EN Official Journal of the European Union L 250/38

COMMISSION DECISION (EU) 2015/1584

of 1 October 2014

on State aid SA.23098 (C 37/07) (ex NN 36/07) implemented by Italy in favour of Società di Gestione dell'Aeroporto di Alghero So.Ge.A.AL S.p.A. and various air carriers operating at Alghero airport

(notified under document C(2014) 6838)

(Only the English text is authentic)

(Text with EEA relevance)

THE EUROPEAN COMMISSION,

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

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

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

Whereas:

1. PROCEDURE

(1) On 22 December 2003 the Commission received a complaint from the Italian air carrier Air One S.p.A. (‘Air One’), alleging that managers of several Italian airports had granted unlawful aid to Ryanair Ltd (‘Ryanair’) by means of several agreements setting up operating conditions at the airports. The airports concerned were Alghero, Pescara and Rome, managed respectively by Società di Gestione dell'Aeroporto di Alghero So.Ge.A.AL S.p.A. (‘So.Ge.A.AL’), SAGA S.p.A. and Aeroporti di Roma S.p.A., as well as the airports of Pisa, Treviso and Bergamo (‘Orio al Serio’).

(2) By letter of 11 June 2004 Air One called upon the Commission to define its position with regard to its complaint in accordance with Article 265 of the Treaty and introduced an application for failure to act before the General Court. The Court dismissed the action (2).

(3) By letter of 9 July 2004 the Commission forwarded a non-confidential version of the complaint to Italy. After the Commission agreed to an extension of the deadline, Italy's comments on the complaint were submitted by letters of 5 October 2004 and of 5 November 2004.

(4) Additional information was requested by the Commission by letter of 14 March 2005. After the Commission agreed to an extension of the deadline, Italy submitted the requested information by letter dated 17 June 2005. By letter of 30 June 2005 Italy submitted further information to the Commission.

(5) By letter of 21 November 2005 Air One requested the Commission to extend its investigation to Bari and Brindisi airports. By letter of 18 May 2006 Air One formally called upon the Commission to define its position under Article 265 of the Treaty. The Commission replied by letter of 14 July 2006.

(6) By letters of 26 October 2006 and 10 January 2007 Air One limited its objections to the presumed aid granted under the agreements signed between the Alghero airport manager, So.Ge.A.AL, and Ryanair. On 12 February 2007 Air One called upon the Commission to comply with Article 265 of the Treaty.

(7) By letters of 27 June 2006 and of 30 November 2006 the Commission requested further information from Italy. That request was partially addressed by Italy's letter of 17 January 2007. The Commission requested additional information from Italy by letter dated 19 February 2007. Italy replied to that request by letters dated 16 March 2007 and 26 March 2007.

(8) Having examined the information supplied by Italy, on 12 September 2007 the Commission decided to open the investigation procedure laid down in Article 108(2) of the Treaty (‘the 2007 Decision’). The 2007 Decision was published in the Official Journal of the European Union (3). The Commission invited interested parties to submit their comments on the measures under investigation.

(9) By letters dated 15 October 2007 and 22 October 2007 Italy requested the Commission to extend the deadline to submit its observations on the assessment in the 2007 Decision. The Commission granted an extension of the deadline by letter of 23 October 2007. Italy submitted its observations on the 2007 Decision on 14 November 2007.

(10) The Commission published a corrigendum to the 2007 Decision on 12 February 2008 (4).

(11) On 18 February 2008 Ryanair submitted its observations on the assessment in the 2007 Decision. So.Ge.A.AL submitted its observations on the same date. Further information was submitted by So.Ge.A.AL by letter dated 16 June 2008. On 20 February 2008 Italy forwarded to the Commission the observations of the Sardinian Region (‘RAS’).

(12) The observations of Ryanair and So.Ge.A.AL were forwarded to Italy by letter dated 28 February 2008.

(13) By letter of 20 June 2008 Air One supplemented its original complaint. The Commission sent that submission to Italy for comments on 10 December 2008. By letter dated 15 January 2009 the Italian authorities requested an extension of the deadline to submit comments on Air One's submission. The Commission agreed to extend the deadline by letter dated 20 January 2009. On 13 February 2009 Italy submitted its observations to the Commission.

(14) On 1 September 2008 the Commission contacted Ecorys Netherlands BV (‘Ecorys’) to carry out an economic valuation in relation to several on-going State aid investigations, including the one concerning Alghero airport. The analysis addressed, inter alia, the behaviour of the airport manager So.Ge.A.AL and the local authorities with respect to the agreements concluded between So.Ge.A.AL and air carriers and the extent to which the arrangements with the air carriers operating at Alghero airport were compliant with the Market Economy Operator Principle (‘MEOP’). Ecorys submitted its final report on 30 March 2011 (‘the Ecorys Report’).

(15) By letter of 5 March 2010 Ryanair submitted to the Commission further information concerning all on-going State aid investigations involving Ryanair, among which the one related to Alghero airport.

(16) On 30 March 2011 the Commission sent a request for additional information to Italy. By the same letter, the Commission forwarded to Italy the English version of the Ecorys Report.

(17) The Commission sent a request for information to Ryanair on 8 April 2011. Ryanair replied to that request by letter dated 22 July 2011.

(18) By letters dated 23 May 2011 and 30 May 2011 Italy requested an extension of the deadline to provide the information requested by the Commission on 30 March 2011. By the same letter, Italy requested the translation into Italian of the English version of the Ecorys Report. On 1 June 2011 Italy confirmed the translation request. On 1 August 2011 the Commission sent to Italy the translation into Italian of the Ecorys Report.

(19) By letters dated 31 August 2011 and 9 September 2011, Italy (both RAS and the Italian Ministry of Transport) replied to the Commission's request for information of 30 March 2011.

(20) By letter dated 19 October 2011 the Commission forwarded Ryanair's reply of 22 July 2011 to Italy. By letter dated 16 November 2011 Italy asked for an extension of the deadline for comments. By the same letter Italy asked for the translation into Italian of the Economic Market Economy Investor Principle Assessment Report (the ‘2011 MEOP Report’) attached to Ryanair's reply. By letter of 17 November 2011 the Commission agreed to extend the deadline. On 23 January 2012 the Commission sent the Italian version of the 2011 MEOP Report to Italy. On 15 February 2012 Italy submitted its comments on Ryanair's observations, notably on the 2011 MEOP Report.

(21) On 17 February 2012 the Commission sent a request for information to Ryanair concerning a series of on-going State aid investigations, including the one on Alghero airport. Ryanair replied to this request by letter of 16 April 2012.

(22) On 27 June 2012 the Commission extended the formal investigation procedure to include additional measures taken by Italy that were not subject to Air One's complaint (‘the 2012 Decision’) (5). The 2012 Decision was published in the Official Journal of the European Union. The Commission invited interested parties to submit their comments on the measures under investigation.

(23) Italy submitted its observations on the 2012 Decision on 31 August 2012, 3 October 2012, 19 October 2012, 22 October 2012 and 20 February 2013. The Commission received comments from four interested parties: So.Ge.A.AL, Ryanair, Airport Marketing Services Ltd (‘AMS’) and Unioncamere. Ryanair's submission included an updated MEOP report (‘the 2013 MEOP report’). The Commission forwarded the comments from interested parties to Italy, which was given the opportunity to react. Italy's observations on the comments submitted by interested parties were received on 6 September 2013 and 13 November 2013.

(24) Several submissions were received from Ryanair on 20 December 2013, 17, 24 and 31 January 2014. The Commission forwarded all submissions relevant to Alghero airport to Italy on 9 January 2014 and 5 February 2014. On 24 February 2014 Italy asked for the translation into Italian of the submissions from Ryanair forwarded to it by letter of the Commission of 5 February 2014. By letter of 8 April 2014 the Commission forwarded to Italy the Italian version of Ryanair's submissions as requested.

(25) By letter dated 23 December 2013 the Commission requested additional information from Italy on the measures subject to the investigation. After an extension of the initial deadline set, Italy provided a partial reply to the Commission's request on 18 February 2014. On 4 March 2014 Italy was reminded of its obligation to provide a comprehensive reply to all questions addressed to it in the Commission's letter of 23 December 2013. Italy provided the information requested by letter of 25 March 2014.

(26) On 14 March 2014 the Commission informed Italy and the interested parties to the procedure that the Commission guidelines on State aid to airports and airlines (‘the 2014 Aviation Guidelines’) (6) were adopted on 20 February 2014 and invited Italy to submit comments within 20 working days of the publication of the 2014 Aviation Guidelines. Italy did not reply to the Commission's letter 14 March 2014.

(27) The Commission requested further information from Italy by letter of 21 March 2014. After an extension of the initial deadline set, Italy provided the information requested on 25 April 2014 and 8 May 2014.

(28) The 2014 Aviation Guidelines were published in the Official Journal of the European Union on 4 April 2014. They replaced the 2005 guidelines on financing of airports and start-up aid to airlines departing from regional airports (‘the 2005 Aviation Guidelines’) (7).

(29) On 15 April 2014 a notice was published in the Official Journal of the European Union inviting Member States and interested parties to submit comments on the application of the 2014 Aviation Guidelines in this case within one month of the publication date. So.Ge.A.AL submitted its comments on 8 May 2014. So.Ge.A.AL's comments were forwarded to Italy on 22 May 2014.

(30) The Commission requested further information from Italy by letter of 26 May 2014. Italy provided the information requested on 10 June 2014, 28 July 2014, 20 and 27 August 2014, 1 and 19 September 2014.

(31) By letter of 11 September 2014, Italy informed the Commission that it exceptionally accepts that this Decision be adopted in English only.

2. GENERAL INFORMATION ON ALGHERO AIRPORT

(32) Alghero airport is situated in the North-West of the Italian island of Sardinia. Alghero was initially set up as military airport and opened to civilian traffic in 1974. Airport infrastructures and facilities are owned by the State through the Ente Nazionale Aviazione Civile (‘ENAC’), which is the Italian National Civil Aviation Authority.

(33) As regards the distance between Alghero airport and the other Sardinian airports, Alghero airport is located 128 km from Olbia airport, 133 Km from Oristano airport, 225 Km from Tortolì — Arbatax airport and 235 km from Cagliari airport (8). According to Italy, due to its geographical position and the specific features of the transport network (road and rail modes), Alghero airport is not substitutable with any of those neighbouring airports.

(34) Passenger traffic at the airport increased from 663 570 in 2000 to over 1 million in 2005 and nearly 1,6 million in 2013. Table 1 Passenger traffic at Alghero airport Year Passengers 2000 663 570 2001 680 854 2002 803 763 2003 887 127 2004 997 674 2005 1 078 671 2006 1 069 595 2007 1 299 047 2008 1 379 791 2009 1 506 080 2010 1 387 287 2011 1 513 245 2012 1 512 954 2013 1 563 020

(35) Ryanair has been the main airline using the airport since 2000. However, other airlines, including other low-cost carriers, have also operated at the airport since 2000 (Germanwings, Air Italy, Air Dolomiti, Air Vallée, Meridiana, Alpi Eagles, bmibaby, easyJet, Air One, Volare, Alitalia) (9).

(36) At Alghero airport, fees charged to airlines are usually set on the basis of a published schedule of airport charges which includes the following items: take-off and landing charge, passenger charge, security charge, baggage screening charge and ground handling service charge.

3. MANAGEMENT OF ALGHERO AIRPORT

3.1. So.Ge.A.AL

(37) So.Ge.A.AL was established in 1994 as the manager of Alghero airport. The company had an initial capital of ITL 200 million (EUR 103 291,4), entirely subscribed by local public bodies. The majority of the capital was held (directly or indirectly through Società Finanziaria Industriale Regione Sardegna — SFIRS S.p.A (‘SFIRS’) by the RAS. SFIRS was set up as investment company of RAS (10).

(38) Although the composition of So.Ge.A.AL's capital varied in the course of the years, since 1994, the company has always been wholly owned by public bodies: the Chamber of Commerce of Sassari, the Province of Sassari, the Municipality of Sassari, the Municipality of Alghero, RAS and SFIRS S.p.A.

(39) In 2010 So.Ge.A.AL's shares were held 80,20 % by RAS and 19,80 % by SFIRS.

3.2. THE MANAGEMENT CONCESSION

(40) On 28 May 2007 So.Ge.A.AL signed with ENAC a Convention for the forty-year ‘comprehensive’ management concession (11) of Alghero airport (‘the Convention’) (12). Prior to 2007, Alghero airport was managed by So.Ge.A.AL on the basis of a ‘temporary’ management concession awarded to it on 11 February 1999.

(41) In Italy the concession for the management of an airport is awarded by ENAC based on the assessment of the sustainability of a business plan, which includes an action plan, an investment plan and an economic-financial plan. In the action plan the airport manager outlines its economic programming strategies as well as the organisational structure. The investment plan consists of a brief report on the planned actions and their technical, economic and administrative feasibility. The economic-financial plan illustrates the financial balance of the airport management.

(42) According to Article 8 of the Convention, So.Ge.A.AL's proceeds consist of: (a) user fees of airports as per Italian Law No 324 of 5 May 1976 and subsequent modifications; (b) loading and unloading fees for goods transported by air as per Italian Law No 117 of 16 April 1974; (c) concession fees for security services determined in accordance with Italian Law 248/2005 and subsequent modifications; (d) revenues deriving directly or indirectly from running the airport, as well as from the use of airport areas and facilities by third parties, provided for in the Italian Legislative Decree No 18/1999.

(43) Airport managers must pay an annual concession fee to ENAC for the right to manage the airport, in the amount and according to the procedures defined by the relevant laws in force (for details on the setting of concession fees see recitals 155 to 157).

(44) Based on Article 12 of the Convention, each year beginning with the year of award of the concession, the airport manager must submit to ENAC a report on the status of implementation of the action plan. In addition, the airport manager must submit to ENAC for approval, no longer than six months prior to the expiry of each four-year period of the concession, the business plan (including the investment plan and the action plan) for the following four-year period. Penalties apply in case of non-compliance by the airport manager with those obligations.

(45) According to Article 14bis of the Convention, the concession will be revoked and the Convention legally terminated in the event of: (i) non-implementation within the set deadlines of the measures described in recital 44; (ii) delay of more than 12 months in paying the concession fee owed by the airport manager; (iii) bankruptcy or (iv) non-achievement of economic-financial balance by the end of the first four-year period.

3.3. THE PUBLIC POLICY REMIT

(46) By letter of 18 February 2014 Italy claimed that So.Ge.A.AL does not carry out activities falling within the scope of the public policy remit (13).

(47) So.Ge.A.AL would however make available airport premises for the purpose of the provision of certain services by the State in its exercise of public powers and bear the costs for the maintenance and administration of the areas in question.

(48) By letter of 10 June 2014 (14) Italy reconsidered its position and claimed that the costs incurred in the administration of those airport premises would fall within the public policy remit. As regards the legal framework, Italy submitted that there are legal rules strictly imposing those costs on airport managers. In particular, the airport manager is bound to make available to ENAC and other public entities (the Air Border Police, the Customs Agency, the Finance Guard, the Office of Maritime, Air and Border Health, the Italian Red Cross, the Fire service, the Police) certain airport areas and bear the corresponding administration and maintenance costs (15). The obligation on airport managers to make available to public entities airport premises and to bear the respective costs was laid down by the Framework Convention for the award of the management of Italian airports referred to by the Italian Disposition No 12479 of 20 October 1999 of the Ministry of Transport and Navigation, adopted in application of Ministerial Decree No 521 of 1997. The relevant provisions were transposed in the Convention, which lays down in its Article 4(1)(c) the obligation on the airport manager ‘to carry out the activities required to support the activities within the responsibility of the State, of the emergency and health services, within airport premises’. According to Italy the total operating costs incurred by So.Ge.A.AL in the maintenance of those areas in the period 2000-2010 amounted to EUR 2 776 073 (16).

(49) In addition, Italy submitted that EUR 1 284 133 of the total costs of investment in the new terminal would represent the costs of construction of areas which So.Ge.A.AL is bound to make available to public entities and would therefore also qualify as costs incurred in the provision of activities falling within the public policy remit (see also recital 86).

3.4. CONCESSION FEES PAID BY So.Ge.A.AL

(50) The (management and security) concession fees paid by So.Ge.A.AL between 2000 and 2010 are shown in Table 2 (17). Table 2 Concession fees paid by So.Ge.A.AL during 1998-2010 (EUR) Description 1998 1999 2000 2001 2002 2003 2004 Management concession fee to the Ministry 139 572 166 505 243 880 266 205 312 950 371 912 418 358 Security concession fee — — — — — — — Total 139 572 166 505 243 880 266 205 312 950 371 912 418 358 Description 2005 2006 2007 2008 2009 2010 Total Management concession fee 473 836 119 197 171 019 232 130 267 009 171 005 2 643 514 Security concession fee 7 092 37 324 45 439 48 205 52 618 48 571 239 249 Total 480 928 156 539 216 458 280 335 319 627 219 575 2 882 763

3.5. FINANCIAL SITUATION OF So.Ge.A.AL

(51) So.Ge.A.AL's financial results were negative during the period 2000 - 2010. According to Italy, the poor performance of the company was the result of the delay in the award of the ‘comprehensive’ concession for the management of the airport. Following the award of the concession, the economic crisis resulted in a sharp down-turn in passenger numbers which affected negatively the airport activity.

(52) In August 2011 Italy submitted to the Commission a report assessing the financial situation of Alghero airport during the period 2000-2010 (‘the Accuracy Report’) (18). Based on the Accuracy Report So.Ge.A.AL's annual financial results were as follows: Table 3 Financial results of So.Ge.A.AL 2000 – 2010 (in thousand EUR) Year Result 2000 (32,2) 2001 (790,7) 2002 (47,3) 2003 (951,0) 2004 (2 981,7) 2005 (2 064,7) 2006 (1 108,2) 2007 (1 800,8) 2008 (4 577,3) 2009 (12 404,1) 2010 (1 847,2)

(53) In the course of the investigation Italy submitted to the Commission So.Ge.A.AL's annual reports (‘Relazione sulla gestione del bilancio’) for the period 2000 – 2010 (19).

(54) So.Ge.A.AL reported a loss of ITL 1 530 960 048 in 2001. So.Ge.A.AL reported negative figures in 2002 and 2003 as well.

(55) So.Ge.A.AL closed 2004 with a EUR 2 981 688 loss. It continued to mark up losses in 2005 and 2006. It further recorded a EUR 1 801 000 loss in 2007 despite being awarded the ‘comprehensive’ concession for the management of the airport on 3 August 2007. Based on the 2007 annual report, unforeseen events worsened So.Ge.A.AL's financial performance in 2007.

(56) So.Ge.A.AL reported losses worth EUR 4 577 000 in 2008 and EUR 12 404 126 in 2009.

(57) In its 2009 annual report, So.Ge.A.AL took note that based on the 2007 Convention it had to break-even within four years from the award of the concession. Considering its poor financial situation in 2009, So.Ge.A.AL proposed the preparation and adoption of an updated business plan which it described as necessary to bring forecasts more in line with market developments. In that sense the business plan prepared by Roland Berger (see recitals 64-70) was considered insufficiently reliable.

(58) A EUR 1 847 165 loss was further reported for 2010. Reportedly traffic figures continued to develop positively, even in what was a difficult economic environment impacted by the volcanic ash crisis, which had led to the temporary closure of European air space.

4. THE BUSINESS PLANS

(59) Since 1999, So.Ge.A.AL has drawn up several business plans, which are briefly summarised in recitals 60 to 75.

4.1. THE 1999 BUSINESS PLAN

(60) The 1999 business plan covers the period between 1999-2007 in two successive phases: (a) 1999-2001: over that period, So.Ge.A.AL planned in particular a capital increase, the launch of its privatisation, the award of the ‘comprehensive’ concession, investments in airport infrastructure, the start-up of new scheduled flights by two airlines and the definition of a marketing and commercial development plan; (b) 2002-2007: this phase was due to be devoted to the development of the business based on the improved airport infrastructure.

(61) The business plan assumed the award of the ‘comprehensive’ concession in 1999, following an increase in So.Ge.A.AL's capital to ITL 6 billion.

(62) The business plan assumed a diversification of airline connections by attracting two fast growing low-cost airlines as major growth driver. One air carrier was to take up operations from Alghero airport on the Alghero — Milan route in 1999 and a second one to start-up the Alghero — London route in 2000, with three flights per week operated at discounted promotional fees for the first year.

(63) The traffic forecasts showed Alghero airport reaching 1 million passengers in 2004 up to 1,1 million in 2007 as a result of the start-up of new routes by the two air carriers mentioned in recital 62, which at the time the business plan was prepared were negotiating airport services agreements with So.Ge.A.AL.

4.2. THE ROLAND BERGER PLAN

(64) The 2004 plan prepared for So.Ge.A.AL by consultancy Roland Berger (‘the Roland Berger Plan’) provided for a detailed forecast for the period 2004-2008. The main elements of the business plan were: (a) Increase in low-cost traffic from 20 to 44 % of the overall traffic at the airport, up to 620 000 passengers in 2008; (b) Growth in non-aeronautical revenues from 2,2 EUR/pax to 5 EUR/pax (20); (c) Growth in aeronautical revenues from 6,8 EUR/pax in 2003 to 7,47/7,75 EUR/pax in 2008; (d) EUR 42,6 million of investments in infrastructure and equipment, of which EUR 41,3 million would be covered by public funding.

(65) In order to understand how Alghero airport performed against the market, its performance was benchmarked against that of comparable airports: (a) handling revenues and revenue from non-aeronautical sources such as parking, rental cars, fuel flow, and retail and food concessions were reportedly below sector average; spend per passenger varied from half to one third of that recorded by small airports, and was less than one fifth of that of larger airports; (b) poor revenue performance was confirmed by the spend per passenger in line with that of Puglia airport, which recorded a negative net operating result; (c) operating costs were however aligned with the best performing Italian airports.

(66) The projections developed in the Roland Berger Plan depicted future operating revenues and expenses of the airport manager based on two scenarios: development of the airport under a ‘temporary’ concession scenario versus a ‘comprehensive’ concession scenario. Under the first scenario the airport was expected to continue to mark up losses until 2008, whereas under the second, the airport would breakeven already in 2005 based on annual revenues higher by 7 % on average in a ‘comprehensive’ concession scenario as compared to the ‘temporary’ scenario (largely due to higher non-aeronautical revenues — a more efficient advertising business, car park operation and fuel sales were expected to drive commercial income upwards). Financial outcomes for aeronautical activity were expected to be negative even in a ‘comprehensive’ concession scenario.

(67) The Roland Berger Plan showed underperforming handling income largely on account of low-cost traffic. Handling was expected to continue generating losses on the medium term even in an optimistic approach. It was estimated that the foregone revenues deriving from the handling of low-cost traffic would equal EUR 3,2 million in 2008.

(68) Based on the Roland Berger Plan, the airport's primary focus in order to reverse previous declines and reach breakeven point was to drive commercial revenue, until the point where spend per passenger was brought in line with that of comparable airports (from EUR 2,2 to EUR 5 per passenger). Low-cost traffic was expected to be the main non-aeronautical revenue generator for the period 2004-2008 and to mitigate losses in aeronautical business. The projections showed 620 000 low-cost passengers in 2008.

(69) The Roland Berger Plan also noted that a continuation of the management of the airport under a ‘temporary concession’ could require the recapitalisation of So.Ge.A.AL to cover operational losses.

(70) The Roland Berger Plan was updated twice, in 2007 and 2008, to take into account developments in the sector. The updates proposed concrete actions for the development of the airport in the period 2008-2011, by increasing both aeronautical revenues — notably from the handling business, and non-aeronautical revenues.

4.3. THE BUSINESS PLAN FOR THE AWARD OF THE CONCESSION

(71) So.Ge.A.AL's business plan drawn up in view of the award of the comprehensive concession was approved in September 2005 and provided for a forecast of revenues and costs for the forty-year duration of the concession for the management of the airport, on the assumption that the concession would be granted to So.Ge.A.AL in 2006.

(72) Forecasts of annual traffic showed a steady year-on-year increase of 4,5 % until 2010, 2,6 % from 2011 to 2025 and 3,78 % during 2006-2025, to around 2 800 000 million passengers approaching 2045. Non-aeronautical revenue was budgeted to increase from an annual EUR 2 929 000 in 2006 to EUR 8 814 000 in 2045. Likewise, aeronautical revenues were expected to increase from EUR 9 288 000 in 2006 to EUR 29 587 000 at the end of the forty-year period. The forecasts assumed a 20 % reduction in aeronautical revenues upon the airport reaching the 2 million passengers ceiling and the consequent entry on the market of an additional provider of ground handling services in accordance with the EU rules on ground-handling at European airports (21).

(73) EUR 143,3 million of capital expenditure were foreseen between 2006 and 2045. The plan included a detailed programme of capital investments per year during 2006 – 2045 and listed the sources of financing (private or public) for these investments.

4.4. THE 2010 REORGANISATION AND RESTRUCTURING PLAN

(74) The 2010 reorganisation and restructuring plan was endorsed by RAS in September 2010. The plan provided for a comprehensive analysis of the economic situation of So.Ge.A.AL for the period 2000-2010 and projected the company's return to viability in 2012, also taking into account a recapitalisation of the company envisaged for 2010.

(75) According to the 2010 reorganisation and restructuring plan, So.Ge.A.AL's poor performance until 2010 was the result of inadequate management, inefficient ground handling activity, infrastructure deficiencies and insufficient aeronautical and non-aeronautical revenues.

5. MEASURES SUBJECT TO INVESTIGATION

(76) The following measures are subject to the investigation opened and extended by the 2007 and 2012 Decisions respectively: (a) Measures in favour of the airport manager So.Ge.A.AL: — Capital injections by RAS and other public shareholders; — Contributions for ‘fittings and works’ from RAS; — Financing of airport infrastructure and equipment by the State. (b) Potential aid in various agreements concluded with airlines using the airport as of 2000.

5.1. MEASURES IN FAVOUR OF So.Ge.A.AL

5.1.1. Measure 1 — Capital injections

(77) Italian law requires airport managers to maintain a minimum level of capital depending on traffic volumes (22): for airports with traffic between 300 000 and 1 million passengers, the minimum capital required was set at EUR 3 million, whilst for traffic between 1 million and 2 million, the threshold was set at EUR 7,5 million. In the course of the investigation Italy maintained that the capital injections carried out by So.Ge.A.AL's public shareholders primarily aimed at restoring the company's capital eroded by losses to the level imposed by national law.

(78) Based on the information provided by Italy, between 2000 and 2010, So.Ge.A.AL's public shareholders injected fresh capital in the company on several occasions as follows (23): Table 4 Operations on So.Ge.A.AL's capital Year Description Meeting of So.Ge.A.AL's Shareholders Assembly Capital injection (EUR) 2003 Injection to restore capital eroded by losses and increase capital to EUR 7 754 000 9 May 2003 5 198 000 2005 EUR 3 933 372,17 injection to restore capital eroded by losses 29 April 2005 3 933 372,17 2007 EUR 3 797 185 injection to restore capital eroded by losses 31 October 2007 3 797 185 2009 EUR 5 649 535 injection to restore capital eroded by losses 26 January 2009 5 649 535 2010 EUR 12 508 306 injection to restore capital eroded by losses 21 May 2010 12 508 306

5.1.2. Measure 2 — Financing of ‘fittings and works’

(79) According to the information provided by Italy, from 1998 to 2009, So.Ge.A.AL received contributions from RAS for ‘fittings and works’ for a total amount of EUR 6 540 269.

(80) In its comments on the 2012 Decision Italy clarified that the main objective of the ‘fittings and works’ measures was to upgrade airport infrastructure. Italy referred to the general definition of public works (‘lavoro pubblico’) provided in Article 2, paragraph 1 of the Italian Law No 109 of 11 February 1994 (‘Legge quadro in materia di lavori pubblici’) (24), namely the ‘activities of construction, demolition, restoration, renovation and maintenance of works and installations, including defence of the environment and bioengineering’ (25). Italy clarified that the funding in question was eventually used for the financing of the works on the passenger terminal, upgrading of the external road connections, upgrading of the aircraft parking areas as well as equipment necessary for the operation of the airport.

(81) Based on those clarifications, in the assessment conducted in this Decision, the Commission analysed the financing of ‘fittings and works’ (Measure 2) and the subsidies for infrastructure investments (Measure 3) together, as a series of measures financing the creation and upgrading of infrastructure and equipment.

5.1.3. Measure 3 — Financing of airport infrastructure and equipment

(82) Table 5 details the infrastructure investments carried out during 2000-2010, which were partly financed by public funds (26). Table 5 Infrastructure investments 2000-2010 Investment Date of binding commitment for the public financing Investment costs (EUR) Public financing (EUR) Source of the public financing New departures area 1994 109 773,59 109 774 RAS Restructuring of the arrivals area (‘Ristrutturazione zona arrivi’) 1996 1 442 990,23 1 350 812 RAS New terminal 1997 17 325 483,05 15 012 344,72 ENAC Upgrading of the pavement of the taxiway 1997 4 175 608,09 3 861 392 ENAC Lateral safety zones 1998 429 894,54 417 102 RAS TOTAL n.a. 23 483 749,5 20 751 424,72 ENAC X-ray baggage control system 2003 208 782,99 191 082,99 ENAC Restructuring of the old passenger terminal (‘Ristrutturazione vecchia aerostazione passeggeri’) 2003 2 406 862,57 1 623 967 ENAC Upgrading of the apron 2003 7 499 177,02 6 905 599 ENAC Upgrading of the taxiway 2003 7 287 065,75 6 755 162 ENAC Upgrading of the runway 2003 6 702 055,64 6 323 883 ENAC Perimeter control system 2003 6 073 054,61 5 951 919 ENAC Anti-explosive equipment (‘Carrello antideflagrante’) 2004 76 001,29 76 000 ENAC TOTAL n.a. 53 736 749,37 48 579 036,23 n.a.

(83) In addition, in the period 2000-2010 RAS granted to So.Ge.A.AL direct grants for the acquisition of equipment (internal communication devices, software, vehicles, etc.) for a total amount of EUR 4 680 281,44.

(84) According to Italy (27), an amount of EUR 25 431 706,16 of the public financing had been legally committed before 2000, namely the date of the Aéroports de Paris judgment (28). In particular: (a) State financing laid down by the CIPE (29) Decision of 29 August 1997: the funding was used for the construction of the new passenger terminal and upgrading of the taxiway; (b) Regional financing granted to So.Ge.A.AL based on the Framework Agreement between RAS and the Ministry of Transport of 5 August 1996, Italian Regional Laws No 2 of 29 January 1994 and No 9 of 15 February 1996: the funding was directed towards the restructuring of the old terminal and the construction of lateral safety zones. In addition, pursuant to those Regional Laws, regional financing was granted to So.Ge.A.AL for the financing of equipment.

(85) According to Italy before the award of the ‘comprehensive’ concession in 2007, the State retained responsibility for infrastructure investments while the airport manager was a mere executor of the infrastructure works approved by the State.

(86) By letter of 10 June 2014 (30) Italy also submitted that, out of the total costs of investment in the new terminal, EUR 1 284 133 would qualify as costs incurred in the provision of activities falling within the public policy remit, as corresponding to the costs of construction of the terminal areas which So.Ge.A.AL is bound to make available to public entities (see also recital 49).

5.2. MEASURES IN FAVOUR OF AIRLINES USING THE AIRPORT

(87) The investigation covers several agreements entered into by So.Ge.A.AL with various airlines flying from Alghero airport, which, in the 2007 and 2012 Decisions, were considered by the Commission as possibly constituting State aid to the airlines concerned.

(88) According to Italy the agreements with air carriers were negotiated by the Director-General of So.Ge.A.AL, who reported to the Board of Directors on the status of the negotiations and the content of the agreements. So.Ge.A.AL's Board of Directors approved the terms of the agreements prior to their signature (31).

5.2.1. Measure 4 — Agreements signed by So.Ge.A.AL with Ryanair/AMS

(89) Since 2000, Ryanair has been the main airline operating at Alghero. Two types of agreements have been signed between Ryanair and its subsidiary AMS on the one hand, and So.Ge.A.AL, on the other.

(i) Airport Services Agreements (‘ASAs’)

(90) The Airport Services Agreements (‘ASAs’) signed from 2000 onwards between Ryanair and So.Ge.A.AL, laid down Ryanair's operating conditions at Alghero airport and the level of airport charges due by the airline. Ryanair committed to meeting pre-defined flight/passenger targets against a success fee to be paid by So.Ge.A.AL. Penalties were laid down in case such targets were not fully met.

(ii) Marketing Services Agreements

(91) The marketing services agreements relate to the advertising of the Alghero destination on the official website of Ryanair. Since 2006, they were signed with Ryanair's 100 % subsidiary AMS and concluded on the same dates as the ASAs signed by Ryanair.

(92) In recitals 93 to 109, the Commission summarises the main provisions of the agreements (the ASAs and the marketing services agreements) signed by So.Ge.A.AL and Ryanair/AMS.

5.2.1.1. The 2000 ASA with Ryanair

(93) The first ASA between Ryanair and So.Ge.A.AL was agreed on 22 June 2000 for a period of 10 years.

(94) Based on the 2000 ASA, Ryanair was to operate at least one return flight per day between London and Alghero and to pay So.Ge.A.AL an amount of ITL […] (32) per turnaround. Ryanair was also to submit annually a sales and marketing plan and indicate results obtained in the operation of the route, as well as development prospects.

(95) So.Ge.A.AL undertook to provide terminal and handling services to Ryanair. The airport manager was to ‘pay or credit’ a monthly amount equivalent to the amount payable by Ryanair for handling fees, with a cap for the first year of the agreement. So.Ge.A.AL also undertook to pay annually to Ryanair a fixed amount and an additional amount should a second return flight be added to its schedule.

5.2.1.2. The 2002 ASA and marketing agreement with Ryanair

(96) Ryanair signed a second ASA with So.Ge.A.AL on 25 January 2002, which superseded the 2000 ASA and covered the period between 1 January 2002 and 31 December 2012. Based on that agreement Ryanair was to pay So.Ge.A.AL EUR […] per turnaround for handling services. Ryanair was to pay airport fees and security charges as per the published schedule of charges.

(97) On the same date, a marketing agreement was signed between So.Ge.A.AL and Ryanair, which covered the same period as the 2002 ASA. Ryanair undertook to carry out advertising and promotional activities on its web page and other media at its discretion to promote the connection Alghero — London in consultation with So.Ge.A.AL. Based on this agreement So.Ge.A.AL was to pay marketing contributions of EUR […] for the first daily year round rotation on each route and EUR […] for the second daily summer-only rotation on each route.

5.2.1.3. The 2003 ASA and marketing agreement with Ryanair

(98) On 1 September 2003, So.Ge.A.AL signed with Ryanair a new ASA, for a period of eleven years (with the possibility of an extension for an additional period of 10 years), superseding the 2002 ASA.

(99) Based on the 2003 ASA, Ryanair was to continue to fly to London and depending on the success of previous agreements in terms of traffic flows, Ryanair was to set up a new daily flight to Frankfurt-Hahn or to any other points on the Ryanair network. Ryanair was to pay So.Ge.A.AL EUR […] per turnaround for handling services. In turn, the airline was to pay airport fees and security charges as per the published schedule of charges.

(100) On 1 September 2003, a marketing services agreement was also signed, which covered the same period as the 2003 ASA. Based on that agreement So.Ge.A.AL was to pay marketing contributions of (i) EUR […] per annum for the first daily year-round rotation on each international route, (ii) EUR […] for the second daily summer-only rotation on each route, and (iii) a one-off introductory marketing contribution of EUR […] in respect of the first year of operation of each international route other than the London route and a further EUR […] for each of the second and third years of operation of such new route.

(101) Ryanair was to continue its daily scheduled passenger air services between Alghero and London and inaugurate additional daily passenger air services between Alghero and Frankfurt Hahn and/or any other points on the Ryanair network (‘the Services’). Ryanair was also to carry out, in consultation with So.Ge.A.AL, any service and activity customarily offered by advertising, sales promotion and public relations companies, acting in the same field, such as (but not limited to): — design, arrange, produce, develop, test, implement, maintain and update web links and the Ryanair website and undertake any other measures which are deemed appropriate by Ryanair as being capable of generating, maintaining and/or promoting the advertising efforts with respect to bookings by customers through the internet to and from Alghero airport; — design advertising in English or other language (if appropriate) adapted to the internet medium and undertake sales promotion and public relations as being capable of generating, maintaining and/or promoting the awareness of the Services by customers through the internet; — design, arrange and produce advertising material or any other relevant method of promoting the Services; — design, arrange and produce advertising material or any other relevant method of promoting Alghero airport in the United Kingdom and in any other country in which Ryanair inaugurates a route of the Services; — educate the press about the Services and thereby influence the general public, make them more familiar with the region surrounding Alghero airport and encourage them to fly on the routes in question; — arrange to link one website proposed by So.Ge.A.AL and agreed with Ryanair to Ryanair's internet website subject to such website not containing any direct on-line hotel or car hire reservation function.

5.2.1.4. The 2006 ASA with Ryanair and marketing agreement with AMS

(102) On 3 April 2006, a new ASA was agreed between So.Ge.A.AL and Ryanair, which replaced the 2003 ASA and was effective from 1 January 2006 to 31 December 2010, with the possibility of a five-year extension.

(103) Associated with that agreement was a supplemental agreement signed on 3 April 2006 for the period 1 January 2006-31 December 2010, which stipulated the overall passenger targets to be achieved by Ryanair and the success fee payable by So.Ge.A.AL. It also provided for penalties to be incurred by Ryanair in case of non-fulfilment of the passenger targets.

(104) The 2006 marketing agreement was signed with AMS (rather than Ryanair) on 3 April 2006 and covered the same period as the ASA. The agreement was rooted in Ryanair's commitment to operate certain EU routes and to meet certain targets as to the level of passengers. AMS offered So.Ge.A.AL online advertising services in exchange for EUR […] per year.

5.2.1.5. The 2010 ASA with Ryanair and marketing agreement with AMS

(105) In the early part of 2010, So.Ge.A.AL and Ryanair expressed their intention to renew the terms of their existing relationship by negotiating a new agreement and signed a Memorandum of Understanding (MoU) on 10 March 2010. The MoU states that ‘starting from March 2010 Ryanair and So.Ge.A.AL shall negotiate in good faith in order to redefine the terms and the provisions of their partnership’.

(106) On this basis, a new ASA was subsequently signed between So.Ge.A.AL and Ryanair on 20 October 2010, which replaced the 2006 ASA. This agreement laid down new fees and incentive structure for the period between 1 January 2010 and 31 December 2013, with the possibility for a five-year extension upon expiry of the initial term of the agreement.

(107) So.Ge.A.AL undertook to pay success fees for targeted numbers of flights and certain levels of passenger traffic, while Ryanair undertook to pay for handling fees and airport charges, and to carry out sales promotion and public relations activities.

(108) A marketing agreement was signed on the same day for a four-year duration with a possibility to extend it for a further four years. AMS offered So.Ge.A.AL a package of online advertising services in exchange for the following annual rates: EUR […] for 2010; EUR […] for 2011; EUR […] for 2012; EUR […] for 2013. As in 2006, the marketing agreement was rooted in Ryanair's commitment to operate certain EU routes and to meet certain passenger targets.

(109) Upon request by the Commission, Italy reconstructed the ex ante profitability analysis of the agreements with Ryanair based on the incremental costs and revenues that could be reasonably expected by a market economy operator acting in lieu of So.Ge.A.AL at the time of the conclusion of each of these agreements during the period under investigation, i.e. 2000-2010 (the ‘2014 MEOP Report’) (33). According to Italy, So.Ge.A.AL expected the agreements with Ryanair to be profitable for the airport at the time they were concluded.

5.2.2. Measure 5 — Agreements with other carriers

(110) At the time the 2012 Decision was adopted, the Commission noted that So.Ge.A.AL appeared to also have granted discounts on airport charges to carriers other than Ryanair. Although the Commission was aware that So.Ge.A.AL had concluded marketing agreements with other carriers as well, insufficient information on those agreements were provided to the Commission at that stage.

(111) By letter dated 18 February 2014 Italy provided the Commission with a profitability analysis based on ex post data of the arrangements with Alitalia, Meridiana and Volare in order to demonstrate that it was economically justified from the airport's perspective to conclude the agreements with these airlines. No analysis of the agreement with Germanwings had been provided at that date.

(112) Subsequently, by letter dated 25 March 2014, Italy provided to the Commission an analysis of the profitability of the agreements concluded by So.Ge.A.AL with Air One/Alitalia, Meridiana, Volare and Germanwings which sought to demonstrate that these agreements were expected to be profitable for So.Ge.A.AL on an ex ante basis.

(113) Finally, on 10 June 2014 Italy submitted to the Commission an analysis of the expected profitability of the handling agreements concluded by So.Ge.A.AL with bmibaby, Air Vallée and Air Italy.

(114) The agreements concluded by So.Ge.A.AL with carriers other than Ryanair subject to the investigation in this case are presented in recitals 115 to 132.

5.2.2.1. Agreements with Germanwings, Volare, Meridiana and Alitalia

(115) So.Ge.A.AL concluded handling and marketing agreements with Germanwings, Volare, Meridiana and Alitalia.

(i) Germanwings

(116) The handling agreement between Germanwings and So.Ge.A.AL was signed on 19 March 2007 and was set to apply as of 25 March 2007. Based on this agreement Germanwings was to pay So.Ge.A.AL EUR […] per turnaround for handling services.

(117) On 25 March 2007, a marketing agreement was signed between Germanwings and So.Ge.A.AL by which the carrier undertook to operate certain EU routes and to meet certain passengers and frequency targets. The agreement was to apply from 25 March 2007 to 31 October 2009. However, Germanwings only operated from Alghero airport in 2007. According to Italy the carrier decided to stop operations from Alghero airport as it could not generate sufficient traffic to break even from a financial perspective.

(118) The marketing agreement laid down a ‘start-up’ contribution amounting to EUR […] to be paid by So.Ge.A.AL to Germanwings ‘in order to promote Alghero airport in increasing the volume of departing passengers by opening a new route’.

(119) The marketing agreement also set out success fees to be paid by So.Ge.A.AL to Germanwings if the airline met the stipulated traffic targets. The agreement also specified penalties to be paid by Germanwings to So.Ge.A.AL in the event that the airline either cancelled over 10 % of its flights or did not meet the stipulated traffic targets.

(ii) Volare

(120) On 29 November 2007, Volare signed a handling and a marketing agreement with So.Ge.A.AL.

(121) The handling agreement set out goals to be met by the carrier in terms of number of passengers and flights per year, and the corresponding success fees to be paid by So.Ge.A.AL.

(122) The marketing agreement laid down an annual marketing fee of EUR […] to be paid by the airport manager as ‘advertising support for the first year of activity’. The marketing agreement applied during from 28 October 2007 to 31 October 2010.

(iii) Meridiana

(123) Meridiana operated from Alghero airport in 2000, 2001 and 2010.

(124) In 2000 and 2001, Meridiana did not operate scheduled services from Alghero airport, and only provided flight services based on charter demands. As such, no formal handling agreements were signed between So.Ge.A.AL and Meridiana. The carrier paid So.Ge.A.AL published airport charges for all airport services.

(125) Meridiana did not operate from the airport between 2002 and 2010. In 2010, Meridiana took up operations from the airport and signed a marketing agreement as well as a handling agreement with So.Ge.A.AL.

(126) The handling agreement was signed on 28 April 2010 and covered the period between April 2010 and April 2011. Based on this agreement Meridiana was to pay So.Ge.A.AL EUR […] per turnaround for handling services.

(127) The marketing agreement was signed on 20 October 2010 and covered the period between June 2010 and October 2010. The agreement specified a one-off payment of EUR […] (excluding VAT) to be paid by So.Ge.A.AL to Meridiana relating to the start-up of routes to/from Milan, Verona and Bari in summer 2010. The payment was conditional on Meridiana meeting certain traffic targets. According to Italy, during the time for which the agreement with Meridiana applied retrospectively, So.Ge.A.AL had been negotiating with the carrier similar terms which were eventually included in the signed agreement. In this sense, Italy provided to the Commission a draft agreement which was being negotiated at the time by Meridiana and So.Ge.A.AL dated 7 June 2010.

(iv) Air One/Alitalia

(128) Until 2010, Air One/Alitalia did not sign any formal agreement with So.Ge.A.AL and paid So.Ge.A.AL published airport charges for all airport services. Until 2010, So.Ge.A.AL did not provide ground-handling services to Air One/Alitalia.

(129) In 2010, So.Ge.A.AL started to provide ground-handling services to Air One/Alitalia. This led to Air One/Alitalia signing a handling agreement with So.Ge.A.AL. The two parties also entered into a marketing agreement relating to Air One/Alitalia's start of international routes from Alghero airport.

(130) The marketing agreement was signed on 20 October 2010 and covered the period from 7 June 2010 to 30 September 2010. Italy provided to the Commission the draft agreement which had been negotiated at the time by Alitalia and So.Ge.A.AL in May 2010. The signed agreement specified a one-off marketing payment of EUR […] to be received by Air One/Alitalia for providing marketing services to So.Ge.A.AL in that period, with the possibility of the agreement being extended to 2011 and 2012.

(131) The handling agreement was signed between Air One/Alitalia and So.Ge.A.AL on 30 November 2010 for a period of six years and specified handling charges to be paid by Air One/Alitalia to So.Ge.A.AL for domestic and international routes.

5.2.2.2. Handling agreements with other carriers

(132) The Commission also investigated the ground handling agreements concluded by So.Ge.A.AL with Air Italy, Bmibaby and Air Vallée. The agreements were concluded for a duration between one month (Air Vallée) and more than two years (Air Italy) and specified handling charges to be paid by the carriers. Table 6 Handling agreements with Air Italy, Bmibaby and Air Vallée Date of conclusion Carrier Duration 28.5.2008 Air Italy 1.6.2008-31.12.2010 29.7.2010 Bmibaby 29.5.2010-30.9.2010 2010 Air Vallée 9.8.2010-30.8.2010

6. THE ECORYS REPORT

(133) In the course of the investigation, the Commission asked Ecorys to produce a report on the financial performance of So.Ge.A.AL and to establish whether the airport manager behaved like a market economy operator when concluding agreements with air carriers. The Ecorys Report was delivered on 30 March 2011.

(134) The Ecorys Report concluded that So.Ge.A.AL's conduct was MEOP-compliant. Ecorys considered that the business strategy pursued by So.Ge.A.AL bore fruit. Such strategy implied that the airport manager submitted an application for the ‘comprehensive’ concession for the management of the airport, that the capacity of the terminal was extended, and that agreements were signed with low-cost carriers aimed at incentivising international traffic flows. Ecorys concluded that from a MEO's perspective the conclusion of the agreements with Ryanair was a rational decision in that those agreements ensured a considerable increase in traffic which was expected to drive both aeronautical and non-aeronautical income. According to Ecorys, So.Ge.A.AL could reasonably expect that in the long run the benefits derived by such agreements would outweigh incremental costs.

7. GROUNDS FOR INITIATING THE PROCEDURE

7.1. EXISTENCE OF AID TO So.Ge.A.AL

(135) As concerns potential aid to the airport manager, the Commission noted that prior to the Aéroports de Paris judgment, the development and operation of airport infrastructure did not qualify as economic activity within the meaning of Article 107(1) of the Treaty (34). Since part of the measures under assessment was decided before 2001, the Commission noted that it would have to assess whether they stemmed from legally binding commitments taken before the Aéroports the Paris ruling was issued, namely 12 December 2000 (35) and hence fell outside the scope of State aid rules.

(136) The Commission also recalled that, to the extent financing of activities which normally fell within the responsibility of the State in the exercise of public powers was limited to cover costs and was not used to finance other economic activities (36), such financing was not subject to State aid rules. At the time of adoption of the 2012 Decision, the Commission did not have sufficient information on the nature (economic or not) of the activities carried out by So.Ge.A.AL and of infrastructure related costs financed by the measures subject to the investigation, nor whether certain costs were inherently linked to activities within the public policy remit. The Commission invited Italy to clarify which activities must be considered as non-economic in nature and which costs linked to such activities, if any, had been financed by the measures covered by the Commission's investigation.

7.1.1. Measure 1 — Capital injections

(137) The Commission expressed serious doubts that the capital injections would be MEOP-compliant. It noted that So.Ge.A.AL had constantly operated at a loss since 2000 and that its financial performance seemed to worsen following the award of the ‘comprehensive’ concession. This seemed to contradict Italy's claim that the poor results of the company were primarily justified by the impossibility to exploit fully airport related activities based on the partial/temporary concession.

(138) The Commission further noted that Italy had at that time only provided ex post considerations in support of its claims that the measures were guided by profitability prospects. Such analysis in addition seemed to relate to the overall benefit derived by RAS from an increase in air traffic levels and therefore to revenues that a private investor would not take into account in the analysis of the profitability of its investment. On that basis the Commission took the preliminary view that the capital injections provided the airport manager with an advantage and constituted operating aid to the latter.

(139) The Commission finally noted that, even if So.Ge.A.AL met the conditions to qualify as a firm in difficulty under the Guidelines on State aid for rescueing and restructuring firms in difficulty (37), no element had been submitted to the Commission by Italy to support the conclusion that such aid would comply with the compatibility requirements of those guidelines.

7.1.2. Measure 2 — Contributions for fittings and works

(140) Insufficient information was provided to the Commission on the contributions for fitting and works worth EUR 6 540 269 granted to So.Ge.A.AL by RAS between 1998 and 2009. Italy was invited to specify the exact nature of the costs subsidised by RAS.

7.1.3. Measure 3 — Investments in airport infrastructure and equipment

(141) The Commission noted that between 2001 and 2010 So.Ge.A.AL paid EUR 3 042 887 to the State in fees for the use of the airport infrastructure, whilst the State financed infrastructure investments for EUR 46 940 534 and equipment for EUR 284 782 during 2004 to 2010.

(142) The Commission further noted that the award of the comprehensive concession to So.Ge.A.AL in 2007 did not appear to have led to an increase in the level of the concession fees. On that basis the Commission took the preliminary view that the concession fee was manifestly disproportionate to the public funding made available by the State in relation to infrastructure investments. The Commission therefore preliminarily considered that So.Ge.A.AL might have received an advantage by paying a concession fee below market price.

(143) Italy was invited to provide any ex ante business plan which would demonstrate the profitability prospects of infrastructure investments carried out by public entities at Alghero airport which could support the claim that such investments were MEIP-compliant.

7.2. PRELIMINARY VIEWS ON COMPATIBILITY OF AID TO So.Ge.A.AL

(144) The Commission expressed doubts as to the compatibility under Article 107(3) of the Treaty of aid to So.Ge.A.AL under the 2005 Aviation Guidelines.

(145) Although the measures seemed to meet an objective of general interest which was clearly defined, insufficient information was provided to the Commission to assess whether the infrastructure at Alghero airport was necessary and proportional to the objective set. Nor did the Commission have sufficient elements to assess the perspectives for the use of such infrastructure in the medium term. The Commission also had doubts whether the airport infrastructure was made available to air carriers on non-discriminatory terms.

(146) Finally, given that certain infrastructure investments appeared at that stage to result from So.Ge.A.AL's contractual obligations towards Ryanair, the Commission had doubts on the necessity of any aid to finance such investments.

7.3. POTENTIAL AID TO THE AIRLINES

(147) The Commission took the preliminary view that the decisions concerning airlines' operating conditions at Alghero airport were likely to involve State resources and be imputable to the State.

7.3.1. Measure 4 — Agreements signed by So.Ge.A.AL with Ryanair/AMS

(148) The Commission noted first that AMS is a 100 %-owned subsidiary of Ryanair, set up with the specific aim of supplying marketing services via the website of Ryanair, and which does not provide other services. On that basis the Commission took the preliminary view that in order to assess the presence of a selective advantage, Ryanair and AMS had to be considered as one single entity. The Commission also took the view that, when assessing whether the measures in relation to Ryanair/AMS were market conform, the behaviour of So.Ge.A.AL had to be assessed together with the behaviour of RAS and/or other public shareholders of So.Ge.A.AL during the period under investigation. The Commission considered that, for the purpose of the MEOP assessment, the ASAs and the marketing agreements and their financial consequences could not be severed and must therefore be subject to a joint assessment.

(149) The Commission recalled that regional development considerations could not be taken into consideration for the application of the MEOP. It also observed that according to the information at its disposal at that stage no business plan or ex ante analysis of the agreements signed with Ryanair/AMS had been prepared as the basis for So.Ge.A.AL's decision to enter such arrangements.

(150) On that basis, the Commission expressed doubts that So.Ge.A.AL and RAS behaved as a market economy investor in their relationship with Ryanair/AMS.

7.3.2. Measure 5 — Agreements with air carriers other than Ryanair

(151) The Commission noted that substantial discounts on airport charges were applied by So.Ge.A.AL to air carriers other than Ryanair, for instance depending on the start-up of new routes and increase in traffic levels. The Commission invited Italy to provide any ex ante business plans, studies or documents assessing the profitability for the airport manager of each of the agreements with the airlines operating at the airport or, should such documents be unavailable, So.Ge.A.AL's latest budget forecasts prepared prior to the conclusion of those agreements. On this basis, the Commission expressed doubts that So.Ge.A.AL and RAS behaved as a market economy investor in their relationship with the carriers operating at the airport.

8. COMMENTS FROM ITALY

(152) The Commission notes that, in addition to the replies to the requests for information by the Commission, Italy has in the course of the investigation made various submissions. However, although the Commission accepted a one-month extension of the deadline laid down by Article 6(1) of the Procedural Regulation (38) for Member States to submit their comments following a decision opening the formal investigation by the Commission, only one of Italy's submissions was made within this extended deadline, namely Italy's letter of 31 August 2012. Italy's submissions of 3 October 2012, 19 October 2012, 22 October 2012 and 20 February 2013 were submitted after the expiry of the deadline.

(153) This section therefore deals only with the observations provided by Italy in its letter of 31 August 2012. The arguments put forward in Italy's subsequent letters which are of relevance to the assessment in this case were presented in Sections 3 – 5.

8.1. POTENTIAL AID TO THE AIRPORT

(i) On the repayment of losses and capital injections

(154) Italy recalled that airport managers are required by law to observe certain capital thresholds. According to Italy the capital injections under assessment in this case aimed to restore So.Ge.A.AL's capital to the required standards.

(ii) On the public financing for fittings and works

(155) Italy explained that prior to 2003, the concession fees to be paid by airport managers having obtained the ‘comprehensive’ concession was set at 10 % of the user fees as per Italian Law No 324 of 5 May 1976 as subsequently amended, and the fee for loading and unloading goods transported by air as per Italian Law No 117 of 16 April 1974.

(156) As of 2003 the annual concession fees were determined with reference to the airport's Work Load Units (WLU, or units of load corresponding to one passenger or one hundred kilograms of goods or mail), which were in turn determined on the basis of traffic data published yearly by the Ministry of Infrastructure and Transport-ENAC.

(157) By virtue of Italian Law 296 of 27 December 2006, the annual concession fee for airport managers was increased so as to guarantee revenues of EUR 3 million in 2007, EUR 9,5 million in 2008 and EUR 10 million in 2009 respectively to the Italian Treasury.

8.2. POTENTIAL AID TO THE AIRLINES

(158) Italy did not comment on the potential aid to the airlines operating at Alghero airport within the deadline laid down by Article 6(1) of the Procedural Regulation for Member States to submit their comments following a decision opening the formal investigation by the Commission.

9. COMMENTS FROM INTERESTED PARTIES

(159) The Commission notes that the comments of interested parties cover a wide range of arguments. For instance, in its numerous submissions to the Commission Ryanair detailed the underlying principles and assumptions which it considers should serve as the basis for the Commission's MEOP analysis of the agreements with airlines. So.Ge.A.AL claimed that there exist numerous grounds on the basis of which the measures subject to the assessment in its favour could be declared compatible with the internal market.

9.1. COMMENTS FROM So.Ge.A.AL

9.1.1. Potential aid to the airport manager

(i) On economic activity

(160) So.Ge.A.AL underlines that the public funding granted to it to cover costs incurred in the provision of services falling within the public policy remit does not constitute State aid. So.Ge.A.AL did not detail the nature or amount of such costs.

(161) So.Ge.A.AL considers that all measures under assessment in this case concerning the financing of infrastructure, equipment and ‘fittings and works’ had been legally committed before the Aéroports de Paris ruling and should therefore be excluded from State aid scrutiny. As concerns the period after 12 December 2000, So.Ge.A.AL recalls that Italy had already submitted evidence of the non-economic character of certain activities carried out by the airport manager. On that basis the Commission should attribute part of the public financing in question to costs incurred in the provision of non-economic activities.

(162) So.Ge.A.AL further notes that the 2012 Decision is not clear as to the nature and scope of the presumed aid to the airport manager. In particular, it would be unclear whether the intention of the Commission was to qualify the totality of the financing for infrastructure works as State aid or, in the alternative, to consider that only the difference between the market based concession fee, which So.Ge.A.AL would have had to pay to the State for the improved infrastructure and the concession fee actually paid by the airport manager would qualify as aid. It argued that the first option could not be reconciled with the fact that the State retained at all material times ownership of the airport infrastructure. So.Ge.A.AL cannot therefore be considered as beneficiary of investment aid. At any rate, So.Ge.A.AL submits that it had not benefitted from any undue economic advantage even if the second option was favoured.

(ii) On non-distortion of competition

(163) So.Ge.A.AL underlines that no distortion of competition can arise as a result of public financing granted to it. Given the remote location of Alghero airport, its catchment area (39) does not overlap with that of any other airport in Italy or other Member States. Neither is the airport competing with other airports on the island, given the distance between them and the absence of reliable land connections. So.Ge.A.AL adds that the three Sardinian airports handle different types of traffic. Furthermore, air transport would not compete with other transport means for the traffic to and from the island.

(164) So.Ge.A.AL does not accept the argument brought forward by the Commission in the 2012 Decision that several airport managers compete for the management of airport infrastructure. So.Ge.A.AL was awarded the first ‘partial’ concession (40) for the management of the airport in 1995 and therefore long before the Aéroports de Paris ruling. As from 1995 So.Ge.A.AL would merely act as manager of the infrastructure at Alghero airport, and its activity would therefore not be in competition with that of any other airport manager.

(iii) On absence of any economic advantage to So.Ge.A.AL

(165) So.Ge.A.AL submits that the capital injections would be MEIP-compliant. According to So.Ge.A.AL, the economic rationale of the measures should be assessed separately and distinctly for two periods: prior and following the award of the ‘comprehensive’ concession to So.Ge.A.AL in 2007.

(166) So.Ge.A.AL claims that the recapitalisations undertaken prior to 2007 were guided by the need to safeguard its business, in view notably of the award of the ‘comprehensive’ concession which it had already on 18 January 1999. Based on information available at the time the decisions to inject capital into the company were taken, the perspective of being awarded the ‘comprehensive’ concession was of crucial importance to So.Ge.A.AL's shareholders, to the extent it would have allowed the airport manager to fully capitalise on airport activities and therefore increase aeronautical and non-aeronautical revenues. Public shareholders would have had no viable alternative but to recapitalise the company and were justified in doing so given that the delay in the award of the concession was caused by external events which could not be imputed to the company. So.Ge.A.AL argues that the Commission must take that into account in its MEOP assessment. So.Ge.A.AL adds that the measures would also be justified based on the forecasted increase in passenger volumes as a result of low-cost strategy followed as of 1999.

(167) The capital injections carried out in 2009 and 2010 were driven by the need to safeguard the operability of the airport manager, notably in view of the improved viability perspectives resulting from the award of the ‘comprehensive’ concession. The fact that So.Ge.A.AL did not recover its profitability after the award of the concession was due to a market scenario that differed significantly from what had been forecasted, which affected considerably the development of air traffic in that period, namely the economic downturn and the consequent economic challenges faced by international airlines. In that sense So.Ge.A.AL suffered a 1,8 % drop in traffic levels. In addition, So.Ge.A.AL claims that traffic could not develop as it had been projected due to the delay in the execution of infrastructure works (which should have started already in 2004 but had not yet been initiated in 2009). Finally, the failure by ENAC to revise the airport charges upwards, irrespective of the formal request introduced in that sense by So.Ge.A.AL, has to be taken into account.

(168) It was in that context that So.Ge.A.AL developed corrective actions in view of reaching economic balance, such as the reorganisation of its activities, the cut in operating costs and investment measures in infrastructure. Those actions are assessed in detail in the 2010 reorganisation and restructuring plan.

(169) So.Ge.A.AL rejects the argument of the Commission that no ex ante analysis was carried out before the measures were put into effect. So.Ge.A.AL's public shareholders presumably undertook the measures in question on the basis of business plans developed ex ante. Evidence to that effect would be the documents submitted to the Commission in the course of the investigation, in particular: (a) So.Ge.A.AL's business plan of 15 March 1999; (b) the minutes of So.Ge.A.AL's Board of Directors meeting of 8 April 2000; (c) the business plan for the award of the forty-year concession of September 2005; (d) the Roland Berger Plan, as updated in 2007 and 2009; (e) the reorganisation and restructuring programme 2010-2012; (f) the Accuracy report.

(170) So.Ge.A.AL further recalls that the conformity of the capital injections with the MEOP principle were already established by the Ecorys Report, the Accuracy Report and the Roland Berger Plan.

(171) The Commission would have failed to give proper consideration to the specific character of the air traffic sector in Italy in light of the applicable Italian regulations. In its assessment of the situation prior to and following the award of the comprehensive concession to So.Ge.A.AL, the Commission should have taken into account the fact that the recapitalisations resulted from a legal obligation, whose non-observance would have triggered the revocation of the concession. So.Ge.A.AL's shareholders thus favoured the most cost-efficient option in deciding to recapitalise the company.

(172) So.Ge.A.AL considers that, in carrying out the capital injections, its public shareholders have acted in the same way a MEO would have acted in similar circumstances in that the injections guaranteed the public investors a positive return in the medium to long term. According to So.Ge.A.AL, the airport activities generate tax income in an amount superior to that of the public financing granted to it.

(173) So.Ge.A.AL also claims that the capital injections would not confer the airport manager an economic advantage within the meaning of the Altmark jurisprudence (41). The overall management of the airport would qualify as service of general economic interest (‘SGEI’) given the need to guarantee accessibility of the island and therefore the capital injections in question would amount to compensation for the provision of an SGEI by the airport.

(174) So.Ge.A.AL would have been entrusted with the provision of the SGEI by the Convention. The partial concessions awarded to So.Ge.A.AL prior to 2007 may equally be considered as entrustment acts. So.Ge.A.AL further notes that from a purely legal point of view airport managers are compelled to observe certain obligations in respect of the management of airports, which inevitably take into account the public interest. Such obligations refer to the guarantee of a sufficient quality of the services, the observance of security standards, continuity and regularity of the services.

(175) The second and third conditions deriving from the Altmark ruling would be observed given that So.Ge.A.AL has only been compensated to the level required to offset losses, more specifically to the level required to bring capital back in line with legal requirements after such losses had been covered. So.Ge.A.AL further adds that airport managers are by law required to keep separate accounting between core and non-core activities.

(176) Finally, So.Ge.A.AL claims that the fourth Altmark criterion would also be complied with, without however providing any material evidence in that respect.

(iv) On compatibility

(177) According to So.Ge.A.AL the compatibility of potential aid to the airport should be assessed by the Commission under: (a) the Regional Aid Guidelines; (b) the Rescue and Restructuring Guidelines; (c) Article 106(2) of the Treaty; (d) the 2014 Aviation Guidelines.

(178) First, So.Ge.A.AL submits that the measures in question were granted to Alghero airport to compensate for the disadvantage stemming from the insularity of the Sardinian region. On that basis the Commission should declare the aid compatible with the internal market under Article 107(3)(a) of the Treaty.

(179) Second, So.Ge.A.AL claims that all measures under assessment were granted to allow So.Ge.A.AL to undergo restructuring, in order to ensure its return to viability. In that sense So.Ge.A.AL submitted that, as concerns the 2009 and 2010 capital injections, So.Ge.A.AL prepared a restructuring plan, namely the 2010 reorganisation and restructuring plan, which identified the factors having had a negative impact on the company and which proposed corrective actions aiming at a reduction in costs and a revision of the business policy. That plan envisaged a significant own contribution from So.Ge.A.AL to the restructuring.

(180) Third, as concerns compatibility of the aid under Article 106(2) of the Treaty, So.Ge.A.AL argues that the compensation granted to it for the provision of SGEIs was constantly below the ceiling laid down by Article 2(1)(a) of the 2005 SGEI Decision (42), namely EUR 30 million per annum, and its turnover was below EUR 100 million. So.Ge.A.AL adds that prior to 2004 the 1 million passengers ceiling in Article 2(1)(d) of the 2005 SGEI Decision was also observed. The provisions in Articles 4, 5, 6 of the 2005 SGEI Decision would also be observed given that the compensation was granted to the company in connection with correctly defined SGEIs and entrusted to So.Ge.A.AL by one or more entrustment acts, and that such compensation did not exceed what was necessary for the provision of the SGEIs.

(181) Fourth, So.Ge.A.AL submits that aid to the airport for infrastructure investments, equipment, fittings and works should be deemed compatible on the basis of the 2005 Aviation Guidelines. The infrastructure in question would be proportional to the objective pursued and would have medium term prospects for use in the meaning of the 2004 Aviation Guidelines. The infrastructure was also put at the disposal of airlines on non-discriminatory terms. Furthermore, trade was not affected to an extent contrary to the common interest and the public financing was necessary and proportionate.

9.1.2. Measures in favour of the airlines operating at the airport

(182) The Commission would be correct in considering So.Ge.A.AL and RAS together for the purpose of the application of the MEOP principle. In adopting the measures in question RAS and So.Ge.A.AL behaved in the same way an MEO would have in similar circumstances. So.Ge.A.AL would have derived no economic advantage from marketing contributions granted by RAS in favour of airlines using Alghero airport. The contributions in question have only transited through the airport manager to be eventually granted to airlines.

(183) So.Ge.A.AL submits that any aid to airlines operating at Alghero airport in the form of lower airport charges or marketing contributions should be deemed compatible with the internal market under Article 107(3)(a) or (c) of the Treaty and the 2005 Aviation Guidelines.

(184) To support that conclusion, So.Ge.A.AL puts forward that the potential aid was granted to companies licenced to provide air transport services by a Member State, for routes linking a regional airport falling within the C or D category as defined by the 2005 Aviation Guidelines, with another Union airport. The funding did not concern routes subject to public service obligations (‘PSOs’) within the meaning of Regulation (EC) No 1008/2008 of the European Parliament and of the Council (43) and the agreements concluded with the airlines laid down penalties to be applied in case of non-observance of their commitments by the airlines.

(185) Whilst admitting that the grants in question were granted to airlines for a longer period and with a higher intensity than permitted under the 2005 Aviation Guidelines, So.Ge.A.AL underlines that the agreements with airlines did not have a duration longer than three years, and that the 2005 Aviation Guidelines allow derogations concerning intensity levels in the case of disadvantaged regions.

9.1.3. Applicability of the 2014 Aviation Guidelines

(186) In its comments on the applicability of the 2014 Aviation Guidelines, So.Ge.A.AL recalls that none of the measures under assessment in favour of the airport amounts to State aid. However, should the Commission conclude that any of those measures constitute operating aid to So.Ge.A.AL, it submits that all compatibility conditions laid down by the 2014 Aviation Guidelines are observed.

10. COMMENTS FROM OTHER INTERESTED PARTIES

(187) Ryanair, AMS and Unioncamere provided their observations in the course of the investigation.

10.1. COMMENTS FROM RYANAIR

(188) Ryanair submitted its comments on the 2012 Decision on 12 March 2013. Ryanair referred to its previous submissions in this case before the adoption of the 2012 Decision, as well as to several other submissions concerning a number of State aid investigations concerning potential aid to Ryanair.

(189) Ryanair's main comments as they result from those submissions are summarised in recitals 190 to 226.

(i) On AMS

(190) Ryanair rejects the preliminary conclusion of the Commission that Ryanair and AMS must be considered as a single entity, and that the ASAs and the marketing services agreements as well as their financial consequences should be assessed jointly for the purpose of assessment of the economic advantage.

(191) Neither the ownership structure of AMS nor its purpose would support that approach. The ASAs concluded with Ryanair and the marketing services agreements concluded with AMS would be separate and independent, they would relate to different services and would not be subject to any contractual or other link between them justifying their consideration as a single set of measures.

(192) The marketing services agreements benefitted So.Ge.A.AL as purchaser of advertising services. Those agreements constituted an investment to enhance the brand of the airport and would have led to an increase in the number of inbound passengers, and consequently in non-aeronautical income. They were not intended to improve the load factor or yield on Ryanair routes nor contingent on any assumed benefit such airport advertising on Ryanair.com provides to Ryanair.

(193) In addition, the conclusion of a marketing services agreement with AMS is not a condition for the operation of routes by Ryanair to and from an airport. Indeed, many airports served by Ryanair do not conclude agreements with AMS. In general, the need for specific marketing aimed at building the brand of an airport and influencing the proportion of inbound passengers arises at less well-known airports where the brand of the airport is not visible and inbound traffic needs to be stimulated.

(194) It would thus be perfectly rational for such an airport to spend funds for such a purpose, and the fact that Ryanair may or may not also benefit through that advertising would be commercially irrelevant to the airport. A private investor will not abstain from an investment simply because other parties may also gain from a growth of its business.

(195) Ryanair's agreements with So.Ge.A.AL were normal commercial agreements compliant with the MEOP, and the same applies with regard to AMS's agreements with So.Ge.A.AL, since AMS concludes marketing agreements at the same rates and in respect of comparable volumes with both public and private airports, tourism bodies, car rental groups, hotel reservation websites, insurance companies, telecommunications service providers (44).

(196) That approach is consistent with the line taken by Ryanair in other submissions sent to the Commission in the course of the investigation. In those other submissions Ryanair disagrees with the Commission's assessment of payments to AMS as costs to the airport. According to Ryanair that approach would disregard the value of AMS' services to the airport (45). By buying advertising space, airports can increase the proportion of incoming passengers on Ryanair flights, who tend to spend more than outgoing passengers on non-aeronautical goods and services. Doing this makes commercial sense for the airports (46). Ryanair believes that the purchase of marketing services at market rates should be severed from any other airport-airline contractual arrangements for the purposes of an MEOP assessment. Should the Commission insist on including AMS arrangements and Ryanair airport services arrangements in a joint MEO test, the value of AMS services to the airport should not be disregarded.

(ii) On imputability/State resources

(197) Ryanair considers that the Commission's view that the public authorities were involved in the adoption of the measures under review involving Ryanair and AMS is not supported by evidence. It could not be assumed — and it has yet to be shown — that the public authorities were actually involved in the adoption of the measures.

(198) The argument that ‘So.Ge.A.AL is wholly owned by public authorities which “interfered in the decisional process of So.Ge.A.AL”’ would be insufficiently evidenced inasmuch as it is solely based on the sole organic criterion of appointment of the Board of Directors of So.Ge.A.AL by its public shareholders. Neither would the 2002 agreement, wherein Sardinia undertook to cooperate with Ryanair with the aim of developing tourism and the employment rate in the region prove that public authorities were involved, in one way or another, in the adoption of the measures taken by So.Ge.A.AL towards Ryanair or AMS after the signature of that agreement. Furthermore, the circumstance that So.Ge.A.AL and Sardinia signed subsequent agreements in 2004, 2005, 2006 and 2007 for co-marketing contributions would only support the position that Sardinia was financing So.Ge.A.AL, but not that it was directing So.Ge.A.AL's action towards Ryanair or AMS.

(199) Ryanair is not aware of or responsible for agreements between So.Ge.A.AL and RAS, has not prompted or demanded such agreements, and therefore the arrangements Ryanair and AMS have with So.Ge.A.AL should not be affected by arrangements between So.Ge.A.AL and RAS.

(200) Neither would Ryanair qualify as an indirect recipient of State aid. The Commission cannot simply presume that State aid has been granted to the airlines operating at the airport without evidence establishing the actual existence of an advantage through State aid. As long as the terms of the commercial relationship between Ryanair and an airport can be justified under the MEOP, any recovery obligation cannot extend to Ryanair. Ryanair criticizes the Commission's consideration that any incentive granted by a public airport to an airline automatically qualifies as State aid even if only part has been financed through public resources. Ryanair submits that the Commission's reluctance to investigate the issue of imputability of measures to the State does not reflect the 2005 Aviation Guidelines, which imply that the decision to redistribute public resources to an airline should be imputable to the public authorities in order to constitute aid (47).

(iii) On comparator analysis

(201) Ryanair argues that according to the case law (48), a comparator analysis should be the primary test used to verify the presence of aid to airlines and the cost-based test should only be used if it was impossible to compare the situation of the alleged grantor of aid with that of a private group of undertakings. Ryanair further states that when assessing the agreements concluded by airport managers with the airlines, the network externalities resulting from the agreements should also be considered. In a different submission Ryanair agreed that both comparator and cost-based methods of analysis are standard business practice (49).

(iv) On ex ante profitability

(202) Ryanair essentially argues that the Commission's entire reasoning in the 2012 Decision was vitiated by an erroneous application of the MEO test, which would have derived from an inaccurate presumption that an ex ante business plan was required to conclude that the MEOP was complied with. Business plans are not a sine qua non for the commercial actions of private investors (50). Whilst such plans may prove beyond doubt that a public body was acting as a private investor, the absence of such plan would not suffice to conclude that a public body was not acting as a private investor.

(203) In any event, in this case the Commission would have already admitted in the 2012 Decision that Alghero airport provided a basic ex ante analysis, which should be considered sufficient. The Commission is not in a position to assess what constitutes an ‘acceptable’ business plan and should not try to do so.

(204) Ryanair further notes that the Commission obtained an MEOP analysis from Ecorys, which concluded that the Ryanair agreements were MEOP-compliant, and that So.Ge.A.AL's losses arose due to the significant and unforeseeable delays of the State in awarding the ‘comprehensive’ concession. Unforeseeable inefficiencies and delays should be neutralized in an MEOP analysis since they can also be faced by private airports during the normal course of business, whether due to State failures or the acts of other private enterprises upon which the airport relies.

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

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

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

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

(208) This is because: (a) comparator analyses are widely used for MEO tests outside of the field of State aid; (b) companies affect each other's pricing decisions only to the extent that their products are substitutes or complements; (c) airports in the same catchment area do not necessarily compete with each other, and the comparator airports used in the reports submitted face limited competition from State-owned airports within their catchment area (< 1/3 of commercial airports within the catchment area of comparator airports is fully State owned, and none of the airports within the same catchment area as comparator airports was subject to on-going State aid concerns (as of April 2013); (d) even where comparator airports face competition from State-owned airports within the same catchment area, there are reasons to believe their behaviour is in line with the MEO principle (for example, where there is a large private ownership stake or where the airport is privately managed); (e) MEO airports will not set prices below incremental cost.

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

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

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

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

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

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

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

(213) Ryanair submitted further reports by its consultant Oxera. In those reports, Oxera discussed the principles which, according to the airline, should be taken into account in the profitability analysis of, on the one hand, ASAs between Ryanair and the airports and, on the other hand, the marketing agreements between AMS and the same airports as part of the MEO test (51). Ryanair emphasised that those reports do not in any way change its position presented earlier that the ASAs and the marketing agreements should be analysed under separate MEO tests.

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

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

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

(217) In support of that approach, the reports presented a synthesis of the results of studies on the effects of marketing on the value of a brand. Those studies recognise that marketing can support the value of a brand and can help to build a customer base. According to the reports, for an airport marketing on Ryanair.com especially increases the visibility of the airport's brand. Moreover, the reports stated that especially smaller regional airports wishing to increase their air traffic could therefore increase the value of their brand by concluding marketing agreements with AMS.

(218) The reports lastly indicated that a cash-flow-based approach was to be preferred over the capitalisation approach, in which the expenses of AMS would be treated as capital expenditure of an intangible asset (that is, the value of the brand) (52). The capitalisation approach would only take into account the proportion of marketing expenditure that is attributable to the intangible assets of an airport. The marketing expenses would be treated as intangible assets, and then depreciated for the duration of the agreement, taking into consideration a residual value at the foreseen termination of the ASA. That approach would not take into account the incremental profits brought by the conclusion of an ASA with Ryanair. It is also difficult to calculate the value of the immaterial asset due to the expenses of the brand and the time period of use of the asset. The cash-flow method is more appropriate than a capitalisation approach, since the latter would not capture the positive benefits to the airport that are expected to arise as a result of signing an ASA with Ryanair.

(v) The 2011 and 2013 MEOP reports

(219) Oxera was asked by Ryanair to undertake a test based on the MEOP which was submitted to the Commission on behalf of Ryanair in July 2011 (the ‘2011 MEOP Report’) (53). The 2011 MEOP report presented results of a profitability analysis of the 2000 and 2010 ASAs between So.Ge.A.AL and Ryanair, based on information which, according to Ryanair, would have been available to So.Ge.A.AL at the time these agreements were concluded. The 2011 MEOP Report did not include an analysis of the expected profitability of the 2002, 2003 and 2006 ASAs.

(220) Building on the 2011 MEOP Report, an updated report was submitted to the Commission in March 2013 (the ‘2013 MEOP Report’) (54), which estimates the expected profitability of the ASAs not considered in the 2011 MEOP Report (namely, the 2002, 2003 and 2006 ASAs).

(221) According to Ryanair, the ex ante assessment of the profitability of the 2000, 2002, 2003, 2006 and 2010 ASAs would suggest that all of these agreements were expected to be profitable for the airport at the time when they were signed. The expected profitability of each agreement between So.Ge.A.AL and Ryanair was assessed taking into account expected incremental cost and incremental revenue forecasts, including aeronautical and non-aeronautical revenues and the costs of the financial incentives offered to Ryanair. The fact that the resulting NPVs are all positive would presumably confirm that it was rational to conclude the agreements with Ryanair.

(222) When applying the MEO test in relation to the ASAs, the 2011 and 2013 MEOP Reports do not consider the agreements between So.Ge.A.AL and AMS for the provision of marketing services. According to Ryanair the agreements with AMS are separate from Ryanair's ASAs with the airport, in that the former concern the provision of marketing services to airports (rather than flights/passengers) at a market price and should therefore not be considered.

(vi) On non-selectivity of airport charges to Ryanair

(223) Ryanair rejects the Commission's view that any discount granted by Alghero airport should be treated as State aid, even where all airlines could benefit from the discounts. First, according to Ryanair, if all airlines get discounts, then the appropriate counterfactual price may be the lowest level of discount, rather than the published charges. Second, that approach fails to take into account any element of differential costs and benefits of serving the different airlines. An assessment of cost-reflectivity is a necessary step to assess whether a discount to a particular airline is State aid. Relatively low charges, by themselves, do not necessarily constitute State aid, and, consistent with the findings of Ecorys, the lower charges reflect lower levels of service requested by Ryanair.

(224) In this case the discounts that Ryanair received were offered in recognition of the significant commercial risk that Ryanair took when establishing scheduled year-round operations at an airport that was unknown at the time (55).

(vii) On distortion of competition

(225) The Commission appears not to exclude competition between Alghero and Cagliari or Olbia airports, despite respectively 235 and 128 kilometres of mountainous relief separating these airports, and the absence of motorways in Sardinia. According to Ryanair, it would be uncertain whether any State aid at Alghero airport could result in a distortion of competition, and what the Commission believes to be the scope of such distortion.

(viii) On compat