this point, the Commission would be abusing the power that it holds under the provisions of the Treaty on State aid, whereas the Treaty provides a distinct legal basis, Article 80, for legislating on airport fees(18). The proposal for a Council Directive on airport fees(19) rested on this legal basis.

(46) After recalling what the relations with the Walloon airport were, Ryanair points out that the agreements negotiated between Ryanair, BSCA and the Walloon Region did not contain any elements of State aid, for three reasons: the principle of private investor in a market economy applies, there is no selectivity, and the agreements do not distort the competition.

3.3.3.1. Relations between Ryanair and the secondary airports

(47) To attract investments in their infrastructure, secondary airports need a critical mass of passengers that can be obtained only through long-term agreements with an airline. The guaranteed volumes of passengers are different for bases or routes opened by Ryanair, as Tables 1 and 2 show.

Table 1 - Ryanair bases (volume of passengers)

>TABLE>

Table 2 - Ryanair routes (volume of passengers)

>TABLE>

(48) To attract companies, airports are ready to negotiate reductions, as was shown in a study requested by the Commission(20). Ryanair provided confidential information to the Commission on what the company pays at Charleroi and at "private" airports such as Stockholm-Skavsta, Glasgow Prestwick, Frankfurt-Hahn, Ancona, Bournemouth, Liverpool or Knock, showing that the net payment provided as a benefit at Charleroi is higher than those provided at other airports(21).

(49) Before Ryanair set up at Charleroi, the airport received only 20000 passengers per year, an average of 50 per day. Thanks to the Charleroi-Dublin route, opened on 1 May 1997, Ryanair transported 178000 passengers in 2000. In four years, it transported more passengers between these two cities than all the traffic in existence on the Brussels-Dublin route in 1997. In 2002, the airport received over 1,25 million passengers, almost 4000 per day, for ten destinations across Europe. The volume of traffic increased by 1,455 % between 1997 and 2002.

(50) Ryanair has made a number of remarks on how its negotiations with the airport developed, in connection with the description given in the decision to initiate the procedure:

- During summer and autumn 2000, Ryanair commenced negotiations with other airports, either for the creation of a new Ryanair base or to add new aircraft to certain lines from summer 2001 onwards.

- The agreements between BSCA, Ryanair and the Walloon Region were approved in February 2001. Their signature in November 2001 is merely their formalisation. The negotiations with Charleroi were conducted like all trade negotiations.

Application of the principle of private investor in a market economy

(51) The principle of private investor in a market economy must be applied both to BSCA, which is acting as any airport manager would by maximising the profitability of the airport, and to the Walloon Region, the airport owner, which is acting as any airport shareholder seeking to maximise the value of the airport. The agreements were concluded under normal market conditions, as has happened with several private airports. In addition, Ryanair received more favourable conditions from London Luton.

(52) The profits generated by the arrival of Ryanair for the owner and manager of the airport exceed those of Ryanair, guaranteeing, for example, an increase in the value of the airport (a huge investment in the form of four aircraft based permanently at Charleroi, an average of 4000 passengers a day, over 1,5 million passengers in 2003, efficient use of the airport, substantial profits in two years, growth of the most significant kind for a European airport based on a 150-year agreement, ten destinations in four European countries, investment in the marketing of the airport, heavy financial penalties for Ryanair in the event of failure to respect the conditions laid down in the contract in relation to passenger volumes, experience in dealing with one of the most effective companies in the world and more experienced staff, increase in rental income, increase in the business value of the airport, and a more attractive airport for new investors).

(53) The duration of the agreements (15 years) is not unusual. Ryanair has agreements lasting 10 to 20 years with almost all the airports that it uses. These durations guarantee stability of income, which makes investment in long-term infrastructures possible.

Application of the principle of private investor in a market economy to the Walloon Region

(54) Ryanair considers that the principle of private investor in a market economy is applicable to the Walloon Region, as the measures taken by the Region were taken purely in its capacity as an economic actor and not as a regulator exercising public power prerogatives. Ryanair asks the Commission to bear in mind that the Walloon Region is acting as the airport owner. In addition, as the Walloon Region is the main shareholder in BSCA, any benefit for BSCA also benefits the airport owner.

(55) The value of Charleroi airport has increased considerably since Ryanair set up there six years ago, especially over the last four years. As for any other airport, this value is commensurate with the volumes of passengers transported, especially by low-cost companies(22). The commercial success of BSCA is demonstrated in the interest shown by businesses such as Morrison, Vinci and Aéroports de Paris in the purchase of 25 % of BSCA. As examples of this increase in value, Ryanair cites Glasgow and Copenhagen airports and those belonging to the British Airport Authority(23).

(56) By modifying the landing charges for Ryanair, the Walloon Region would have acted as a market actor and not as a regulator or fiscal authority that raises or lowers "tax" levels. In addition, we are not looking at "taxes" here, but at "fees", as the Walloon regulations term them. The "fees" are paid entirely to BSCA and not to the Walloon Region. In general and in practice, these fees are collected by the airports (after agreement and negotiation) from the airlines. The rates published may be approved by the governments, but in essence they are determined by the airports and negotiated directly between airports and airlines.

(57) Reductions in landing charges for the launch of new services or the strengthening of new frequencies are common in the industry, with the exception of congested hubs such as Heathrow and Charles de Gaulle.

(58) The Commission appears to consider that it is unusual or even illegal to fix the total landing charges on a passenger basis and not according to the weight of the aircraft. Ryanair, however, has agreements with several airports based on this model.

(59) Ryanair points out that the weights quoted in the decision to initiate the procedure are not correct. The weight of a Boeing 737-800 developed for Ryanair (the only type of aircraft now used at Charleroi) is 67 tonnes and not 78. On this basis, the amount of the reduction is 36.7 % on average and not 50 %. If this particular agreement did not exist, Ryanair would be eligible for the system of reductions provided for in the Belgian legislation of 1998, which makes provision for reductions of 5-25 %.

(60) With regard to the compensation guarantees or "obligations not to do", undertaken by the Walloon Region in the event of changes to airport fees before 2015 and alteration of airport opening times, these are not matters of a "regulatory" nature but commercial decisions essential for the establishment of a Ryanair base. These guarantees would be similar to "stabilisation clauses" or "comfort letters" used in the context of long-term agreements between private companies and state bodies, for example in the tunnel or pipeline sector or in the context of privatisation. It would be normal for parent companies to grant these guarantees to third parties signing contracts with their subsidiaries. It is essential for Ryanair to obtain a measure of security from a government. These guarantees would not limit the sovereignty of the Walloon Region by preventing it from changing the law: there would be no compensation for changes initiated by other parties outside the competence of the Walloon Region (at federal, European or international level). These undertakings, according to Ryanair, cannot be seen as limiting or calling into question the exercise of regulatory power.

(61) If the Commission were to decide that the Walloon Region did not have the right to give this assurance without even considering whether a private investor in a market economy would have done so, it would be discriminating between public airports (whose fees are often fixed and controlled by a government or regulatory authority) and private airports (which are free to fix fees for the duration of a contract).

Application of the principle of private investor in a market economy to BSCA

(62) Ryanair is criticising the fact that the Commission, in its decision to initiate the procedure, saw difficulty in applying the principle of private investor in a market economy to BSCA because of the complexity of its relations with the Walloon Region. The Commission will have to apply this principle by separating the various activities of BSCA from those of the Walloon Region, basing itself not on the present moment but on the duration of the contract (15 years) or even on the duration of the BSCA concession (50 years). The fact that BSCA showed losses for the first few years is not significant, as the return on investment is realised after a few years(24). Since BSCA's projections have a reasonable foundation and indicate a reasonable return on investment within a five-year period, the Commission would not have any objective reason for concluding that State aid was present. The Commission should not be indifferent to any proof showing a posteriori that the investment decisions were the right ones.

(63) The Commission must consider the whole of the income collected by BSCA according to the "single till" principle, that is, without making a separation between air travel revenue and income linked to BSCA's commercial activities. Once the critical mass of passengers (which generally corresponds to two million) has been reached, BSCA may expect its business revenue to offset any possible shortfall in air travel revenue.

(64) The profitability of the airport will increase thanks to a "network effect", as there are positive external factors between an airport and the airlines; the expansion of one party provides an incentive for the other to develop(25). A second reason for the profitability of the airport is linked to the "learning curve" and economies of scale, which also lower the airport's unit costs. Given the rapid expansion in traffic at the airport, it is probable that at this stage, the managers' attention was focused on the needs relating to handling these volumes of passengers, and not to any economies of scale.

(65) The Commission should not take account of the costs of the infrastructure in the case of airports such as Charleroi; these costs should be considered as irrecoverable or "sunk" costs financed many years ago, sometimes under the military expenditure of a government. In addition, Ryanair recalls that the Commission's policy was generally one of considering that the financing of infrastructures does not constitute State aid when it falls within the framework of national or European transport policy.

(66) The advantages for BSCA in having a contract with Ryanair include in particular the revenue from airport taxes, which Ryanair estimates at EUR 243 million during the period 2001-2015, and the services provided by Ryanair in relation to marketing, sold to it at much lower prices than to other partners (value of publicity, of a link with the Ryanair.com site, of promotional tickets etc).

(67) Ryanair specifies, with regard to the advantages that it receives:

- The "one-off" incentives, estimated to total 2,5 million, are aimed at developing new geographical connections rather than at operating fewer routes at a higher frequency. They are paid on the basis of invoices and must be repaid if Ryanair withdraws. This is common practice in the airport industry (for example Waterford, Belfast, Bristol, Liverpool, Luton and Stansted) and Ryanair benefits from it at Stockholm Skavsta.

- The marketing contribution is probably a better tool for promoting an airport than a reduction in airport fees. The owner and manager of the airport both benefit from the Promocy campaigns, which help increase passenger volumes, revenue and the value of the airport. Such campaigns are common in the airport industry(26).

- With regard to the provision of offices and the EUR 4000 grant for office equipment, Ryanair points out that the sum of EUR 4000 is scarcely of importance and indeed is a "minimum" amount. Ryanair did not use the office space offered and no building work was carried out in Ryanair's favour.

3.3.3.2. Absence of selectivity

(68) Ryanair recalls that the Charleroi agreements were given a measure of publicity. They were known to the industry and received press coverage in Belgium, the United Kingdom and Ireland in 2001, and were confirmed by the Walloon authorities in a press communiqué in July 2001, which indicated that the advantages granted would be available to other airlines investing in Charleroi under similar conditions. Ryanair considers that a publicity obligation would lead to discrimination between public airports and private airports (which are exempted), in contradiction of Article 295 of the Treaty. The decision taken by the Commission in the Manchester case(27) should not be used as a base for compelling public airports to offer the same conditions to all companies, without considering their position.

(69) The selectivity criterion would be absent in this case, for a number of reasons put forward by the company: the agreements would not be exclusive and reductions could be granted to other users, and in addition Belgian law provides for a system of reductions and the Charleroi Airport promotional documentation mentions the possibility of reductions. The airport would have taken steps with 35 airlines before and after the agreements with Ryanair, and would have additional capacity to welcome other airlines.

3.3.3.3. Impact on competition

(70) Ryanair considers that the conditions of competition were not affected on the relevant market, which it defines by analogy with competition law to extend it to include rights to State aid. There would not in fact be any competition in relation to the type of products covered (charter flights and scheduled flights) and the geographical area covered (the routes served).

(71) Contrary to the Commission's assertion, the companies operating out of Charleroi airport are not competitors of Ryanair. They are charter companies, which offer one or two flights per week from Charleroi, mostly during the summer. In addition, Ryanair supposes that these companies have not lodged a complaint. This can be explained by the fact that the agreements between the Walloon Region, BSCA and Ryanair do not have any effect on them. In fact, they benefit more from the marketing campaign, developed by Ryanair and BSCA, which has turned Charleroi into a known airport. In addition, charter companies do not generally pay much attention to the costs linked to the use of their airports, as they operate costly and irregular services for which ground handling costs or air travel costs only form a small part of the overall travel costs or "package". Conversely, airport costs make up a very large part of the Ryanair ticket price.

(72) There is a level of competition between Ryanair and the companies that operate out of other airports, but it has not been distorted because the other airports offer other competitive advantages. Ryanair's direct competitors, such as Easyjet and Virgin Express, have refused to use Charleroi airport; their competitive positions would not therefore have been affected by the Charleroi agreements.

3.3.3.4. Compatibility of aid

(73) If the Commission concludes that State aid is present, it would be obliged to determine the compatibility of the measures with the common market on the basis of the relevant frameworks, on the basis of the exemption rules, or on their own merits. The socioeconomic benefits brought to the region should be analysed, and Ryanair states that it reserves the right to adopt a more detailed position if the Commission were to examine the measures for compatibility on the basis of Article 87(3) of the Treaty.

(74) In an annex to its response(28), Ryanair explains that the economic impact of the airport activity on the region is higher than for other airports, insofar as the passengers are not in transit. By 2005, Ryanair should be transporting about 1,95 million passengers and the number of jobs generated should be at least 1400, including the 120 Ryanair employees(29). By 2010, with 60 rotations, Ryanair would be in a position to create 4235 additional jobs (2329 direct and 290 indirect). Its activity will lead other businesses to set up in the region, with the airport opening the door to international activity. Ryanair also contributes to the development of tourist activity and income in Belgium; it encourages passengers to come back to Belgium because of its low-price ticket policy.

(75) Ryanair recalls that the Hainaut region is one of the poorest in Belgium and falls within Article 87(3)(c) of the Treaty, and that although the aid does not fulfil a priori all of the conditions defined in the various frameworks and exemption rules, the Commission would however be required to judge each case on its individual merits(30). In particular, Ryanair is asking the Commission to assess the compatibility of aid for pilot training on the basis of Commission Regulation (EC) No 68/2001 of 12 January 2001 on the application of Articles 87 and 88 of the EC Treaty to training aid(31).

4. COMMENTS FROM BELGIUM

(76) Belgium communicated its comments when the procedure was initiated in February 2003. In addition to remarks on the development of secondary airports and relations with Ryanair, and on the private investor behaviour of the Walloon Region, the response included a demonstration of the behaviour of BSCA as a private investor in a market economy. The company's business plan dated April 2002, together with a specialist report by the consultant Deloitte & Touche dated 2003 and intended to assess plausibility in relation to the company's results, was sent to the Commission. The report, submitted to the Commission, allowed the consultants to validate the structure and the general hypotheses that underlay the BSCA business plan. The consultants even concluded that the future results to be expected today are better than those shown in the business plan, and that "although a first reading creates the impression that the Board of Directors, by committing the company to Ryanair, is considerably increasing activity at the expense of profitability, developments in years to come show that on the contrary, the business plan brings the results back to a positive total in 2004 and they will continue to improve, as our comments on the profitability of the investment in terms of equity funds demonstrates. [...] It can therefore be considered that the Board's decision was justified by a business plan that has so far turned out to be prudent and reliable, and that a period of negative profitability lasting three years represents a normal transition between the differing conditions of operation"(32).

(77) In response to the comments from the interested third parties, Belgium submitted some additional elements to the Commission in May 2003. On this occasion it pointed out that thanks to the successful management of its activities and the faster than anticipated increase in commercial income, the Board of Directors of BSCA approved a 2003 budget that showed a positive result and the results for the third and fourth quarters of 2002 showed a profit of EUR [...](33) and a break-even result respectively.

(78) The Commission requested meetings with the Belgian authorities in order to clarify a number of questions still outstanding in relation to BSCA's behaviour as a private investor in a market economy, airport taxes, the environment fund, the maintenance/fire compensation and the re-capitalisation of BSCA.

(79) The central question addressed during these meetings was the behaviour of BSCA. The Commission pointed out that the BSCA business plan sent to the Commission, together with the consultant's report, could not be used as an appropriate basis for applying the private investor principle. This plan was dated spring 2002, and therefore post-dated BSCA's investment decision to commit itself with regard to Ryanair in 2001. The 2002 plan was even less admissible as it was based on operating parameters different from those known to BSCA in 2001. In fact, it included elements that reflected the modification made to the concession conditions in 2002(34) and described in the decision to initiate the procedure.

(80) The Commission therefore asked the Belgian authorities to send it the business plan produced by BSCA in 2001, together with any other useful document that would, in accordance with its practice and Court of Justice case law, allow it to analyse the private investor reasoning at the time of the decision to invest. This business plan, sent by Belgium, is the one used by the Commission for the financial analysis carried out with the present decision in mind.

4.1. DEVELOPMENT OF REGIONAL AIRPORTS AND RELATIONS WITH RYANAIR

(81) As in the case of many other regional airports, Belgium indicated that the infrastructure of Charleroi Airport was being under-used and could not be made profitable. When management and operation of regional airports was transferred to the regions in 1988, the Walloon government decided to use the economic potential presented by these airports and made a number of investments aimed at developing them(35). In a decision of 20 July 2000, it approved the guidelines of an investment programme for Charleroi valued at EUR 113730000 (BEF 4588000000)(36).

(82) Belgium stresses that the provisions on State aid laid down in the Treaty do not apply to this type of funding. The Commission guidelines relating to the application of Articles 92 and 93 of the EC Treaty and Article 61 of the EEA agreement to State aid to the aviation sector(37) (hereinafter "the aviation sector guidelines") indicate that "the construction of enlargement of infrastructure projects (such as airports, motorways, bridges, etc.) represents a general measure of economic policy which cannot be controlled by the Commission under the Treaty rules on State aid. Infrastructure development decisions for outside the scope of application of this communication insofar as they are aimed at meeting planning needs or implementing national environmental and transport policies".

(83) Belgium pointed out that according to the University of Cranfield study mentioned in (48), small regional airports cannot survive without public finance if passenger volumes are less than one million per year, and the impact of passenger volumes on the unit costs to be borne by the airports is a determining factor. Unit cost falls significantly from 500000 passengers onwards and stabilises at around 3 million passengers. In order to attract these passenger volumes, efforts have been made to attract airlines to the Charleroi site from 1995 and 1996 onwards.

(84) Contacts were made with low-cost companies (Virgin Express, Ryanair, Easyjet and Debonair), a large number of regional companies and some charter companies (Neckermann, Sunsnacks, Pégase, Sunair, Jet Air, Best Tours, Bosphorus), and the airport was able to develop charter flights in association with Thomas Cook, British World Airlines and Wasteels Travel as well as flights to Algeria and Yemen. However, a series of handicaps that affected the airport(38) and a number of reasons particular to the airlines canvassed made it difficult to set up airlines departing from Charleroi(39).

(85) In 2001, the company Grands Travaux de Marseille (GTM), interested in a holding in BSCA, carried out a study of the development potential of the airport. The study revealed that Ryanair was the only immediately feasible option for BSCA for transforming the airport into a commercial operation that would realise profits in the short or medium term. Belgium specifies: "Although it is true that the financial concessions requested by Ryanair were higher for BSCA than those that could be envisaged for other low-cost companies contacted, the interest shown by these other companies was low or zero, so that they could not constitute a possible alternative to the setting-up of Ryanair at Charleroi".

(86) Belgium stresses that the regional airports and the charter companies are "a winning team". On one hand, these airports are able to grant good time slots, a congestion-free environment, very rapid aircraft rotation and greatly reduced airport taxes, and can offer flexible services that are suitable for this type of airline. On the other hand, these alliances have allowed previously under-used regional airports to enjoy a truly dramatic growth(40). The number of new passengers generated by each new destination launched by Ryanair, on the basis of daily frequency, is increasing by about 100000 per year. An airport therefore derives considerable benefit from the opening of a route. The opening of a base allows a critical mass of various revenue types to be realised, thus ensuring that costs are covered more quickly. Thanks to the opening of the Ryanair base, passenger numbers increased from 773431 in 2001 to 1271979 in 2002. The passenger volume for 2003 has been estimated at 1700000. The network of multiple destinations available immediately further increases the success of the airport. Stansted, Liverpool and Luton airports incurred losses after granting fee reductions to the low-cost companies, but then enjoyed phenomenal growth because of the passenger volumes generated by these companies and showed profits.

(87) The airports have learnt to diversify their sources of income and understood that their profitability depended mainly on the volume of passengers passing through their infrastructures. Commercial income tended to exceed income from aeronautical activities more and more, especially at the main airports. Consequently, these airports, which have become mainly commercial companies, negotiate favourable conditions on a case-by-case basis in order to attract airlines and thus increase traffic volumes. Thus, following the establishment of Ryanair, a number of sub-agents set themselves up at Charleroi(41). The guarantee duration of the contract also made it easier to fix the profitability parameters for the construction of the new terminal, which will allow the commercial capacity of the airport to be increased by improving reception for more passengers and increasing the business surface area.

(88) Belgium underlines the interest in having private airport managers for BSCA, such as Grands Travaux de Marseille(42) or Morrison, who have expressed an interest in acquiring 25 % of the capital: "The fact that private partners such as Vinci and Morrison have shown an interest in acquiring a 25 % shareholding in BSCA clearly demonstrates that the agreement reached with Ryanair could have been reached with a private investor insofar as it appears that BSCA will become a profitable business in the near future".

(89) In terms of airport capacity, Belgium has specified that it is inaccurate to consider that the airport is saturated. At present, the remaining capacity is 25 % from a commercial viewpoint and 50 % from an operational viewpoint. The theoretical capacity of the current infrastructure is estimated at 5,5 million passengers, and in more realistic terms, it could quite reasonably cater for 2,5 million passengers; this leaves a progression margin of about 50 % in relation to the volume of passengers for 2002. BSCA considers that the new terminal will increase capacity by 100 %, thus allowing at least two new airlines to open a base at Charleroi. New users could set up at Charleroi, such as Flyeco, which intends to introduce five destinations in December 2003 and is counting on 300000 passengers in the first year of activity.

4.2. APPLICATION OF THE PRINCIPLE OF A PRIVATE INVESTOR IN A MARKET ECONOMY

4.2.1. APPLICATION OF THE PRIVATE INVESTOR PRINCIPLE TO THE WALLOON REGION

4.2.1.1. Reduction in landing charges

(90) Belgium believes that it is advisable to apply the principle of private investor in a market economy to the Walloon Region because its policy "is effectively part of the exercise of business activity and not part of the exercise of its regal powers". Contrary to its past assertions, Belgium has now explained that airport taxes should be considered fees and not taxes; the fees are levied on users according to their levels of consumption, while the concept of tax implies equality of all the users faced with it. It would involve "a fee that constitutes a price for the use of the airport by users in return for serviced rendered".

(91) During the meeting on 24 June 2003, the Commission asked to what specific service the fee related. Belgium answered that this fee did not relate to a specific service rendered but was a partial financial contribution for the use of the airport infrastructure under the terms of the Walloon Decree of 16 July 1998.

(92) During this meeting, the Commission also asked whether the revenue from the tax is held by the Walloon Region or by BSCA. Belgium answered that it is initially held by the Walloon Region, which transfers 65 % of the revenue to BSCA. The Commission asked, seeing that the decree of 16 July 1998 stipulates that BSCA "collects" the airport taxes, whether the word "collect" simply means "levy" or whether BSCA holds a right of ownership over the revenue. Belgium answered that it was a simple collection process.

(93) However, in its letter of 27 August 2003, Belgium supplied other explanations. It explained that BSCA is the owner of the taxes from the time of their collection from the users, except for the 35 % paid to the environment fund(43). Belgium explains that BSCA is responsible for providing a public service concession: "It is a concession of public services, that it, the management by a private individual of a public service at his expense, risk and peril, under the control and according to the methods determined by the licensor, in return for a payment collected by the agents at the expense of the users". Insofar as BSCA is the entity that manages and operates the airport and supplies the services to the users, "it is logical that it should collect and keep the fees that constitute a consideration for the services rendered to the users".

(94) Belgium believes that BSCA's holding of 65 % of the airport taxes does not constitute State aid from the Walloon Region in favour of BSCA, as there is no transfer of public resources from one entity to another. In support of its argument, it quotes the case law concerning PreussenElektra(44).

(95) Belgium stresses that it is up to each Member State or public authority to fix the airport taxes for the airports that fall within their competence. Some airports fix their tariff levels themselves, under the control of a regulating authority. These tariffs cannot be easily compared as they correspond to structural costs, business policy, development phases, transport policies and very different airports. Regional airports would have lower structural costs and taxes than the main airports. With regard to comparisons with other airports, Belgium considers that the assertion according to which Interested Party B has to pay charges of EUR 32 at Zaventem while Ryanair pays a mere EUR 4 for the same services is incorrect. It points out that for each passenger Ryanair pays EUR 1 for landing, EUR 1 for ground handling, EUR 7 for the passenger fee and EUR 4 for the contribution to Promocy, making a total of EUR 13.

(96) Belgium justifies the reduction granted to Ryanair on the landing tax by "the volume of passengers that will be brought in by the company, that it, at least 27 million passengers during the contractual period of 15 years". "The Walloon public authorities can grant discriminatory reductions in order to attract new users such as Ryanair, which will allow a regional airport such as Charleroi to exceed one million passengers and thus reach break-even point". It should not be forgotten that a reduction in landing taxes will raise the total tax revenue significantly thanks to Ryanair: it has increased to EUR 5,2 million, while without the Ryanair traffic, only EUR 310000 would have been collected.

(97) Belgium considers that "BSCA [the Walloon Region(45)] was confronted with a 'commercial need' when granting the reductions on the landing charges, since there was a risk of substitution in relation to Ryanair, which could easily have contracted with another airport" and refers to the Van Der Kooy case law in a case relating to gas supply prices in the Netherlands(46). In its judgment of 2 February 1988, the Court of Justice considered that a preferential rate granted to horticulturists did not constitute an aid measure "if it were demonstrated that the preferential tariff was, in the context of the market in question, objectively justified by economic reasons such as the need to resist competition on the same market from other sources of energy the price of which was competitive." The Court confirmed this case law in a judgment of 29 February 1996, according to which "if it is commercially necessary, it is common commercial practice for an undertaking to grant a discount if it is economically maintainable"(47).

(98) Public airports should not be bound by any publicity obligation when they grant reductions on landing charges while private airports, which also have recourse to this type of negotiation, are protected from any of the Commission's measures relating to State aid. Belgium quotes several examples of airports that have agreed to reduce their fees without any prior publication.

(99) Belgium asserts that Charleroi airport is ready to grant such rebates to any other airline that brings in a volume of passengers comparable to that generated by Ryanair. Moreover, the BSCA business plan was compiled on the basis of the principle of a landing tax total equal to that paid by Ryanair, namely EUR 1 per passenger for all airport users; this would be proof of the fact that the measures are not selective. Belgium submitted to the Commission the offers made by BSCA to three airlines ([...]), made with the same total of EUR 1.

(100) Belgium explained that the Walloon public authorities were preparing an amendment to the Walloon decree of 16 July 1998, "which would allow more accurate consideration to be taken of the various objective criteria that distinguish different types of users of the Walloon airports".

4.2.1.2. Compensation clause for the Walloon Region

(101) Belgium contests the Commission's statement that the principle of private investor is not applicable to the Walloon Region when it exercises its regulatory powers. It answers that "the Commission cannot however force the Walloon Region to act according to the criteria of the private operator in a market economy, which include the conclusion of synallagmatic contracts, and at the same time deny its right to give its co-contractor the legal security that it has the right to expect". It would be quite normal for the Walloon Region, within its specific competence, to be able to commit itself to its co-contractor to ensure a level of legal security for a contract concluded for a 15-year period.

(102) It should also be stressed that the Walloon Region did not shrink from exercising its regulatory power, either in relation to taxes or in relation to Charleroi Airport's opening hours. The compensation clause would only be effective in the context of its commercial relations with Ryanair. These clauses would not be discriminatory insofar as no real competitor carries on any activities similar to those of Ryanair at Charleroi. The Walloon Region states that it is willing to grant such a clause to any potential competitor of Ryanair wishing to operate regular flights there.

(103) During the meeting on 24 June 2003, the Commission asked whether, if a new tax were introduced (such as an environment tax), Ryanair would be required to pay it during the contractual period. Belgium explained that the Walloon Region would not introduce any new airport tax on its own initiative, but that this does not preclude the introduction of new regulations by the Community or the Belgian Federal State under which Ryanair would be charged.

4.2.2. APPLICATION OF THE PRINCIPLE OF PRIVATE INVESTOR TO BSCA

4.2.2.1. Type of advantages granted to Ryanair

(104) The Belgian authorities' remarks on the type of advantages granted to Ryanair are joined to those formulated by the Irish company, TBI and Morrison:

- The "one-off" incentives were granted in return for the significant risk taken by Ryanair and the investment made within the development of new destinations from a regional airport that has not yet proved its worth. BSCA would be ready to grant these incentives to other companies.

- The relatively low price for ground handling is explained by the limited and basic services and an optimal allocation of human resources. These services should continue to be rationalised in order to minimise losses on the benefits supplied to Ryanair. These transitional losses must be envisaged in the overall context of the transaction with Ryanair: they are offset by income generated by airport taxes and commercial activity.

- Following the remark by Interested Party B on the opening of the ground handling market in Charleroi, Belgium specifies that "at present, this directive [Directive 96/67/EC] is not applicable to Charleroi Airport as that airport has not yet passed the two-million-passenger threshold. When the criteria for applying this directive are fulfilled, BSCA will of course take all the required measures to comply with it".

- With regard to the marketing contribution, Belgium considers that there is no interest in promoting an airport as such, as passengers favour an airline rather than a specific airport infrastructure. It is the airline that is the vector for passenger flows, that provides the airport with its income on a correlative basis. Although it is true that marketing activity is centred on Ryanair flights, they contribute directly to the creation of BSCA's airport and commercial income thanks to the increase in passenger numbers triggered by the publicity centred on the airline's operations. The image of Charleroi Airport is improving because it benefits from publicity via the Ryanair site, which is the most visited travel site in the European airport sector. Regional airports are less known to consumers and airlines and have to make a greater effort in order to create a reputation for themselves and be seen as a viable alternative to the larger main airports, which benefit from better rail and road links and a more established reputation.

4.2.2.2. The BSCA decision-making process

(105) On the development of negotiations with Ryanair, Belgium specified that:

- A first business plan was submitted to BSCA's Board of Directors during 2000. However, this plan was not considered to be greatly credible because of the tendency to underestimate certain charges and overestimate revenue.

- New contacts were made with Ryanair in order to re-negotiate these conditions. After three months of intensive negotiations, an agreement in principle was reached in February 2001, providing for a passenger tax increase from BEF 200 (about EUR 5) to EUR 7(48), an increase in taxes over time to take account of inflation, and the removal of the upper limit on landing tax, which originally applied only to the first 130 passengers on each flight.

- These elements were incorporated into a new business plan, which was then formally approved by the Board of Directors of BSCA before the contractual texts were signed.

- The BSCA Board of Directors includes a number of business managers experienced in the management of large private companies. Their approval of the agreement, therefore, was naturally based on a detailed examination.

(106) During the meeting on 24 June 2003, the Commission asked the Belgian authorities what was the precise date of the decision by BSCA to invest in Ryanair. In their written replies, Belgium and Ryanair pointed out that the date of signature of the agreements between Ryanair, BSCA and the Walloon Region (November 2001) was simply the formalisation of an agreement reached in February 2001 (Ryanair) or April 2001 (Belgium). Belgium answered that the Board of Directors of BSCA took the decision on 31 July 2001. The reports of the Board of Directors of BSCA allow the development of the negotiations to be traced.

(107) During the meeting on 30 May 2001, the Board of Directors of BSCA, which had just elected its Vice-President and a new management committee, was informed by the Walloon government representative responsible for airports that the negotiations with Ryanair were in the final stages. The agreement would soon be submitted to the Board of Directors, which wanted "as soon as possible, to have a financial projection relating to the future operations with Ryanair"(49).

(108) During its meeting on 15 June 2001, a point was made on the state of the negotiations with Ryanair. These negotiations were led by two BSCA Directors who were also members of the Walloon Prime Minister's office and that of the Walloon Transport Minister's. This meeting was, first and foremost, an opportunity for the Board of Directors to hear a presentation from the company's auditor on the tasks to be carried out by BSCA under the 1991 concession agreement. The following points were covered: fire services, with strict compliance with ICAO standards; maintenance services for buildings, runways and surrounding areas; the sale of aviation fuel; the management of hangars; the management and development of the car park service; the management of premises within the administrative buildings, cafeteria and restaurant; the management of advertising spaces; ground handling; catering; business areas; the tax-free shop; and the passenger information service. The agent must also, in the context of the private area management agreement, provide maintenance for the land, buildings, equipment and structures included in the concession or made available, so that they are always suitable for the use for which they are intended.

(109) The meeting of 29 June 2001 was largely devoted to the negotiations with Ryanair. The Walloon government representative explained that the contract was "still at the draft stage, but a verbal agreement has been reached between the parties". Several questions were touched on:

- The number of based aircraft, fixed between two and four.

- The limitation of the number of flights to 26 per day, because of "the capacity of the airport and the financial limitation of the contribution. The long-term objective is also to be able to diversify and find other companies, as it is not wished that Ryanair should be the sole client at Charleroi Airport".

- The landing tax: "[the director] recalls that for points 1.2 and 1.4, the landing tax is fixed by the Walloon Government. The Minister may grant a preferential rate, collected by BSCA and remaining the property of the operating company. In addition, the Minister was challenged on this matter in Parliament, and he answered that for any company operating in a Walloon airport, the tax will be the same". "[Another director] asks whether the EUR 7 in point 1.4 and the euros in point 1.2 remain the property of BSCA. [The director] replied in the affirmative".

(110) The meeting of 10 July 2001 was also mostly given over to negotiations with Ryanair, the Walloon government representative commenting on the draft contract to the members of the Board of Directors. One director "pointed out that there was not much left before the contract was finalised in terms of content, but that the directors had little information on which to assess the financial side of the contract. This financial side is very important because it commits the airport and therefore the responsibility of the directors". The directors wish to obtain precise information on the possibility of Ryanair obtaining financial advantages beyond the four aircraft based there(50).

(111) The meeting of 31 July 2001 allowed discussions to be finalised on the contract with Ryanair. The Board of Directors then had two documents that could be used as a basis: a business plan in the form of a table, showing revenue and expenditure spread over several years, and a strategic guidelines note. 31 July 2001 was therefore the date on which the Board of Directors of BSCA took the decision to finalise an agreement with Ryanair. The minutes of the following meetings indicate that if there was any delay in signing the agreements with Ryanair, it was because Ryanair had difficulties relating to the conditions for operating Promocy. After 31 July 2001, however, the Board of Directors did not address the issue of agreements again.

4.2.2.3. The 2001 business plan and the strategic guidelines note

(112) On 31 July 2001, the Board of Directors examined a business plan, shown in Table 3, and its various components, most notably ground handling income, land royalties, issues connected with the environment fund, and passenger volumes. It addressed once again the issue of airport taxes and opening hours, the Walloon government representative stressing that "if the Walloon Region does not fulfil its commitments, there will be no effect on BSCA", and that it was the Walloon Region that would be held liable if airport opening hours were changed or taxes increased. He also specified that "the passenger or boarding taxes are fixed for the whole of the period, and total one euro for all airlines. Commercially, the passenger tax has just been increased from EUR 5 to EUR 7 and the boarding tax can therefore now be reduced".

Table 3

>TABLE>

(113) Moreover, Belgium has provided analytical details of BSCA's operations after 2010 which are summed up in Table 4.

Table 4

>TABLE>

(114) The Board of Directors also discussed a note on strategic guidelines submitted to it. The note sets out the objectives to be achieved for the airport in terms of passenger volume (2500000 to 3000000) by 2010 which would represent a share of the Belgian market not exceeding 10 %. It outlines a market niche strategy designed to establish a light structure offering airlines attractive financial conditions and quick rotation times and focusing on short flights, for pleasure or business, to nearby destinations. As potential users it targets low-cost airlines and East European airlines while stressing the difficulty of attracting regional airlines(51).

(115) The implementation of this strategy is based on the development of air traffic. Air traffic should increase to 1400000 passengers per year thanks to the 26 flights per day out of Charleroi; Ryanair is expected to bring in 1 million passengers from 2000 onwards. The development of Ryanair's activities should be the subject of re-negotiation and an extension of the agreement to 40 daily flights, or some 2 million passengers per year, the note specifying that "[...]". It is estimated that with Ryanair present, it will be difficult for another low-cost company to set up a base and that [Charleroi] should make itself available as a potential destination from another base.

(116) The BSCA company auditor examined the analysis of the 2001 business plan and judged its hypotheses to be prudent, but underlined a number of problems.

"Generally speaking, the hypotheses used in compiling the business plan are prudent, especially in terms of revenue from the car park and also in terms of general expenses if one makes a comparison with what was actually spent at the end of June. However, the following points must be highlighted:

(a) The results take account of a fee for maintenance and fire operations to be paid from the Walloon Region's budget, which increases progressively over time, and of a subsidy for the maintenance and fire investment for the period 2001-2003. This revenue must comply with the provisions of the concession agreement and with the schedule of conditions, which, as a reminder, expired on 31 December 2000 [emphasised by auditor].

(b) It is necessary to make sure that the tariffs applied to Ryanair are wholly consistent with the Walloon Government Decree of 16 July 1998, especially in relation to the discount of EUR 4 per passenger [emphasised by auditor]. [...]. An attached note, 'BSCA Comments Business Plan 2001' points out that the environment fund 'shall total a maximum of BEF 75 million indexed from 2003 onwards (no agreement signed to date)'."

4.2.2.4. Analysis of certain parameters underlying the 2001 business plan

Responsibility for fire and maintenance services

(117) The Commission has pointed out that BSCA was paid financial compensation by the Walloon Region for the "fire and maintenance" services that it performs on its behalf. The compensation is specified in the 2001 business plan in the revenue section.

(118) The Commission considered the issue of who, either BSCA or the Walloon Region, was responsible for these services, examining the agreement documents drawn up between these two parties. Article 12 of the schedule of conditions attached to the 1991 concession convention states that BSCA is responsible for providing and developing "fire services with strict compliance with ICAO standards" and "maintenance services for buildings, runways, surrounding areas, cartage, etc".

(119) However, the transitional provisions (Article 25) stipulate that between 1991 and 1997, "the conceding authority [the Walloon Region] shall bear the cost of fire and maintenance services".

(120) Following an amendment to the concession in August 1999, the principle of BSCA's accepting responsibility has been retained, but it is once again the Walloon Region that will finance it from 1997 to end 2000: "For a period of three years commencing on 1 January 1997, the conceding authority [the Walloon Region] shall bear the cost of fire and maintenance services as mentioned in Articles 12 and 19 above. The parties agree to re-examine these provisions within the framework of the 2000 budget, according to the financial balance of the Concession and the forecast and budgeted developments in subsequent years in the BSCA profit and loss account".

(121) During its meeting with the Belgian authorities on 23 July 2003, the Commission pointed out that when BSCA took the decision to conclude agreements with Ryanair in July 2001, there was nothing to assure it that the Walloon Region would continue to bear the costs of these services in years to come. On the contrary, the concession documents of the time provided that it should pay these costs(52), as was indicated by the BSCA company auditor during the Board of Directors' meeting on 15 June 2001(53). The Commission therefore asked Belgium on what basis BSCA could believe that the Walloon Region would continue bearing the costs of these services. Belgium has transmitted the legal bases for the fire and maintenance subsidies granted to BSCA for 2000 and 2001(54).

(122) In its latest contribution dated 19 December 2003, Belgium presented a new document relating to the fire and maintenance subsidy; this was a letter sent by BSCA to the Walloon Transport Ministry on 5 July 2001, setting out the costs budgeted by the airport for 2002 for this category of expenses. The letter is said to follow a telephone conversation between the two parties. No return letter sent by the Walloon Government to BSCA was transmitted by the Belgian authorities in confirmation of their agreement to bear these costs.

(123) In the same statement, Belgium considers that the compensation paid to BSCA for maintenance and fire-fighting is consistent with Court of Justice case law in the Altmark case(55).

The environment fund and the infrastructure provision fee

(124) According to the Walloon Decree of 16 April 1998, still in force, 35 % of the airport taxes are allocated to an environment fund. The Commission has asked Belgium if this 35 % was in fact paid to the fund, as BSCA appears to have kept part of the revenue.

(125) During the meeting with the Commission on 24 June 2003, Belgium specified that this fund no longer existed and that the legislative provision should have been abolished. The Commission notes that it is still in force today. BSCA paid the 35 % collected into the environment fund in 2001. This contribution should have reached a ceiling of BEF 75 million (EUR 1,86 million) in 2002. Belgium points out in its contribution of 19 December 2003 that the environment fund ceiling of BEF 75 million per year, indexed at 2 %, was indicated in Sowaer's financial plan, approved by the Walloon Government on 23 May 2001 and sent to BSCA on 1 August 2001. After the amendments made to the concession contract in 2002(56), the environment contribution was changed into a fee payable to Sowaer for the use of infrastructure.

(126) In fact, in response to Interested Party C, who asserts that BSCA is not paying for the provision of the infrastructure, Belgium replies that this assertion is incorrect, as "the 35 % ceiling for aeronautical fees is allocated to Sowaer under the terms of the sub-concession agreement of 15 April 2002" and that "part of the fee payable by users of the infrastructure, that is both airlines and passengers, are allocated to Sowaer for participation in the cost of financing the infrastructure. This assertion is therefore unjustified"(57).

Re-capitalisation of BSCA by the Walloon Region

(127) The meeting of the BSCA Board of Directors on 31 July 2001 was alerted to the losses linked to the setting-up of the Ryanair base during the early years of the contract. Re-capitalisation of the business by the Walloon Region, to the tune of EUR 5 million, was judged necessary "in order to avoid being in a precarious situation"(58).

(128) The principle of re-capitalisation is mentioned in May 2001 in a decision by the Walloon Government(59) and its annex, the financial plan of Société Wallonne des Aéroports. This plan provides for "a shareholding in BSCA totalling around 60 million BEF [...] and then distributed over 3 years, 3 times 30 million (capital of 600 million and Sowaer holding 25 % or 150 million)".

(129) However, when the BSCA directors decided to conclude the agreements with Ryanair, they did not seem to have any guarantee with regard to the re-capitalisation: [Director A] "asked whether a request to increase the capital had already been submitted to Sowaer. [Director B] answered that Sowaer is envisaging an increase in capital of up to 150 million. The increase in capital should be made in 2002. [Director C] was concerned that the Board of Directors would have to approve a plan without knowing whether the shareholder will follow; in this case, will BSCA be able to fulfil the contract? [Director B] proposes including this item on the agenda of the next Sowaer Board of Directors' meeting. [Another director] notes that the Board of Directors' was asked to approve the contract without being certain of obtaining the increase in capital from Sowaer. [...] [Director B] informed the Board that Sowaer would send a letter to BSCA confirming that the Board of Directors of Sowaer had approved the financial plan in which an increase in capital was provided for"(60).

(130) On 19 December 2003, the Belgian authorities produced a letter sent on 1 August 2001 by Sowaer to BSCA, containing a copy of the decision taken on 23 May 2001 by the Walloon Government to re-capitalise the two Walloon airports, to the tune of BEF 150 million each. The letter specifies that this document was approved by Sowaer on 1 July 2001.

(131) The question of re-capitalisation of BSCA was raised by Interested Party C. In its written replies, Belgium answered that an increase in BSCA's capital of EUR 3961340, agreed in principle in 2001, was actually made by Sowaer on 3 December 2002.

(132) The operation was carried out in accordance with the principle of private investor in a market economy. The consultancy firm Deloitte & Touche, in its analysis of the 2002 business plan, pointed out that the Region / Sowaer had acted as a private investor, the funds invested in BSCA being required to produce a return on investment of some 27 % in view of the results expected of BSCA for the period 2001-2010(61).

(133) In their contribution dated 19 December 2003, the Belgian authorities indicated that on 27 November 2003, Sowaer asked Deloitte & Touche to analyse the comparison of the 2001 and 2002 business plans. They also supplied Deloitte & Touche's response of 27 November 2003, in which the expert considers that the general conclusions of his study relating to the 2002 business plan can all be extended to the 2001 business plan.

4.2.2.5. Other comments from the Belgian authorities

(134) In response to the remarks on the financing of security operations, made by Interested Party C, Belgium considers that these operations constitute "a public service obligation that is incumbent on the Member State" and that the operations "are provided by the Walloon Region itself, without BSCA being involved in them in any way. It is up to the Member State to determine the way in which it will finance these operations, but the fact that the Walloon Region decided not to charge BSCA any security fee is based on a political choice that does not in any way constitute State aid in favour of the latter".

(135) Belgium shares the views of Ryanair with regard to the relevant market: the other companies that use the airport are charter companies whose transport services are distinct from those of the low-cost companies, as the Commission Decisions relating to concentrations show(62).

(136) The Belgian authorities state in their contribution of 19 December 2003 that the private investor attitude of BSCA is strengthened by the observation a posteriori that the results anticipated for 2003 are much higher than those anticipated in the business plan: the figure declared was a net profit in the region of EUR 1500000, compared with a projected loss of EUR 1531793 in the business plan(63).

5. ASSESSMENT OF THE AID

5.1. EVALUATION OF THE PRESENCE OF AID WITHIN THE MEANING OF ARTICLE 87(1) OF THE TREATY

(137) According to Article 87(1) of the Treaty and Article 61(1) of the EEA Agreement, any aid granted by a Member State or through State resources, in any form, is incompatible with the Treaty and the EEA Agreement insofar as it affects trade between Member States and between contracting parties and distorts or threatens to distort competition by favouring certain undertakings or the production of certain goods.

5.1.1. ADVANTAGES GRANTED TO RYANAIR

(138) In its decision to initiate the procedure, the Commission distinguished two types of advantages received by Ryanair: those granted by the Walloon Region and those granted by BSCA.

5.1.1.1. Advantages granted by the Walloon Region

(139) Before addressing the specific issue of advantages granted to Ryanair in the form of reductions in landing charges, estimated at some 50 % of the general tariff but without the level itself being the problem to be addressed here, the Commission points out that it is not opposed to reductions being granted to airlines, under certain conditions. In its "Manchester" decision, mentioned above, the Commission decided that short-term reductions, which are available and granted without exercising discrimination between airport users, do not fall within the scope of Article 87 of the Treaty as they do not lead to distortion of competition. On the other hand, the Commission specified that a reduction or system of reductions granting preferential treatment to a specific business was likely to fall within the scope of Article 87 of the Treaty(64).

(140) The Commission considers that the case at issue falls under the second hypothesis: the reduction in landing charges, like the guarantee of compensation, were granted to one company only for a period of 15 years and not to all the companies set up at Charleroi. Article 87 of the Treaty is therefore likely to apply when a benefit arising from the granting of an exemption from the common law tariff system is not justified on objective economic grounds.

(141) The first question to be examined in the present case is whether an "advantage" within the meaning of Article 87(1) of the Treaty has been granted to Ryanair. Belgium and Ryanair consider that Ryanair does not benefit from an advantage within the meaning of the State aid rules as the Walloon Region has acted as a private investor in a market economy offering a preferential but economically viable tariff.

(142) In point 76 of the decision to initiate the procedure, the Commission noted that the principle of private investor in a market economy could not be applied to the actions of the Walloon Region for justifying the reduction of the landing "tax" and the compensation guarantee if the airport opening hours or landing "tax" levels are altered. It specified that this principle can only enter into play "in the context of carrying on an economic activity and never in the context of exercising regulatory powers" and that "a public authority may not use the argument by which it could obtain economic benefits as the owner of an airport business for justifying aid adopted in the form of a discriminatory exercise of its regulatory or fiscal powers".

(143) During the procedure, Belgium and Ryanair pointed out that the abovementioned advantages had been granted to Ryanair in the context of economic activities and not in the exercise of regal powers, in return for the commitments made and the benefits brought about by Ryanair. The Walloon Region therefore acted as other airports, especially private airports, have done in Europe, and in accordance with the principle of private investor in a market economy.

(144) The Commission maintains that the act of fixing airport taxes falls within the legislative and regulatory competence of the Walloon Region and that the principle of private investor in a market economy is not applicable in these circumstances. The Walloon airport organisation falls within the following legal framework:

- The Walloon Region's competence in relation to airports arises from a Belgian federal law: the Region was granted the competence in relation to equipping and operating public airports and aerodromes located within its territory by the Belgian Federal Law of 8 August 1988, which amended the special law of 8 August 1980.

- The Walloon Government was authorised to regulate access to the Walloon airports (Charleroi, Liège, Saint-Hubert and Spa) on the basis of a Walloon Parliament act in 1994(65). This legislative act allows the Walloon Government to transfer the operation of the Walloon airports, and authorises it "according to the methods that it determines, to fix and collect fees (...) and, where necessary, transfer the right of collection to agents". Thus, although the Walloon legislature provided that the right of collection could under certain conditions be entrusted to an agent, the right of fixing the fees has not been, and cannot currently be, transferred. It is held by the Walloon political and regulatory power. Neither BSCA nor the Liège-Bierset airport company may hold the right to fix the fees. They are merely "passive" beneficiaries of part of the fee income, and hold no power in relation to their total. In particular, the portion payable to the environment fund, fixed at 35 % of the fees received, has been regularly altered by the Walloon Region in relation to whether or not it should be capped, in relation to its recipient (that is, a dedicated fund or the new BSCA public shareholder Sowaer), and finally in relation to the liquidation of the said fund and the allocation of the sums owed to it by BSCA.

- The Walloon Government regulated access to all Walloon airports and aerodromes in the July 1998 decree, amended by a 2001 decree. This decree fixed the level of fees to be collected from users, set up a system of landing charge reductions available to everyone according to weight of aircraft (Article 7(1) and (2)), planned for the meeting of a users' advisory committee that would deliver opinions on proposals for changes to the fee system or to fee levels(66), determined the methods for collecting the fees, and provided that "fees and subscriptions shall be brought to the attention of users by all appropriate means, in particular by display and publication in the AIP (Aeronautical Information Publication)".

(145) Through the applicable regulations, published in the Moniteur Belge, the Walloon Region is acting as a public authority that regulates access to Walloon public property and guarantees it to all, under conditions of user equality. If, as Belgium and Ryanair maintain, the Walloon Region involves itself in a sector of economic activity, its function is similar to that of a regulator. By fixing the level of the airport taxes payable by users for the use of the Walloon airports, it regulates an activity but certainly does not act as a company.

(146) The decision to initiate the procedure defined the airport taxes established by the Walloon Region for Charleroi airport as "taxes", and the present decision has kept this description unchanged, until now. It can be considered that they are what the Court of Justice describes as "parafiscal charges", that is, charges characterised in that they are intended, from the moment of their collection, to finance a specified transfer of resources(67). In this case, the airport charges fixed by the Walloon Region are allocated to the operation of the airport and allotted 65 % to the management company and 35 % to an environment fund. They allow the financing of a specific transfer of resources. Such methods of financing have been examined by the Court(68) from the point of view of parafiscal charges.

(147) In the case at issue, the definition of "fees", defined as payment for a service rendered, could be accepted if a rather broad interpretation is applied. In the Walloon airport tariff system, however, the clear and direct link between the level of the charge and the service rendered to users is weak. The charges levied do not correspond to a direct payment for a service; the services corresponding to the payment are not defined precisely and the "fees" are not fixed by direct reference to a parameter such as operating costs, but in a relatively "abstract" manner(69).

(148) The Commission must however also take account of its practices in previous decisions relating to airport charges; on many occasions, it has ruled on this idea by describing them as fees(70). Even though the aim of these decisions was not generally to distinguish between taxes and fees, and although the terminology used in them could be independent from the definition adopted in the notification proper, the Commission considers that its practice of considering these charges as fees rather than as taxes is established. The Commission also notes that the Court of Justice has not disputed this definition(71).

(149) The Commission therefore considers it appropriate, beyond the description itself, to consider legally as fees the totals established by the Walloon Region for landing or parking aircraft at Charleroi, and to use the generic description of airport charges.

(150) The Commission notes in any event that this question of terminology does not change its analysis regarding the assessment of these charges, which are established by the regional authority and for which the regional authority decides on the allocation partly to the concessionary airport and partly to the environment fund that it has created.

(151) Article 7(3) of the Walloon decree of 16 July 1998 provided that the Walloon Minister of Transport could grant even more advantageous reductions on landing charges, on a promotional basis. If that proved necessary, it was also possible to alter the basis for calculating the airport's fees (per passenger or per tonne) by making changes to the appropriate legal framework.

(152) Instead of that, the Walloon authorities undertook to reduce landing charges for one user only, through a contract under private law that was not intended to be made public, on a fee basis distinct from that shown in the regulations, for a period of 15 years and without creation of rights for other users. The Walloon Region also undertook t