COMMISSION DECISION (EU) 2020/1671

of 2 August 2019

on State aid SA.47867 2018/C (ex 2017/FC) granted by France to Ryanair and Airport Marketing Services

(notified under document C(2019) 5729)

(Only the French text is authentic)

(Text with EEA relevance)

THE EUROPEAN COMMISSION,

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

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

Having called on interested parties to submit their comments pursuant to those articles (1), and having regard to their comments,

Whereas:

1. PROCEDURE

(1) By letter dated 23 March 2017, the Commission received a complaint from the airline Air France (2) alleging that the airline Ryanair had enjoyed advantages between 2010 and 2015 in connection with its air transport operations to and from Montpellier airport. These advantages had allegedly been granted through marketing services agreements concluded by the Association for the Promotion of Tourist and Economic Flows (Association de promotion des flux touristiques et économiques – ‘APFTE’) with Ryanair or its subsidiary Airport Marketing Services (‘AMS’). On the basis of these agreements, the APFTE had paid Ryanair around EUR 8,5 million between 2010 and 2015.

(2) By letter dated 24 May 2017, the Commission sent France a non-confidential version of the complaint and invited France to submit its comments and answer certain questions on the measures at issue. On 12 July 2017, the Commission sent a reminder asking France to provide the information requested by the letter of 24 May 2017.

(3) France replied by letter dated 18 August 2017.

(4) By letter dated 13 September 2017, the Commission asked France for further information. On 9 October 2017, France requested further time to reply, to which the Commission agreed by letter dated 18 October 2017.

(5) By letter dated 22 November 2017, France provided some of the information requested by the Commission.

(6) On 22 December 2017, the Commission sent a reminder asking France to provide the answers to the remaining questions.

(7) France replied by letter dated 29 January 2018.

(8) By letter dated 4 July 2018, the Commission notified France of its decision (‘the opening decision’) to initiate the procedure laid down in Article 108(2) of the Treaty on the Functioning of the European Union (‘TFEU’) in respect of the aid.

(9) The Opening Decision was published in the Official Journal of the European Union (3). The Commission called on interested parties to submit their comments on the aid in question.

(10) The Commission received comments from Ryanair, the Region of Occitania, the Chamber of Commerce and Industry of Hérault, the Montpellier local authority structure Montpellier Méditerranée Métropole, the Pays de l’Or local authority structure Communauté d’agglomération du Pays de l’Or, […] and the APFTE. On 15 April and 17 May 2019, the Commission sent Ryanair’s comments to France (with a request for information) and asked the latter to comment on them. The Commission received France’s comments by letter dated 13 June 2019 and the APFTE’s comments by letter dated 21 June 2019. The comments of the other interested parties were sent to France on 18 June 2019.

2. GENERAL INFORMATION ON MONTPELLIER AIRPORT

2.1. Airport characteristics and traffic

(11) Montpellier Méditerranée airport (‘Montpellier airport’) lies approximately 7 km from the centre of Montpellier, which is the capital of the department of Hérault, in the Region of Occitania in France. The airport is open to domestic and international commercial traffic.

(12) An overview of passenger traffic at Montpellier airport in recent years can be found in Table 1 below. The airport handled nearly 1,85 million passengers in 2017 and 1,88 million in 2018. Table 1 Commercial passenger traffic at Montpellier airport between 2010 and 2018 (number of passengers) Year 2010 2011 2012 2013 2014 2015 2016 2017 2018 Local passengers (4) 1 177 860 1 308 346 1 285 428 1 420 614 1 444 110 1 507 928 1 669 023 1 847 314 1 878 035 Of which international passengers 295 334 400 818 398 609 391 855 433 923 480 667 616 564 661 456 641 005 Of which domestic passengers 882 526 907 528 886 819 1 028 759 1 010 187 1 027 261 1 052 459 1 185 858 1 237 030 Passengers in transit 2 588 4 930 2 787 2 179 1 224 2 242 2 063 2 096 1 928 Total 1 180 448 1 313 276 1 288 215 1 422 793 1 445 334 1 510 170 1 671 086 1 849 410 1 879 963 Of which low-cost airline passengers 275 341 378 980 397 819 441 388 464 170 507 965 577 198 679 148 708 273 Source: http://www.aeroport.fr/view-statistiques/montpellier-mediterranee, visited on 1 July 2019.

(13) Several airlines (5) currently operate scheduled flights from Montpellier airport to destinations in France, other European countries and the Maghreb.

(14) Aside from these scheduled flights, other commercial movements at Montpellier airport during the 2010-2018 period mainly involved flying club and business flights.

(15) Ryanair served Montpellier airport between March 2002 and April 2019.

(16) The first Ryanair flights at Montpellier took place in March 2002. Ryanair initially operated one scheduled route to Frankfurt-Hahn airport, situated in the German Land of Rhineland-Palatinate, and one scheduled route to London-Stansted airport (which ended in 2009). In 2008, Ryanair opened a route to Brussels-Charleroi airport (situated in Wallonia, Belgium), and in 2010 it opened a route to Leeds-Bradford airport (situated in Yorkshire, United Kingdom). A flight to Bristol was introduced and then ended in 2009. The Frankfurt-Hahn, Brussels-Charleroi and Leeds-Bradford routes were therefore already in operation when the APFTE was set up on 24 June 2010. A flight to Birmingham was introduced on 13 April 2011, and then ended in November 2013. Unlike Montpellier, the airports of Leeds-Bradford, Birmingham, Brussels-Charleroi and Frankfurt-Hahn are all Ryanair bases (6).

(17) Ryanair stopped operating the Montpellier-Leeds route in October 2017, and then the Montpellier-Hahn route in November 2018. In April 2019, Ryanair ended all operations at Montpellier airport when it stopped operating the Montpellier-Charleroi route. Table 2 Ryanair’s share of commercial passenger traffic at Montpellier airport between 2010 and 2019 Year 2010 2011 2012 2013 2014 2015 2016 2017 2018 January-April 2019 Total traffic at the airport by number of passengers (7) […] […] […] […] […] […] […] […] […] […] Ryanair passengers by number of passengers (8) […] […] […] […] […] […] […] […] […] […] — Hahn route […] […] […] […] […] […] […] […] […] — Charleroi route […] […] […] […] […] […] […] […] […] […] — Bradford route […] […] […] […] […] […] […] […] — Birmingham route […] […] […] Ryanair passengers as % of total passenger traffic [5-10] [10-15] [10-15] [5-10] [5-10] [5-10] [5-10] [5-10] [0-5] [0-5] Source: Information received from the French authorities.

(18) As apparent from Table 2, from 2010 onwards, the total number of Ryanair passengers flying to and from Montpellier airport accounted for only a relatively small share of the airport’s passenger traffic (less than [10-15] %), i.e. between […] and […] passengers between 2010 and 2017.

(19) It will also be seen from Table 2 that the number of Ryanair passengers fell constantly from 2012. When we look at the number of Ryanair passengers from 2002 onward, it becomes clear that the decline in the number of Ryanair passengers at Montpellier airport began in 2006 (9).

(20) Montpellier airport lies 57 km from Nîmes-Alés-Camargue-Cévennes airport and 70 km from Béziers-Cap d’Agde airport, which both handle international scheduled and charter flights.

(21) In April 2019, Ryanair launched a route to Brussels-Charleroi from Béziers-Cap d’Agde airport. Ryanair has been operating a route between Nîmes and Charleroi since April 2006.

2.2. Operation and ownership of airport infrastructure

(22) Between 1964 and 2009 Montpellier airport was managed by the Chamber of Commerce and Industry of Montpellier (‘CCIM’; the abbreviation is here also used to denote the Chamber of Commerce and Industry of Hérault (10)).

(23) On 23 June 2009, management of the airport was transferred to the public limited company Aéroport Montpellier Méditerranée (‘AMM’), which is 60 % owned by the French State (i.e. the State administrative body at national level), 25 % by the CCIM, 7 % by the Departmental Council of Hérault, 6,5 % by the Region of Occitania (11), 1 % by the Communauté d’agglomération du Pays de l’Or (12) and 0,5 % by Montpellier Méditerranée Métropole (13) (14).

(24) The State owns the airport infrastructure and delegates its management and operation to AMM through a concession.

(25) AMM and Ryanair concluded the following agreements: […].

3. GENERAL INFORMATION ON THE APFTE

3.1. Creation and object

(26) The APFTE is an association set up in June 2010 on the initiative of the CCIM in collaboration with several local and regional authorities – namely, the Regional Council of Languedoc-Roussillon (now the Region of Occitania), the Department of Hérault, the Communauté d’agglomération de Montpellier (now Montpellier Méditerranée Métropole), the Communauté de communes du Pays de l’Or, and the City of Montpellier (these being the ‘public members’ of the APFTE) – and with the participation of several local businesses (15).

(27) According to its constitution, the APFTE’s object is to ‘promote and develop tourism in the area, including business tourism, by entering into promotional agreements, purchasing internet advertising and marketing services or utilising any other advertising medium such as participation in fairs and exhibitions, in order to attract international customers’ (16).

(28) However, despite the very broad formal object of promoting Montpellier and its area, the APFTE’s brief, as envisaged when it was set up by the CCIM with the local authorities involved, was to enable the conclusion of ‘marketing’ or ‘promotional’ agreements with airlines, which the CCIM had previously concluded as airport manager (17). The formal investigation confirmed that, in practice, the APFTE’s work involved concluding and implementing such ‘marketing’ agreements with airlines (18), with any other work serving to support that practice.

(29) The nature of these marketing agreements will be analysed in more depth in recitals 152 et seq. and recitals 189 et seq.

(30) The APFTE’s raison d’être is explained by the change in the management of Montpellier airport in 2009. As airport manager, the CCIM contracted directly with airlines, not only to conclude airport service agreements, but also marketing agreements. The documents submitted by the French authorities show that this practice began in around 2001. Through these marketing agreements, the CCIM purchased ‘marketing’ services from certain airlines operating at Montpellier airport, particularly low-cost airlines. Under the agreements, the CCIM paid money to the airlines concerned in return for the promotion of Montpellier as a destination on the airline’s website. Although it was only the CCIM that entered into the agreement with the airlines, the funds to purchase the marketing services came not only from the CCIM but also from local authorities, with which the CCIM in turn concluded bilateral agreements for the purpose. It was these same local authorities that joined with the CCIM in 2010 to set up and fund the APFTE (19).

(31) The documents relating to the operation of the APFTE and its founding public members, for example the minutes of the APFTE’s inaugural General Meeting of 24 June 2010, show that the APFTE was set up after the CCIM became a minority shareholder in AMM in 2009. As the CCIM was no longer the airport concession-holder, it was no longer able to conclude agreements with low-cost airlines ‘to encourage the operation of low-cost airlines at Montpellier Méditerranée Airport’. The APFTE was the result of ‘discussions with the Regional Prefecture and all local authorities with a view to setting up a legal structure that could continue with the online marketing agreements’ previously concluded by the CCIM as the airport concession-holder (20). Continued cooperation with low-cost airlines was considered beneficial owing to its contribution to the local economy (21).

(32) It is therefore clear from the minutes of the APFTE’s General Meeting that the association was regarded as ‘the structure best suited to meeting the legal requirements, and would boost the area’s development through this “low-cost” momentum’.

(33) The association was initially set up with local private businesses as members, before public members subsequently became involved. This method was chosen by the CCIM to speed up the formation of the association, given that the appointment of representatives of local authorities and public bodies would take some time (22).

(34) In 2017, the CCIM and the other public members decided that the APFTE would cease operating from 2018 – without, however, ceasing to exist – owing to questions about its legality raised by domestic and European complaints and investigations (23). According to the French authorities, the APFTE’s General Meeting of 20 December 2017 confirmed the decision to stop using the association to promote tourist flows from the summer 2018 season. According to the French authorities, the APFTE informed Ryanair of this decision by letter dated 18 January 2018.

3.2. Composition and governing bodies

(35) The APFTE has around 30 members, including about 20 (24) from private structures fully or partly engaged in tourism (hotels, tourist residences, etc.). The public members of the APFTE are representatives of the CCIM and representatives of the aforementioned local authorities, namely the Region of Occitania, the Department of Hérault, Montpellier Méditerranée Métropole, the Communauté d’agglomération du Pays de l’Or, and the City of Montpellier.

(36) When the APFTE was set up, the public bodies involved decided that this association should have three collegial bodies, namely the General Meeting (ordinary and extraordinary), the Board (Conseil d’Administration), and the Executive Committee (consisting of the president, treasurer and secretary), in order to meet the legal requirements imposed by the French law on associations set up by local authorities, public institutions, public bodies and private-law undertakings (25).

(37) According to the APFTE’s constitution, the General Meeting approves the accounts for the previous financial year, votes on the budget for the next financial year, debates and votes on all items placed on the agenda, and where necessary renews the members of the Board. The General Meeting comprises the paid-up members of the association and meets at least once a year. All its decisions are taken by a simple majority of the votes cast, except where they involve any contractual obligation with a value of more than EUR 10 000. In such cases, the General Meeting must decide by a two-thirds majority. This is the case, for example, with any marketing agreement with a value of more than EUR 10 000.

(38) The constitution also provides for the APFTE to be administered by a Board consisting of at least nine members and at most twenty-five members appointed by the General Meeting. From among its members, the Board appoints an Executive Committee consisting of a president, one or more vice-presidents, a secretary and a treasurer, in accordance with the rules of procedure decided by the Board. The Board meets at the invitation of its president at least twice a year, at the request of half of its members provided that one third of its members are present. Decisions are taken by a majority of the votes cast for routine decisions and by a two-thirds majority for the signature of any commitment exceeding one year and with a value of more than EUR 10 000.

(39) According to the APFTE’s constitution, the president represents the association in all civil acts and is invested with all necessary powers for this purpose. This covers the signature of agreements and contracts that may commit the APFTE. To date three different people have held the office of President of the APFTE. These people all had pre-existing links with the CCIM or with the French local authorities funding the APFTE. (a) The first President of the APFTE was a full member of the CCIM in 2010 and between 2016 and 2019, and a technical adviser within the CCIM from 2013 to 2015. This person was President of the APFTE from June 2010 to March 2011 and then again from December 2012 to at least 2018, and also Vice-President of the APFTE (with the capacity to act on behalf of the President of the APFTE) from October to December 2012. (b) The President of the APFTE between April 2011 and February 2012 also acted as a technical adviser within the CCIM between 2011 and 2012 (26). (c) His successor (President from February 2012 to December 2012) was at the same time President of the Regional Economic, Social and Environmental Council of Languedoc-Roussillon (Conseil économique, social, et environnemental régional du Languedoc-Roussillon) and thus president of an institution of one of the local authorities belonging to the APFTE.

(40) Furthermore, the minutes and records of the APFTE and its collegial bodies and committees show that the APFTE also had a committee consisting of the local authorities and the CCIM, but excluding the private members: the ‘Governance Committee’ (since March 2011), later the ‘Committee on Finance’. These committees are not mentioned in the constitution. (a) The Governance Committee was intended to ‘bring together the local authorities, as funders of the [APFTE]’. Its objective was to ‘guide and confirm the strategic choices made in the development of routes and the associated budget. The Governance Committee meeting [was] preceded, where necessary, by a preparatory meeting with all the local authority technicians’ (27). This committee was formed at the request of the local authorities (28), which wanted to ensure that the choice of marketing agreements to be funded was not determined solely by the new airport operator, AMM (29). The records of the committee, as provided to the Commission, show that it consisted of representatives of the local authorities (Region, Department, Pays de l’Or, Agglomération de Montpellier, City of Montpellier), the CCIM and the Executive Committee of the APFTE. The records also refer to the presence of an AMM representative who proposed strategic choices to the funding members of the APFTE (30). (b) In addition, documents relating to the workings of the APFTE show that the Governance Committee was subsequently called the ‘Funders Committee’ from at least 2012, but involved the same institutions. The French authorities have confirmed that, according to the APFTE, the ‘Funders Committee’ is the same body as the ‘Governance Committee’, which had different names at different times.

3.3. Decision-making within the APFTE

(41) According to the APFTE’s constitution and the French authorities, the decision-making procedure followed within the APFTE for the conclusion of marketing agreements is as follows: — Proposals on geographical areas to be targeted by tourist marketing services are submitted to the Board, which gives an opinion on them. — The proposals are then submitted for approval by the General Meeting. — If the General Meeting approves the proposals (by a two-thirds majority for any marketing agreement with a value of more than EUR 10 000), a public procurement procedure is launched. — The results of the analysis of the tenders received are presented to the Board, which gives an opinion. — The results are then submitted to the General Meeting, which may authorise the President to sign the contracts (by a two-thirds majority for any marketing agreement with a value of more than EUR 10 000; the decision is recorded in the minutes of the General Meeting). — Depending on the applicable procedure, any rejection letters are written and sent. — Depending on the applicable procedure, notification letters signed by the President and accompanied by the tender document and price schedule, both also signed by the President, are also written and sent to each of the successful tenders.

(42) Although the information just cited does not say so, in practice, when proposals were put forward for geographical areas to be targeted by tourist marketing services, before the deliberations of the Board and General Meeting other parties played a part in making the budget choices and determining the policy of the APFTE (i.e. the marketing agreements to be concluded).

(43) The records and minutes of the APFTE, its committees and its public members show that the choice of geographical areas to be targeted by tourist marketing services was actually made initially by the CCIM and AMM, and then from March 2011 onward – thus before any funds were effectively paid to the APFTE by the local authorities – by the local authorities and the CCIM (31). The local authorities and the CCIM decided which agreements would be prioritised before they were submitted to the General Meeting. Since March 2011 the procedure has been as follows: apart from the bodies indicated in its constitution, the APFTE has had additional committees, in particular the Governance Committee (formed in March 2011) and the Funders Committee, which have been closely involved in selecting the marketing agreements submitted to the General Meeting. Before the Funders Committee was formed, AMM had significant influence over the choice of marketing agreements concluded by the APFTE. The local authorities then refused simply to endorse AMM’s choices without having any room for manoeuvre, which explains why the Governance Committee was formed (32).

(44) The question regarding the actual influence that the public members funding the APFTE had over the association’s decision-making will be considered in further detail in the analysis of financial resources and the imputability of the measures to the State (33).

3.4. Financial resources

(45) The APFTE’s resources consist of (i) membership fees, as determined by the General Meeting, and (ii) annual contributions or subsidies paid by the various members of the APFTE in addition to their membership fees. Most of the APFTE’s resources come from the annual contributions made by its member public entities, as illustrated by the table below. In practice, the membership fees of the APFTE’s members represent only a small proportion of its income. As they have been set at EUR 50 or EUR 100 per member per year, their total annual amount has not exceeded EUR 1 550 since 2010. Table 3 Origin of the APFTE’s income between 2010 and 2019 Year 2010 2011 2012 2013 2014 2015 2016 2017 2018 (34) 2019 (35) 2010 to 2019 Subsidies from local authorities and the CCIM in EUR (proportion of this entity’s contribution) Regional Council of Languedoc-Roussillon (now the Region of Occitania) 283 670 550 000 509 024 550 000 446 830 587 696 509 174 355 239 75 000 0 3 866 633 (30 %) (27 %) (25 %) (23 %) (28 %) (36 %) (32 %) (32 %) (34 %) (29 %) Hérault Departmental Council 283 670 559 746 509 024 550 000 150 000 0 111 092 0 0 0 2 163 532 (30 %) (27 %) (25 %) (23 %) (10 %) (0 %) (7 %) (0 %) (0 %) (16 %) Communauté d’agglomération de Montpellier (now Montpellier Méditerranée Métropole) and City of Montpellier 283 670 730 473 706 524 747 500 644 331 747 500 692 015 505 865 75 000 0 5 132 878 (30 %) (36 %) (35 %) (31 %) (41 %) (46 %) (44 %) (45 %) (34 %) (38 %) Communauté d’agglomération du Pays de l’Or 85 000 85 000 100 000 119 915 97 574 130 803 110 092 107 250 21 500 0 857 134 (9 %) (4 %) (5 %) (5 %) (6 %) (8 %) (7 %) (10 %) (10 %) (6 %) CCIM (now the Chamber of Commerce and Industry of Hérault) 0 (36) 125 000 212 000 440 000 232 500 150 000 150 000 150 000 51 000 0 1 510 500 (0 %) (6 %) (10 %) (18 %) (15 %) (9 %) (10 %) (13 %) (23 %) (11 %) Membership fees of the various APFTE members Membership fees from EUR 50 to EUR 100 1 100 50 1 550 1 500 0 600 0 0 0 0 4 800 (0,117 %) (0,002 %) (0,076 %) (0,062 %) (0 %) (0,037 %) (0 %) (0 %) (0 %) (0 %) (0,035 %) (Proportion of the membership fees within the APFTE’s total budget) Subsidies from local authorities and the CCIM in euro (proportion of this entity’s contribution) APFTE’s total budget in euro (37) (subsidies plus membership fees) 937 110 2 050 269 2 038 112 2 408 915 1 571 235 1 616 599 1 572 373 1 118 354 222 500 0 13 535 477 Source: information received from the French authorities.

(46) The public contributions received by the APFTE were used mainly for the payments made under the marketing agreements concluded between the APFTE and the airlines, with the bulk – approximately EUR 8,5 million, i.e. [60-70] % of the APFTE’s total budget from 2010 to 2019 (38) – being allocated to the marketing agreements concluded with Ryanair or its subsidiary AMS (39).

(47) Furthermore, an analysis of the decision-making processes of these public entities in approving their subsidies to the APFTE’s budget indicates that they decided their contributions on the basis of the APFTE’s ‘projected promotional programme’, defined by the public members funding the APFTE (40) and subsequently approved by the latter’s General Meeting, which contains precise information on the planned use of the APFTE’s resources. These programmes specifically mention the destinations covered by the promotional activities (41).

(48) The public contributions were paid in the form of subsidies to the APFTE on the basis of bilateral agreements concluded between the APFTE and the respective public entities. The French authorities have provided the Commission with most of these agreements, though without their annexes (42).

(49) The documents relating to the workings of the APFTE, submitted by the French authorities show that the public entities routinely paid their financial contributions for the budget years indicated in Table 3 at a point in time when the promotional programme had already been decided (with their participation) and the extension of the marketing agreements with Ryanair/AMS – described in detail in recitals 53 et seq. had already been concluded with Ryanair/AMS. For example: (a) The 2010 marketing agreement with AMS (valid from 1 July 2010 to 31 December 2011) was approved by the General Meeting on 16 September 2010 and signed on the same day by the APFTE. The funding agreements with the local authorities for the 2010 budget year that have been provided to the Commission were not signed until 2011, and those for the 2011 budget year were signed only between June and November 2011 (43). (b) The amendment to the 2010 marketing agreement with AMS regarding the Birmingham route was approved by the General Meeting on 20 April 2011 and signed on 11 April 2011 by the APFTE. The funding agreements with the local authorities for the 2011 budget year provided to the Commission were signed only between June and November 2011 (44). (c) The extension of the 2010 marketing agreement with AMS for 2012 was decided by the Governance Committee on 23 September 2011, and the General Meeting of 19 October 2011 was so informed (45) (the minutes of that meeting do not indicate that the General Meeting actually voted on the matter). The extension letter sent to AMS was signed by the President of the APFTE on 29 September 2011. The funding agreements with the local authorities for the 2012 budget year provided to the Commission were signed only between April and October 2012 (46). (d) The extension of the 2010 marketing agreement with AMS for 2013 was signed on 23 February 2013 by the APFTE. The 2013 budget and the marketing action programme including payments to Ryanair on the basis of that agreement were decided by the APFTE’s General Meeting on 4 July 2013 (47). The funding agreements with the local authorities for the 2013 budget year that have been provided to the Commission were signed only between April and November 2013 (48). (e) On 27 January 2014, the General Meeting authorised the President of the APFTE to sign new marketing agreements with Ryanair for 2014, following the 2013 invitation to tender. These agreements had already been concluded by the President of the APFTE on 22 November 2013. The funding agreements with the local authorities for the 2014 budget year that have been provided to the Commission were signed only between February and October 2014 (49). (f) The extension of the 2013 marketing agreements with Ryanair for 2015 was approved by the General Meeting on 11 December 2014 and signed by the APFTE on 19 December 2014. The funding agreements with the local authorities for the 2015 budget year that have been provided to the Commission were signed only between June and December 2015 (50). (g) The extension of the 2013 marketing agreement with Ryanair for 2016 was approved by the General Meeting on 30 May 2016 and signed by the APFTE on 22 April 2016. The funding agreements with the local authorities for the 2016 budget year that have been provided to the Commission were signed only between July and December 2016 (51). (h) The new 2017 marketing agreements with Ryanair were concluded by the APFTE on 19 May 2017 and approved by the APFTE’s General Meeting on 25 April 2017. The funding agreements with the local authorities for the 2017 budget year that have been provided to the Commission were signed only between June and September 2017 (52). (i) For 2018, the Commission does not have any information on the date of extension of the 2017 marketing agreement with Ryanair. However, the sole budget allocation agreement provided to the Commission, namely the agreement concluded between the APFTE and the Communauté d’agglomération du Pays de l’Or in March 2018, refers to the promotion of Montpellier in Wallonia, Rhineland-Palatinate and Yorkshire, which were destinations of Ryanair flights (53). It seems that, for the final time, the budget for 2018 was approved by the APFTE’s General Meeting on 20 December 2017 in order to honour the APFTE’s existing commitments – including its commitments to Ryanair – before the contractual relations between the CCIM, local authorities and airlines were legally restructured (54).

(50) In addition, the minutes of APFTE’s General Meeting show that, before the first payment of subsidies to the APFTE, the local authorities stated that they wanted to have some influence over the routes covered by the marketing agreements that they were to fund, which until that point had been determined by the airport operator AMM (55). That is why the APFTE’s Governance Committee was created before the local authorities agreed the subsidies to the APFTE for the first time.

(51) Moreover, an analysis of the funding agreements shows that the local authorities retained the possibility of being repaid the funds under certain conditions (for example, some authorities reserved a right of repayment of the funds, a right to make pro rata payments for the promotional programme or a right to terminate the funding agreement if the APFTE failed to meet its contractual obligations, i.e. to carry out the promotional programme approved by the General Meeting). In particular: (a) The agreements concluded with the Region gave the latter the right to demand repayment of the subsidy if the APFTE did not use this for the agreed purposes. They also included a right to terminate the agreement. (b) The agreements concluded with the Department provided for a right of repayment of the subsidy to the Department if the APFTE used this for purposes other than those set out in the agreement. The description of the purposes of the 2010, 2011 and 2012 agreements explicitly included the conclusion of agreements with AMS. Moreover, the agreements contained a clause allowing the Department to terminate the agreement if the APFTE failed to meet its contractual obligations. (c) The agreements concluded with the Communauté d’agglomération de Montpellier provided for the subsidy to be paid in proportion to the number of months that the actions of the destination programme were carried out, and on presentation of the corresponding invoices. In addition, the agreements subjected the body’s funding commitment to compliance by the APFTE with its contractual obligations, and included the right to terminate the agreement. (d) The agreements concluded with the Communauté d’agglomération du Pays de l’Or subjected that authority’s commitment to compliance by the APFTE with its contractual obligations (the agreements concluded with Ryanair/AMS expressly refer to this) and entitled the authority to demand repayment of the subsidy and to terminate the agreement if the APFTE failed to meet its contractual obligations. (e) The agreements concluded with the City of Montpellier required the APFTE to submit an activity report to that authority in order to demonstrate the progress made in the actions proposed by the APFTE on submission of the subsidy application. The French authorities have not provided these subsidy applications, but the Commission concludes from the circumstances of the case that they contain the promotional programme for the budget year in question. Moreover, the authority reserved the right to terminate the agreement if the APFTE failed to meet its contractual undertakings.

4. DETAILED DESCRIPTION OF THE AID

4.1. Actions

(52) The measures that formed the subject of the formal investigation are the marketing agreements concluded between the APFTE and Ryanair or its subsidiary AMS. Between 2010 and 2018, Ryanair/AMS and the APFTE concluded three sets of marketing agreements.

4.2. The agreement of 16 September 2010, its amendment and its renewal agreements

(53) On 16 September 2010, less than three months after its creation, the APFTE concluded an agreement with AMS (‘the 2010 agreement’), signed by the President of the APFTE without any prior invitation to tender.

(54) The agreement was concluded for an initial term from 1 July 2010 to 31 December 2011.

(55) Under this agreement, AMS undertook to provide the APFTE with a range of basic marketing services on Ryanair’s website. In addition, the agreement itself states as follows: ‘this Agreement is based on Ryanair’s commitment to serve the area of Montpellier: — with a route between Frankfurt-Hahn and Montpellier offering four flights per week in summer and at least two flights per week in winter, — with a route between Brussels South-Charleroi and Montpellier offering at least three flights per week throughout the year, — with a route between Leeds-Bradford and Montpellier offering at least two flights per week in summer’ (56).

(56) The agreement details ‘the annual bundled offer of marketing services’ that AMS undertakes to provide to the APFTE, which are summarised in points (a) and (b). (a) For 2010, this offer includes five paragraphs of 150 words each to be selected by the APFTE and placed under the heading ‘Top Five Things to Do’ on the ‘Destination Montpellier’ page of Ryanair’s website; the presence of two links to a website selected by the APFTE, placed under the heading ‘Top Five Things to Do’ on the aforementioned ‘Destination Montpellier’ page; and the presence of one link to the website selected by the APFTE on the home pages of the British, German, Dutch and Belgian (French and Dutch) websites of www.ryanair.com for 55 days. The price of these services was EUR […]. (b) For 2011, the offer includes all the services provided in 2010, plus a ‘graphic banner link-button (200x110px)’ to be selected by the APFTE and placed on the ‘Discover Europe’ page of Ryanair’s website for 12 months, and a presence as ‘Destination of the Day (text, image and link selected by the APFTE)’ on the home pages of the British, German, Dutch and Belgian (French and Dutch) websites of www.ryanair.com for a total period of two weeks. The price of these services was EUR […].

(57) The agreement also expressly states that the prices for the marketing services offered by AMS ‘are linked to Ryanair’s commitment to serve the area of Montpellier with routes from Frankfurt-Hahn, Brussels-Charleroi and Leeds-Bradford […]’ and stipulates that, ‘if this commitment is not met, the price will be revised through an amendment.’ (57).

4.3. Amendment of 20 April 2011

(58) The agreement of 16 September 2010 was altered by an amendment of 20 April 2011, which added a new Birmingham route to the three routes already mentioned in the agreement.

(59) According to its own wording, the amendment ‘is based on Ryanair’s commitment to serve the area of Montpellier with a route between Birmingham and Montpellier offering two flights per week in summer’. It also provides for the APFTE to purchase the following marketing services from AMS: — The presence of a link to a website selected by the APFTE, placed under the heading ‘Airports and tourism’ on the home page of the British website of www.ryanair.com for 14 days per year. — A presence as ‘Destination of the Day’ (text, image and link selected by the APFTE) on the home page of the British website of www.ryanair.com for a total of one week per year.

(60) The price of these services was EUR […]. It was stipulated that the APFTE would pay this sum in monthly instalments of EUR […], on receipt of the AMS invoices, for each of the months of April to October of each year during the period of application of this amendment.

4.4. First letter of undertaking to renew the 2010 marketing services agreement

(61) The APFTE sent a letter of undertaking to renew the 2010 agreement to AMS on 29 September 2011. The purpose of the letter was to renew the 2010 agreement for an additional period of one year, starting on 1 January 2012 and ending on 31 December 2012. According to its own wording, the APFTE undertook to renew the 2010 agreement on the basis of the following routes operated by Ryanair: Brussels-Charleroi, Frankfurt-Hahn and Leeds-Bradford.

4.5. Second letter of undertaking to renew the 2010 marketing services agreement

(62) On 25 February 2013, a second letter of undertaking to renew the 2010 agreement was sent to AMS. The purpose of this letter was to renew the 2010 agreement for an additional period of one year, starting on 1 January 2013 and ending on 31 December 2013, ‘on the basis of the following routes operated by Ryanair: Brussels South-Charleroi, Frankfurt-Hahn, Leeds-Bradford and Birmingham’ (58).

4.6. The agreements of 22 November 2013

(63) The marketing agreement concluded with AMS in 2010 had thus been extended up to the end of December 2013; as the expiry date approached the APFTE was obliged to put a new marketing agreement out to tender, ‘destination by destination’, in order to comply with the rules on public procurement (59).

(64) On 2 October 2013, the APFTE therefore organised an invitation to tender for the purchase of marketing services intended to promote tourist and economic flows to Montpellier for 2014.

(65) The invitation to tender indicated that tenderers should offer ‘to promote tourist and economic flows to Montpellier through all available media on the market’. The following media examples were listed: ‘radio campaigns; TV campaigns; communication on social networks (Facebook, Twitter, YouTube, etc.); participation in trade fairs; sponsorship of well-known events and visibility for Montpellier as a destination; training trips for professionals, press trips with journalists’, and digital communication. According to the invitation to tender, ‘In all cases, tenderers must include a link to the APFTE’s website (go to Montpellier) on their own website’. This was the only imperative criterion to be met by the marketing service provider.

(66) The invitation to tender also divided the contract into five ‘lots’, namely ‘Brussels-Charleroi’, ‘Frankfurt-Hahn’, ‘Leeds’, ‘Birmingham’ and ‘[…]’. For each of them, the invitation to tender indicates the criteria to be met in terms of air transport to be offered: a minimum annual offer of seats available for sale, a minimum annual volume of incoming passengers, the seasonality recommended for the contract (annual or seasonal route), a minimum number of flights per week, and a start date for the route.

(67) The evident aim of the invitation to tender was therefore to select not just any online marketing services providers, but rather airlines offering such services in addition to their air transport activities and also undertaking to operate air transport services between Montpellier airport and the destinations indicated by the various ‘lots’, under the conditions detailed by the invitation to tender in terms of seasonality, flight frequencies, minimum number of incoming passengers, and start date of the routes.

(68) The lots entitled ‘Brussels-Charleroi’, ‘Frankfurt-Hahn’, ‘Leeds’ and ‘Birmingham’ and the minimum flight frequencies indicated for these in the invitation to tender precisely corresponded to the four destinations already operated from Montpellier by Ryanair at the time when the invitation to tender was launched.

(69) There was only one lot, ‘[…]’, that did not correspond to a route served by Ryanair: it corresponded to a route served by another airline flying to Montpellier airport with which the APFTE had also previously concluded a marketing agreement. The maximum value of this lot, estimated at EUR […] excluding taxes per year, was significantly less than the maximum value of the previous four (between EUR […] and EUR […] excluding taxes per year and per lot) (60).

(70) Ryanair was the only airline to submit a bid for the ‘Brussels-Charleroi’, ‘Frankfurt-Hahn’, ‘Leeds’ and ‘Birmingham’ lots.

(71) Following the invitation to tender, four lots were awarded to Ryanair, which concluded agreements with the APFTE on 22 November 2013 (‘the 2013 agreements’) for the first three lots, with a total value of approximately EUR […] for one year (‘Brussels-Charleroi’ for a fixed amount of EUR […], ‘Frankfurt-Hahn’ for a lump sum of EUR […]; and ‘Leeds-Bradford’ for a lump sum of EUR […]).

(72) However, no agreement was concluded for the fourth lot, ‘Birmingham’. The official reason was ‘the lack of funding for this lot’ (61). The Commission notes that Ryanair stopped operating the route between Montpellier and Birmingham in November 2013.

(73) The 2013 agreements concluded with Ryanair for the ‘Brussels-Charleroi’, ‘Frankfurt-Hahn’ and ‘Leeds’ lots were extended twice, up to the end of 2016, for a total price of approximately EUR […] per year: — On 19 December 2014, in three letters signed by the President of the APFTE, the APFTE renewed with Ryanair, for 2015, the promotional services for each of the three destinations Brussels-Charleroi, Frankfurt-Hahn and Leeds-Bradford, for a price of EUR […] for Brussels-Charleroi, EUR […] for Frankfurt-Hahn and EUR […] for Leeds-Bradford. — On 22 April 2016, in three letters signed by the President of the APFTE, the APFTE again renewed with Ryanair, for 2016, the promotional services for each of the three destinations, for a price of EUR […] for Brussels-Charleroi, EUR […] for Frankfurt-Hahn and EUR […] for Leeds-Bradford.

4.7. The agreements of 19 May 2017

(74) On 13 March 2017, the APFTE launched a new invitation to tender for the purchase of marketing services, for one year with options to extend, in order to encourage ‘tourist and business flows’ to Montpellier. The tender specifications divided the contract into various ‘lots’, each covering a European region. The lots covered those regions whose inhabitants were to be targeted by the marketing services in question.

(75) Unlike the 2013 invitation to tender, the specifications for this new invitation to tender did not explicitly refer to air transport activities or specific airports, but set out seven different lots entitled ‘Wallonia’, ‘Rhineland-Palatinate’, ‘Yorkshire’, ‘[…]’, ‘[…]’, ‘[…]’ and ‘[…]’. The Commission observes that the lots entitled ‘Wallonia’, ‘Rhineland-Palatinate’ and ‘Yorkshire’ corresponded to the regions where the three airports served by Ryanair from Montpellier when the invitation to tender was launched were located (62).

(76) The invitation to tender stated that the selection criteria would be weighted as follows: price of services 40 %, and technical value 60 %.

(77) There were two bids for each of the ‘Wallonia’, ‘Rhineland-Palatinate’ and ‘Yorkshire’ lots. Ryanair submitted bids for each of these lots. For each lot, there was a competing bid from an online marketing firm (not an airline), […]. The bids submitted per lot were as follows: — ‘Wallonia’ lot: Ryanair […] euro, […] […] euro; — ‘Rhineland-Palatinate’ lot: Ryanair […] euro, […] […] euro; — ‘Yorkshire’ lot: Ryanair […] euro, […] […] euro

(78) All three lots were awarded to Ryanair, whose bid for each lot was exactly EUR […] cheaper than the bid submitted by […]. The French authorities have not provided any information showing that the APFTE queried this consistent price difference between the two competing bids.

(79) On 19 May 2017 the APFTE concluded agreements with Ryanair for an indicative amount of EUR […] (for the Wallonia, Rhineland-Palatinate and Yorkshire agreements, respectively EUR […] excluding taxes, EUR […] excluding taxes and EUR […] excluding taxes).

(80) In accordance with the tender specifications, these were agreements under which the marketing services would be provided and paid for only on the issue of purchase orders by the APFTE. The order forms issued by the APFTE show that the payments per target region (Wallonia, Rhineland-Palatinate, Yorkshire) were made in two stages: a payment for the ‘spring/summer period’ and another payment for the ‘autumn/winter’ period. The Commission notes that these periods correspond to the two seasons of the civil aviation calendar (April to September and October to March) defined by the International Air Transport Association (IATA).

(81) The agreements concluded with Ryanair were the only agreements that the APFTE implemented as a result of this invitation to tender. (a) For the […] and […] lots, the successful tenderer was […], which beat […] (identical bid in terms of price, but different in terms of marketing services). The agreement concluded between the APFTE and […] was also based on purchase orders. The bid amounted to EUR […] for both lots combined. However, it is apparent from the information received from the French authorities that the APFTE never issued any purchase orders under this agreement. (b) For the […] and […] lots, only […] submitted a bid (EUR […] in total). For these lots the APFTE judged the invitation to tender to have been unsuccessful, because […]’s bid was declared inadmissible on the grounds that the bid documents did not include the schedule of unit prices.

4.8. Budget (origin of resources used to finance the aid)

(82) According to the information received from the French authorities, the APFTE paid the following sums to Ryanair/AMS from its budget. Table 4 Payments by the APFTE to Ryanair/AMS from 2010 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2010 to 2019 Payments to Ryanair/AMS for the budget year […] (the payments were actually made between 2010 and 2011) […] (the payments were actually made between 2011 and 2012) […] (the payments were actually made between 2012 and 2013) […] (the payments were actually made between 2013 and 2014) […] (the payments were actually made between 2014 and 2015) […] (the payments were actually made between 2015 and 2016) […] (the payments were actually made between 2016 and 2017) […] (the payments were actually made between 2018 and February 2019) […] (63) […] 856 089 904 APFTE budget in EUR (see also Table 3) 937 110 2 050 269 2 038 112 2 408 915 1 571 235 1 616 599 1 572 373 1 118 354 222 500 0 13 535 477 Source: Information received from the French authorities.

(83) According to the French authorities, the APFTE did not pay Ryanair for marketing services beyond April 2019.

4.9. Grounds for initiating the procedure

(84) The Commission initiated the formal investigation on 4 July 2018 because it could not rule out the possibility that the measures described in recitals 52 et seq. constituted State aid to Ryanair and its subsidiary AMS.

5. COMMENTS BY INTERESTED PARTIES

5.1. The complainant

(85) The complainant stands by the arguments set out in its complaint, namely that the APFTE was a vehicle for transferring State aid to Ryanair/AMS.

5.2. Ryanair

(86) Ryanair contests the Commission’s analysis. According to Ryanair, the marketing services provided by AMS and Ryanair had a market price and met the APFTE’s needs. The APFTE’s interest in concluding marketing agreements lay in attracting foreign tourists with significant purchasing power who might contribute to the development of tourist activities in the region. According to Ryanair, any marketing expenditure that the airline might have undertaken itself would not have specifically targeted foreign tourists, as tourist expenditure is not taken into account by Ryanair. As a result, the APFTE had an interest in marketing expenditure targeted at foreign tourists, whereas Ryanair, if it had undertaken marketing expenditure, would have would have been aimed just as much at passengers starting their journey in Montpellier and living in the region. Ryanair has also indicated that the load factor of its flights was determined mainly by its yield management (64).

(87) In the alternative, Ryanair contests the Commission’s conclusions as regards the applicability of the market economy operator principle to the case, the determination of the aid beneficiary, the selectivity of the aid, and its imputability to the State.

(88) AMS did not submit any comments.

5.3. APFTE

(89) The APFTE denies having granted any advantage to Ryanair. It describes the contested sums as market-price remuneration for a service provided. The APFTE states that it acted as a public purchaser of services and that the promotional actions carried out formed part of a comprehensive marketing strategy for Montpellier and its surrounding area.

(90) The APFTE points out that the regions targeted by the invitations to tender were the subject of discussions and strategic choices of the General Meeting and the Board. It submits that the decisions taken by the association cannot be imputable to the State, and refers to the APFTE’s method of working, as described in its constitution.

(91) In the alternative, even supposing that the Commission were to maintain its position that the APFTE’s public actions favoured Ryanair, the APFTE submits that these measures were compatible with the 2005 guidelines (65) on financing of airports and start-up aid to airlines departing from regional airports.

(92) In the further alternative, even supposing that the Commission were to conclude that Ryanair and AMS had received State aid, the APFTE considers that Ryanair and AMS should repay only the difference between the price paid in remuneration for these services and the market price, given that, in its opinion, the services fell within the APFTE’s public policy tasks and the association clearly profited from them.

5.4. Region of Occitania

(93) The Region of Occitania argues that the complaint is unfounded, as the APFTE’s actions created tourist and economic benefits for all the local and regional stakeholders. It considers that the APFTE worked to develop a more international customer base and enabled undertakings in the sector to continue trading over a longer period.

(94) It states that, within the APFTE, decisions to fund the marketing campaigns in order to develop the area’s attractiveness for tourists were taken mainly by the General Meeting, with each member having one vote, generally by a qualified majority of two thirds.

(95) The Region of Occitania adds that the APFTE acted through invitations to tender for the provision of services aimed at increasing the area’s visibility and attractiveness. These invitations were open to all undertakings that could submit a bid complying with the tender specifications, including the complainant.

5.5. Chamber of Commerce and Industry of Hérault (‘CCI Hérault’, formerly CCIM)

(96) The CCI Hérault considers that the APFTE’s actions to promote the Montpellier area among the public in Belgium, the Netherlands, Germany, England and […] were economically important to the area given their economic benefits. It adds that by pooling its members’ interests the APFTE met the need for the economic and tourist development of the area, which was entirely within the APFTE’s sphere of responsibility and that of the CCI Hérault.

5.6. Montpellier Méditerranée Métropole

(97) Montpellier Méditerranée Métropole considers that an aggressive strategy to increase the area’s attractiveness needs to be conducted in order to develop the area, support the economy and combat unemployment. It states that the APFTE is a non-profit association of public and private partners whose common objective is to take measures to promote and develop tourism, as tourism serves the interests of both public regional development and private business development.

(98) Montpellier Méditerranée Métropole considers that the marketing services purchased by the APFTE were in line with its actual needs and purpose, and that those services were the subject of prior competitive tendering, so that there was no element of selectivity of any kind (Ryanair was successful in some of the invitations to tender organised by the APFTE). Moreover, Montpellier Méditerranée feels that those services cannot be classified as aid: firstly, no advantage was conferred, because the remuneration received by Ryanair did not exceed market prices; and secondly, the measures were not imputable to the State, because the APFTE’s decisions took account of private structures, which formed the vast majority of its members and had significant decision-making power.

5.7. […]

(99) The […], a member of the APFTE, considers that the association has provided a forum for discussions between private operators in various sectors of activity and representatives of local authorities. It adds that the decisions made within the association have been in the collective interest of all economic operators and inhabitants in the region. It submits that this pooling of effort by the public sector and the private sector has allowed the objectives of increasing the visibility and development of the city of Montpellier and its surrounding area to be achieved.

5.8. Communauté d’agglomération du Pays de l’Or

(100) The Communauté d’agglomération du Pays de l’Or considers that the advertising measures carried out by the APFTE in order to promote the Montpellier area among the public in Belgium, the Netherlands, Germany and England were important for the area owing to the economic benefits they brought and were targeted at regions with significant economic and tourist potential for the Montpellier area.

6. COMMENTS BY FRANCE

(101) France considers that the payments in question do not constitute State aid. Given the APFTE’s structure and operation, as defined in its constitution, these measures are not imputable to the State. Furthermore, the objective of the agreements concluded with Ryanair/AMS was the promotion of a region through marketing, and the purchase of advertising by the APFTE – at a market price – was a legitimate measure contributing to regional economic development which did not confer any advantage on Ryanair and was not selective.

7. ASSESSMENT OF THE AID

7.1. Existence of aid within the meaning of Article 107(1) TFEU

(102) 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.

(103) For a measure to be classed as State aid the following cumulative criteria therefore have to be met: 1) the beneficiary or beneficiaries must be undertakings within the meaning of Article 107(1) TFEU; 2) the measure must be granted through State resources and be imputable to the State; 3) the measure must confer an economic advantage on the beneficiary or beneficiaries; 4) the advantage must be selective; and 5) the measure must distort or threaten to distort competition and must be likely to affect trade between Member States.

7.1.1. Concepts of undertaking and economic activity

(104) According to settled case-law (66), summarised in point 27 of the 2014 guidelines on State aid to airports and airlines (67) (‘the 2014 guidelines’), the activity of airlines which consists in providing transport services to passengers or undertakings constitutes an economic activity.

(105) As the beneficiaries of the measures are an airline and one of its wholly-owned subsidiaries providing marketing services, the Commission concludes that their activities are economic in nature within the meaning of Article 107(1) TFEU.

7.1.2. Imputability to the State and state resources

(106) According to settled case-law, Article 107(1) TFEU covers all aid granted through State resources without it being necessary to make a distinction whether the aid is granted directly by the State or by public or private bodies established or appointed by it to administer the aid. A measure financed by such a body is therefore imputable to the State where the State decides to establish the measure and defines the conditions of use, management or distribution of those resources (68). That aid is State aid is even more evident where the intermediary is a preferred policy instrument of a region, where it was set up to pursue the policy defined by the region, and where the decisions to grant an economic advantage are directly linked to the region (69).

7.1.2.1. Whether imputable to the State

(107) From the formal investigation the Commission concludes that the measures are imputable to the State. The marketing services agreements were concluded between Ryanair or its subsidiary AMS, on the one hand, and the APFTE, on the other hand, in order to achieve the APFTE’s objective of promoting the tourist flows generated by Ryanair for Montpellier and its area.

(108) Ryanair contests the imputability of the APFTE’s decisions and actions to the State on the grounds that the APFTE is a private association with the majority of its members coming from the private sector.

(109) But the formal investigation has enabled the Commission to gather various facts – from the records and minutes of the APFTE and its public members, supplied by the French authorities, and from public statements made by the APFTE – which clearly show that, despite its status as a private association, consisting mainly of private sector members and according to its constitution taking decisions by a majority of two thirds at its General Meeting, the APFTE was in reality an instrument of the member local authorities of the APFTE and of the CCIM, and was intended to allow them to pursue their regional development policy objectives.

(110) In line with the case-law of the Court of Justice (70), the Commission has inferred that the APFTE’s decisions were imputable to the French State within the meaning of Article 107(1) TFEU (through the CCIM and the local authorities involved) from a body of evidence showing that when it concluded the marketing agreements the association, far from enjoying complete independence, acted under the control and instructions of the public authorities. This evidence includes the following: — the APFTE was designed by the CCIM and local authorities as a vehicle for public funding; — the APFTE pursued a public policy objective; — there were close links between the APFTE and the CCIM (and the local authorities); — strategic choices were made by the public members of the APFTE; — the APFTE was funded by its public members and the use of the APFTE’s budget was controlled by the public members.

(a) The APFTE was designed by the CCIM and local authorities as a vehicle for public funding

(111) As described in recitals 28 et seq., the APFTE was designed by public entities as a legal structure enabling the payment of public funds to Ryanair and other low-cost airlines.

(112) From its creation on the initiative of the CCIM, the APFTE’s true purpose – as apparent from a number of documents supplied by France and from public statements made by the APFTE (71) – was to provide a legal structure enabling public subsidies to be channelled to the chosen airlines, in particular Ryanair.

(113) The aforementioned documents show that the APFTE was set up as a direct result of the CCIM losing its status as manager of Montpellier airport, as described in recitals 26 et seq. The CCIM wanted to find a way of continuing to pay funds to the airlines through marketing agreements that the CCIM had previously concluded as airport manager.

(114) The CCIM was therefore very active in setting up the APFTE with the aim of establishing a secure legal means of continuing to pay public subsidies to fund these marketing agreements with the airlines. These facts are clearly indicated by the initial resolutions of the APFTE, by the initial resolutions of the local authorities that approved the subsidies paid to the authorities, and by the initial resolutions of the CCIM (72).

(115) By way of example, there are the minutes of the Regional Council of Languedoc-Roussillon of 20 July 2012: ‘In view of the changes in the management of Montpellier airport, an Association for the Promotion of Tourist and Economic Flows (APFTE) had been set up to continue the work of promoting the area carried on with the airlines serving Montpellier airport.’ (73).

(116) The nature of these marketing agreements and the extent to which they were intended to promote Montpellier and its surrounding area will be analysed in more depth below, when the issue of the existence of an economic advantage to Ryanair is considered.

(b) The APFTE pursued a public policy objective

(117) The APFTE’s constitution (74), and public statements and documents connected with the workings of the APFTE, show that its purpose was to pursue a public policy objective, namely the promotion and development of tourism on behalf of the local authorities and the CCIM. Documents relating to the setting up of the APFTE also show that, despite its status as a private association, the APFTE was an instrument designed by its public members to take certain measures on their behalf in respect of the development of tourism (75).

(118) Consequently, the APFTE is to be regarded as a ‘body governed by public law’ for purposes of European public procurement law, in that it was a body which was established for the specific purpose of meeting needs in the general interest, not having an industrial or commercial character, which had legal personality, and which was financed for the most part by public bodies or authorities. It follows that the APFTE was a contracting authority, and that it was therefore subject to public procurement law in its contracting processes (76).

(119) The Commission observes that the APFTE was aware of its obligation to comply with the public procurement rules when it extended the agreements concluded with Ryanair in 2013 and 2017.

(120) The Commission infers that, despite the APFTE’s assertions regarding imputability, with particular reference to the decision-making power held by the private structures within the association, the APFTE did not regard itself as a simple private association, but as a body with a public policy task – namely the development of the local economy through tourism – that had to comply with the public procurement rules. The Commission regards this aspect as further evidence that the APFTE was no more than a legal device designed to facilitate the payment of public funds to airlines.

(c) There were close links between the APFTE and the CCIM (or the local authorities)

(121) In addition to the facts relating to the setting up, object, funding and decision-making of the APFTE, the formal investigation has identified further links between the APFTE and its public members, particularly the CCIM, with the latter acting as a public agency under the supervision of the prefect of the Region of Occitania, who was informed of the activities and raison d’être of the APFTE, according to the documents received from the French authorities.

(122) It is clear from the documents received from the French authorities that the CCIM provided logistical support to the APFTE, in particular by allowing the APFTE’s committees and governing bodies to hold their meetings on the CCIM’s premises and by making available to the APFTE the website used for its promotional activities (77).

(123) In addition, as mentioned in recital 39, the formal investigation has shown that the position of President of the APFTE was always given to people who also held a post in the CCIM or a local authority involved in the APFTE. Furthermore, the Commission has found evidence that the President was chosen essentially by the public members of the APFTE, and not by all the members of the APFTE meeting in the Board, as provided in the APFTE’s constitution (78). The summary of the decisions made by the Funders Committee meeting on 15 October 2012 shows that the President of the APFTE – who was absent for health reasons and wished to resign – ‘wanted […], former President of the Association, to replace him in these duties, which meant that the Board and the General Meeting would have to appoint him vice-president in accordance with the constitution so that he could chair the association’s bodies.’

(124) The formal investigation has also shown that, at the very least, the CCIM played an active role in the transfer of power between these two APFTE Presidents on 11 December 2012. The transfer of power between the outgoing President and the new President of the APFTE was conducted by the President of the CCIM at the APFTE’s General Meeting on 11 December 2012 (79).

(125) This is typical of the close link between the APFTE and its public members given that, in the de facto operation of the APFTE, the President and the Executive Committee play a fundamental role in determining the APFTE’s budget priorities (with the Funders Committee, consisting of the CCIM and the local authorities), which are then submitted to the General Meeting. In addition, according to the APFTE’s constitution, it is the President who is authorised to legally commit the APFTE in relation to third parties, which gives him the power to sign and therefore conclude marketing agreements with airlines and also subsidy agreements with local authorities.

(126) The Commission regards these facts as further evidence of the decisive influence of the APFTE’s public members over the association, specifically in terms of the appointment of the APFTE’s President. This influence ensured that the APFTE continued to conclude marketing agreements with the airlines, as initiated by the CCIM.

(d) Strategic choices were made by the public members of the APFTE

(127) From the start, and despite the decision-making process described in the APFTE’s constitution, it was the CCIM and the local authorities that steered the association’s choices. The private members, despite their two-thirds majority in the General Meeting, did not have any chance to object to the strategic priorities chosen by the public entities or to impose their strategic choices on the public entities. The Commission has arrived at this conclusion on the basis of the following findings:

(128) The formal investigation has shown that the APFTE’s strategic choices, namely the choice of specific marketing agreements to be concluded with airlines, were ultimately predetermined by the CCIM and the other public members of the APFTE before the promotional programme was submitted to the Board or the General Meeting (80). The private members therefore had the opportunity only to express an opinion, and not to determine the association’s strategic choices without the public members being in agreement (81).

(129) The APFTE’s bodies and committees that predetermined the choice of marketing agreements to be confirmed by the General Meeting – namely the Executive Committee, the Governance Committee and the Funders Committee (82) – consisted of representatives of the local authorities and the CCIM. The circumstances in which it was set up indicate that the Governance Committee (which later became the Funders Committee) was intended to formalise the practice that had been applied since the APFTE had been formed, namely that priority choices were made by the local authorities and the CCIM.

(130) The Commission notes that the French authorities have not commented on the existence or role of the Governance Committee and the Funders Committee.

(131) The minutes of the APFTE’s inaugural General Meeting, mentioned in recital 33, show that the presence of private members in the APFTE was explained partly by the desire to set up the APFTE more quickly.

(132) The minutes of this inaugural General Meeting also show that, before the association was set up, the CCIM and its legal adviser, and also the local authorities involved, had been seeking a legally stable structure to justify continuing to make payments to the airlines after 2009, being aware that these payments were difficult to justify (83). The Commission concludes that the structure of the APFTE with its majority of private members – who, according to the constitution, were therefore in a position to determine the association’s decisions (84) – was deliberately chosen by the public bodies concerned in order to conceal the real influence of the CCIM and the local authorities over the payment of funds to the airlines. From the point of view of private undertakings, participation in the APFTE had no disadvantages: their financial participation was symbolic and the financing of the marketing agreements by the public members of the APFTE was designed to contribute to increasing the impact on the local economy.

(133) According to these same minutes, the CCIM representative (who was elected President of the APFTE during the meeting) explained the purpose of the APFTE to the private members present at the inaugural General Meeting, namely to continue concluding marketing agreements with the airlines. This CCIM representative stated that it was vital that ‘the undertakings could give their opinion on the chosen action plan’. The expression ‘give their opinion’ betrays the real role that the CCIM had planned for the private members, despite their majority in the General Meeting, in particular the lack of any real decision-making power as regards the strategic and budget orientations of the association, which were to be determined by the public members. This implies that the APFTE’s private members that were present at the time were aware of the fact that the strategic choices would be made by the CCIM and the local authorities, although the latter could take account of the opinions given by the private members.

(134) Analysis of the minutes and records of the APFTE confirms this conclusion: although proposals made by the private members could be selected, this occurred only on a subsidiary basis if there were any budget lines remaining after the funding of the routes chosen by the public members, and thus in particular the routes operated by Ryanair (85).

(135) The APFTE’s funds were always allocated in such a way that the projects defined by the public members were funded first, with the proposals of the private members being selected only on a subsidiary basis.

(136) Even within the Funders Committee, only unanimously approved projects would receive funds, due to the funders determining the exact amount of their subsidies for a given year based on the chosen marketing agreements. This is evident from the discussion within the Funders’ Committee on 29 January 2013 regarding the funding of ‘tourist flows’ to and from […] (carried by an Italian airline) and […] (carried by a Norwegian airline). The funding of these ‘flows’, which had initially been proposed by the APFTE’s private members during the General Meeting of 29 January 2013 and subsequently supported by certain public members, was blocked by the refusal of the three main funders (the Regional Council of Languedoc-Roussillon, the Departmental Council of Hérault and the Communauté d’agglomération de Montpellier) to increase their financial contribution in order to include these two ‘flows’ in the 2013 budget. The CCIM, which was interested at the time in developing these ‘flows’, therefore unilaterally increased its subsidy for that year only so that these two ‘flows’ could be supported (86).

(137) The APFTE’s minutes do not refer to either the mechanisms or the implementation of the marketing agreements concluded with AMS and Ryanair. The agreements constantly benefited from public funding, although the annual budgets were variable. This funding was never called into question in discussions within the APFTE, despite the fact that the public members provided no justification for its continuation. The public members simply renewed the agreements every year, describing them as ‘historic destinations’ or ‘routes’ in certain documents connected with the workings of the APFTE, without providing any further explanation.

(138) The vote in the General Meeting was therefore simply a formality to show that the APFTE was operating correctly. This is particularly apparent for the 2012, 2013 and 2014 budget years, with regard to which the APFTE’s commitment to Ryanair/AMS in fact preceded the authorisation of the strategic choices in the General Meeting: (a) With regard to the 2012 budget, the extension letter sent to AMS was signed on 29 September 2011 by the President of the APFTE. The extension of the 2010 marketing agreement with AMS for 2012 had been decided earlier by the Governance Committee on 23 September 2011. But the General Meeting was informed of this only on 19 October 2011 (87) (the minutes of that meeting did not in fact indicate that the General Meeting actually voted on the matter). (b) With regard to the 2013 budget, the extension of the 2010 marketing agreement with AMS for 2013 was signed by the APFTE on 23 February 2013. The 2013 budget and the marketing action programme including payments to Ryanair on the basis of that agreement were decided by the APFTE’s General Meeting on 4 July 2013 (88). (c) With regard to the 2014 budget, the President of the APFTE had signed the agreements with Ryanair on 22 November 2013, following the 2013 invitation to tender. However, it was not until 27 January 2014 that the General Meeting authorised the President to sign new marketing agreements with Ryanair.

(139) The documents on the workings of the APFTE provided to the Commission show that voting within the association was always unanimous. The Commission notes that, within the Board and the General Meeting, the private members gave several opinions, particularly on the production of market studies, with the aim of ensuring that the funded flight routes were having economic benefits for the region. However, in the discussions in the General Meeting or Board, the private members never really objected, by voting against them, to the choices proposed by the Executive Committee, the Governance Committee or the Funders Committee. In addition, the Commission notes that the participation of private members in the General Meetings fell significantly year by year, compared with a more or less constant presence of representatives of the public members (89). Thus the private members constantly supported the actions of the public members, even though their proposals were not taken up. This is explained particularly by the fact that the financial contribution of the private members was symbolic, while the economic benefits of the marketing agreements funded by the APFTE were at best positive and at worst non-existent. The private members therefore had no interest in entering into conflict with the APFTE’s public members, who provided the funding.

(140) In addition, as indicated in recitals 46 et seq., the public members controlled the APFTE’s strategic choices by controlling their payments to the APFTE: it was apparent to any member of the APFTE that a marketing agreement that was not a priority in the eyes of the public members would not be funded by them (90).

(e) The APFTE was funded by its public members and the use of the APFTE’s budget was controlled by the public members

(141) As described in recitals 45 et seq. and 107 et seq., with regard to the nature of the APFTE’s financial resources, the public members of the APFTE – the local authorities and the CCIM – that initially determined the APFTE’s budget choices by defining the APFTE’s promotional programme, which contained the precise choice of marketing agreements, and tightly controlled the APFTE’s subsequent use of their subsidies by making the subsidies conditional on the APFTE’s implementation of the promotional programme.

7.1.2.2. State resources

(142) The payments made by the APFTE to Ryanair and AMS under the various marketing agreements described in recitals 52 et seq. were made using resources from the APFTE’s general budget. As indicated in recitals 45 et seq., from the start, the APFTE was funded almost entirely ([95-100] %) by subsidies granted by local and regional public bodies, namely the Region of Occitania/Regional Council of Languedoc-Roussillon, the Department of Hérault, Montpellier Méditerranée Métropole/Communauté d’agglomération de Montpellier, the Communauté d’agglomération du Pays de l’Or, the City of Montpellier and the CCIM/Chamber of Commerce and Industry of Hérault (91).

(143) These public entities tightly controlled the use of their funds by the APFTE in several ways: (a) As described in recitals 49 et seq., an analysis of voting in the General Meeting, of the dates of signature of the marketing agreements and of the subsidy payments made year by year by the local authorities shows that the APFTE never had a budget placed at its disposal in advance that the association could have managed as it wished. The subsidies from the local authorities for a given budget year were always paid after the marketing agreements that the subsidies were intended to finance had been decided and signed. The local authorities were therefore always able to pay over their funds knowing precisely how the funds would be used (92). This means that they could have refused to sign the funding agreements with the APFTE if they had not agreed with the choice made by the association. However, it also means that the APFTE, as an association, did not have a budget that it could freely use, but was obliged to request payment of the subsidies by the public members after the precise budget choices – decided by the public members themselves through the proposals of the Funders Committee – had been made. The Commission concludes that this practice at the very least had the effect (if not the object) of dissuading the APFTE’s private members from voting in the General Meeting for budget choices that would not be agreeable to the APFTE’s public members. The practice therefore enabled the public members effectively to control the use of the APFTE’s budget. (b) Furthermore, the analysis of the funding agreements in recital 51 shows that the APFTE’s public members, through various contractual stipulations, ensured that their subsidies would be used for their strategic choices as set out in the APFTE’s promotional programme for each budget year, whose content was decided by them (93), thus preventing the private members from making budget choices independently. (c) Lastly, since the APFTE Presidents authorised to sign the marketing agreements with Ryanair/AMS and the funding agreements with the funding members all had links to those funding members (whether the CCIM or the Region of Occitania) (94), the APFTE’s public members had further control over the APFTE’s financial commitments and over the payment of subsidies to the APFTE.

(144) Thus the public members funding the APFTE tightly controlled the funds allocated to the APFTE until the funds were transferred to their final recipients. As a result, the funds in question retained their character of State resources when they were transferred by the APFTE to Ryanair or AMS.

(145) As explained in more detail in the previous chapter, on the imputability of the measures to the State, the Commission regards the APFTE as a body governed by private law set up by the public entities concerned in order to grant and manage payments of public funds to airlines (95).

(146) As regards the part of the APFTE’s budget made up of membership fees paid by the private members (less than [0-5] % of the APFTE’s budget, as shown in Table 3), these membership fees formed part of the same cash resources as the payments made by the public members to the APFTE. Once they were incorporated into the APFTE’s budget, the use of which was entirely controlled by the State (i.e. the public members of the APFTE), as described in this chapter and the next chapter, the Commission considers that these membership fees likewise constituted State resources (96).

7.1.2.3. Conclusion

(147) On that basis, the Commission concludes that, from the start of its existence, the APFTE was designed and used by the CCIM and the local authorities concerned simply as a vehicle for paying public funds to Ryanair, without the association itself or its private members having any room for manoeuvre. The actions and decisions of the APFTE are therefore imputable to the State.

(148) These observations support the statements mentioned in the opening decision made by the Regional Audit Chamber of Languedoc-Roussillon (Chambre Régionale des Comptes de Languedoc-Roussillon) (97), which indicated in some of its reports that the APFTE was in reality no more than a vehicle for collecting public funds intended to finance marketing agreements.

(149) As a result, the Commission considers that the measures are imputable to the State and were granted by France using State resources within the meaning of Article 107(1) TFEU.

7.1.3. Economic advantage

(150) In determining whether a State measure constitutes aid, it is necessary to establish whether the recipient undertaking receives an economic advantage which it would not have obtained under normal market conditions (98).

(151) It must be assessed whether the market economy operator principle applies to the agreements in question and, if so, whether the agreements comply with the principle.

7.1.3.1. Joint assessment of an economic benefit granted to Ryanair and AMS

(152) With regard to the agreements concluded between the APFTE and AMS or Ryanair, the Commission must firstly determine whether, for the purposes of identifying an economic advantage from which they may have benefited, Ryanair and its subsidiary AMS should be considered individually or jointly.

(153) The Commission observes that AMS is a wholly-owned subsidiary of Ryanair. The Commission further notes that AMS was actually formed for the sole purpose of providing marketing services on the Ryanair website and that it does not carry out any other activities (99).

(154) Furthermore, Ryanair appears to be substitutable for AMS in its contractual relations with the APFTE. The APFTE initially concluded a marketing agreement with AMS (the 2010 agreement). Subsequently, the 2013 and 2017 agreements were concluded directly between the APFTE and Ryanair.

(155) In addition, the marketing services agreement concluded with AMS stipulates in its statement of purpose that it is ‘linked to Ryanair’s commitment to serve the area of Montpellier’ (100).

(156) For all these reasons, the Commission regards Ryanair and AMS jointly as the sole beneficiary of the measures in question (101).

7.1.3.2. Individual assessment of the marketing agreements

(157) According to France, the APFTE acted as a public purchaser of services that enabled it to carry out its public policy tasks. According to France, the marketing agreements were therefore not in any way linked to the airport services agreements, and their objective was to contribute to the region’s economic development by attracting tourists.

(158) France has not provided any evidence that might show that the decision to conclude the marketing services agreements was taken on the basis of specific economic assessments that sought to determine the future profitability of concluding those agreements with Ryanair/AMS or the resulting economic benefits, either considering the marketing agreements on their own or looking at the marketing agreements in conjunction with the airport services agreements.

(159) Ryanair has not taken a clear position on the question whether the marketing agreements concluded with the APFTE and the airport services agreements concluded with AMM should be assessed in conjunction or separately: it argues that in any event Ryanair/AMS should not be regarded as a beneficiary of aid.

(160) In this case, by contrast with the majority of recent cases decided by the Commission that have involved Ryanair and State aid, the Commission has not established a link between the marketing agreements and the airport services agreements, for the following reasons.

(161) Firstly, the two types of agreement were concluded by two different legal persons pursuing different goals, namely AMM and the APFTE (102), which cannot be regarded as a single economic entity.

(162) Although it cannot be ruled out that the two types of agreement were linked at the time when the CCIM was still the airport concession-holder, and was concluding both types of agreement with Ryanair/AMS, that potential link ceased to exist when AMM took over the management of the airport in 2009. As indicated in recital 28, the minutes of the APFTE’s inaugural General Meeting on 24 June 2010 show that the setting up and funding of the APFTE were initiated by the CCIM, and supported by the local authorities concerned, in order to continue the practice of concluding marketing agreements with the low-cost airlines after the CCIM lost its status as concession-holder of Montpellier airport. Under the circumstances, the CCIM no longer wanted to take the financial and legal risks associated with the marketing agreements, and asked the local authorities concerned to participate directly in the marketing payments made to the airlines (which up to that point had been funded directly by the CCIM, as the bilateral funding agreements with the various authorities were finalised only at a later date) (103).

(163) Although the APFTE’s public members are also shareholders in the airport, their participation in funding the marketing agreements is out of all proportion to their shareholding in the airport (104). In particular, whilst the French State holds 60 % of the capital in AMM, it is not a member of the APFTE and does not contribute to its budget. The CCIM, which holds 25 % of the capital in AMM, contributed only [10-20] % of the APFTE’s total budget from 2010 to 2019. The other subsidies paid to the APFTE between 2010 and 2019 – [80-90] % – came from the local authorities that together hold only 15 % of the capital in AMM. Table 5 Comparison of the proportion of contributions by the APFTE’s public members to their shareholdings in AMM Regional Council of Languedoc-Roussillon (now the Region of Occitania) Hérault Departmental Council Communauté d’agglomération de Montpellier (now Montpellier Méditerranée Métropole) and City of Montpellier Communauté d'agglomération du Pays de l'Or CCIM (now the Chamber of Commerce and Industry of Hérault) French State (at national level) Participation in the funding of the APFTE (2010 to 2019) (%) [20-30] [10-20] [30-40] [0-10] [10-20] Shareholding in AMM (%) 6,5 7 0,5 (105) 1 25 60

(164) This information shows that the funding provided for the marketing agreements by the APFTE’s public members was not related to their participation in AMM’s capital. If the marketing agreements had resulted in an increase in the revenue associated with the airport agreement, the APFTE’s public members would have benefited from only 40 % of the additional revenue, whereas they would have contributed [95-100] % of the marketing expenditure. The individual situation of each of the APFTE’s public members is also very different, and even more unfavourable in the case of the three main funders of the APFTE: the Region (6,5 % of the capital in AMM), the Department (7 % of the capital in AMM) and Montpellier Méditerranée Métropole (0,5 % of the capital in AMM), which together funded [80-90] % (106) of the APFTE’s budget (107).

(165) In addition, the aforementioned minutes for 24 June 2010 show that, in concluding the marketing agreements, the APFTE and its members sought to promote the regional economy, with a view to the possible economic benefits of the marketing agreements for the region and various local businesses, and were not pursuing the interests that would be pursued by an operator (even in a minority capacity) of an airport or other business benefiting directly from the economic effects of the agreements.

(166) When it has to be determined whether a public entity has acted as a market economy operator, considerations of regional policy are not relevant. And the formal investigation has not found anything to indicate that the contribution of the APFTE’s public members to the marketing agreements had the aim of increasing the revenue they obtained from the airport, for example through the payment of a dividend or other bonus by AMM that might have reflected a positive effect of the marketing agreements on the airport’s revenue.

(167) On the basis of the aforementioned evidence, the Commission concludes that the links between the airport services agreements concluded by AMM and the marketing agreements concluded by the APFTE are not sufficient to justify assessing the two types of agreement in conjunction. The Commission has therefore assessed the marketing agreements in isolation.

(168) Consequently, and given that the APFTE cannot be regarded as the airport operator, the incremental profitability method for assessing agreements between airports and airlines provided for in the 2014 guidelines (108) cannot be applied to the agreements in question.

7.1.3.3. Applicability of the market economy operator principle

(169) In determining whether a State measure constitutes aid, it is necessary to establish whether the recipient undertaking receives an economic advantage which it would not have obtained under normal market conditions (109).

(170) According to France, the APFTE considers that the payments in question do not constitute State aid because the sums paid by the APFTE to Ryanair/AMS corresponded to the market price of the services, which were purchased following an invitation to tender. In the APFTE’s view, the services purchased also met the requirements of the APFTE and of its public policy tasks, namely the promotion of tourism and regional economic development. As a result, the APFTE acted as a public purchaser that was pursuing its public policy objective. The APFTE argues that, in this context, there was no need to carry out a profitability analysis in relation to the APFTE. According to the APFTE, therefore, the marketing agreements did not confer any economic advantage on Ryanair or AMS.

(171) Ryanair puts forward the same arguments.

(172) As regards the applicability of the market economy operator principle, it should be borne in mind that the comparison is not with any market economy operator in general but rather with a market economy operator in the situation of the APFTE.

(173) Consideration has therefore to be given to the scope of the market economy operator principle with regard to the APFTE.

(174) According to paragraph 77 of the Commission Notice on the notion of State aid as referred to in Article 107(1) of the Treaty on the Functioning of the European Union (‘the Notice on the notion of State aid’) (110): ‘only the benefits and obligations linked to the role of the State as an economic operator – to the exclusion of those linked to its role as a public authority – are to be taken into account’, which among other things means that no account is to be taken of public interest considerations such as regional development.

(175) According to its constitution the APFTE’s object is to ‘promote and develop tourism in the area, including business tourism, by entering into promotional agreements, purchasing internet advertising and marketing services or utilising any other advertising medium such as participation in fairs and exhibitions, in order to attract international customers’. The public statements of members of the APFTE’s bureau and the minutes and other documents concerning its workings referred to above show that the APFTE also seeks to pursue a regional policy objective (111).

(176) The minutes, records and other documents regarding the APFTE submitted by the French authorities show that when it concluded the marketing agreements with Ryanair/AMS, the APFTE was acting only as a public authority, in particular with a view to developing the regional economy.

(177) The benefits of marketing agreements in terms of developing regional tourism, namely the potential revenue generated by tourism for the region, are not relevant to an assessment of compliance with the market economy operator criteria.

(178) In the present case the Commission does not have any evidence to indicate that, through the conclusion of the marketing agreements, the APFTE or its funding public members could have expected any financial gain as market economy operators – in particular a return on investment – aside from the development of tourism in the region, an objective deriving entirely from the role of the APFTE and its funding public members as public authorities.

(179) The APFTE does not benefit from any increase in the revenue of the operator of Montpellier airport that might result from an increase in traffic. The APFTE does not operate Montpellier airport, and the members funding the APFTE are minority shareholders (40 %) in Montpellier airport. The French authorities have not put forward any gains linked to an increase in Montpellier airport’s revenue that might have benefited the members of the APFTE that are also shareholders in the airport. No business plan was drawn up assessing such potential benefits before the decisions were made to conclude the marketing agreements with Ryanair. Even if the marketing agreements did have the objective or the effect of increasing passenger traffic, it would not have made sense for minority shareholders controlling 40 % of the airport to fund [95-100] % of the marketing agreements. Furthermore, the various minority shareholders in the airport contributed to the funding of the marketing agreements in proportions different to their shareholdings in the airport (112), which likewise suggests that the decisions to conclude the marketing agreements had no economic link with the shareholdings held by some members of the APFTE. In conclusion, the marketing agreements were concluded with Ryanair by the APFTE exclusively with a view to a public policy objective pursued by the APFTE and its public members, which gained no benefit from them as economic operators.

(180) Furthermore, as shown in detail in section 7.1.3.4(a), the Commission concludes that the purchase of marketing services by APFTE did not meet a real need but was in fact intended to subsidise Ryanair flights from and to Montpellier airport. Therefore, the Commission concludes that the market economy operator test is not applicable (113). Furthermore, as indicated in section 7.1.3.4(b), the prices paid by APFTE to Ryanair/AMS for the purchase of marketing services are not in line with normal market conditions. Thus, even if the MEO test were applicable, it would not be satisfied.

(181) Finally, the Commission notes that a measure is considered not to constitute an advantage where a State measure represents compensation corresponding to consideration for services provided by undertakings entrusted with a service of general economic interest in order to perform public service obligations, where those undertakings do not in fact enjoy a financial advantage and where the measure does not have the effect of putting those undertakings in a more favourable position than their competitors (114). In the present case, however, there is no indication that Ryanair was subject to public service obligations.’

7.1.3.4. Determination of the advantage conferred on Ryanair/AMS by the APFTE

(182) The formal investigation has shown that the payments made on the basis of the marketing agreements were of the same nature as subsidies paid by a public authority to an airline to ensure an air service to an airport. The Commission has concluded that the payments made by the APFTE to Ryanair and AMS can be regarded as straightforward subsidies aimed at reducing the costs borne by Ryanair to operate scheduled flights to Montpellier, so that they confer an economic advantage on Ryanair.

(183) In order to determine the existence of an advantage for Ryanair/AMS, the Commission has examined all the relevant circumstances of the case, in accordance with the Notice on the notion of State aid. For instance, there can be exceptional circumstances in which the purchase of goods or services by a public authority, even if carried out at market prices, may not be considered in line with market conditions, especially if the purchase does not meet the actual needs of the authority (115).

(184) On the basis of a range of indicators examined during the formal investigation, the Commission has concluded that the purchase of marketing services from Ryanair did not meet an actual need of the APFTE. This is sufficient to establish the existence of an advantage conferred on Ryanair by the measures covered by the investigation.

(185) Moreover, the formal investigation has not found evidence to confirm the claim made by Ryanair/AMS and the French authorities that the marketing services were purchased at market prices.

(a) Lack of any actual need for the APFTE to purchase marketing services from Ryanair/AMS

(186) France, the APFTE, the CCIM, the local authorities having submitted comments and Ryanair have argued that the APFTE was a local tourism promotion association that purchased marketing services from Ryanair at market prices.

(187) The question at the heart of the Commission’s assessment of the existence of an advantage conferred on Ryanair is whether the APFTE had an actual need for marketing services purchased from Ryanair/AMS in order to fulfil its public policy objective, namely the promotion of the city of Montpellier and its surrounding area (116).

(188) The Commission has reached the conclusion that the purchase of marketing services from Ryanair/AMS did not meet an actual need of the APFTE, on the basis of the following findings: — The purchase of marketing services served only as justification for the payments made to Ryanair to keep the latter at Montpellier airport; even if the marketing services had some marketing effect (quod non), it was not the main intention of the agreements, which must be viewed rather as concealed subsidies: — there was no real intention on the par