COMMISSION DECISION (EU) 2021/1428

of 24 February 2020

ON THE STATE AID SA.31662 – C/2011 (ex NN/2011) implemented by Romania for Timișoara International Airport – Wizz Air

(notified under document C(2021) 1065)

(Only the Romanian version is authentic)

(Text with EEA relevance)

THE EUROPEAN COMMISSION,

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

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

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

Whereas:

1. PROCEDURE

(1) By letter dated 30 September 2010, Carpatair (2), a company active on the European air transport market (the "Complainant" or "Carpatair"), submitted a complaint (the "Complaint") alleging unlawful State aid provided by the Romanian authorities at Timișoara International Airport ("Timișoara International Airport" or the "Airport") in favour of the Wizz Air Hungarian Airlines Ltd ("Wizz Air"). (3) The Complaint was registered under the State aid case number SA.31662 (ex CP 237/2010).

(2) The Commission observed that the Complaint appeared to be connected with the notification of Romanian authorities dated 17 May 2010 (the "Notification") concerning plans to provide public support in favour of regional airports. The Notification was registered under case number N 185/2010. On 15 September 2010, the Romanian authorities informed the Commission that Timișoara International Airport would not fall within the eligible airports under the notified scheme. Nevertheless, as the Commission obtained information about certain public financing of Timișoara International Airport over the period 2007 – 2009, the public financing for this period is being analysed in the present case.

(3) By letter dated 21 October 2010, the Commission forwarded the Complaint to Romania and requested information. The Romanian authorities responded by letter dated 15 December 2010.

(4) The Complainant provided additional information by letters dated 24 November 2010, 25 November 2010, 14 January 2011 and 3 February 2011. By letters dated 9 February 2011 and 2 March 2011, the Commission informed the Complainant about the state of the case and requested additional information. The Complainant responded by letters dated 22 February 2011, 9 March 2011 and 28 March 2011, and provided additional information.

(5) The Commission requested additional information from the Romanian authorities by letters dated 16 February 2011, 3 March 2011 and 16 March 2011. The Romanian authorities responded by letters dated 10 March 2011 and 5 April 2011. On 16 March 2011, the Commission informed the Romanian authorities that further information was still required and requested it to be sent by 15 April 2011. The Romanian authorities responded by letter dated 21 April 2011.

(6) By letter dated 12 May 2011, the Complainant agreed to disclose its identity and its financial situation and provided additional information in that regard.

(7) By letter dated 24 May 2011, the Commission notified Romania of its decision to initiate a formal investigation procedure in relation to the financing connected with Timișoara International Airport, the 2008 agreement between the operator of that airport and Wizz Air, the non-payment of airport charges by Wizz Air as well as the discounts and rebates under the 2007, 2008 and 2010 schedule of airport charges (the "Opening Decision").

(8) By letter dated 16 June 2011, the Romanian authorities indicated which information they wished to have removed from the Opening Decision prior to its publication.

(9) On 23 June 2011, the Commission sent a proposal for a non-confidential version of the Opening Decision to Romania. The Commission indicated to Romania which information it did not accept as being confidential.

(10) By letter dated 27 June 2011, Romania replied to the Commission maintaining its request for deletion of certain information.

(11) Based on the correspondence with Romania, the Commission took a final decision on the text it intended to publish, in accordance with point 33 of the Commission Communication on professional secrecy in State aid decisions. (4) By letter dated 25 July 2011, the Commission informed Romania of its decision to reject Romania’s request for a deletion of certain information. Romania was given 15 days to react to that decision and provide additional elements to justify its request.

(12) By letter dated 11 August 2011, Romania informed the Commission that it maintains its view regarding the deletion of certain information but did not object anymore to the publication of the Opening Decision.

(13) The Opening Decision was published in the Official Journal of the European Union (5) on 13 September 2011. The Commission invited interested parties to submit their comments on the measure in question within one month of the publication date.

(14) The Commission received comments on the Opening Decision from Romania by letters dated 27 June 2011 and 14 October 2011. Romania submitted further information on 27 July 2011 and 12 June 2012.

(15) The Commission received comments on the Opening Decision from Societatea Nationala Aeroportul International Timișoara – Traian Vuia – S. A. ("The Airport Manager") on 27 October 2011, from Carpatair on 8 August 2011, and from Wizz Air on 24 June 2011 and 27 October 2011. The Commission also received observations on the Opening Decision from the Romanian Airport Association, the former director of the Airport Manager, Eurojet, Austrian Airlines and European Regions Airline Association.

(16) The Commission transmitted the third party comments on the Opening Decision to Romania on 4 September 2012 and 20 September 2012. It received Romania’s response to those comments by letters dated 5 October 2012 and 17 October 2012.

(17) The Commission requested additional information from the Romanian authorities by letters dated 12 October 2011, 24 February 2012, 27 July 2012, 9 August 2012, 3 November 2012, 30 October 2014 and 28 July 2015. The Romanian authorities responded by letters dated 16 November 2011, 13 April 2012, 3 May 2012, 3 September 2012, 5 October 2012, 12 December 2012, 2 December 2014, 9 December 2014 and 21 September 2015 respectively.

(18) By letter dated 27 July 2012, the Commission requested additional information from the Complainant. The latter responded with additional information on 3 September 2012. The Complainant also provided information on 7 June 2011, 30 June 2011, 8 August 2011, 14 October 2011, 19 March 2012, 14 May 2012, 13 July 2012, 19 October 2012, 3 December 2012, 1 July 2013, 6 June 2014, 10 July 2014, 10 October 2014, 15 and 16 October 2014, 10 November 2014, 12 November 2014, 14 November 2014, 25 February 2015, 25 May 2015, 28 May 2015, 29 September 2015, 10 December 2015, 22 December 2015, 13 April 2016, 28 April 2016, 27 February 2018 and 20 April 2018.

(19) Wizz Air submitted additional information on 11 February 2015 and 3 July 2015, which included a report prepared by Oxera for Wizz Air, applying the market economy operator (the "MEO") principle (the "MEOP") to the various agreements between Wizz Air and the Airport Manager. Oxera submitted updates of the reports and further notes on 14 May 2015, 10 August 2015, 21 September 2015, 20 October 2015, 15 September 2017 and 22 September 2017. On 10 November 2017, the Commission requested a non-confidential version of Oxera’s replies of 15 and 22 September 2017. Oxera informed the Commission on 15 November 2017 that Wizz Air did not request a redaction of any information and after further clarification with Oxera on 23 November 2017, the Commission forwarded Oxera’s replies of 15 and 22 September 2017 to Romania on 1 December 2017. The Romanian authorities submitted their comments in relation to the Oxera’s study on 1 February 2018.

(20) On 14 March 2014, the Commission informed Romania and the interested parties about the adoption of the Communication "EU Guidelines on State Aid to Airports and Airlines" (6) ("2014 Aviation Guidelines") and asked to provide comments within 20 working days of the date of the publication of the 2014 Aviation Guidelines. On 4 April 2014, the 2014 Aviation Guidelines were published in the Official Journal of the European Union. The Commission received comments from Carpatair on 25 March 2014, from Wizz Air on 30 April 2014 and from the Airport Manager Operator on 8 May 2014.

(21) The Commission transmitted the comments of third parties on the 2014 Aviation Guidelines to Romania on 28 May 2014. The Commission received Romania’s observations on the interested parties’ comments by letter dated 3 July 2014.

(22) The Airport Manager submitted additional information on 11 November 2011, 24 November 2016 and 16 December 2016. The Commission also received additional submissions by the Airport Manager on 18 January 2016, 31 January 2016 and 7 March 2016. On 11 March 2016, the Commission transmitted these submissions to Romania which did not have any comments.

(23) By letter dated 17 July 2015, the Commission transmitted further comments from the Complainant and from Wizz Air to Romania, which commented on these observations on 21 September 2015.

(24) By letter dated 11 March 2016, the Commission transmitted further submissions by Oxera to Romania, which commented on these submissions on 15 April 2016.

(25) The Commission requested additional information from the Romanian authorities on 30 October 2017. The translated version of the request in Romanian was sent to the Romanian authorities on 9 November 2017. The Romanian authorities responded after two approved extensions of deadline on 15 January 2018. The Commission sent a request for the further clarifications to the Romanian authorities on 26 March 2018 and 31 October 2018 to which the latter replied on 4 June 2018 and 21 November 2018 respectively. On 8 April 2019, the Romanian authorities provided the translation of their replies of 4 June 2018.

(26) On 17 May 2019, Wizz Air sent a letter to the Commission claiming the right of access to the file and the right to be heard to which the Commission replied on 11 June 2019.

2. TIMIȘOARA INTERNATIONAL AIRPORT

2.1. The Airport

(27) Timișoara International Airport is an international airport situated in the western part of Romania.

(28) The Airport is operated by the Airport Manager (recital (15)), a joint stock company in which the Romanian State holds 80 % of the shares on the date of this Decision. (7) The remainder of the shares is owned by Fondul Proprietatea. (8) Previously, the initial capital stock was entirely subscribed by Romania and paid in full on the date the Airport Manager was set up. (9)

(29) The Airport Manager owns the airport infrastructure, except for the runway, taxiway and the apron which are owned by the Romanian State. This latter infrastructure is concessioned to the Airport Manager by the State.

(30) Timișoara International Airport has one runway, which is 3 500 metres long and 45 metres wide. The aprons provide for 22 parking positions. The capacity of the airport amounts to 1 300 international passengers/hour and 500 domestic passengers/hour. The airport also has a cargo terminal.

(31) In years 2007 to 2009, i.e. the period under assessment, Timișoara International Airport was the second largest airport in Romania in terms of traffic (Table 1). Table 1 includes also the subsequent evolution of the traffic until 2017. Table 1: Traffic at Timișoara International Airport between 2007 – 2018 2007 2008 2009 2010 2011 2012 2013 834 580 889 756 974 785 1 137 218 1 200 762 1 035 929 757 069 2014 2015 2016 2017 736 191 924 459 1 161 510 1 650 000 Source: Romanian authorities

(32) At the time of this Decision, Timișoara International Airport has scheduled passenger air services by several low cost airlines. Wizz Air serves the highest number of European destinations, with Ryanair and Blue Air having a more limited offering. The Airport is also served by two full services carriers: Tarom and Lufthansa. There are also seasonal charter flights and several cargo operators.

(33) From 2007 to 2009, Timișoara International Airport was a regional hub for Carpatair, a regional full service carrier which operated some 32 domestic and European destinations. Other airlines serving the airport during that period included Tarom, Lufthansa, Austrian Airlines, Malev, Alitalia, Moldavian Airlines.

(34) The nearest airports to Timișoara International Airport are: — Arad Airport which is located 50 km away. This amounts to a travelling time by road of 40 minutes. Arad Airport has the largest cargo terminal in western Romania. Its passenger traffic is decreased from 67 183 passengers in 2007 to 11 367 passengers in 2018; and — Caransebes Airport which is located 107 km away. This amounts to a travelling time of 1 hour and 14 minutes. It is a private airport with no regular service. It is used for general aviation and rescue and police flights.

(35) Table 2 summarises the financial situation (10) of the Airport Manager in the period under assessment: Table 2: Key financial indicators (in RON thousand) RON thousand 2007 2008 2009 Revenues 23 473 30 545 41 067 Sales growth n. a. +30,1 % +34,4 % EBITDA 7 318 10 646 12 212 EBITDA margin 31,2 % 34,9 % 29,7 % EBIT 3 249 5 809 5 655 Net Profit 2 417 4 874 3 508 Net Profit margin 10,3 % 16,0 % 8,5 %

2.2. The development plan of the Timișoara International Airport 2006 – 2015

(36) The development plan 2006-2015 ("Development Plan") foresaw an increase of passenger traffic from 611 705 in 2005 to 1 661 332 in 2010 and 2 565 494 passengers in 2015. The accession of Romania to the EU in 2007 was expected to increase traffic by 16 -18 %.

(37) The Development Plan observed that over the period 2001-2005, the passenger traffic and the number of aircraft movement increased by 250 %. It also found that in 2006 the existing capacity reached a critical level regarding the passenger terminal, apron, runway, access road and parking, which jeopardised the possibility to open new routes and increase of the number of passengers on existing routes. The works started in 2003 regarding the extension of the passenger terminal and in 2004 for the extension of the apron. The Development Plan confirmed the need to continue the extension and development of infrastructure to accomodate the envisaged traffic increase.

3. DISPUTED MEASURES

3.1. Measure 1 – Annual financing granted to the Airport Manager

(38) The Airport Manager received annual grants from the State ("Measure 1"). According to Romania, the funding granted to the Airport Manager in the period 2007 – 2009 related to investments of the following types and amounts (Table 3). Table 3: Public financing granted to the Airport Manager in 2007 – 2009 Year Item no. Amount (thousand RON) Investment project Owner of the infrastructure 2007 1 500 Access road and parking lot development Airport 2 1 758 Non-Schengen Terminal development (initially Domestic Flights Terminal) Airport 3 6 846 Improvement of the runway and extension of the aircraft apron Romanian State 9 104 Sub-total 2008 4 10 236,65 Improvement of the runway and extension of the aircraft apron Romanian State 5 242 Non-Schengen Terminal development (initially Domestic Flights Terminal) Airport 6 97,24 Security gates metal detectors Airport 7 4 598,4 Explosives-detecting system Airport 8 703,99 Portable explosives-detecting devices Airport 9 1 344,00 Lighting equipment Airport 10 1 773,61 X-ray scanning system Airport 11 511,81 EMS self-propelled chassis Airport 19 507,7 Sub-total 2009 12 2 387,99 Improvement of the runway and extension of the aircraft apron Romanian State 13 6 379,96 Non-Schengen Terminal improvement (initially Domestic Flights Terminal) Airport 8 767,95 Sub-total 2007-2009 37 379,65 Total

(39) According to Romania, the financing of the investments had the following legal bases: (1) For the security equipment, the Government Decision 1461/2007 concerning financing of programmes to purchase airport security equipment which included the security equipment to be financed at Timișoara International Airport in 2008. The financing was allocated in the draft 2008 budget approved by the Government decision 666/2008 from 24 June 2008. (2) For the remainder of the investments, the Government Decision 615/2002 approved the strategic programme for the development of the airport infrastructure at the Timișoara International Airport for the period 2002 – 2015. It was amended by the Government Decision 1212/2007 which approved the strategic programme for the period 2007 – 2015. The list of investments were specifically included in the strategic programme. The amounts allocated for these investments were included in the legal acts approving the budgets for years 2007, 2008 and 2009. (11)

3.2. Measure 2 – The 2007, 2008 and 2010 AIP

3.2.1. The 2007 AIP and 2008 AIP

(40) Based on the information from Romania, each airport manager has the power, under the applicable national legal framework, to set its airport charges. The charges set by the airport manager are subject to the formal publication as required by the international aviation rules, in the Aeronautical Information Publication (the "AIP"). Accordingly, the charge policy for the use of the Timișoara International Airport has been set only with respect to that Airport and is not applicable with respect to any other airport within the regional or national territory. The AIPs are proposed by the executive management of the Airport Manager, and approved by the Board, in accordance with the prerogatives entrusted expressly under the statute of the company.

(41) The applicable charges were published in the AIP on 7 June 2007 under the reference GEN 4.1-17 ("2007 AIP") as follows: Table 4: 2007 AIP airport charges (in EUR) Charge Minimum charge Unit rate Landing 50 7 /tonne Lighting 50 2,10 /tonne Parking 15 0,15 /tonne/hour Passengers service — international flights — domestic flights — security — transit or transfer 8 /passenger 3 /passenger 7 /passenger 5 /passenger

(42) The 2007 AIP provides for the reductions on the landing charges based on the number of landings as summarised in the following table: Table 5: 2007 AIP reductions of the airport charges International flights Number of landings/year Rebate (%) 250 – 500 10 501 – 1 200 20 1 201 – 2 000 30 2 001 – 2 500 40 2 501 – 3 000 50 3 001 – 3 500 60 3 501 – 4 000 70 > 4 001 85

(43) Furthermore, a 50 % discount on the landing charges for a period of six months is granted for new air operators which perform at least two flights per week and for new destinations that are not yet connected with Timișoara International Airport.

(44) The 2008 applicable airport charges were published in the AIP on 23 October 2008 under the reference GEN 4.1-17 ("2008 AIP") as follows: Table 6: Applicable airport charges (2008 AIP) in EUR Charge Minimum charge Unit rate Landing 50 7 /tonne Lighting 50 2,10 /tonne Parking 15 0,15 /tonne/hour Passengers service — international flights — domestic flights — security — transit or transfer — persons with reduced mobility 8 /passenger 5 /passenger 10 /passenger 1,50 /passenger 0,20 /passenger

(45) The 2008 AIP increased the passenger security charges from 7 EUR in 2007 to 10 EUR per passenger. The passenger fee for transit or transfer passengers was reduced from 5 EUR per passenger to EUR 1,50. In addition, the Airport Manager has introduced a charge amounting to EUR 0,20 for persons with reduced mobility.

(46) The 2008 AIP provides for reductions on the landing charges based on the number of landings of the previous year as follows: Table 7: Reductions in airport charges (2008 AIP) International flights Number of landings/year Rebate (%) 250 – 500 10 501 – 1 200 20 1 201 – 2 000 30 2 001 – 2 500 40 2 501 – 3 000 50 3 001 – 3 500 60 > 3 501 70

(47) The 2008 AIP provides also for a discount of 50 % on the landing charges for a period of 12 months for new air operators at Timișoara International Airport that perform at least three flights per week by an aircraft of at least 70 seats. For each new opened destination, the applied discount on the landing charges is 50 % for a period of six months.

(48) In addition to the previous discounts and reductions, the Airport Manager grants also a partial reimbursement of the payments it receives which originated from the embarkment charge (Table 8). Table 8: Reimbursement of revenue originated from the embarkment charge according to 2008 AIP Number of embarked passengers/year delivered by the user Reimbursement 150 001 – 300 000 10 % 300 001 – 500 000 20 % > 500 001 30 %

3.2.2. The 2010 AIP

(49) On 26 August 2010, an amendment to the airport charges at Timișoara International Airport was published ("2010 AIP"). The Airport Manager introduced a new category of discounts for aircraft over 70 tonnes maximum takeover weight ("MTOW"): Table 9: The 2010 AIP discounts for aircrafts over 70 tonnes MTOW Number of embarked passengers/month delivered by the user Discount (%) 0 – 10 000 0 10 001 – 18 000 72 18 001 – 36 000 82 > 36 000 85

3.3. Measure 3 – The 2008 Agreements between the Airport Manager and Wizz Air

(50) In the middle of 2008, the Airport Manager and Wizz Air signed a series of agreements, determining the principles of their cooperation as well as terms and conditions of the use of the airport infrastructure and services by the airline. The signed agreements consisted of (i) a memorandum of understanding, (ii) a marketing agreement, (iii) an operation agreement, and (iv) a ground handling agreement (jointly the "2008 Agreements"). On the basis of the 2008 Agreements, Wizz Air started its operations from Timișoara International Airport at the end of 2008. In 2009, the company gradually increased its number of international destinations served with A320 type aircrafts (280 seats).

3.3.1. The Memorandum of Understanding of 25 June 2008

(51) The memorandum of understanding ("Memorandum of Understanding" or "MoU") was signed on 25 June 2008 by the Airport Manager and Wizz Air. It was signed for an initial period of three years plus one year during which the parties could terminate it for a breach of contract. The MoU set the general principles of their cooperation, and the terms and conditions for the use of the airport infrastructure and services by Wizz Air.

(52) The Airport Manager agreed to expand the passenger terminal in order to allow it to handle up to three million passengers per year by 1 January 2011 at the latest. It also agreed to upgrade the landing and takeoff category of the runway to category III in both directions before the end of 2009 and to make slots available according to Wizz Air’s request.

(53) Wizz Air agreed to conduct marketing activities for the Airport Manager. In particular, it was agreed to promote Wizz Air’s flight destinations from or to the Airport to increase the number of departing and arriving passengers at the Airport. In return, the Airport Manager agreed to pay marketing fees, depending on the number of landings and delivered passengers numbers.

3.3.2. The marketing agreement of 30 July 2008

(54) The marketing agreement ("Marketing Agreement") was signed by the parties on 30 July 2008 and concluded for an initial term of three years, commencing on 11 December 2008. The duration of the Marketing Agreement could be extended after an initial period of three years by one year.

(55) The Marketing Agreement set the terms and conditions of the marketing activities carried out by Wizz Air, with the aim to increase the number of departing and arriving passengers at the Airport.

(56) The Marketing Agreement details the following marketing activities to be carried out by Wizz Air: — the promotion of the Timișoara International Airport and Wizz Air flights to and/or from the Timișoara International Airport in its online and board magazine; — advertisement of Timișoara International Airport on its website; — creation of a marketing strategy for Timișoara International Airport and Wizz Air; — advertising promotions in relation to the air services at the Timișoara International Airport; and — other activities promoting passenger growth at Timișoara International Airport.

(57) The marketing activities were to be carried out in Romanian and in foreign media.

(58) In return for Wizz Air’s marketing activities, the Airport Manager was to pay Wizz Air a marketing fee which depended on the delivered departing passenger numbers.

(59) The Marketing Agreement stipulated that, in case of an increase of the charges regulated in the operation agreement or the ground handling agreement, the marketing fee was to be modified equally to the change of the airport charges.

(60) Additionally, the Airport Manager has the following obligations towards Wizz Air: — to allow Wizz Air the use of the Timișoara International Airport’s infrastructure for commercial and marketing activities; — to support Wizz Air’s contacts with local public and business entities, — to provide Wizz Air with its experiences, knowledge and contacts to the local marketing services and media; — to involve Wizz Air in its promotion and marketing activities;and — to provide Wizz Air with advertising space at the Timișoara International Airport; — to support Wizz Air with public relation activities.

(61) The Marketing Agreement provided that Wizz Air was to issue an invoice for the marketing fee after the receipt of a "pro-forma invoice" from the Airport Manager on the charges of the operation agreement and the ground handling agreement.

(62) According to the Marketing Agreement, Wizz Air was obliged to provide the Airport Manager at least annually with reports describing its conducted marketing activities (i.e. description of marketing activities, target groups, advertising, frequency, choice of media, amounts spent on the marketing activities).

3.3.3. Termination of the Marketing Agreement and payment of marketing fees by the Airport Manager

(63) On 11 February 2010, the Airport Manager decided to terminate the Marketing Agreement.

(64) With regard to public procurement rules, the Romanian National Authority for Regulating and Monitoring Public Procurement concluded that the award of the Marketing Agreement, without applying any of the awarding procedures laid down in the national legislation, constituted an infringement of these rules and was punishable by a fine between RON 70 000 and 100 000.

(65) The Airport Manager had received invoices from Wizz Air amounting to a total of EUR 2 560 992,90 for marketing services for the period October 2008 to January 2010. The Romanian authorities claim that the Airport Manager did not pay this amount and that the payment obligation from the Marketing Agreement would be settled in accordance with business law.

(66) The invoices of Wizz Air to the Airport Manager show that the marketing fees have been invoiced with a few months of delay.

3.3.4. The operation agreement of 1 August 2008

(67) The operation agreement was concluded on 1 August 2008 for the period of 11 December 2008 to 10 December 2009, with an automatic renewal for further 12 month periods at each anniversary of its entry into force (the "Operation Agreement"). (12) The Operation Agreement detailed the requirements for the services to be provided to Wizz Air by the Airport Manager (passenger services, security services, transit/transfer services) and set out the applicable airport charges to be paid by Wizz Air as well as discounts and exemptions to the charges.

(68) The charges were essentially (13) the same as set in the 2008 AIP. Additionally, the airline was entitled to a 50 % discount for six months for an increase in frequencies.

(69) The payments for the services were due 30 days after the receipt of the invoice "without any deduction by reason of any alleged counterclaim or otherwise howsoever". Late payment penalty interest was set at the level of 6,5 % per annum. Penalties were to be set out in an invoice.

(70) The breach of the confidentiality of the contract was to be sanctioned by a penalty in the amount of EUR 10 000.

(71) On 25 June 2010, the Operation Agreement was amended by a new discount scheme, which covered the period up to 6 February 2011. This new discount scheme corresponds to the one set out in the 2010 AIP.

3.3.5. The ground handling agreement of 1 August 2008

(72) The ground handling agreement (the "GHA") constituted an annex to the Standard Ground Handling Agreement of April 2004 and was effective from 11 December 2008 to 10 December 2009 with an automatic renewal for further 12 month periods at each anniversary of its entry into force. (14)

(73) The GHA set the handling charges for an Airbus A320 passenger aircraft at EUR 150 for a single ground handling consisting of an arrival and a subsequent departure. Services "on request" were not included and were to be charged separately.

(74) The invoices for the handling services were to be issued no later than the 5th of the following month. The payments were to be made in 30 days from the date of the receipt of the invoice. A late payment interest was set at a rate of 6,5 % per annum.

(75) On 1 February 2010, the GHA was extended for a period of one year starting on 6 February 2010. The provision in the Marketing Agreement, which allowed an immediate termination of the GHA and the Operation Agreement without any damages when the Marketing Agreement expired or was terminated, was declared void.

(76) On 25 June 2010, the GHA was amended by a new discount scheme applicable for the handling charges and the services on request which covered the period until 6 February 2011. The new discount scheme had been introduced by a decision of the Board of Directors of the Airport Manager on 15 June 2010. This new discount scheme corresponds to the one set out in the 2010 AIP.

3.4. Measure 4 – Forbearance of invoiced airport charges to Wizz Air for the period October 2009 – February 2010

(77) On 28 April 2010, the Airport Manager sent Wizz Air a summons to pay EUR 2 825 360 for invoices concerning the fees due under the Operation Agreement and the GHA dated from October 2009 to February 2010.

(78) At the time of the Opening Decision, Wizz Air had only paid EUR 264 367,10 in the first half of 2010 and it seemed that no further action had been taken by the Airport Manager to collect the amounts due.

4. GROUNDS FOR INITIATING THE INVESTIGATION PROCEDURE

(79) In the Opening Decision, the Commission concluded that the base rate of the airport charges contained in the 2007 AIP, 2008 AIP, and 2010 AIP did not amount to State aid.

(80) However, the Opening Decision raised the question whether the following measures were granted at market conditions, and thus did not involve State aid. And if not, whether such State aid could be considered compatible with the internal market: — Annual operating financing granted to the Airport Manager in 2007, 2008 and 2009; — Discounts and rebates according to the 2007 AIP, 2008 AIP and 2010 AIP; — 2008 Agreements between Wizz Air and Airport Manager; — Forbearance of invoiced airport charges to Wizz Air for the period October 2009 to February 2010.

4.1. Measure 1 – Annual operating financing granted to the Airport Manager 2007 – 2009

(81) The Commission took the preliminary view that the annual financing granted to the Airport Manager does not conform with the MEOP due to the fact that no business plan or profitability projections had been provided, the fact that the minority shareholder (Fondul Proprietatea) did not seem to have contributed to the financing under the same conditions and the fact that it was not clear that the Airport Manager has consistently paid the corresponding dividends to the shareholders.

4.2. Measure 2 – Discounts and rebates according to the 2007 AIP, 2008 AIP and 2010 AIP

(82) The Commission took the preliminary view that the discounts and rebates in the 2007 AIP amounted to State aid and it could not exclude that the 2008 AIP and 2010 AIP involved State aid. The Commission could not exclude that some users of the Timișoara International Airport had received a selective advantage granted through such rebates and discounts. With regards to the new rebate for aircraft over 70 MTOW set forth in the 2010 AIP, the Commission took the view that it constituted State aid as it was not prima facie sufficient to cover the costs of the Airport Manager. In addition, the difference in charges for national passengers and international passengers as well as for transit passengers led the Commission to question the non-discriminatory character of the schemes.

4.3. Measure 3 – 2008 Agreements between Wizz Air and the Airport Manager

(83) The Commission took the preliminary view that the 2008 Agreements with Wizz Air were not concluded under normal market conditions and, therefore, Wizz Air has received a selective economic advantage. The Commission therefore took the preliminary view that the 2008 Agreements amounted to State aid.

4.4. Measure 4 – Forbearance of invoiced airport charges to Wizz Air for the period October 2009 – February 2010

(84) The Commission took the preliminary view that it cannot exclude that forbearance of airport charges involves State aid as no steps of enforcement had been taken.

5. COMMENTS FROM ROMANIA

5.1. Measure 1 – Annual financing granted to the Airport Manager 2007 – 2009

(85) Romania explained that the alleged operating aid granted to the Airport Manager in fact relates to investment costs and did not constitute State aid. The investment projects are indicated in Table 3 of the present decision.

(86) Regarding the financing of the runway improvement and aircraft apron extension in 2007, 2008 and 2009, Romania argued that such financing was carried out in compliance with the MEOP. According to Romania, the MEOP is complied with if investments are made in assets that are State owned and that generate revenues from dividends and concession fees. In this case, Romania calculated a concession fee of 2 % of the gross income received through the concession. Romania stated that the Development Plan and the Timișoara International Airport Capacity Assessment drawn up in 2006 (the "Capacity Assessment") indicated economic sustainability of the investments. According to Romania, economic sustainability could have been expected as increased passenger numbers and efficiency gains would increase revenues from operating the airport infrastructure. According to Romania, the investments were also necessary to meet aviation security requirements (in particular to avoid unauthorised access to airplanes) and to cope with operational needs resulting from traffic growth. Romania further stated that in addition to commercial activities, the infrastructure was also used for military activities, official missions, search and rescue missions, humanitarian and emergency aid airfare, UN, Red Cross and Red Crescent flights and similar. Romania stated that activities of national interest (the army and national defence, humanitarian and rescue missions, and similar) fall under the public service remit. Romania submitted that according to Romanian law, the Airport Manager had the obligation to enable the free use of airport infrastructure for such non-commercial activities.

(87) Regarding the financing of security equipment in 2008, Romania argued that such financing relates to activities falling under the public service remit. Romania stated that these investments were required by Regulation (EC) No 2320/2002 of the European Parliament and of the Council, by Commission Regulation (EC) No 622/2003 and by national law. Moreover, Romania stated that the security equipment helped the Airport Manager to comply with the requirements on border security imposed by Regulation (EC) No 562/2006 of the European Parliament and of the Council.

(88) Regarding the financing of extension and improvement of non-Schengen terminal in 2007, 2008, 2009 and 2010, Romania argued that such financing was either carried out in compliance with the MEOP or was related to activities falling under the public policy remit. According to Romania, these investments were based on economic considerations to prepare the airport for higher passenger numbers. Romania stated that the State was guided by prospects of profitability in the longer term. Further, Romania explained that the investments were necessary to fulfill the obligations of Romania in order to join the Schengen area. In particular, Romania stated that investments were necessary to comply with Regulation (EC) No 2320/2002 of the European Parliament and of the Council and with Regulation (EC) No 562/2006 of the European Parliament and of the Council.

(89) Regarding the financing of an access road and parking lot development in 2007, Romania argued that such financing was carried out in compliance with the MEOP. Romania stated that a feasibility study on this investment was carried out in 2005 and that this included a business plan as well as a profitability assessment of the investment. According to Romania, the profitability analysis indicated an opportunity for significant revenues.

(90) Regarding the financing of lighting equipment in 2008, Romania argued that such financing was carried out in compliance with the MEOP. According to Romania, the investment in lighting equipment was needed to ensure an optimal use of the airport infrastructure and safety of passengers and aircraft. Romania stated that the investment also proved profitable ex post.

5.2. Measure 2 – Discounts and Rebates according to the 2007 AIP, 2008 AIP and 2010 AIP

5.2.1. The 2007 AIP and the 2008 AIP

(91) Romania submitted that the Airport Manager operated profitably since 2007 and that profits increased on a constant basis since then. In this context, the tariffs applied by the Airport Manager covered the costs of the services rendered.

(92) Romania stated that the decisions on the application of airport charges were based on economic and financial background notes drawn up by a specialised department of the Airport Manager.

(93) According to Romania, airport charges were published in the AIP and were applicable to all users on a non-discriminatory basis.

(94) Romania clarified that the 2007 AIP and the 2008 AIP were approved by the Board of Directors of the Airport Manager approximately two months prior to the entry into force of each AIP respectively.

(95) According to Romania, the business model of Carpatair, namely the hub and spoke model, led to a situation where, during the peak times of Carpatair passenger arrivals, the airport capacities were almost completely exhausted. On the other hand, during the off-peak time, the capacity was under-used. Therefore, the incremental costs of increasing passenger output at Timișoara International Airport, at least at off-peak times created by Carpatair’s operating model, was very low due to most costs being fixed. Consequently, even low aeronautic charges were estimated to be incrementally profitable. This is demonstrated by the 39 % increase in operating revenues observed by the Airport Manager over the period 2008-2010, which was achieved with only a 22 % increase in operating costs.

(96) According to Romania, the rebates and discounts included in the 2007 AIP and 2008 AIP reflect economies of scale for the Airport Manager resulting from the high fixed cost nature of airport operation. It means that there is a strong incentive to pursue incremental volumes. The rebates and discounts are designed to incentivise and increase economic activity which makes the most efficient use of the airport infrastructure.

5.2.2. The 2010 AIP

(97) According to Romania, the Airport Manager acted on its own when determining the charges and reductions published in the 2010 AIP. Romania stated that the charges and reductions are not attributable to the State.

(98) Romania submitted that the 2010 AIP was adopted in compliance with the MEOP. According to Romania, non-aviation revenues, the outsourcing of the network and an increase of the value of the company should be taken into account when analysing compliance with the MEOP. About 14 % of the Airport Manager’s revenues were non-aeronautical revenues. According to Romania, passengers of low-cost airlines are usually more prone to buy newspapers, food, drinks or similar at an airport’s shops than other passengers as low-cost airlines usually do not provide these items on board.

(99) Romania believed the 2010 AIP provided an incentive to airlines to attract more passengers. Romania stated that throughout the application of the 2010 AIP, the traffic at the Airport had developed positively (see Table 10). Table 10: Timișoara airport – Revenue and Passenger numbers Total number of passengers Total revenue RON (EUR) 2008 831 404 22 033 887 (5 983 079 ) 2009 944 167 34 977 836 (8 254 746 ) 2010 1 137 218 37 565 399 (8 923 110 )

(100) Romania explained that airport charges applicable to Carpatair were reduced by 70 % for landings and by 50 % for lighting. Only EUR 1,5 per transfer passenger was charged. According to the 2010 AIP, the maximum reduction of airport charges applicable to Wizz Air amounted to inbetween 67 % and 72 %. Discounts amounting to 72 % to 85 % were never applied to Wizz Air because it had never reached the respective thresholds. According to Romania, other airlines were also entitled to the reduction of charges according to the level of passengers or movements reached.

(101) Romania stated that the reduction of airport charges in the 2010 AIP reflects the Airport Manager’s opportunity costs in providing services to companies using small aircrafts and longer rotation times as compared to providing services to larger aircrafts which bring a higher number of passenger per landing. The 2010 AIP aimed at attracting airlines with shorter rotation times so as to allow for a higher number of rotations per hour and therefore improve the operational capacity of the Airport Manager in terms of number of landings per hour.

(102) Romania stated that the discounts applied to Wizz Air also reflect the smaller amount of services used. Wizz Air only offered direct flights and thus did not require facilities and services needed for transfer. For transit flights, the Airport Manager must double the security facilities. According to Romania, 60 % of Wizz Air passengers check in online, which entails a significant reduction of required staff at the check-in. Wizz Air passengers carry less baggage, reducing the staff and facilities required to handle such baggage. According to Romania, Wizz Air’s own teams provided the routine cleaning of aircrafts during the rotation time.

5.3. Measure 3 – 2008 Agreements between Wizz Air and the Airport Manager

(103) Romania submitted that none of the investments in taxiway restoration or apron extension were made specifically due to the presence of Wizz Air. According to Romania investments made by the State as a main shareholder were launched before Wizz Air announced its intention to operate at Timișoara International Airport. Romania stated that, similarly, investments and repairs made from own resources of the Airport Manager were not made because of the presence of Wizz Air or any other airline at Timișoara International Airport but rather to ensure the safety and security conditions necessary for the good conduct of the airport activity. Repairs were made because of normal wear and tear and not for or due to any airline.

(104) According to Romania, as indicated in its preamble, the MoU was an agreement in principle which did not impose any legal obligations on the parties. Romania submitted that except for violation of the confidentiality clause, the agreement did not set any sanctions for potential infringements. In addition to the absence of any valid obligation concerning the provision of the services listed in the MoU, the Airport Manager did not carry out any infrastructure work in the period concerned other than the infrastructure work that was completely independent of Wizz Air’s operation.

(105) Romania stated that the MoU expresses the intention of the parties to start negotiations in good faith concerning a potential cooperation that was to be set upon the basis of mandatory agreements. Romania submitted that such mandatory agreements were indeed concluded, practically replacing the MoU: Operation Agreement, GHA and the Marketing Agreement.

(106) According to Romania, the Airport Manager acted in line with the MEOP when signing the 2008 Agreements with Wizz Air. In order to substantiate the argument, Romania sent to the Commission an ex ante business plan reconstructed ex-post, which showed that the 2008 Agreements with Wizz Air were expected to generate higher passenger numbers, as well as higher profits.

5.4. Measure 4 – Forebearance of invoiced airport charges to Wizz Air for the period October 2009 – February 2010

(107) Romania stated that the Airport Manager acted on its own as regards the payment of the airport charges owed by Wizz Air to the Airport Manager. According to Romania, the decision in this context is therefore not attributable to the Romanian State.

(108) Romania submitted that the decision by the Airport Manager regarding the payment of airport charges owed by Wizz Air to the Airport Manager respected the MEOP.

(109) According to Romania, the amounts that were to be refunded to and recovered from Wizz Air were set off on 1 March 2014 in a settlement agreement No 20310 (15) between the Airport Manager and Wizz Air (the "Settlement Agreement").

(110) Romania submitted that as of 20 November 2014, debts of the Airport Manager to Wizz Air amounted to EUR 0 and debts of Wizz Air to the Airport Manager amounted to EUR 122 861,67 for operations from 1 October 2014 to 31 October 2014 and EUR 1 256,12 for the rent of an administrative area at Timișoara International Airport. According to Romania these amounts were due on 30 November 2014.

6. OBSERVATION FROM THIRD PARTIES

6.1. Carpatair

6.1.1. Measure 3 – 2008 Agreements between Wizz Air and the Airport Manager

(111) According to Carpatair, the various schemes in favour of Wizz Air’s operation at Timișoara International Airport constitute State aid. The alleged aid granted to Wizz Air is estimated by Carpatair to amount to EUR 5,5 million between October 2008 and December 2010. It was allegedly granted through the Marketing Agreement, in the amount of EUR 2,6 million and discounts based on the AIP and Operating Agreement, in the amount of EUR 2,9 million. In addition, Carpatair claimed that in 2011 the measure continued to be provided to Wizz Air by the Airport Manager and it would amount to EUR 8,3 million by the end of 2011.

(112) Carpatair commented on the MEOP. According to Carpatair, a market economy investor would have based its decisions on the specificities of the airport. Due to its location and the efforts of Carpatair, a hub and spoke system had been progressively created since 2000, leading to a situation where Carpatair provided 38 % of the Airport Manager’s revenues in 2008, at the time where Wizz Air arrived. This is essentially because Carpatair was able to attract a stable traffic of business people coming from Romania, Italy, Moldova, Ukraine and Germany.

(113) Carpatair further submitted that the traffic at Timișoara International Airport was 836 574 passengers in 2007 and 890 704 passengers in 2008. This normally had to be the base and reference of revenues on which a private investor would aim to build marginal revenues. The main concern of the Airport Manager should have been not to cannibalize the existing business and revenues. However, according to Carpatair, the Airport Manager did not take this into consideration and, as a result, in 2013 Timișoara International Airport processed only 757 009 passengers. This was 15 % less than before Wizz Air’s arrival. A prudent investor would therefore have taken into account that it was this very traffic which brought high quality yield, and would have limited the advantage given to Wizz Air to new routes only. This was not the case. The Marketing Agreement gave a 85 % rebate on all charges, handling services and even material used for three years, on all the routes, including therefore half of them already flown by Carpatair. A wise investor would have known that weakening its main client, Carpatair, would destroy the existing hub and the resources attached to it. A wise private investor should have been aware of the actual profitability margins in the industry, particularly of those airlines operating hub and spoke model. Considering that only half of revenues stemming from operation at Timișoara International Airport (20 % of the total Carpatair revenues) would have been lost after implementation of the alleged aid, the slump in the profitability would be a 15 % loss on total revenues from 5 % profit. When expressed in absolute figures, the respective loss meant EUR 10 – 15 million of negative impact a year.

(114) Carpatair stated that a prudent investor would have disclosed the results of a study commissioned in 2006 which showed the need to repair the runway at a cost of EUR 30 million. The information was made available in 2010 by the new airport director. A prudent private investor is guided by the prospect of longer term profitability which allows to bypass the short term notion of marginal profit brought by even extremely low incremental revenues such a 1 EUR per passenger. It is clear that the Airport Manager, when it ignored the costs of repair and – on the contrary – allowed an airline which was bound to overload and damage the runway, did not consider the long term profitability. A prudent investor in the airline industry would have imposed a surcharge on such an airline, for each overload operation movement.

(115) Carpatair claimed that at the beginning of 2012, the Airport Manager conditioned the renewal of its contract upon the agreement of Carpatair with the arrangements with Wizz Air and the terms thereof.

(116) Carpatair alleged that the MEOP is not fulfilled. Carpatair claimed that no ex ante analysis was made and no business plan was presented to the Commission in accordance with the 2005 Guidelines on financing of airports and start-up aid to airlines departing from regional airports (16) (the "2005 Aviation Guidelines").

(117) Carpatair rejected Romania’s arguments on the fact that non-aeronautical income has to be included in the analysis of the MEOP. Carpatair stated that Romania was not able to submit a detailed economic analysis of how the subsidies to Wizz Air would be justified by an increased non-aeronautical profit.

6.1.2. The 2014 Aviation Guidelines

(118) Carpatair stated that the 2014 Aviation Guidelines confirm that the measures were State aid. The MEOP test was not met as there was no ex ante business plan and consequently, Romanian authorities did not provide to the Commission such plan or profitability projections of the 2008 Agreements.

(119) Carpatair claimed that the latest financial data of the Airport Manager confirm that the aid is incompatible. Carpatair argued that the State aid decreased the profitability of the Airport Manager and the aid did not comply with the cumulative conditions for start-up aid.

(120) Carpatair further informed the Commission that it lodged a complaint with the Romanian Competition Council alledging that the Airport Manager abused its dominant position by offering discriminatory conditions to airlines.

6.2. Wizz Air

6.2.1. Measure 2 – Discounts and Rebates according to the 2007 AIP, 2008 AIP and 2010 AIP

(121) Wizz Air claimed that a discount up to 85 % pursuant 2010 AIP was never applied. Instead, an average maximum 73 % discount was applied after the Romanian Ministry of Transport opposed the above scheme of charges.

(122) Moreover, according to Wizz Air, there is no selectivity and advantage in its favour under the 2007 AIP, the 2008 AIP and the 2010 AIP. Other airlines operate aircraft of the same size and MTOW as Wizz Air’s and therefore could benefit from the same level of discount.

(123) Wizz Air alleged that since its arrival, the general trend towards the use of larger aircraft was encouraged by the Airport Manager, and the number of passengers has increased by 36 % in the period from 2007 to 2010, with an increase in movement by only 2 %.

(124) Contrary to Carpatair, Wizz Air offered a low fare service, and its operations were efficient. Consequently, it was economically rational that the provision of less expensive infrastructure and services lead to the application of lower charges by an airport acting as a MEO. Wizz Air declared having boosted the Airport’s traffic by increasing aeronautical and non-aeronautical revenues.

6.2.2. Measure 3 – 2008 Agreements between Wizz Air and the Airport Manager

(125) Wizz Air argued that the lack of an ex-ante business plan is not evidence that the Romanian authorities failed to act as an MEO.

(126) Wizz Air hired an economic consultant, Oxera Consulting Ltd, in order to prepare the Economic MEIP assessment in relation to the Airport. The Oxera’s report, submitted to the Commission on 27 October 2011, aimed to establish whether the MEOP test is fulfilled in the agreements between the Airport Manager and Wizz Air.

(127) Oxera’s analysis focused on the 2008 Agreements as well as the 2007 AIP, the 2008 AIP and the 2010 AIP.

(128) According to Oxera, the charges paid by Wizz Air at Timișoara International Airport should be compared with charges paid by Wizz Air at similar airports over an appropriate timeframe.

(129) In Oxera’s analysis, three airports have been chosen as relevant comparators for the purposes of this analysis. Oxera claimed that the ownership and funding structure of these airports is such that all of them are likely to behave in a manner consistent with ‘private investors’ airports, and they are Wizz Air destinations that are broadly comparable in a number of dimensions.

(130) Based on data received from Wizz Air, Oxera concluded that the overall charges paid by the airline at Timișoara International Airport can be compared with the respective charges paid at the three comparator airports between 2008 – 2009 and 2010 – 2011, both on a per passenger and a per turnaround basis.

(131) According to Oxera, the analysis has shown that the overall level of charges paid by Wizz Air at Timișoara International Airport, as per the agreements detailed, is higher, on average, than the comparable average level of charges paid by the airline at the comparators airports. The lower prices paid by Wizz Air at the comparator airports suggest that a private investor would have been likely to enter into a contract on the terms of the deal between the Airport Manager and Wizz Air.

(132) The profitability assessment of agreements shows that a rational private sector investor would be willing to enter into the same deal with Wizz Air. The profitability analysis therefore implied that, by concluding the various agreements with Wizz Air, the Airport Manager conducted itself in a way consistent with the MEOP.

(133) Overall, Oxera concluded that the result of the comparator analysis and the analysis of the profitability of the agreements suggested that the charges paid by Wizz Air at Timișoara International Airport were comparable with a level of charges that would have been offered to Wizz Air by an airport- owning market economy investor in similar circumstances.

6.2.3. Measure 4 – Forebearance of invoiced airport charges to Wizz Air for the period October 2009 – February 2010

(134) In Wizz Air’s opinion, the alleged outstanding amount due to the Airport Manager clearly did not constitute aid. Wizz Air claimed to have reciprocal claims against the Airport Manager resulting from the reversal of a set off procedure between the Airport Manager and Wizz Air.

(135) Wizz Air argued that the imputability of the State was not proven because the Commission has not established that the State was involved in the failure to pay charges due.

(136) The alleged aid granted by the Airport Manager to airlines is not attributable to the Romanian State citing the Court’s case-law in Stardust Marine. (17) According to Wizz Air, the Airport Manager appears to have acted autonomously and without the approval or even the knowledge of the Romanian State. The Romanian government intervention has consisted only in orders to reverse certain measures adopted by the Airport Manager which met with the government’s ex post disapproval.

6.2.4. The 2014 Aviation Guidelines

(137) Wizz Air reiterated that the 2008 Agreements with the Airport Manager did not constitute a State aid under the 2014 Aviation Guidelines.

(138) According to Wizz Air, the agreements between the Airport Manager and Wizz Air were in compliance with MEOP test. The comparison with the market price and the ex-ante profitability analysis, described in the 2014 Aviation Guidelines, were applied in this case, as proved by the Oxera’s report.

(139) Wizz Air finds that the alleged State aid to the Airport Manager, if any, was not passed on to Wizz Air. It referred to points 11 and 65 of the 2014 Aviation Guidelines under which where an airport has been the recipient of aid, then the advantage resulting from such aid is not passed on to a specific airline if relevant infrastructure is open to all airlines and not dedicated to a specific airline and the airlines pay tariffs covering at least the incremental cost of their operation at the airport.

(140) Wizz Air stated that these conditions were satisfied. Wizz Air was not the only airline operating aircraft of more than 70 tonnes MTOW at Timișoara International Airport during the relevant period and, therefore, other airlines possibly benefitted from similar or greater rebates on airport charges than Wizz Air.

(141) Wizz Air concluded from point 172 of the 2014 Aviation Guidelines that even if it was found that the Airport Manager has received aid, its compatibility should be assessed based on the 2014 Aviation Guidelines, with aid intensities allowed for airports under 700 000 passangers.

6.3. The Airport Manager

6.3.1. Measure 3 – 2008 Agreements between Wizz Air and the Airport Manager

(142) The Airport Manager stated that no State aid within the meaning of Article 107(1) TFEU is involved in the 2008 Agreements.

(143) According to the Airport Manager, there was no selectivity. The alleged aid provided to Wizz Air was available to all comparable airlines on a transparent basis and without discrimination.

(144) The Airport Manager claimed that the marketing arrangement concerned Wizz Air’s marketing services for the Airport Manager. The Airport Manager would have offered such arrangement to other airlines but could not as there was a limitation on how much the Airport Manager could spend on advertising.

(145) The Airport Manager argued having no access to State resources. The State resources were only used for the provision of non-discriminatory infrastructure such as taxiways, aprons, security equipment, terminal facilities and terminal equipment.

(146) The Airport Manager alleged to have acted autonomously. The fact that Romania is shareholder with an 80 % stake in the Airport would not imply that the State has direct or indirect control on the resources under consideration.

(147) The MEOP has been satisfied in all respects in the 2008 Agreements. The Airport Manager declared having carried out calculations before concluding the 2008 Agreements. According to the Airport Manager, there was no legal obligation to have prepared a business plan. The Airport Manager knew of no reason to retain any documentation.

(148) The RBB (18) Report, sent by the Airport Manager, sought to estimate the incremental costs and benefits to the Airport Manager under the 2008 Agreements. According to the report, the 2008 Agreements have, even over the three years in which the Airport Manager bore the cost of the Marketing Agreement, produced a positive return for the Airport Manager.

(149) The RBB Report considered the efficiency improvement enjoyed by the Airport as a result of Wizz Air operation. The data showed that Wizz Air carried a significantly greater number of passengers per aircraft movement than other airlines operating at the Airport. The addition of Wizz Air to the Airport Manager’s customer portfolio has therefore provided it with a substantial increase in passengers for only a small increase in aircraft movements.

(150) This pattern of growth improved the Airport’s profitability: over the period 2008 to 2010, the Airport Manager’s total operating revenues have increased by 39 %, while total operating costs have increased only by 22 %.

(151) According to the RBB Report, the data showed that Wizz Air bears a share of aeronautical revenues commensurate to or greater than its share of both passengers and aircraft movements at the Timișoara International Airport. By contrast, the RBB Report stated that the data showed that Carpatair has consistently made a smaller contribution to the Airport Manager’s revenues than is consistent with its usage of the Timișoara International Airport’s facilities as measured by its share of passengers and aircraft movements.

(152) The report suggested that Carpatair obtained better terms from the Airport Manager than other airlines, including Wizz Air. This consistent underpayment relative to capacity usage reflects the relative inefficiency, in terms of airport utilisation, of Carpatair’s business modal based on a large number of aircraft movements each carrying relatively few passengers.

(153) According to the study from the University of Timișoara, the investments made by the Airport Manager were profitable and beneficial. The study alleged that the Airport Manager acted in compliance with the MEOP.

(154) The study stated that the Airport Manager had a correct strategy channelled into the increase in passengers’ numbers as well as aircraft movements. For this, taking as an example the charges on other airports in the country and abroad, an advantageous scheme of discounts was produced, especially for the airlines carrying large numbers of passengers and operating large capacity aircraft. Moreover, the rental charges for the locations within the terminal building respect the market price, the charges were compatibles with those practiced in Timișoara for locations of the same type.

6.3.2. The 2014 Aviation Guidelines (Measure 1 and Measure 3)

(155) The Airport Manager submitted that, on the basis of the 2014 Aviation Guidelines, there was no illegal State aid. Even if there had been aid, it would have been compatible with the internal market pursuant to Article 107(3)(c) TFEU.

(156) According to the Airport Manager, the aid to the Airport Manager contributed to a well-defined objective of common interest as it increased the mobility of European Union citizens and the connectivity of the Timiș County by establishing access points for intra-EU flights, combated air traffic congestion at major EU hub airports, and facilitated regional development in the Timiș County.

(157) The Airport Manager stated that the investment aimed at creating new capacity at Timișoara International Airport, the new infrastructure meets, in the medium-term, the forecasted demand of the airlines, passengers and freight forwarders in the catchment area of the Timișoara International Airport.

(158) According to the Airport Manager, the arrangements between Wizz Air and the the Airport Manager did not constitute State aid under the MEOP test.

(159) The Airport Manager applied the two different approaches described in the 2014 Aviation Guidelines for the MEOP test.

(160) The Airport Manager argued that the price charged by an airport to a particular airline corresponds to the market price: the Airport Manager reminded that the RBB Report showed that the aeronautical fees paid by Carpatair in 2010 were lower than those charged to Wizz Air.

(161) In the Airport Manager’s opinion, the arrangements contributed to the profitability of the Airport by quantifying the incremental costs and benefits: according to the RBB Report, for the period 2008 to 2010, the arrangements with Wizz Air showed an incremental profit to the Airport Manager.

(162) Moreover, while aeronautical charges to Wizz Air represented an ongoing income stream for the Airport Manager due to continued operations, around 50 % of the incremental costs faced by the Airport Manager consisted of a one-off marketing payment in 2009.

(163) Consequently, the 2008 Agreements did not constitute State aid.

6.4. The European Regions Airline Association (ERA)

6.4.1. Measure 3 – 2008 Agreements between Wizz Air and the Airport Manager

(164) ERA (19) alleged that the measures provided to Wizz Air are State aid within the meaning of Article 107(1) TFEU.

(165) ERA believed that the financial data are essential evidence of the infringement and should therefore be disclosed.

(166) According to ERA, the existence of a clear business plan should form an essential element of analysis of any aid granted. Such a plan should clearly demonstrate the financial viability of the route.

(167) ERA highlighted that the airline industry is characterised by traditionally low margins and high capital investment requirements. Therefore, advantages of this magnitude, financed through State funds, quickly lead to those carriers not receiving an advantage to leave the marketplace.

(168) In ERA’s opinion, the result is not only a distortion of competition but potential monopoly dominance by the remaining subsidised airport operator. The impact on the consumer in the long term is an increase of prices and reduction of choice.

6.5. Eurojet

6.5.1. Measure 2 – Discounts and Rebates according to the 2007 AIP, 2008 AIP and 2010 AIP

(169) Eurojet, a business charter company operating also in Romania, agreed that a discount be accorded to an airline when non-aviation activities make up an important share of the airport’s revenues.

(170) However, in Eurojet’s opinion, the 85 % discount applicable to operators that use aircraft with a mass greater than 70 tonnes has clearly been introduced for the exclusive benefit of a single operator.

7. ASSESMENT OF MEASURE 1 – ANNUAL OPERATING FINANCING GRANTED TO THE AIRPORT MANAGER

7.1. Existence of Aid

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

(172) The qualification of a measure as State aid within the meaning of this provision thus requires the following cumulative conditions to be met: (a) the beneficiary is an undertaking; (b) the measure is financed through state resources and is imputable to the State; (c) it confers an economic advantage on its recipient; (d) the advantage is selective; and (e) the measure must distort or threaten to distort competition and is liable to affect trade between Member States.

(173) In the Opening Decision, the Commission took the preliminary view that the public financing granted to the Airport Manager amounted to State aid. Based on the information available at the time of the Opening Decision, the Commission considered such public financing to constitute operating aid.

(174) Following the Opening Decision, Romania submitted that the annual grants did not constitute operating aid but were earmarked for investments at Timișoara International Airport. Romania further argued that the investments made did not constitute State aid as they either fell within the public policy remit or were in line with the MEOP.

(175) The Commission recalls that distinction needs to be made between investment aid and operating aid. In line with the 2014 Aviation Guidelines, investment aid is defined as aid to finance fixed capital assets, specifically, to cover the ‘capital costs funding gap’. Operating aid is defined as aid to cover the ‘operating funding gap’, either in the form of an upfront payment or in the form of periodic installments to cover expected operating costs (periodic lump sum payments).

(176) The Commission notes that the investment projects submitted by Romania (Table 3) relate to the financing of fixed capital assets and were accounted for in the capital expenditure in the Airport Manager’s accounting. Based on the information provided by Romania after the Opening Decision, in particular the legal acts approving the investments projects, the Commission therefore considers such financing as financing of investment projects.

(177) The Commission will analyse whether the investments submitted by Romania (Table 3) constitute State aid. The Commission will then subtract the annual amount of investments that do not constitute State aid from the total annual amount of investments. The difference, if any, is the annual amount of investment aid granted to the Airport Manager.

(178) The Commission will then analyse whether the investment aid granted to the Airport Manager, if any, is compatible.

7.1.1. Economic activity and notion of undertaking

7.1.1.1. Principles

(179) According to settled case-law, the Commission must first establish whether the Airport Manager is an undertaking within the meaning of Article 107(1) TFEU. The concept of an undertaking covers any entity engaged in an economic activity, regardless of its legal status and the way in which it is financed. (20) Any activity consisting in offering goods or services on a given market is an economic activity.

(180) It is settled case law that the operation and construction of airport infrastructure must be considered as an economic activity falling within the ambit of State aid control as of 12 December 2000, the date of the Aéroports de Paris judgment. (21) Once an airport operator engages in economic activities by offering airport services against remuneration, regardless of its legal status or the way in which it is financed, it constitutes an undertaking within the meaning of Article 107(1) TFEU, and the Treaty rules on State aid are therefore capable of applying to advantages granted by the State or through State resources to that airport operator.

(181) While airport operators must be considered to constitute undertakings in the sense of Article 107(1) TFEU, it must be recalled that not all activities of an airport operator are necessarily of an economic nature. (22)

(182) The Court of Justice held that activities that normally fall under the State’s responsibility in the exercise of its official powers as a public authority are not of an economic nature and do not fall within the scope of the rules on State aid. (23)

(183) Therefore, the financing of activities falling within the public policy remit or of infrastructure directly related to those activities in general does not constitute State aid. (24) At an airport, activities such as air traffic control, police, customs, firefighting, activities necessary to safeguard civil aviation against acts of unlawful interference and the investments relating to the infrastructure and equipment necessary to perform these activities are generally considered to be of a non-economic nature. (25)

(184) However, public financing of non-economic activities must not lead to undue discrimination between airlines and airport managers. Indeed, it is established case-law that an advantage is present when public authorities relieve undertakings of the costs inherent to their economic activities. (26) Therefore, if, in a given legal system, it is normal that airlines or airport managers bear the costs of certain services, whereas some airlines or airport managers providing the same services on behalf of the same public authorities do not have to bear those costs, the latter may enjoy an advantage, even if those services are considered in themselves non-economic. (27)

7.1.1.2. Application to the present case

(185) The Airport Manager is engaged in constructing, maintaining and operating the airport infrastructure. The Airport Manager offers airport services and charges users – commercial aviation operators as well as non-commercial general aviation users – for the use of the airport infrastructure, thereby commercially exploiting the infrastructure. It must therefore be concluded that Airport Manager was engaged in an economic activity in the period under assessment and, thus, constitutes an undertaking within the meaning of Article 107(1) TFEU.

(186) Romania submitted that the costs arising from the following activities are to be considered as falling within the public policy remit (recitals (87) and (88)): — Investments in runway restoration and apron extension relate to non-commercial activities at Timișoara International Airport (such as military activities, official missions, search and rescue missions, humanitarian and emergency flights); — Investments in security equipment; — Investments in non-Schengen terminal development aimed at ensuring compliance with the EU requirements so that the terminal was able to receive non-Schengen flights – at that time Romania expected to become a member of the Schengen area in 2011.

(187) Regarding the investments in runway restoration and apron extension in 2007, 2008 and 2009, the Commission recalls that if infrastructure is used for both economic and non-economic activities, public funding will only fall under State aid rules insofar as it covers the costs linked to the economic activities.

(188) However, in this case the investments in taxiway restoration and apron extension were predominantely required because of the commercial usage of the airport facilities. Romania argued that the investments were necessary to meet the demands of increased commercial traffic forecasts, to generate further revenues for the Airport Manager and increase its profitability (recital (86)). The Commission recalls that funding of an airport’s non-economic activity may not lead to cross-subsidisation of the airport’s economic activities. For the purposes of this Decision, the Commission considers the investments in runway restoration and apron extension to be fully linked to economic activities and therefore to be outside the public policy remit.

(189) Regarding the investments in security equipment, the Commission recalls that activities necessary to safeguard civil aviation against acts of unlawful interference and the investments relating to the infrastructure and equipment necessary to perform those activities are considered in general to be of a non-economic nature. The Commission considers the control of hold baggage, passengers, cabin luggage and the control of access of members of the public to the security area of an airport to be measures falling within the scope of safeguarding civil aviation against acts of unlawful interference. (28)

(190) Romania confirmed that under the Romanian legal order, the State finances the security equipment of all airports on the basis of the Government Decision 1661 from 6 December 2007.

(191) The Commission considers the investments in security equipment in 2008 as submitted by Romania to be necessary to safeguard civil aviation against acts of unlawful interference. The investments therefore fall into the public service remit and therefore do not constitute State aid.

(192) Regarding the investments in non-Schengen terminal development, Romania states that the initial terminal extension investments were triggered by economic considerations but were also essential for creating a terminal that complies with the safety measures required by EU rules on civil aviation security and Schengen borders control. In particular, these measures relate to the separation of passengers. There was no specification as to which investments were strictly necessary for the compliance with such rules and thus for exercising public powers.

(193) The Commission recalls that funding of an airport’s non-economic activity may not lead to cross-subsidisation of the airport’s economic activities. Based on Romania’s submission, the Commission considers that the investments in the terminals were to a large part conducted for economic purposes. For the purposes of this Decision, the Commission considers investments in non-Schengen terminals to be outside the public policy remit.

(194) In conclusion, the Commission finds that: (i) the investments in runway restoration and apron extension in 2007, 2008 and 2009, to be outside the scope of the public policy remit and therefore to constitue an economic activity; (ii) the investments in security equipment in 2008 to fall within the public policy remit and therefore do not constitute State aid; (iii) the investments in non-Schengen terminal development in 2007, 2008 and 2009 to be outside the public policy remit and thus an economic activity.

7.1.2. State resources and imputability to the State

7.1.2.1. Principles

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

(196) The concept of State aid applies to any advantage granted through State resources by the State itself or by any intermediary body acting by virtue of powers conferred on it. (29) Resources of local authorities are, for the application of Article 107 TFEU, State resources. (30)

7.1.2.2. Application to the present case

(197) The public funding granted to the Airport Manager was decided by Government decisions 615/2002 and 1212/2007 (recital (39)) and were direct grants from the budget of the national authority, namely the Ministry of Transport of Romania. The funds were granted for the investment projects and were recorded as capital expenditure. The funds were allocated throughout the investment on the basis of a budget approved for the year concerned.

(198) Thus, the Commission considers that they are financed through State resources and are also imputable to the State.

7.1.3. Selectivity

7.1.3.1. Principles

(199) To fall within the scope of Article 107(1) TFEU, a State measure must favour "certain undertakings or the production of certain goods". Hence, only those State measures favouring undertakings which grant an advantage in a selective way fall under the notion of State aid.

(200) As confirmed by the Court of Justice, when the terms of the agreement concluded were proposed selectively by the State to one or more operators rather than on the basis of objective criteria, laid down by a text of general application, applicable to any operator, together with other elements, this can be an indication of State aid. (31)

7.1.3.2. Application to the present case

(201) In the case at hand, the financial support was proposed and given by the State to a single undertaking- the Airport Manager- only. This is an individual measure. Measure 1 was thus selective by definition within the meaning of Article 107(1) TFEU.

7.1.4. Economic advantage

7.1.4.1. Principles

(202) An advantage within the meaning of Article 107(1) TFEU is any economic benefit which an undertaking would not have obtained under normal market conditions, that is to say in the absence of State intervention. Only the effect of the measure on the undertaking is relevant, not the cause nor the objective of the State intervention. Whenever the financial situation of the undertaking is improved as a result of State intervention, an advantage is present.

(203) However, public resources placed directly or indirectly at the disposal of an undertaking by the State in circumstances which correspond to normal market conditions cannot be regarded as State aid (32) (the "MEO Principle" or "MEOP").

(204) The MEO Principle applies only if the State acted as a private market operator which is in comparable circumstances.

(205) Regional or policy considerations cannot be taken into account for the purposes of the MEOP test. Any positive repercussions on the economy or accessibility of the region in which the undertaking is located should be left aside. (33)

(206) The MEOP test should be based on available information and foreseeable developments at the time when the public funding was granted and it should not rely on any analysis based on a later situation. (34)

(207) Consequently, as regards public financing to airports, the analysis of conformity with the MEOP test should be based on sound ex ante profitability prospects for the entity granting the financing. (35) Any traffic forecasts used for that purpose should be realistic and subject to a reasonable sensitivity analysis. The absence of a business plan constitutes an indication that the MEOP test may not be met. (36)

(208) In the absence of a business plan, Member States can provide analysis or internal documents from the public authorities or from the airport concerned showing clearly that an ex ante analysis demonstrates that the MEOP test is satisfied. (37)

(209) According to the settled case-law of the Court, it is for the Member State itself to establish that it acted as a prudent private investor (38) and submit to the Commission the evidence to that effect. (39)

7.1.4.2. Application to the present case

(210) In the present case, in order to determine whether the public financing grants the Airport Manager an advantage that it would not have received under normal market conditions, the Commission has to compare the conduct of the public authorities providing the direct investment grants and capital injections to that of a market economy operator who, leaving aside all social, regional-policy and sectoral considerations, is guided by prospects of profitability in the long-term, over the lifetime of the investment. (40) These prospects are particularly pertinent to investment in infrastructure, which often involve large amounts of financial resources and can produce a positive return only after many years. Any assessment of the profitability of an airport must take into account airport revenues.

(211) The Commission notes that initially, the Government owned 100 % of the shares of the Airport Manager (recital (28)). However, its shareholding decreased to 80 % of the shares at the end of 2008. The size of the Government’s shareholding when compared to the proportion of the costs it financed is taken into acount for the purposes of the MEOP assessment.

(212) The Commission must base its assessment on the information and assumptions which were at the disposal of the relevant Romanian authorities at the time when the public funding was granted. (41)

(213) According to Romania, the following investments were carried out in line with the MEOP (recital (86): — Financing of runway restoration and apron extension in 2007, 2008 and 2009; — Financing of non-Schengen terminal development in 2007, 2008 and 2009; — Financing of an access road and parking area development in 2007; and — Financing of lighting equipment in 2008.

(214) According to Romania, these investments were guided by prospects of profitability in the longer term from which the State could benefit in a double position: that of a shareholder which receives dividends and as an owner which receives a concession fees (calculated as 2 % of the gross income received through the exploitation of the concession) (recital (86)). Romania states that the Development Plan drawn up in 2006 and the Capacity Assessment drawn up in 2006 indicated economic sustainability of the investments. According to Romania, economic sustainability could have been expected as increased passenger numbers and efficiency gains would increase revenues from operating the airport infrastructure (recital (86)).

(215) The Commission will first consider whether the ex-ante feasibility studies provided by Romania for the investments above are sufficient to prove compliance with the MEOP.

Feasiblity studies

(216) Romania submitted feasibility studies prepared in view of the investments related to the runway restoration and apron extension, for the non-Schengen terminal development, for the access road and parking area development and for the lighting equipment. The feasibility studies aim at assessing the overall profitability of the projects that received State investments. They are therefore used to analyse whether Romania invested in projects that were expected to be profitable.

(217) The feasibility study for the runway restoration and apron extension found a net present value (the "NPV") of EUR 3,791 million and an internal rate of return of 10,56 % (using a discount rate of 5 %). The Commission found that this study shows a number of shortcomings. In particular, the NPV value shows significant discrepancies when compared to NPV values set out in the ex post feasibility studies. The forecasting period of 25 years is too long, given the limited nature of the type of restorative investments carried out by Romania, especially when taking into account its limited contribution to the overall passenger growth. The ex post feasiblity study, in contrast, looks at a substantially shorter forecasting period for this investment (6 years). Furthermore, the study does not include any traffic evolution which should have been the basis for forecasted revenues. The predicted inflation rates are not explained and very low (1,5 % as of the 11th year), considering the inflation rate at the time (4,7 % in 2007, 7,9 % in 2008). The discount rate of 5 % is unexplained and seems too low, especially when compared to other contemporary investments, such as the modernisation and extension of the parking area. The Commission thus does not consider this study to be reasonable. Furthermore, while a large part of the investments were carried out in 2007, the study was drawn up in July 2008. This feasiblity study therefore cannot confirm profitability of investments as required by the MEOP test (42).

(218) Regarding the feasibility study for the non-Schengen terminal development, the Commission found that when calculating the NPV of the terminal, the study did not consider investments as costs. The Commission therefore cannot accept this feasibility study as proving compliance with the MEOP. In addition, the study was drawn up in June 2008 and it seems to relate only to the investments in 2009.

(219) Regarding the feasibility study for the modernisation and the extension of the parking on the basis of which the investments related to the access road and parking lot development were undertaken, the Commission considers the study reasonable. The study assumes a 15 % increase in revenues from the expected increase in the users of the parking linked to the increase in the number of passengers. The study found a positive NPV using a discount rate of 15 % over the expected life time of the investment of eight years. The Commission finds the discount rate of 15 % reasonable and the life time of the investment conservatively short. The study shows that the investment will be already amortised after five years. The study was drawn up in November 2005 and is therefore suitable to indicate MEOP compliance of the investment in 2007. Furthermore, the Commission notes that at the time the financing of the modernisation and the extension of the parking was decided, the Government owned 100 % of the shares in the Airport Manager. It is therefore not necessary to proportionally adjust the NPV of the project.

(220) Romania submitted that the relevant date for the feasibility study for lighting equipment is the date when it was prepared by IPTANA SA, which started the works on the study in August 2007 under Contract no. 1016/22.8.2007 and it was given a favourable opinion by the Technical and Economic Council of the Ministry of Transport in Opinion No 33/1998, revised in 2007. Nevertheless, the exact date when the study was drawn up is not available. In any case, the feasibility study for the lighting equipment did not include a profitability analysis, but elaborated the costs estimations for this project. Therefore, it did not show how the behaviour of the Airport Manager was guided by the prospects of profitability in the longer term. The Commission therefore cannot accept this feasibility study as proving compliance with the MEOP.

(221) On the basis of the above, the Commission considers the ex-ante feasibility study prepared in view of the investments related to the access road and parking area sufficient to prove compliance with the MEOP. The Commission finds that the feasibility studies for the taxiway restoration and the apron extension, for lighting and for the non-Schengen terminal do not demonstrate compliance with the MEOP.

Ex post reconstructed ex ante profitability studies

(222) The Airport Manager also submitted ex-ante profitability studies reconstructed ex post for the investments listed in recital (213).

(223) Regarding the investments in the runway restoration and apron extension, the profitability study reconstructed ex post found an NPV of EUR 1 784 600,12 and an internal rate of return of 13,12 %. The discount rate used was 9,1 %. The reconstructed ex-post study assumes a different passenger traffic forecast than available ex-ante on the basis of the Development Plan. These passengers forecasts are more conservative and estimated number of passengers are lower than included in the Development Plan. In this respect, the expected profitability would have been therefore even higher if the passenger number forecast in the Development Plan would have been taken into account. Nevertheless, the Commission notes that the estimated investment costs differ from the ex-ante feasibility study drawn up in July 2008. The Commission cannot verify whether the investment costs assumptions are those that could have been expected ex ante. Consequently, it is not possible to conclude that the assumptions taken into account are those that would have been available before granting the public financing and reconstructed study cannot be seen as providing a reliable ex-ante profitability analysis.

(224) Regarding the investment in the lighting equipment, the profitability study reconstructed ex post provided by the Airport Manager found an NPV of EUR 226 066,84 and an internal rate of return of 26,9 %. The discount rate used was 9,1 %. The reconstructed ex-post study assumes a different passenger traffic forecast than available ex-ante in the Development Plan. These passengers forecasts used are more conservative as the estimated number of passengers are lower than included in the Development Plan. In this respect, the expected profitability would have been therefore even higher if the passenger number forecast in the Development Plan would have been taken into account. This ex-ante analysis reconstructed ex-post seems reasonable to indicate the ex-ante profitability prospects of the investment in the lighting equipment in 2008.

(225) The Airport Manager has provided a profitability study reconstructed ex post for the investment in the non-Schengen terminal. This study found an NPV of EUR 2 536 094,92 and an internal rate of return of 14,71 %. The discount rate used was 8,67 %. The reconstructed ex-post study assumes a different passenger traffic forecast than available ex-ante in the Development Plan. These passengers forecasts used are more conservative and estimated number of passengers are lower than included in the Development Plan. Nevertheless, the Commission cannot verify the investment costs assumptions are those that could have been expected ex ante. In addition, it is not clear how the investment costs in the reconstructed study relate to the investment costs assumed in the ex-ante profitability study drawn up in June 2008 (recital (218)). Consequently, it is not possible to conclude that the assumptions taken into account are those that would have been available before granting the public financing and therefore the reconstructed study cannot be seen as providing a reliable ex-ante profitability analysis for investment in the non-Schengen terminal.

7.1.4.3. Conclusion on economic advantage

(226) As explained above, the Commission considers that Romania acted in line with the MEOP when investing in the access road and parking lot development project at Timișoara International Airport as shown in Table 3. The Commission therefore concludes that the financing related to this investment did not confer an economic advantage on the Airport Manager.

(227) Regarding the other three investment projects (taxiway restoration and apron extension, non-Schengen terminal development and lighting equipment), the Commission concludes that the public financing for these three investment projects provided an economic advantage to the Airport Manager.

7.1.5. Distortion of competition and effect on trade between Member States

7.1.5.1. Principles

(228) When aid granted by a Member State strengthens the position of an undertaking compared with other undertakings competing in intra-EU trade, the latter must be regarded as affected by that aid. (43)

(229) Since the operation of an airport is an economic activity, competition takes place, on the one hand, between airports to attract airlines and the corresponding air traffic (passengers and freight), and, on the other hand, between airport managers, which may compete between themselves to be entrusted with the management of a given airport. Moreover, in particular with respect to low cost carriers and charters, airports that are not located in the same catchment areas and even in different Member States can also be in competition with each other to attract those airlines.

(230) A public financing of an airport may therefore distort competition between airports. Competition between airports can be assessed in the light of airlines’ criteria of choice, and in particular by comparing factors such as the type of airport services provided and the clients concerned, population or economic activity, congestion, whether there is access by land, and the level of charges for use of airport infrastructure and services. (44)

(231) As mentioned in point 40 of the 2005 Aviation Guidelines and reaffirmed in point 45 of the 2014 Aviation Guidelines, it is not possible to exclude even small airports from the scope of application of Article 107(1) TFEU. Furthermore, point 45 of the 2014 Aviation Guidelines explicitly states that “the relatively small size of the undertaking which receives public funding does not, as such, exclude the possibility that trade between Member States migh be affected.”

7.1.5.2. Application to the present case

(232) At the time under assessment, Timișoara International Airport was the second largest airport in Romania (recital (31)). It carried approximately 900 000 passengers per year. It is located in the vincinity of the Arad Airport which is 50 km away and within a two hour drive from Caransebes (recital (34)). There are international flights flying from Timișoara International Airport to other parts of the Union by a variety of different airlines that are operating also from different airports in Romania and other Member States. The runway at Timișoara International Airport is of sufficient length and allows airlines to serve medium- haul international destinations and, thus, to attract airlines to the detriment of other similar airports located in other Member States. The economic advantage granted by the direct investment grants in this case to the Airport Manager strengthened its economic position, as the Airport Manager was able to set up its business without bearing all of the inherent investment costs.

(233) Therefore, the measures under assessment must be considered liable to distort competition and affect trade between Member States.

7.1.6. Conclusion on existence of State aid

(234) On the basis of the above, the Commission concludes that public financing of the access road and parking area development in 2007 and of the security equipment in 2008 does not constitute State aid within the meaning of Article 107(1) TFEU.

(235) The Commission finds, however, that the public financing for the non-Schengen terminal development, the improvement of the taxiway and the extension of the apron and the lighting equipment constitutes State aid to the Airport Manager within the meaning of Article 107(1) TFEU.

7.2. Type of aid: existing or new aid

(236) The Commission notes that under the provisions of Annex V of the Act concerning the conditions of accession of the Republic of Bulgaria and Romania, (45)"aid schemes and individual aid to the transport sector, put into effect in a new Member States before the date of accession and still applicable after that date shall be regarded as existing aid within the meaning of Article 88(1) of the EC Treaty subject to the following condition: the aid measures shall be communicated to the Commission within four months of the date of accession […] These aid measures shall be regarded as ‘existing’ aid within the meaning of Article 88(1) of the EC Treaty until the end of the third year from the date of accession."

(237) It follows from the above that in the case of Romania, the regime foreseen in Annex V will only apply to aid put into force before 1 January 2007 and continued thereafter if such aids have been communicated to the Commission within four months of the date of accession.

(238) Romania submitted that the public financing for the investments at Timișoara International Airport for 2007 were approved in November 2006, hence before Romania’s accession to the European Union. However, given that these measures have not been listed amongst the measures communicated to the Commission in accordance with the procedure detailed above, they cannot constitute existing aid. The Commission therefore concludes that the public financing for the non-Schengen terminal development, the improvement of the taxiway and the extension of the apron and the lighting equipment constitute new aid.

7.3. Lawfulness of the aid

(239) The public financing for the non-Schengen terminal development, the improvement of the taxiway and the extension of the apron and the lighting equipment was put into effect without a prior formal approval by the Commission. The measures do not meet the requirements of a block exemption from the notification obligation laid down in Article 108 of the Treaty. They were implemented by Romania in breach of its obligations under Article 108(3) TFEU.

(240) Therefore, the measures constitute unlawful State aid.

7.4. Compatibility with the internal market

(241) The public financing for the non-Schengen terminal development, the improvement of the taxiway and the extension of the apron and the lighting equipment (Table 3) was granted before 4 April 2014, which was the date when the 2014 Aviation Guidelines became applicable. According to 2014 Aviation Guidelines, the Commission will apply to unlawful investment aid to airports the rules in force at the time when the aid was granted. (46)

(242) The 2005 Aviation Guidelines were in force when this investment financing was granted. Therefore, the 2005 Aviation Guidelines apply to the compatibility assessment of this investment aid.

(243) Based on point 61 of the 2005 Aviation Guidelines, the Commission will assess the aid in terms of the following criteria: — the construction and operation of