2002/15/EC: Commission Decision of 8 May 2001 concerning State aid implemented by France in favour of the Bretagne Angleterre Irlande company ("BAI" or "Brittany Ferries") (Text with EEA relevance) (notified under document number C(2001) 1422)
Date: 2001-05-08
Institutions: European Commission
Subjects: France, State aid, application of EU law, control of State aid, financial aid, maritime transport

15.1.2002

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Official Journal of the European Communities

L 12/33

COMMISSION DECISION

of 8 May 2001

concerning State aid implemented by France in favour of the Bretagne Angleterre Irlande
company ((cid:145)BAI(cid:146) or (cid:145)Brittany Ferries(cid:146))

(notified under document number C(2001) 1422)

(Only the French text is authentic)

(Text with EEA relevance)

(2002/15/EC)

THE COMMISSION OF THE EUROPEAN COMMUNITIES,

(4)

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

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

(5)

Having regard to Council Regulation (EC) No 659/1999 of 22
March 1999 laying down detailed rules for the application of
Article 93 of the EC Treaty (1),

Having called on interested parties to submit their comments
and having regard to those comments,

Whereas:

1. PROCEDURE

1.1. Procedural overview

(1)

(2)

(3)

By a complaint of 25 March 1996, registered on 1 April
1996, the Commission was informed that France was
intending to grant
to the Bretagne
Angleterre Irlande shipping company (hereinafter (cid:145)BAI(cid:146)
or (cid:145)Brittany Ferries(cid:146)).

financial support

In an exchange of
France sent a certain amount of
matter, at the Commission’s request.

letters between 1996 and 1998,
information on the

By letter dated 8 May 1998, the Commission informed
France of its decision to initiate the procedure laid down
in Article 88(2) of the EC Treaty in respect of aids NN
64/97 and N 9/98, as case C 31/98.

(1) OJ L 83, 27.3.1999, p. 1.

Having sent
further information to the Commission,
France submitted a new notification as part of the same
dossier by letter dated 15 October 1998. This aid was
registered as N 618/98. By letter dated 30 December
1998, the Commission informed France of its decision
to extend proceedings C 31/98 to include aid N 618/98.

The Commission’s decisions to initiate and extend the
investigation procedure in the abovementioned case
were published in the Official
the European
Communities (2). The Commission invited interested
parties to submit their comments on the aid in question.

Journal of

(6)

The Commission received comments from interested
parties regarding both the initiation and the extension
of the procedure. It forwarded them to France (3), giving
the opportunity to react, and received France’s
it
comments plus additional
information, notably by
letters dated 20 November 1998 and 18 February and 9
April 1999.

(7)

The
sent
French authorities
following documents, inter alia:

the Commission the

of

(cid:151) in July and October 1998, a response to the
procedure,
initiation
comprising a study by Mazars & GuØrard (4),
(cid:145)Comments from Brittany Ferries(cid:146) and a document
entitled (cid:145)1999 to 2003 plan(cid:146),

aforementioned

the

(cid:151) by letter dated 30 March 1999, further comments
and the (cid:145)May 1997 Agreement between the State
and BAI(cid:146), and documents entitled (cid:145)1997 to 1999
three-year plan(cid:146) and (cid:145)1997 to 1999 restructuring
plan(cid:146) dated October 1996 and March 1997
respectively, and

(2) OJ C 244, 4.8.1998, p. 9 (initiation of the procedure);
OJ C 61, 3.3.1999, p. 11 (extension of the procedure).

(3) Letter dated 25.9.1998.
(4) Mazars & GuØrard, (hereinafter (cid:145)M & G(cid:146)) (cid:145)Diagnostic sur la situation
((cid:145)Diagnosis of the BAI
study

financiŁre et
group’s
commissioned by the French authorities.

situation and prospects(cid:146)), April 1998;

les perspectives du groupe BAI(cid:146)

financial

L 12/34

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Official Journal of the European Communities

15.1.2002

(cid:151) in May and June 1999, comments on the report by
particular
the Dynamar
reference to the findings of a counter-study carried
out by the NERA consultancy (6) at the request of
Brittany Ferries.

consultancy (5), with

In addition, the Commission obtained a study by an
independent expert, the Institute of Shipping Analysis,
concerning ship financing.

The French authorities also provided the Commission
with information on the (cid:145)semi-public companies(cid:146) and on
the system whereby those companies finance the ships
been
operates. This
BAI
questioned in the complaint.

arrangement

also

had

In addition, a number of meetings took place between
the Commission,
the French authorities and BAI’s
representatives, the last two being held on 11 and 18
January 2001.
In this context, and following these
meetings, a number of documents was submitted to the
Commission.

(8)

(9)

(10)

(11) Meetings were also held with the complainant, notably
on 19 September 2000 and 24 January 2001, and an
exchange of letters took place. On 1 March 2001 the
complainant instituted proceedings for failure to act in
respect of the matters of complaint submitted on 29
February 2000 regarding the Brittany Ferries case.

1.3. Recipients of the aid

(13)

The direct recipient of the restructuring aid was the
Bretagne Angleterre Irlande shipping company ((cid:145)BAI(cid:146) or
(cid:145)Brittany Ferries(cid:146)). BAI and its partners have also received
other State subsidies, as indicated below.

1.4. Purpose of the aid

(14)

The main purpose of the restructuring aid was to enable
BAI to complete its restructuring process and so ensure
its long-term viability. Other subsidies, most of which
received Commission approval, were
had already
intended to support the company.

1.5. Possible effect of the aid

(15) As Brittany Ferries operates between four different
Member States (France, the United Kingdom, Ireland and
Spain), subsidies granted to it are liable to cause a
distortion of competition which would be contrary to
the common interest.

(16)

subsidies may, however,

These
contribute directly
towards preserving around 2 000 jobs through BAI’s
restructuring and may, in so doing, contribute towards
the development of the regions BAI serves.

1.2. Title of the aid

2. BAI, ITS ACTIVITIES AND THE RESTRUCTURING

(12)

The aid in question is entitled (cid:145)Aid in favour of the
Bretagne Angleterre Irlande company ((cid:147)BAI(cid:148) or (cid:147)Brittany
Ferries(cid:148))(cid:146), dossier C 31/98 (ex NN 64/97, N 9/98 and N
618/98).

(17)

its partners
This section first describes the company,
and its market. It goes on to describe the developments
which forced the company to restructure and the
strategic restructuring measures it implemented. It then
the restructuring and the State
the cost of
sets out
subsidies which accompanied it.

(5) Dynamar Consultancy BV: (cid:145)Review (cid:151) Restructuring Plan (cid:151) Ferry
Company(cid:146), Alkmaar,
the Netherlands, December 1998. Study
commissioned by the Commission, DG (cid:145)Energy and Transport(cid:146). In
the consultant was asked to determine whether the
particular,
information submitted to the Commission by
French
authorities demonstrated adequately that:
(cid:151) the public subsidies granted to Brittany Ferries in the recent
past by the State or through State resources had been granted
in accordance with criteria acceptable to a private investor,
(cid:151) the planned restructuring measures (taking account of

the

the
earlier subsidies) would restore Brittany Ferries to long-term
economic viability within a reasonable period of
in
accordance with the criteria laid down in the Community
guidelines on State aid for rescuing and restructuring firms in
difficulty (OJ C 368, 23.12.1994).
The Dynamar
finalised when the
Commission received the 1996 to 1998 restructuring plan and
the study by the NERA consultancy (see below). Accordingly,
the NERA study was not examined by Dynamar.

report was

already

time,

(6) NERA: National Economic Research Associates,

(cid:145)An assessment of
Brittany Ferries’ viability plan(cid:146) 29 March 1999, London. Study
commissioned by Brittany Ferries. The French authorities made use
of
submitted as additional
information for the dossier, and provided a certain amount of
explanatory material which Dynamar had considered was lacking.

study. The NERA study was

this

2.1. BAI and its subsidiaries

(18)

The Bretagne Angleterre Irlande maritime transport
company ((cid:145)BAI(cid:146) or (cid:145)Brittany Ferries(cid:146)) was set up in 1972
by farming cooperatives and Chambers of Commerce
and Industry from North FinistŁre and by a number of
essentially to boost vegetable
private

investors (7),

(7) A majority of Brittany Ferries’ capital (64,81 %) is held by Soparfi
(Economic Committee of Agricultural Cooperatives). Another
significant share (12,35 %) is held by the Chambers of Commerce
and Industry. The remainder
is held by Divers Groupe SDR
(8,52 %), Sofipar (5,37 %), the Caisse rØgionale d’assurances mutuelles
(CRAMA) of Brittany (4,73 %) and other shareholders
agricoles
(4,21 %). (See correspondence from the French authorities dated 30
March 1999 and 16 February 1998 and (cid:145)Comments from Brittany
Ferries(cid:146) dated 31 March 1999). These figures show BAI’s capital to
be mainly private (80 %), with the remainder held by Divers
Groupe SDR (8 %)
(some shareholders quoted on the stock
exchange) and by the CCIs (12 %).

15.1.2002

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Official Journal of the European Communities

L 12/35

exports to the United Kingdom and open up direct
access to Brittany for British tourists. It operates routes
between France and the United Kingdom (central and
western Channel), France and Ireland, and the United
Kingdom and northern Spain. In so doing, BAI plays an
important part in improving communications with the
regions concerned.

The company carries out its activities either directly in
the case of passenger transport, or through wholly
owned subsidiaries:
(cid:145)Truckline(cid:146) for freight and (cid:145)Serestel(cid:146)
for on-board catering. Its foreign subsidiaries (BAI UK,
Ireland and Spain) provide certain commercial services
and perform reservation services and port operations
abroad.

interest

and falling within the

(23) An SPC’s object may only involve activities relating to
legal
the public
jurisdiction of the local authorities. Possible SPC objects
may include running public services of an industrial or
commercial nature, public services of common interest
relating to cross-border cooperation and/or any activity
of public interest. French law requires intervention by
local authorities to respect the freedom of commerce
and industry, and case-law requires it to be justified by
particular circumstances, such as the need to meet a
requirement of the local community.

Since being set up in 1972, BAI has thus helped
develop the cross-Channel transport market, particularly
in terms of carrying passengers and vehicles between
Brittany and Normandy on the one hand and south-east
England and Ireland on the other. Between 1972 and
1982 BAI bought or rented a number of ships to
operate from Brittany.

(24)

their object,

the SPCs’ priority is not

In view of
to
generate maximum economic and financial return for
their shareholders, but rather to achieve the regional
development/general
objectives
economic
pursued by the public authorities. SPCs have appreciable
influence over the management and strategy of
the
private undertakings with which they associate.

interest

(19)

(20)

(21)

BAI currently runs four permanent daily connections
between Great Britain and France using the following
ships:

(cid:151) Cherbourg/Poole (Barfleur and Coutances)

(25)

(cid:151) Caen/Portsmouth (Duc de Normandie and Normandie)

(cid:151) Saint Malo/Portsmouth (Bretagne)

(cid:151) Roscoff/Plymouth (Quiberon and Val de Loire).

In season, BAI runs a weekly service between Brittany
and Ireland (Roscoff/Cork: Val de Loire) and another
between Great Britain and Spain (Plymouth/Santander:
Val de Loire).

2.2. Operation of the BAI-SPC group

2.2.1. BAI and the SPCs: a closely linked economic group

(22)

for

law (8)

(local)

provides

semi-public
French
companies (sociØtØs d’Øconomie mixte) (hereinafter (cid:145)SPCs(cid:146)).
These are public limited companies whose majority
shareholders are the local authorities and whose object
is
linked both to the public interest and to the
jurisdiction of the said authorities. In other words, SPCs
are characterised by the composition of their capital and
by their company purpose.

(8) Code gØnØral des collectivitØs territoriales.

In 1982 the BAI group ran into financial difficulties
owing to the substantial cost of acquiring ships. These
difficulties prompted it to consider reducing its capacity,
inter alia, by discontinuing several maritime services
operated from the Brittany region. The local authorities
reacted by successively setting up three SPCs to acquire
the ships BAI needed in order to maintain its activities.
companies
the
Thus
Sabemen (9), Senacal (10) and Senamanche (11) were set
up in 1982, 1985 and 1991 respectively, essentially to
act as partners to BAI.

semi-public

it was

that

(9) In October 1996, 55,21 % of Sabemen’s capital was held by
various regional and local authorities and 44,8 % by BAI.
(See
1997 to 1999 three-year plan, pp. 3 and 4).
Currently,
the regional and local authorities as a whole hold
(see
69,07 % and Brittany Ferries 30,93 % of Sabemen’s capital
correspondence from french authorities dated 16.2.1998 and
comments from Brittany Ferries dated 31.3.1999).

(10) In October 1996, 50,21 % of Senacal’s capital was held by various
regional and local authorities, 46,67 % by BAI, 2,35 % by the
Caen Chamber of Commerce and Industry, 0,71 % by CrØdit
Agricole and 0,05 % by various shareholders (see 1997 to 1999
three-year plan, pp. 3 and 4).
Senacal’s share ownership is currently as follows: 65,83 % regional
and local authorities, 32,03 % Brittany Ferries, 1,61 % Caen CCI,
0,49 % CrØdit Agricole and 0,03 % various (see correspondence
from French authorities dated 16.2.1998 and comments from
Brittany Ferries dated 31.3.1999).

(11) In October 1996, 50,00 % of Senamanche’s capital was held by
various regional and local authorities, 49,98 % by BAI and 0,02 %
by various shareholders (see 1997 to 1999 three-year plan, pp. 3
and 4).
Currently, regional and local authorities hold 68,75 %, Brittany
Ferries 31,24 % and various shareholders 0,01 % of Senamanche’s
shares
from French authorities dated
16.2.1998 MABL/dm No 233 and comments from Brittany Ferries
dated 31.3.1999).

correspondence

(see

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Official Journal of the European Communities

15.1.2002

(26)

is at

Though its partnership with the SPCs gives it access to
the same time bound by
public capital, BAI
conditions laid down in its collaboration agreements
with the latter. These agreements binding BAI to the
SPCs and, ultimately, to the requirements of the SPCs’
regional shareholders, require BAI to provide maritime
transport services of at least a certain frequency from
specific ports.
its
operations and provide a forecast of proposed action to
the SPCs’ management boards. The agreements also give
the SPCs observer status, with two observers (censeurs)
on BAI’s management board.

It must also report

the results of

involved all the shareholders (both public and private).
It should nonetheless be noted that the main private
shareholder in the SPCs is the BAI company.

2.2.2. EIGs

(31)

(27)

therefore,

Both de jure and de facto,
the legal and
financial relations between BAI and the SPCs give the
latter a decisive influence over the former. They have
the power to guide BAI’s strategic decisions, since it is
they who decide on the acquisition/sale of the ships BAI
operates (fleet composition),
the operating conditions
for those ships, the general traffic conditions BAI has to
meet, and the capital increases needed to maintain those
conditions.

several

financial

same context,

In this
institutions
established economic interest groupings ((cid:145)EIGs(cid:146)). These
EIGs are governed by the order of 23 September 1967
and their financing mechanisms come under common
law (13). Forming an EIG opens
to tax
optimisation when acquiring heavy industrial assets. In
practice, this involves fiscal transparency vis-(cid:224)-vis the
EIG members, i.e. any profits or losses made by the EIG
are passed on to its members. EIGs are common in
France and may be set up in any sector of economic
activity. According to the French authorities,
this
mechanism comes under common law.

the door

(28)

Information from the French authorities (12) shows the
SPCs to form an integral part of the Brittany Ferries
group, in which their role is that of investment while
BAI and its subsidiaries together constitute the group’s
operating and marketing structure.

(32) What the EIGs do is purchase ships, with the help of
loans, and lease them to the SPCs. The information
available to the Commission shows that fiscal EIGs were
involved in the financing of three ships: the Bretagne,
the Normandie and the Barfleur.

leasing

interest

groupings

they hold

(29) A large part of Brittany Ferries’ debt therefore lies with
these three semi-public companies. The SPCs either own
ships directly, where they have been financed by
contracts with
borrowing, or
((cid:145)EIGs(cid:146)) which have
economic
themselves acquired the ships, where this
form of
financing has been preferred. As shipowners, the SPCs
have an appreciable influence over the BAI group’s
business decisions, particularly when it
to
comes
deciding
the maritime
connections (ports of departure/arrival, frequency, fleet
composition, services to be provided, passenger/freight
transport capacity, etc.) it has to provide inasmuch as
the public authorities consider them necessary for the
achievement of their objectives, particularly in terms of
return and general interest.

strategy

group’s

the

on

(30)

In this context, the SPCs’ shareholders have on several
occasions increased the latter’s capital. Except on the
increases have
last occasion in 1996,

these capital

(33)

(34)

Specifically, in the three cases in this dossier in which
ships have been financed by fiscal EIGs,
it should be
noted that the EIGs own the ships and have taken out
bank loans to finance them. The EIGs rent the ships to
the SPCs under leasing contracts. The SPCs then rent the
ships
as
described below.

through subchartering contracts,

to BAI

the

contract; given the EIG’s

In the EIG accounts, the acquired ships are written off
degressively over a period of around eight years.
Degressive amortisation produces fiscal deficits at the
beginning of
fiscal
transparency these are passed on to the EIG members,
which thus enjoy bank interest rate subsidies. As the
EIG is normally in deficit during the first eight years, the
tax savings made by its members are in some cases
returned to it in the form of a loan. The EIG normally
starts paying back this loan once it shows a profit.

(12) Letter from the French authorities dated 25 June 1999, p. 2.

(13) Applicable across the board irrespective of sector.

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2.2.3. The SPCs: rents charged to BAI

(35) As indicated above, aside from three cases of financing
through EIGs, the SPCs directly acquire ships to rent to
BAI. The rent actually paid by BAI includes:

(cid:151) the rent charged by the SPCs (corresponding to the
leasing charged by the EIGs to the SPCs, including
depreciation and financing costs) or rents directly
charged by the leaser (Trovil for the Quiberon),

(cid:151) the

amortisation

of
(upgrading

additional
to meet

ship-related
standards,

investments
fitting-out, etc.) accounted for in BAI’s books,

balance their budgets (no profit, no loss) until such time
as the ships are definitively sold on.

(37) Dynamar’s report criticised the fact that the level of rent
is around 15 % below the
the SPCs charge to BAI
rate. The French authorities and NERA (14)
market
rejected this, arguing that Dynamar’s finding was based
on a misleading comparison with certain P & O ships.

(38) Moreover,

in January 2001 Brittany Ferries and the
broker Brax Shipping (15) produced a more detailed
estimate of the bareboat chartering rates which would
have been charged on the market in 1999 for the ships
chartered by BAI. BAI also submitted figures for the
rent paid since 1989 for the ships it chartered.

(cid:151) exchange-rate differentials where ships are financed
in foreign currencies (Val de Loire, Normandie, etc.),
directly recorded in BAI’s accounts.

(39)

(36)

Since the credit
institutions apply a margin to the
interest rate charged to the SPCs, the SPCs pass on this
margin to BAI. The French authorities and BAI have
indicated that charging these rents allows the SPCs to

complainant,

too (16), has
The
submitted its own
estimates of the rent it believes BAI should be paying
for the ships it operates. The complainant also argues
that the rents charged to BAI are well below market
rates, as they only cover the external financing of the
ships. The complainant
(public)
capital
increases and investment aid allowed external
financing to be kept at a level well below the market
price. A list of rents actually paid by BAI has also been
supplied (17).

further argues that,

(14) See in particular the letter from the French authorities dated 25

June 1999, registered at the Commission on 28 June 1999.

(15) In its letter to the Commission dated 29.1.2001, Brax Shipping
argues that it is unrealistic to estimate charter rates for Brittany
Ferries’ ships over the last 10 years, given the difficulty of
obtaining meaningful results over such a period.
(16) See document sent by the complainant on 9.2.2000.
(17) See document submitted by BAI’s representatives, registered at the

Commission on 25.1.2001.

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(40)

To test these various arguments and determine whether the rents paid are acceptable (in the past
and in future, following restructuring), the following table compares the above claims regarding the
market rents for ships of the type operated by BAI:

Table 1

Rent paid by BAI to the SPCs

BRAX estimate
July 1999
(annual rent)

SPC/Ship

Conversion of
BRAX estimate
to FRF (July
1999 rate:
$ 1 = FRF
6,329602)

Complainant’s
estimate of
market rent for
BAI

Rent
actually
paid
by BAI

Rent
actually
paid
by BAI

Rent
actually
paid by
BAI

Rent
actually
paid
by BAI

Rent
actually
paid
by BAI

1999

1999

1999

1999

1998

1997

1996

1995

USD million

FRF million

FRF million

FRF mil-
lion

FRF mil-
lion

FRF mil-
lion

FRF mil-
lion

FRF mil-
lion

Sabemen

Armorique

out of service

Bretagne (EIG)

Quiberon

7

3

Duchesse Anne out of service

Cornouailles

out of service

Val de Loire
(EIG)

Senacal

Duc de
Normandie

Normandie

9

4

8

Reine Mathilde

out of service

Senamanche

44

18

58

23

51

43

[(cid:133)] (*)

[(cid:133)]

[(cid:133)]

[(cid:133)]

[(cid:133)]

[(cid:133)]

[(cid:133)]

[(cid:133)]

[(cid:133)]

[(cid:133)]

70

[(cid:133)]

[(cid:133)]

[(cid:133)]

[(cid:133)]

[(cid:133)]

[(cid:133)]

[(cid:133)]

[(cid:133)]

[(cid:133)]

[(cid:133)]

82

[(cid:133)]

[(cid:133)]

[(cid:133)]

[(cid:133)]

[(cid:133)]

Barfleur (EIG)

7

42

53

[(cid:133)]

[(cid:133)]

[(cid:133)]

[(cid:133)]

[(cid:133)]

Truckline
Ferries

Coutances

Trovil Shipping

100 % BAI owned

Quiberon

leasing

(*) Passages between square brackets indicate business secrets or confidential information.

The table shows that while two rents are below the estimates of the experts and the complainant,
all the others match or even exceed those estimates, so that the SPCs cannot be said to charge rents
which are, all in all, below the market rates.

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2.2.4. Financing system and return on investment

(41)

It must be borne in mind that the SPCs’ capital has been
constituted by both public partners (the regions) and
private partners (BAI and CrØdit Agricole). BAI, which
holds a significant proportion of the SPCs’ shares, itself
has a majority of private shareholders. Moreover, private
financial
(mainly CrØdit Agricole) have
granted loans for successive acquisitions of ships.

institutions

(42) All decisions to increase capital have been linked to new
investments (to develop further the market the group
has built up), with BAI subscribing to these capital
increases in proportion to its holdings in the SPCs (18).
The capital
increases have thus been implemented by
both the public and the private shareholders at the same
time and in proportion to their respective shareholdings.

(43)

It should also be emphasised that since being set up in
1995 the SPCs have been balancing their budgets by
means of the rents charged to BAI; it is in selling on
ships that they have realised capital gains giving them
annual profits ranging from 5,9 % to 9 % (see Table
2) (19). These profits have been regularly reinvested in
the group.

(44) According to the French authorities, this system enabled
the SPCs to avoid making losses until 1995. The losses
recorded from then on resulted from the difficulties
Brittany Ferries encountered as of 1993 (see also below),
which prompted the SPCs (and their majority of public
shareholders) to grant a temporary deferment of part of

the rent paid for the ships (FRF 250 million), repayment
of which was made conditional by a (cid:145)better fortunes(cid:146)
clause. The French authorities indicate that the regional
and local authorities had never previously intervened to
recapitalise
Senamanche
following losses.

Sabemen,

Senacal

and

(45)

This system of financing is explained below.

(46) Generally speaking, virtually all

the SPCs’ rights and
obligations under
these financing arrangements are
delegated to BAI. Unless specifically decided otherwise,
all the SPCs’ costs and revenue are billed to BAI as rent
under a chartering contract (20). It is thus through its
chartering contracts with the SPCs that BAI
finances
ships by paying rent. This rent is intended to cover both
the depreciation of the ships and the SPCs’ financing
costs. This is how the SPCs balance their budgets, as
mentioned above.

(47) When ships are sold,

the SPCs recover their capital,
achieving an average annual return (21) of around 7 %
on the invested capital (22). These earnings have been
regularly reinvested in new ships.

(48)

The capital gains break down as follows:

(18) Letter from the French authorities dated 25 June 1999, p. 2.
(19) The table also shows the purchase price and the capital made

available by the group for each ship acquired.

(20) See copies of contracts submitted by Brittany Ferries at

the

meeting on 18 January 2001; see M & G, p. 8.

(21) Annual return for the duration of use is calculated from the
original capital sum provided by the SPC shareholders and the
capital gains realised on the sale of the ship (SPC’s capital after
disposal of the ship in question).

(22) According to information from Shippax, as submitted by BAI at
the meeting held on 18 January 2001, the life expectancy of a
ferry is around 40 years, i.e. around twice the depreciation period.

L 12/40

EN

Official Journal of the European Communities

15.1.2002

Table 2

Return on ships

(in FRF million)

SPC/Ship

Date or
entry into
SPC

Initial value

Repurchase
value (end
of leasing)

Duration of
use by
SPC/BAI
(years)

Date of sale
of ship on
market

A

B

A + B = C1

T1

A + B = C2

T2

Original
capital pro-
vided by
SPC share-
holders (and
reconsti-
tuted)

Capital gains
from sale of
ship

SPC capital
after dis-
posal and
before
recapitali-
sation in
1996

Rate of
return
before
recapitali-
sation in
1996
(in %)

SPC capital
after dis-
posal and
after recap-
italisation in
1996

Rate of
return after
recapitali-
sation in
1996
(in %)

Sabemen

Armorique

Bretagne

Quiberon

Duchesse Anne

Cornouailles

Val de Loire

Senacal

1982

1989

1984

1988

1982

1993

Duc Normandie

1985

Normandie

1992

Reine Mathilde

Senamanche

[(cid:133)]

[(cid:133)]

[(cid:133)]

[(cid:133)]

[(cid:133)]

[(cid:133)]

[(cid:133)]

[(cid:133)]

[(cid:133)]

[(cid:133)]

[(cid:133)]

[(cid:133)]

[(cid:133)]

[(cid:133)]

[(cid:133)]

[(cid:133)]

[(cid:133)]

[(cid:133)]

[(cid:133)]

[(cid:133)]

[(cid:133)]

[(cid:133)]

[(cid:133)]

[(cid:133)]

[(cid:133)]

[(cid:133)]

[(cid:133)]

[(cid:133)]

[(cid:133)]

[(cid:133)]

[(cid:133)]

[(cid:133)]

[(cid:133)]

[(cid:133)]

[(cid:133)]

[(cid:133)]

[(cid:133)]

[(cid:133)]

[(cid:133)]

[(cid:133)]

[(cid:133)]

[(cid:133)]

[(cid:133)]

[(cid:133)]

[(cid:133)]

[(cid:133)]

[(cid:133)]

[(cid:133)]

[(cid:133)]

[(cid:133)]

[(cid:133)]

[(cid:133)]

[(cid:133)]

[(cid:133)]

[(cid:133)]

[(cid:133)]

[(cid:133)]

[(cid:133)]

[(cid:133)]

[(cid:133)]

Barfleur

1992

[(cid:133)]

[(cid:133)]

[(cid:133)]

[(cid:133)]

[(cid:133)]

[(cid:133)]

[(cid:133)]

[(cid:133)]

[(cid:133)]

[(cid:133)]

(49)

regarding

examine market practice

To
financing
methods and return on investment, as applied to ferries,
the Commission referred,
inter alia, to an independent
expert
study by the Institute of Shipping Analysis
((cid:145)ISA(cid:146)) (23), and also compared the ISA’s opinion with
other sources of information, e.g. the material supplied
by Brax Shipping and the complainant.

for

renting

acquiring,

(50) According to the ISA’s general description of financing
arrangements
selling
passenger ferries, it is common practice in the shipping
industry for non-operating shipowners to rent
their
ships to operators. This may be by leasing or via a
chartering contract. Market practice (24)
that
return on investment during the ship’s life time can vary
between a balanced return without profit during the
period the ship is used and enough profit during the

shows

and

(23) Institute for Shipping Analysis working in collaboration with

Shippax.

(24) Taken from Stena annual report, Annex 11 to the document

submitted by BAI and registered on 25 January 2001.

operational period to cover the cost of the capital and
the costs subject to market fluctuation (25).

(51)

It is also usual in the industry for shipowners to realise
a profit on their ships only via the residual capital gains
realised when they sell them. According to the ISA, 10
years ago some ferries were even sold at a premium
over their original construction cost. However, for the
last 10 years or so the second-hand market for ferries
has been far less lucrative. Generally speaking, the ISA
indicates that resale values can vary greatly and that
investors may have highly different investment strategies

(25) To maintain the borrower’s liquidity, it is also common for loans
taken out to finance ships to involve payments of large sums at
the end of the loan ((cid:145)balloon payments(cid:146)).
The normal depreciation period for ships is 20 to 25 years
(sometimes up to 30) and payback arrangements are usually
linear, based on interest rate development (e.g. LIBOR: London
interbank offered rate).

15.1.2002

EN

Official Journal of the European Communities

L 12/41

depending
developments.

on

their

anticipation

of market

2.2.6. Guarantees

(52)

(53)

arguments have been advanced by Brax
Similar
Shipping (26) which has
examples
showing how the second-hand market for ferries has
declined
the
announcement that duty free was to be abolished, but
that it could nonetheless pick up again.

also provided

following

sharply

1996

since

Illustrative information received from CrØdit Agricole
Indosuez (27) shows that certain investors may consider
an annual return of around 7 % acceptable (28). This
nonetheless
relatively difficult present
reflects
situation on the ferry resale market.

the

(57)

BAI has also indicated that regional guarantees have
been provided on three occasions as part of
the
financing of ships:

(cid:151) a guarantee of FRF 24 million given to Sabemen in
1983 by the Brittany region for the financing of the
Quiberon, the total loan being FRF 80 million,

(cid:151) a guarantee of FRF 270 million given in 1987 by
the Brittany and Pays de Loire regions for
the
financing of the Bretagne, the total being FRF 295
million,

de

la Manche

(cid:151) a guarantee of FRF 10 million given by the Conseil
surety for
gØnØral
Senamanche’s obligations in the financing of
the
Barfleur (as part of the extension loan of FRF 178
million).

in 1992 as

2.2.5. Transactions within the group (BAI and SPCs)

(54)

The Commission considered it necessary to compare the
way the three SPCs operate with BAI,
to check for
consistency.

(55)

It should be borne in mind here that the three SPCs do
make a profit, as shown for
instance in Table 2.
However, only Senacal and Senamanche retain their
profits. Sabemen’s profits from rental income and from
sales of the ships it acquires and which must be used
from Roscoff and Saint Malo for services to Plymouth,
Portsmouth, Cork and Santander, are transferred to BAI
(in an internal
transaction within the group). These
transactions are stipulated by the chartering contract (29)
between Sabemen and BAI, as is BAI’s obligation to
serve the ports of Roscoff and Saint Malo.

(56) As explained above, Sabemen expects a return on its
investments, even though this is returned to BAI within
the (BAI-SPC) group. However, after the Commission
indicated that the three SPCs’ operations needed to be
the
aligned within the group they form with BAI,
French authorities stated in a letter dated 8 March 2001
that Sabemen’s operation would be aligned on that of
Senacal and Senamanche in terms of
the agreement
linking it to BAI.

(26) Brax Shipping was consulted by BAI. Brax then wrote to DG

(cid:145)Energy and Transport(cid:146) on 29 January 2001.

(27) Shipping Finance Annual 2000/2001, a Euromoney publication,
places CrØdit Agricole Indosuez among the top 20 shipping
financiers.

(28) As a practical example, BAI indicates that the resale value of the
is the result of a real

Duc de Normandie, as shown in Table 2,
estimate provided by an expert in 1999.

(29) See copy of M & G, p. 8.

2.2.7. The role of CrØdit Agricole

(58)

(59)

CrØdit Agricole, and more specifically CrØdit Agricole
Caisse rØgionale du FinistŁre, as Brittany Ferries’ main
banker since its creation in 1972, meets virtually all the
company’s operational cash requirements, and plays the
financing operations. CrØdit
leading role
Agricole was privatised in 1988.

in fleet

group is not

The French authorities have explained (30)
that
the
a public
CrØdit Agricole banking
undertaking but a strictly private credit institution. The
capital of the Caisse nationale du CrØdit Agricole (CNCA) is
held exclusively by the 56 regional banks
(caisses
rØgionales (cid:151) CRCA) and their directors. The capital of
the CRCA is held by the 2 775 local banks (caisses locales
(cid:151) CLCA) or by individual members. The capital of the
CLCA is in turn held by some 5,5 million members,
either natural or legal persons.

2.3. BAI’s market (geographical map Annex 1)

2.3.1. The cross-Channel passenger market

(60)

The passenger and tourist vehicle market is subject to a
certain degree of one-way substitutability,
i.e. prices
charged by operators
in the North Sea and the
central/western Channel are to some extent influenced
by prices charged in the Channel strait between Calais
though the reverse is not evident (31).
and Dover,

(30) Correspondence of 16 July 1998.
(31) Commission decision of 26 January 1999 (OJ L 163, 29.6.1999,

p. 61).

L 12/42

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Official Journal of the European Communities

15.1.2002

Information supplied by Brittany Ferries (32), NERA (33)
and M & G (34) in the context of this case shows that
in 1994 and the
the opening of the Channel tunnel
subsequent
impact on the strait
segment but a far more limited effect on the western
Channel. The information also shows that BAI operates
in the western and central Channel
the
Dieppe/Newhaven line), and to Ireland and Spain.

fire had a direct

(west of

(65)

(61) M & G and BAI

that

in 1998 the
indicate
western/central Channel sector represented around 5
million passengers and 1,2 million tourist vehicles. This
the market segment
corresponds to around 13 % of
running from the central Channel to the strait in terms
tourist vehicles.
of passengers and 16 % in terms of
BAI’s
fairly stable at
traffic is
between 45 % and 50 % of the central/western Channel
market (35).

share of passenger

(62) According to the information at

the Commission’s
in 1999 the central and western Channel

disposal,
sectors were shared between:

(cid:151) BAI

on

the

Malo/Portsmouth,
Caen/Portsmouth routes,

Roscoff/Plymouth,
Cherbourg/Poole

Saint
and

(cid:151) the P & O company on the Cherbourg/Portsmouth

and Le Havre/Portsmouth routes (36),

(cid:151) the Condor

Ferries

company

Saint
Malo/Weymouth and Poole routes. It should also be
noted that Condor Ferries operates via the Channel
Islands, and only during part of the year.

the

on

2.3.2. The cross-Channel freight market

that

the Channel

the opening of

Substitutability from the strait has a far more marked
impact on the freight market than on the passenger
market (37). Brittany Ferries also comments
its
relevant market in terms of freight has to be defined as
a regional market consisting in the carriage of freight
between the United Kingdom and the continent and
comprising the strait and the Channel (38). Nonetheless,
Brittany Ferries has indicated (39) in the course of this
case that
tunnel caused
freight traffic in the strait to fall by around 22 % (see
also NERA (40)), while traffic in the central/western
the
Channel
impact on the western and central Channel market was
borne by the Dieppe/Newhaven route (41). With P &
OEF having ended its operations on this route, and
Hoverspeed having resumed them only in part, the strait
market’s impact on that of the central/western Channel
would appear
some
distinction between the market segments of the strait
and the central/western Channel might also be made
with regard to the freight.

remained stable. According to NERA,

to have been weakened. Thus

(66) According

estimates (42),

in 1998 the
to BAI’s
central/western Channel market
represented 354 000
lorries carried, i.e. 14,5 % of the overall cross-Channel
freight market of some 2,3 million lorries. BAI has a
fairly stable share of between 45 % and 50 % of the
central/western Channel freight market. On the other
hand, its market share in terms of total cross-Channel
traffic has gradually eroded in recent years, from 12 %
in 1994 to 10 % in 1995, 9 % in 1996 and 1997, and
7,5 % in 1998.

(67) With regard to freight,

for which the whole of

the
relevant market must be considered, BAI’s competitors
within the framework of this dossier (central/western
Channel and the
strait) are P & O Portsmouth,
Commodore, P & O Stena Line, Sea France, Eurotunnel,
Hoverspeed and Holyman Sally.

(63)

(64)

It should further be noted that BAI operates a route
the United Kingdom and
between the south-west of
Santander, Spain, and a service to Ireland. On the
Spanish route it competes with P & O (which operates
on similar routes in the sector) and on the Irish route
with Irish Ferries.

BAI’s representatives say it
which has
Normandy which previously did not exist as such.

is the company’s activity
from Brittany/lower

created a market

(32) Comments from Brittany Ferries, p. 11.
(33) NERA, pp. 14 and 15.
(34) M & G, p. 6, states that BAI’s relevant market for cross-Channel

traffic is the western/central Channel.

(35) Brittany Ferries operates west of the Dieppe/Newhaven line.
(36) The Dieppe/Newhaven line, operated by P & O-Stena until the
beginning of 1999, is now operated on a very reduced basis by
Hoverspeed.

2.4. Deterioration in Brittany Ferries’ economic
situation

(68)

Before describing the various restructuring aid measures,
it will be useful to describe the main factors which led
to the need to restructure Brittany Ferries.

(37) An analysis extending geographically beyond the strait towards
the North Sea is not required in the context of this case, since BAI
does not operate in the strait or in the North Sea.

(38) See also Commission decision of 30 October 1996 (OJ L 26,

29.1.1997, p. 23).

(39) Comments from Brittany Ferries, p. 13.
(40) NERA, p. 16.
(41) In terms of substitutability, the Dieppe/Newhaven route acts as a
vector for prices charged in the strait and those charged in the
central/western Channel.

(42) Comments from Brittany Ferries, p. 10.

15.1.2002

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Official Journal of the European Communities

L 12/43

(69) Owing primarily to external

factors, Brittany Ferries’
economic situation began declining rapidly in 1992,
the company needed to restructure
indicating that
internally
changing
cope with its
environment.

in order

to

According to the Commission’s information (45), one
year later in 1996 the net accounting result would
probably have fallen to FRF ﬂ 169 million had it not
been for State assistance for 1996 (46). As BAI’s fortunes
affect the entire group (cid:151) BAI uses its revenue to pay
rent to the SPCs, which use that rent to balance their
annual budgets (cid:151) the aforementioned result had a
decisive influence on that of the BAI-SPC group.

2.4.1. The external factors

(70) According to Brittany Ferries’ indications, as submitted
by the French authorities, two main coincident external
factors prompted the crisis which hit the company in
1992:

2.5. The restructuring plan

(cid:151) the devaluation of the pound sterling from FRF 9,70
to 8,50 in September 1992, followed by a further
fall to below FRF 8, where it remained in 1995 and
1996, and

(73)

(cid:151) the opening of the Channel tunnel in 1994.

2.4.2. The internal results

very

(71) As a result of these events, which of course did not only
affect BAI, the scale of the company’s losses threatened
its
Commission’s
information (43) shows that a fall of FRF 0,50 in the
value of the pound automatically reduces BAI’s turnover
by at least FRF [(cid:133)](*), quite aside from any impact on
traffic and passenger yield.

survival

1996.

The

in

Brittany Ferries’ restructuring plan comprises a coherent
set of measures. The Commission in fact received a
succession of documents concerning Brittany Ferries’
restructuring, and considers these to form an ensemble
constituting a single restructuring concept. This set of
documents describing the overall
restructuring plan
consists of a concept formulated in October 1996 and
supplemented in 1997 and 1998 (1999 to 2003 plan),
an audit carried out by M & G (see below), comments
from BAI, the NERA study (see below), and the decision
by the French State (central Government and regions) to
grant the company restructuring aid (FRF 70 million,
around FRF 246 million and then a sum of FRF 80
million). The restructuring measures concerned both
BAI, as operator of the ships owned by the SPCs, and
the SPCs themselves in their role as the ships’ owners.

(72)

The combined impact of the devaluation of sterling and
the opening of the Channel tunnel caused increasing
losses, as shown by the results below (44):

Table 3

(in FRF million)

Results prior to 1996

30.9.1992 30.9.1993 30.9.1994 30.9.1995

Turnover

1 342,6

1 389,6

1 451,2

1 284,5

Operating result

24,3

ﬂ 28,3

18,9

ﬂ 44,9

Financial result

ﬂ 6,7

ﬂ 4,8

ﬂ 10,8

ﬂ 16,3

(74)

The aid proposed by the central Government involves
two tranches of direct State aid to BAI, notified in
succession to the Commission (FRF 70 million and then
FRF 80 million), while regional support for restructuring
totalled around FRF 250 million (some FRF 246 million
of public capital). The latter amount consisted in a
capital increase by the SPCs’ shareholders (except BAI),
which the SPCs passed on to BAI as a temporary waiver
of rent (accompanied by a (cid:145)better fortunes(cid:146) clause, whose
conditions the French authorities say have now been
met). The sums of FRF 70 and 250 million have been
paid.

Net result

22,1

ﬂ 12,3

ﬂ 13,9

ﬂ 80,3

(75)

(43) See M & G, p. 12 of the summary.
(44) Agreement of 26 May 1997 between the French Republic and

BAI.

The aim of the restructuring support which the regional
authorities provided in 1996 with a capital increase of
FRF 250 million for
to
following
financial restructuring measures,
implement
which it would be possible to achieve the material and

the SPCs was

first of all

(*) Passages between square brackets indicate business secrets or

confidential information deleted.

(45) See M & G, p. 6 of the summary.
(46) ACOMO payment, see Table 4.

L 12/44

EN

Official Journal of the European Communities

15.1.2002

all

inter alia,

structural restructuring objectives (ship replacement and
in the
reorganisation of services) set out,
restructuring plan of October 1996 and adjusted in
1997 and 1998. This support in fact served both to
finance the repayment of loans during a critical period,
Ferries’
above
the beginning of Brittany
SPCs’
restructuring,
initial
the
investments (in ships), and contributed,
lastly, to the
acquisition of the Normandie 2, which is to replace the
Quiberon in conjunction with a reassignment of ships
among the existing routes with a view to rebalancing
those routes and making them more profitable.

preserve

and

to

at

(76)

expert

require

following

documents

The
closer
attention: the Mazars & GuØrard audit (47) providing, in
April 1998, a picture of the financial situation in the
period 1996 to 1998; the Dynamar report (48), whose
main task was to check whether the documents held by
the Commission were
assessing the
restructuring (report produced in December 1998); the
NERA study (49), supplying the bulk of the outstanding
documents needed to analyse the restructuring.

sufficient

for

(77)

The first of
these, entitled Diagnostic de la situation
financiŁre et les perspectives du groupe BAI, was produced
in April 1998 by Mazars & GuØrard ((cid:145)M & G(cid:146)) at the
request of the French authorities. This detailed analysis
of BAI’s economic situation focuses chiefly on the years
1996 and 1997, with a forecast for 1998 and 1999.

(78)

In April 1998 M & G concluded that:

(cid:145)Internal measures and external support, in conjunction
with positive developments such as the rise in value of
the pound sterling, will enable BAI
to achieve the
recovery envisaged in the three-year plan.

translates

into short-term profitability.

In the
This
medium term this recovery will not provide lasting
solutions to expected events, such as the financing (cid:151)
whether imposed by competition or by obsolescence (cid:151)
the fleet or the ending of duty-free sales, or to
of
in the
unexpected events, such as the significant fall
pound or
the development of competition in the
central/western market.(cid:146)

(79)

In December 1998, the Dynamar consultancy presented
its report, and referred mainly to the findings of M & G
submitted to the
to argue

the documents

that

Commission did not constitute a restructuring plan, as
certain key elements of analysis (cid:151) such as an analysis
by profit centre and an analysis of the relevant market
(cid:151) were lacking. Dynamar also criticised the company’s
high central costs, while acknowledging that Brittany
Ferries had to maintain its image, which Dynamar
described as the (cid:145)strongest brand(cid:146). Dynamar concluded
that the data available to the Commission at the time it
compiled its report (December 1998) were insufficient
to settle the question of
long-term
viability.

the company’s

(80)

In March 1999, Brittany Ferries submitted, inter alia, the
NERA study, which supplied the missing information,
particularly in the major areas indicated by Dynamar
(including a market description, a company analysis by
profit centre, a viability analysis-forward projection.

(81) While M & G focused mainly on the years 1996 to
1998, NERA focused essentially on Brittany Ferries’
future development, projecting an economic model for
the years 1998 to 2006. This projection took account
of a preliminary study incorporating an analysis by
profit centre, an analysis of central service costs, analysis
of necessary future investments and a market analysis.

(82) On this basis NERA analysed Brittany Ferries and the
three SPCs as a single economic entity, as described
above, and concluded, around a year after M & G drew
its conclusions (50), that the group would be viable in
the long term.

(83) With regard to this,

(pound
the
sterling/French franc parity, market developments) and
internal
are
examined in section 5.

restructuring

external

in the

group’s

factors

factors

(84)

The main measures involved in the restructuring are set
out below.

2.5.1. Capacity reduction

(85)

BAI’s downsizing consisted in withdrawing from two
routes (Saint Malo/Poole and Saint Malo/Cork) out of a
total of eight, reducing and rationalising the winter
rotations and laying up and selling two ships (Normandie
Shipper and Duchesse Anne) out of a fleet of nine, along
with a programme to sell off non-core assets (e.g.
its
17 % share in the British television company West
Country TV).

(47) Requested by France.
(48) Requested by DG (cid:145)Energy and Transport(cid:146).
(49) Commissioned and submitted by Brittany Ferries. The French

authorities based their arguments on this report.

(50) Market conditions had altered substantially during the intervening
period, particularly the parity between the pound sterling and the
French franc.

15.1.2002

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Official Journal of the European Communities

L 12/45

(86)

The service Brittany Ferries supplies, measured in terms
of sailings and rotations, will remain constant in 2001
compared with 1998, and well below what it was in
1995 before restructuring, without Brittany Ferries
being able to increase the number of sailings, enter new
routes or assign additional ships to existing routes (51).
Between the financial years 1995 and 1998, Brittany
Ferries’ passenger
reduced by 12 %
capacity was
(ﬂ 1 375 passengers), its berth capacity by 9 % (ﬂ 539
berths) and its garage capacity by 17 % (ﬂ1 480 lane
metres). Between the financial years 1995 and 2003,
once the Quiberon is replaced by the Normandie 2 on the
Caen/Portsmouth route in mid-2002, Brittany Ferries’
overall capacity will remain below its pre-restructuring
capacity, i.e. a reduction of 5 % in passenger capacity
(ﬂ 554 passengers), 9 % in berth capacity (ﬂ 523 berths)
and 4 % in garage capacity (ﬂ 367 lane metres) (52).

2.5.2. Reorganisation of sailings (cid:151) replacement of a ship

(87) With regard to sailings, the Caen/Portsmouth route is
currently operated using two ships, the Normandie and
the Duc de Normandie, of very different
size and
capacity. Given the length of the crossing, there are
three departures each day from Caen to Portsmouth and
vice versa. Each ship thus makes a return journey plus a
single leg each day, starting from Caen one day and
from Portsmouth the next. The ships’ differing capacities
thus cause major fluctuations in supply from one day to
the next (65 % from Caen to Portsmouth and 35 % from
Portsmouth to Caen one day, and the other day round
the next), causing logistical problems and significant
productivity losses.

(89)

(90)

(91)

to seven under restructuring, will not have risen at the
end of the company’s 1999 to 2003 plan.

2.5.3. Refinancing of two ships

interest

BAI refinanced the ships for which this was both an
option and of
it
arranged the leaseback of the Quiberon (54), allowing a
short-term refinancing (to generate short-term liquidity)
but resulting in higher rent (55) of FRF [(cid:133)] spread over
the years 1995 to 2001 (56).

in the short

term. Firstly,

Secondly, the financing period for the Val de Loire was
extended by means of a deferment of payment over a
three-year period (from 1 January 1995 to 1 January
1998) on the loan taken out for that ship with CrØdit
Agricole (private bank). No capital was repaid during
that period, generating costs (in additional interest) of
FRF [(cid:133)] (57). This additional interest was charged to the
SPC, which passed it on to BAI.

By refinancing these two ships the SPC was able to
reduce its operational cash requirements by around FRF
[(cid:133)] over three years (i.e. three repayments of FRF [(cid:133)]).
By easing its operational cash situation, the refinancing
operation enabled Sabemen to limit BAI’s operational
cash requirements. In any event, the refinancing of the
Val de Loire was without cost for Sabemen since the rent
from BAI continued to cover both the depreciation of
the ship and the additional
the
refinancing.

financing costs of

(88)

in full

the 1996 restructuring plan’s
To achieve
objective of (cid:145)pursuing efforts to rationalise and save so
as to improve the breakeven point(cid:146) (53), it was decided,
in addition to the capacity reduction measures,
to
replace a ship in order to rebalance and thus improve
profitability on the routes being served. Accordingly, the
Normandie 2, of
to the
Normandie, will be assigned with the Normandie to the
Caen/Portsmouth route. The Duc de Normandie will
replace the Quiberon on the Roscoff/Plymouth route,
helping to optimise the operation of that route. Since an
old ship is to be replaced in 2001 by a new one
complying with the new safety rules, the total number
of ships operated by Brittany Ferries, reduced from nine

size and features

similar

(51) See comments from Brittany Ferries of 31 March 1999, p. 19, and
letter from Brittany Ferries dated 9 July 1999, registered in DG
(cid:145)Energy and Transport(cid:146) as No 62620.

(52) See BAI correspondence of 9 July 1999, p. 2.
(53) Plan for a return to competitiveness, October 1996, p. 15.

2.5.4. Injection of public capital (around FRF 246 million)

(92)

To support the restructuring process, the SPCs granted
BAI a partial deferment of rent over three years for the

(54) Sold to the Trovil Shipping company and leased back by BAI. The
rent paid under the leaseback comprises capital repayment and
payment of interest. As a result of the leaseback, the rent paid is
considered high by M & G (M & G, Annex 4). Nonetheless, the
operation was carried out with the general aim of financing the
company.

(55) See M & G, Annex 4.
(56) See information sheet on the impact of the restructuring measures
on Brittany Ferries, submitted by the company’s representatives at
a meeting and registered under No 60243.

(57) See information sheet on the impact of the restructuring measures
on Brittany Ferries, submitted by the company’s representatives at
a meeting and registered under No 60243. See also M & G, p. 16
and Annex 7.

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15.1.2002

it operates. This deferment

ships
totalled FRF 250
million (58) for the financial years 1996 to 1998. It was
financed by an increase of around FRF 246 million in
the SPCs’ public capital (59).

(98)

(93) Although this sum was

transactions
between the SPCs and BAI (within the group), the fact is
that there was an input of (external) public capital of
around FRF 246 million into the Brittany Ferries group.

the subject of

(94)

(95)

(96)

2.5.5. Reduction of central costs

It should first be recalled that, within the Brittany
Ferries group, BAI reduced its capacity (two out of nine
ships), reorganised services on its routes (closure of two
out of eight routes) and reduced its traffic,
thereby
reducing the company’s (cid:145)allocated costs(cid:146).

(reorganisation

In addition to reducing its allocated costs, BAI also
reduced its non-allocated costs, both by cutting its own
services,
of
costs
renegotiation of contracts, sale of non-core assets) and
by redistributing its terminal costs in proportion to the
various routes it operates, thereby allocating some 20 %
of the formerly non-allocated costs (60).

land-based

The remaining non-allocated costs are made up of
obviously general expenses. They relate to land-based
services in the United Kingdom (cid:151) including ticket sales,
central BAI
(on-board services),
Truckline staff (freight service), advertising and general
expenses (cid:151) which in total and following redistribution
total
of harbour
operational costs (61).

around 16 % of

staff, Serestel

represent

staff

fees

10 % respectively (62). All in all, these measures cost the
company FRF 19 million.

for voluntary retirement,

In particular, the French authorities intervened through
the National Employment Fund (NEF) in respect of four
office staff (63), and applied four types of measure in
respect of seamen (introduction of part-time working,
support
reduced working
hours and early cessation of activity (ECA)). According
to the French authorities, only the ECA scheme involves
a State contribution. The ECA scheme was notified to
the Commission by letter dated 25 January 1990
(registered on 26 January 1990) in the context of the
fleet(cid:146). The
the
for
(cid:145)Public programme
Commission approved this programme (64)
the
for
period 1990 to 1994; it was renewed by France for the
period 1995 to 1997 and approved by the Commission.
The ECA scheme was re-notified by France by letter
dated 7 September 1998 (65) and was again approved
by the Commission (66).

commercial

(99)

The measures financed through the ECA will have cost
FRF 0,1 million, while the NEF measures will have cost
FRF 0,01 million.

(100) The

French

authorities

indicate

that

no

arrangements were applied in the context of
redundancy programme.

other
the

2.5.7. Savings

(101) The internal and external cost-cutting measures included
a wage freeze and abandonment of part of the 13th
month,
budget,
reorganisation of land-based services and of the medical
service,
subcontracting
renegotiation
the
contracts (e.g. laundry and cleaning).

a 15 % cut

advertising

in the

and

of

2.5.6. Redundancy programme

(97)

The information supplied by the French authorities
shows that BAI implemented a redundancy programme
affecting 24 office staff and 58 regular seamen. It is also
noted that further company measures, in addition to the
redundancy plan, led to the shedding of 35 office staff
and 129 on-board staff, i.e. staff reductions of 11 % and

(58) Of which Sabemen granted FRF 150 million, Senacal FRF 64

million and Senamanche FRF 36 million.

(59) NB: Around 1,49 % of the sum of FRF 250 million came not from
from the Chambers of

the regional and local authorities but
Commerce and Industry, CrØdit Agricole and other shareholders.

(60) See NERA, p. 31.
(61) See NERA, pp. 26 and 31.

(102) The

above

(before

the
restructuring measures
replacement of a ship) produced overall savings of FRF
60 million in 1996 and FRF 50 million in 1997
compared with the respective previous financial year. In
conjunction with an improvement
in the external
context, the measures served to reduce the operating
deficit by 60 % in 1997 and to eliminate it altogether in
1998 (67).

(62) See in particular the letter from the French authorities dated 16

July 1998.

(63) See letter from the French authorities dated 15 October 1998.
Involved were two pre-retirements and two shifts to part-time
working.

(64) Letter to France dated 9 July 1990.
(65) Registered at the Commission on 8.9.1998.
(66) Letter to France dated 11 November 1998.
(67) Brittany Ferries’ 1999 to 2003 plan, September 1998, Annex 3, p.

6.

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L 12/47

2.5.8. Cost and cumulation of restructuring aid (1995 to 1999/2002)

(103) A full picture is needed of the aid given to the Brittany Ferries group during the restructuring
the restructuring aid proper and the parallel aid (68) granted during the

period. Accordingly,
restructuring period have been cumulated in Table 4 below:

Table 4 (69)

Period 1995-2003
Cost of restructuring

(in FRF million)

Year

1995

1996

1997

1998

1999/2002

Total

Cost of restructuring
Redundancy programme
Withdrawal of the Normandie
Shipper
Development of yield management
New reservation software
Sale of West Country TV
Leaseback of the Quiberon
Refinancing of the Val de Loire cost
SPC

[(cid:133)]
[(cid:133)]

[(cid:133)]
[(cid:133)]
[(cid:133)]
[(cid:133)]
[(cid:133)]

subtotal (1)

[(cid:133)]

[(cid:133)]
[(cid:133)]

[(cid:133)]
[(cid:133)]
[(cid:133)]
[(cid:133)]
[(cid:133)]

[(cid:133)]

[(cid:133)]
[(cid:133)]

[(cid:133)]
[(cid:133)]
[(cid:133)]
[(cid:133)]
[(cid:133)]

[(cid:133)]

[(cid:133)]
[(cid:133)]

[(cid:133)]
[(cid:133)]
[(cid:133)]
[(cid:133)]
[(cid:133)]

[(cid:133)]

[(cid:133)]
[(cid:133)]

[(cid:133)]
[(cid:133)]
[(cid:133)]
[(cid:133)]
[(cid:133)]

[(cid:133)]

[(cid:133)]
[(cid:133)]

[(cid:133)]
[(cid:133)]
[(cid:133)]
[(cid:133)]
[(cid:133)]

206,00

860,00
860,00

860,00
860,00

Restructuring investments
Normandie 2

subtotal (2)

Other costs
Investments under ACOMO

subtotal (3)
Total costs (1+2+3)

87,30
87,30
105,40

108,30
108,30
169,00

129,60
129,60
200,40

0,00
0,00
51,20

0,00
0,00
6,20

325,20
325,20
860,00 1 392,20

State aid

Restructuring aid

Ad hoc restructuring aid
(*non-authorised)

Injection of public capital

70,00

80*

0,00

0,00

0,00

246,00

subtotal (1)

70,00

246,00

0,00

0,00

0,00

Other aid

ACOMO (authorised)

40,00

70,00

50,00

0,00

0,00

Early cessation of activity (ECA)
(authorised)

Reimbursement of business tax
(authorised)

Reimbursement employer’s
contributions (authorised)

8,49

9,61

9,71

0,00

0,00

0,00

0,00

0,00

37,77

39,70

subtotal (2)

48,49

79,61

Total (1+2)

118,49

325,61

59,71

59,71

37,77

37,77

39,70

39,70

Intensity of cumulated aid

Intensity of restructuring aid (in the strict sense)

%

%

70,00

246,00

316,00

160,00

0,10

27,81

77,47

265,38

581,38

41,76

29,62

(68) Apart

from the ECA scheme (applied in the context of

the
this parallel aid is not linked to the
redundancy programme),
restructuring plan, but results from the application of schemes
approved prior to restructuring.

(69) See information sheet on the impact of the restructuring measures
on Brittany Ferries, submitted by the company’s representatives at
a meeting and registered under No 60243.

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(104) The cumulated measures taken during its restructuring
phase will have cost
the Brittany Ferries group FRF
1 392 million. Cumulated aid received during this
period totals FRF 581 million.

The intensity of the restructuring aid proper is 30 %.

2.5.9. Aid received before 1995

The intensity of the aid cumulated during restructuring
is 42 %.

(105) Aid paid before the restructuring period and which does

not constitute restructuring aid is indicated in Table 5.

(106) This aid involves the application to Brittany Ferries of schemes approved by the Commission, and
payment of guarantees. The public programme for the French commercial fleet, which includes
ACOMO, investment aid (70), the reimbursement of business tax (71) and the ECA scheme, was
approved in 1990 (72) and renewed up to 1997 (73).

Table 5

Period 1986-1994

Year

1983

1986

1987

1988

1989

1990

1991

1992

1993

1994

Total

Aid

(cid:145)existing aid(cid:146):

Investments (auth-
orised)

ACOMO (authorised)

Reimbursement busi-
ness tax (authorised)

18,49 40,00

40,00 65,00

105,00

13,00 12,00 10,00 22,00 28,00 85,00

0,73

0,98

1,05

1,66

2,03

3,30

4,03

6,01 19,06

Aid for guarantees

24 (*)

270 (*)

10 (*)

Total

18,49 40,73

0,98

1,05 14,66 54,03 78,30 26,03 34,01 209,06

(*) Aid equivalent not established for these amounts.

2.6. Description of grounds for initiating the
procedure

(107) As a result of the complaint referred to at recital 1, the
information received from the French authorities and
articles in the press, the Commission had a body of
its disposal which included information
material at

(70) In its decisions of 1987, 1990 and 1995 on investment aid, the
Commission raised no objections to investment aid up to and
including 1997, or regarding its application prior to 1987.

(71) The submitted documents which led to notification of the scheme
to reimburse business tax as part of the public programme for the
French commercial fleet mentioned that the scheme was applied
(partial reimbursement)
for the 1980, 1981, 1987 and 1988
financial years. Partial application was also planned for 1989 and
100 % application was planned for the financial years 1990
onwards. In 1990 the Commission approved the scheme for the
years 1989 to 1994. The scheme was then renewed up to 1997,
and no objections were raised regarding its application prior to
1989.

(72) Commission Decision addressed to France by letter dated 9 July

1990.

(73) Commission Decision addressed to France by letter dated 10 June

1997.

regarding aid allegedly paid to Brittany Ferries and
information according to which various interventions
involving State resources (subsidies of around FRF 246
million, unpaid interest, alleged aid in respect of a
redundancy programme, prolongation of the ACOMO
scheme, investment aid, loans from CrØdit Agricole and
reductions in port charges (part NN 64/97)) were liable
to benefit the company. The French authorities went on
to notify restructuring aid first of FRF 70 million (part
N 9/98) and then of FRF 80 million (part N 618/98).

(108)

In the light of this varied information, the Commission
decided to initiate the formal
investigation procedure
provided for in Article 88(2) of the Treaty in respect of
aids N 9/98 and NN 64/97 and to extend the procedure
to aid N 618/98. It should be recalled that, in initiating
and then extending the formal investigation procedure,
the Commission has twice given interested parties the
opportunity to have their full say on all the aspects
involved,
restructuring and financial
arrangements of the Brittany Ferries group.

including the

15.1.2002

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Official Journal of the European Communities

L 12/49

(109) The text

indicating the main points mentioned as
remaining unresolved when the investigation procedure
was initiated/extended is quoted below:

2.6.3. CrØdit Agricole

2.6.1. The restructuring

regards

subsidies N 9/98 and N 618/98,

As
(cid:145)the
Commission would emphasise that these would have to
be based on a plan aimed at restoring the long-term
viability of Brittany Ferries. The French authorities did
not include such a plan with the notification. Moreover,
the Commission does not consider that
the planned
structural
capital
handicaps suffered by the company, as detailed by the
French Government, which have led to the present
financial situation [(cid:133)](cid:146).

overcome

injection

could

the

a

that

The Commission considered that, notwithstanding this
rationalisation plan implemented in the process,
(cid:145)the
company and the French authorities have not so far
restructuring
evidence
provided significant
process
restoring
is under way with the aim of
long-term viability. As a general rule, the measures to
support the company appear to have been implemented
as a reaction to the unfavourable financial situation in
which the company has found itself since 1993 in order
to cover successive operating losses and protect
the
company against the effect of market forces. Such aids
are likely to distort competition between shipping
companies in the various Member States to an extent
contrary to the common interest(cid:146).

it

that

stated [to the Commission]

(cid:145)It was
the Caisse
RØgionale du CrØdit Agricole de Bretagne has covered the
successive cash losses incurred by Brittany Ferries since
1993 (including those of FRF 80,2 million in 1995 and
FRF 16,2 million in 1996). In spite of the restructuring
measures taken by the company and its partners, both
for which
public and private,
economic reasons and with which guarantees the bank
agreed to cover the company’s deficits. Under normal
market conditions, a bank would not agree to cover the
cash deficits of a company in such an economic
It does not
position without having solid guarantees.
appear,
intervention by CrØdit
the
that
Agricole has been made on terms which would be
acceptable to an investor operating under free market
conditions.(cid:146)

is not very clear

therefore,

2.6.4. Redundancy programme

(cid:145)In the application of
its social plan, Brittany Ferries
seems to have received State aid under the statutory
provisions which apply specifically to the maritime
sector. The Commission would like to receive further
information on all these provisions which would allow
it to determine whether these aid measures form part of
measures applicable to all sectors of the economy or
shipping
special
whether
companies.(cid:146)

scheme

this

for

is

a

(cid:145)The French authorities should therefore present a sound
restructuring plan to which the aids are tied and furnish
systematic proof that the proposed aid meets all the
general conditions for authorisation referred to above.(cid:146)

2.6.5. ACOMO

2.6.2. The SPCs, investment subsidies, regional guarantees

in these

Regarding part NN 64/97 the Commission raised the
following points: (cid:145)As regards the semi-public companies
(Sabemen, Senacal and Senamanche), it was stated that
they agreed to reduce the rents for the ships paid by
Brittany Ferries over three years and that in return the
public shareholders [in the SPCs] increased their capital
holdings
three
companies have generated losses and accumulated
successive debts in spite of the fact that they receive
investment subsidies from the State and loan guarantees
from the regional authorities. Serious doubts persist,
therefore, as to whether, in the two cases, the entities
and the public
concerned
investors
shareholders)
would(cid:146) (74).

companies
acted in the way private

companies. However,

three

(the

the

(74) See communication from the Commission to the Member States
published in OJ C 307, 13.11.1993, concerning the principle of
an investor in a free market economy.

(cid:145)The Commission reminds the French [authorities] that
the current general French scheme for aid to merchant
shipping (which includes ACOMO aid) approved by the
Commission extends over three years (1995 to 1997)
and can no longer be applied in 1998, contrary to what
they have stated. Any new aid scheme would therefore
have to conform to the new Community guidelines.(cid:146)

2.6.6. Reduction of port charges

the measure
(cid:145)The French authorities maintain that
solidarity fund has not been
relating to the port
implemented. However,
they have stated that port
charges have recently been reduced as a result of
commercial decisions taken by the port authorities. The
Commission would like more information on the ports
concerned, the underlying reasons and the beneficiaries
of the reductions.(cid:146) France has explained with regard to
this that rates are negotiated and set between ports
(administered by chambers of commerce and industry)
under
various
of
(international) operators.

law with

private

rules

the

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15.1.2002

3. COMMENTS FROM INTERESTED PARTIES

Brittany
competitors
restructuring exercises without the benefit of State aid.

engaged

Ferries’

in

costly

3.1. Initiation of the procedure

(115) P & OEF therefore believes that any aid granted to
Brittany Ferries needs to be justified in accordance with
the Community rules on State aid.

3.1.1. Permanent Representation of the United Kingdom to

the European Union

3.1.3. The Chamber of Shipping (United Kingdom)

it

should

companies

should be

comply with

guidelines on State

rescuing and restructuring firms

(110) The United Kingdom believes any aid granted to
shipping
the
aid to maritime
Community
transport and the Community guidelines on State aid
in difficulty.
for
Moreover,
so that
compliance can be clearly demonstrated. The United
Kingdom agrees with the Commission’s view that the
competitive situation faced by Brittany Ferries is no
unique to that company and does not, of itself, justify
State aid. Aid granted in these conditions cannot do
otherwise but distort competition. The consequence is
an adverse impact on other ferry companies competing
within the market without the benefit of State aid.

fully transparent

(111)

(112)

It is reasonable to assume that the aid given to the
company has protected it from market pressures and
enabled it to take market share and revenue from other
companies. This is evidenced by the fact that Brittany
Ferries was able to expand its services in 1996, at a
time when Stena withdrew from the western Channel
and P & O European ferries rationalised its services in
the area.

In the absence of a clear restructuring plan designed to
ensure
the
Commission would seem to be right in inferring that
the granted aid is disproportionate and inappropriate.

longer-term viability,

company’s

the

3.1.2. P & O European Ferries

(113) P & O European Ferries ((cid:145)P & OEF(cid:146)), which competes
with Brittany Ferries on several routes in the western
Channel, believes the Commission’s preliminary findings
warrant further investigation of the factors which the
French Government claims justify the intervention of
regional bodies in favour of Brittany Ferries.

(114) According to P & OEF, Brittany Ferries cannot be said
to be the only company affected by factors which in
fact affect all operators,
including its competitors. For
instance, tougher competition on the market in question
(which became even keener when the Channel tunnel
opened in 1995)
forced Stena Line to abandon its
western Channel operations entirely in 1996, while P &
OEF was obliged to undertake a material restructuring
of its own western Channel operations. In both cases,

the market

(116) The Chamber of Shipping ((cid:145)the Chamber(cid:146)) points out
that
for ferrying passengers and vehicles
is
between the United Kingdom and the continent
keenly competitive. Recalling also that operating aid is
incompatible with the common market, the Chamber
argues that the market between the United Kingdom
and the continent cannot in general be considered to be
either
(cid:145)thinly served(cid:146), as would be
necessary in order to justify a direct operating subsidy.

(cid:145)peripheral(cid:146) or

(117) The Chamber also argues that the guidelines on State
aid for rescuing and restructuring firms in difficulty are
highly pertinent in this context.

(118) Regarding case NN 64/97, the Chamber notes that the
French Government is trying to justify the granting of
is at a
subsidies by asserting that Brittany Ferries
commercial disadvantage vis-(cid:224)-vis its competitors.
It
believes this assertion to be spurious.

(119) Regarding the relations between Brittany Ferries and the
semi-public companies, the Chamber, having reviewed
the information presented by the Commission, believes
the decision to reduce the ships’ rents against a promise
of reimbursement in more propitious trading conditions
when none are in prospect lacks commercial credibility
(cid:151) and thus becomes a State aid.

(120) According to the Chamber, the relations reviewed in
this case appear to fit into a wider pattern of more or
less opaque measures to support
the operations of
Brittany Ferries on the part of public and semi-public
French organisations. The Chamber recalls, in particular,
Commission Decision 88/437/EEC, which forbade an
attempt by the French Government
an
excessive subsidy for the building of a new ship for
Brittany Ferries.

to grant

(121) With regard to the restructuring aid (case N 9/98), the
Chamber argues that there is no indication that the aid
will address the handicaps from which Brittany Ferries is
alleged to suffer.

(122) Accordingly, the Chamber encourages the Commission
to insist on an acceptable justification for these subsidies
from the French authorities. If none is forthcoming or
credible, the Chamber urges the Commission to ensure
that the proposed State aid, or any amount found to be
excessive, be prevented from reaching Brittany Ferries

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Official Journal of the European Communities

L 12/51

and causing further distortion of competition in the
ferry services market between the United Kingdom and
the continent.

3.2. Extension of the procedure

3.2.1. P & O European Ferries

(123) P & O European Ferries refers to the comments it
submitted when the procedure was initiated (see above),
stating that they also apply to the further aid tranche of
the
FRF 80 million covered by the extension of
investigation procedure.

3.2.2. The Chamber of Shipping (United Kingdom)

(124) The Chamber states that

the comments it submitted
when the procedure was initiated (see above) still stand.

(125) The Chamber disputes the French authorities’ argument,
recalling the latter’s admission that
the previously
notified aid package (covered by the initiation of the
procedure) was not sufficient to restore Brittany Ferries’
long-term viability. The Chamber believes this confirms
that the rationalisation programme did not constitute a
meaningful
core
operations.

restructuring

company’s

the

of

(126) The Chamber maintains

implausible that
that
activities which are currently loss-making will become
viable simply as a result of an injection of aid, without
restructuring.

is

it

(127) The Chamber points out that restructuring aid:

(cid:151) should normally only need to be granted once and
repeated

that
instalments of aid constitute a single one-off grant,

is disingenuous

to assert

that

it

(cid:151) should include measures to offset as far as possible
adverse effects on competitors, but that there has
been no sign of such measures.

(128) The Chamber therefore asks that, unless the French
authorities can provide a credible justification for these
subsidies, which must meet the abovementioned criteria,
the Commission prevent
these funds from reaching
Brittany Ferries and distorting competition in the ferry
market between the United Kingdom and the continent.

3.2.3. Ian Bruce, Member of Parliament (cid:151) House of

Commons

(129) According to Mr Bruce, the unfair subsidies received by
the company have directly affected shipping operations

and

from Weymouth
Bruce’s
constituency, and have affected operations out of other
south coast ports, particularly Poole, which is adjacent
to Mr Bruce’s constituency in Dorset.

Portland,

in Mr

(130) Given that, according to Mr Bruce, countries such as
inefficient
to prop up their
France consistently act
companies
simply because they are French-owned,
thereby preventing the most efficient operator within
Europe from providing the necessary services, Mr Bruce
asks that the subsidies in question be sorted out.

3.2.4. Brittany Ferries

(131) Brittany Ferries presented a series of documents,

the

main ones being:

(cid:151) (cid:145)Plan for a return to competitiveness(cid:146) covering the

period 1996 to 1998 (October 1996),

(cid:151) (cid:145)Plan for a return to competitiveness(cid:146) covering the

period 1996 to 1998 (March 1997),

(cid:151) (cid:145)Viability plan(cid:146) covering the period 1999 to 2003

and annexes (September 1998),

(cid:151) Agreement of 26 May 1997 between the French
State and Bretagne Angleterre Irlande (BAI SA),

(cid:151) comments from Brittany Ferries,

(cid:151) annexes to the comments from Brittany Ferries,

(cid:151) study by the NERA consultancy (cid:145)An assessment of
Brittany Ferries’ viability plan(cid:146) dated 29 March
1999.

(132) Brittany Ferries’

in the

argument

abovementioned
documents is designed to demonstrate that the Brittany
returning to long-term
is
Ferries group (BAI-SPCs)
viability following restructuring. This conclusion results
from an overall analysis set out in various study and
forecasting documents submitted by the company.

3.2.5. Associated British Ports, Plymouth

(133) Associated British Ports, Plymouth,

is

((cid:145)ABP(cid:146))

the
harbour authority of Millbay docks within the port of
Plymouth. In its comments, ABP points out that of a
total of around 8 million pounds sterling (GBP) invested
in the ferry facilities in the port of Plymouth, GBP 2,8
million has been funded by ERDF grants, Plymouth
having Objective 5b status. Plymouth has been granted
the status of an Objective 2 region, and the county of
Cornwall, adjacent to Plymouth, has recently obtained
Objective 1 status.

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(134) According to ABP, over the last 20 years traffic volumes
have increased year-on-year between Plymouth and
Roscoff and now total 500 000 passengers a year, along
with 130 000 passengers between Plymouth and
Santander. Over 300 jobs (cid:151) including high-tech jobs,
which are scarce in the Plymouth region (cid:151) depend
directly upon Brittany Ferries’ operations in the City of
Plymouth, where the company has sited its information
technology and training centre.

(135) A termination of the services offered by Brittany Ferries
would be catastrophic for the port and the city of
Plymouth, not only in terms of the severe economic and
logistic effects on local commerce, but also in terms of
the perceived
south-west
community from the rest of Europe. Lastly, the linking
of the regions of the Atlantic Arc is essential to the
development of each of those regions.

isolation of

entire

the

(136) ABP therefore asks the Commission to decide in favour
of Brittany Ferries and approve the aid in question,
which will ensure that
links from Plymouth to the
continent and other Community regions continue.

3.2.6. Poole Harbour Commissioners

(137) Poole Harbour Commissioners ((cid:145)PHC(cid:146))

is the harbour
authority for Poole, Dorset, in the United Kingdom. PHC
states that Poole is in the top 15 of all United Kingdom
ports and that PHC receives no public aid. PHC also
emphasises that 50 % of its annual turnover is generated
by the activities of Brittany Ferries, which is the only
company providing a year-round ferry service out of
Poole. PHC’s other points are set out below.

(138)

In addition to the 160 jobs provided directly by PHC,
some 450 local
jobs are dependent on the success of
Poole harbour’s commercial operations. Over the years
PHC has invested GBP 15 million to help Brittany
Ferries develop its services from Poole.

(139) PHC argues that the ferry services market in the western
Channel displays no overcapacity and that Brittany
Ferries operates in a niche market by having specialised
in linking outlying regions of the United Kingdom and
France. Complete termination of
the Brittany Ferries
service would result in an immediate loss of 100 to 120
jobs, which would be followed by the complete closure
of the commercial port, given that the remaining trade
would not cover operating costs. It is hard to see Poole
harbour developing new trades, not least because of the
shallowness of the harbour and the increasing size of
ships.

(140) PHC also believes it

is unlikely that other operators

would use the facilities offered by the port of Poole.

(141) PHC negotiated a reduction in port charges with
Brittany Ferries so as to help the company restructure
and above all to avoid any further reduction in rotations
by Brittany Ferries.

(142) For the above reasons, PHC asks the Commission to
approve the aid to Brittany Ferries. It points out that
Brittany Ferries’ withdrawal from Poole would probably
result in the closure of the commercial port.

3.2.7. Port of Santander

(143) The port of Santander ((cid:145)PoS(cid:146)) states that

the United
Kingdom is its main commercial partner, particularly in
the area of ro-ro ferry transport. This is why PoS has
continually invested in the expansion of
ro-ro
its
the only
infrastructure. Brittany Ferries, which is
company offering a scheduled passenger service to the
port, has been using PoS’s facilities for over 25 years,
linking Santander with Plymouth and Portsmouth on a
twice-weekly basis.

(144) Brittany Ferries accounts for around 20 % of PoS’s ro-ro
activities and contributes substantially to the regional
economy (PoS impacts the regional economy at a rate
of some 16 % to 17 % in terms of the region’s jobs,
revenue, gross earnings and added value). The existence
of
regional
the
infrastructure.

improved

ferry

link

has

the

(145) PoS also maintains that Brittany Ferries operates in a
niche market between these outlying regions and that
the Community has always
to
develop maritime links in the Atlantic Arc so as to
relieve road congestion and reduce pollution from
lorries.

supported initiatives

(146) PoS therefore believes

the Commission ought

to

approve the aid in question.

3.2.8. Comments from the Conseil rØgional de

Basse-Normandie, the Conseil gØnØral du Calvados
and the Conseil gØnØral de la Manche

(147) The various

regional authorities

referred to above
submitted comments to the Commission individually.
For the most part, these comments expressed similar
opinions, which have been grouped and summarised
below.

(148) The Lower Normandy region, comprising the three
la Manche and Orne, has

departments of Calvados,

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partial Objective 2 and 5b status, qualifying it
for
Structural Fund and regional aid in accordance with
Article 87(3)(c) of the Treaty.

would fly in the face of other Community policies, such
as cohesion and regional development. The regions
point out that much of Brittany is eligible for Objective
2 and 5b programmes.

(149) Lower Normandy’s two main ports, Caen-Ouistreham
and Cherbourg, are both served by Brittany Ferries,
which plays a crucial role in the economic life of the
departments of la Manche and Calvados.
In addition,
both the Lower Normandy region and the departments
of Calvados and la Manche became actively involved in
maritime transport by becoming shareholders in the
semi-public
Senamanche
respectively (the SPCs), which own ships assigned to
routes operated by Brittany Ferries.
the
consequences of the opening of the Channel tunnel and
the fact that the pound sterling fell to a significantly
lower level and remained there for a long period, the
SPCs agreed to support Brittany Ferries, granting it a
temporary deferment of rent during its restructuring
period.

In view of

companies

Senacal

and

(156) Moreover, Brittany Ferries directly employs 1 741
workers in the Brittany and Lower Normandy regions
under French labour contracts, subject to the national
social security scheme. Representing around 20 % of the
to the
French merchant navy,
sustainability of the French institutions,
including the
balance of the French merchant navy’s pension fund.

it also contributes

(157) The future of the ports of Roscoff and Saint Malo is
closely linked to Brittany Ferries continuing its activities.
It is also argued that Brittany Ferries’ operations have
recovered thanks to the implementation of a company
restructuring plan.

(150) Following the recent difficulties in the cross-Channel
sector, Brittany Ferries has restructured and become a
viable operator.

(158)

the

of
the
public

the
In
light
abovementioned
the
Commission to approve the aid notified by the French
Government in order that the company may continue
to play its key role in the regional economy.

arguments,
invite

above
authorities

and Dieppe,

(151) Following P & O’s sudden closure of routes (Boulogne,
regional
for
le Havre
authorities wanted at all costs to avoid tying the future
of the region’s ports to a single shipping company. The
disappearance of Brittany Ferries would hand the P & O
ferry company a monopoly on routes in the central and
western Channel.

instance)

the

4. COMMENTS FROM FRANCE FOLLOWING
INITIATION/EXTENSION OF THE PROCEDURE

(152) The October 1998 report

and opinion entitled
Basse-Normandie,
les retombØes du trafic transmanche
en Basse-Normandie (Lower Normandy, the impact of
cross-Channel traffic for Lower Normandy) submitted to
the
de
the
by
Basse-Normandie support the above argument.

Commission

rØgional

Conseil

(159) The French authorities submitted a whole series of
documents following the initiation and extension of the
procedure,
section.
Nonetheless, some features of the comments submitted
during the procedure are given below.

descriptive

cited

the

as

in

3.2.9. Comments from the Conseil rØgional de Bretagne, the

Conseil gØnØral d’Ille-et-Vilaine, the Conseil gØnØral
des C(cid:244)tes d’Armor, the Conseil gØnØral du FinistŁre
and the Conseil gØnØral du Morbihan

(153) The various

regional authorities

referred to above
submitted comments to the Commission individually.
For the most part, these comments expressed similar
opinions, which have been grouped and summarised
below.

(154) These regional authorities, too, emphasise the regional
importance of Brittany Ferries, which they say should
not be seen as a simple company when what is at stake
is
and the
jobs in the Brittany region. Behind
preservation of
Brittany Ferries there lies an entire region.

an economic player

survival of

the

(155) To slow down or stop the driving force of regional
development which is the operation of Brittany Ferries

4.1. Recap of certain main arguments

(160) The French authorities argue that the business handicaps
which affected the company were compounded over a
period of around four years by major
economic
handicaps (such as the relaxing of controls on duty-free
sales in the strait, the opening of the Channel tunnel
and the devaluation of the pound sterling), causing the
company to make operating losses during that period.

(161) The problems affecting the company were so great that
the French authorities agreed to lend their support to its
restructuring process. The French authorities told the
Commission that, given the exceptional circumstances
described, public support for Brittany Ferries could in
no way be seen as operational aid to offset
the
company’s operating losses and protect it from normal
competition forces. On the contrary, the company has
its operation,
engaged in a genuine restructuring of
from which it will
and more
emerge
competitive, and able to operate without further need
for aid.

stronger

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(162) The French authorities point out what Brittany Ferries
has meant for the last 25 years and emphasise that they
to see the company continuing to serve as a
want
national
for European regional planning,
indicating that the company is a means of satisfying
national interests for strategic purposes.

instrument

(163) On these grounds,

the French authorities ask the
Commission to recognise that the support they decided
to grant to Brittany Ferries is in conformity with the
aid to maritime
Community
transport and with the Community guidelines on State
aid for rescuing and restructuring firms in difficulty.

guidelines on State

4.2. Risk of monopoly

(164) The French authorities also point out that they wish to
maintain a credible competitive alternative in the central
and western Channel, where Brittany Ferries’ only
P & O European Ferries
serious
(Portsmouth). The disappearance of Brittany Ferries
would be liable to create a de facto monopoly for P & O
in the sector.

competitor

is

value of renting to other maritime transport companies)
and so contributing to the company’s recovery. The rent
would be repaid once Brittany Ferries’ capital was back
up to its 1992 level.

all

to protect

(166) These rent reductions were financed by SPC capital
increases subscribed by all shareholders except Brittany
Ferries, which thus
saw its capital holding in the
companies slip from around 45 % to 30 %. The local
authorities intervened in accordance with the principle
and
equalisation,
of
commercial activities
in which they have a direct
interest and to which the activity generated by Brittany
contributes directly. The French authorities
Ferries
in this context, that both the amortisation and
argue,
the profitability of their commercial, port and touristic
operations depend on the success of Brittany Ferries’
operations, so that, all in all, it is in the local authorities’
economic interest to lend temporary support to these
loss-making activities, this being very much the sort of
analysis an informed investor would make.

economic

the

4.3. Temporary waiver of rent, financed by a
capital increase

(165) Regarding the capital increase which in 1996 allowed
the SPCs to grant BAI a temporary waiver of rent, the
French authorities state that the SPCs acted as a private
investor would. As shipowners, the SPCs had the choice
either of seeing Brittany Ferries run into difficulty, and
having to sell their ships without recuperating the full
value of their investments in terms of purchases and
fitting-out, or of accepting a temporarily reduced rent
(but higher than the realisable value of the ships or the

4.4. Investment subsidies (granted in the past) (75)

(167)

In addition, in their letter of 15 October 1998 (76) the
French authorities indicate that the subsidies referred to
below were granted exclusively as part of public aid
measures for the commercial fleet sector.

(168) The particular measure which entered into force on 29
December 1989,
the Commission
i.e. post-dating
guidelines of 3 August 1989 on financial and fiscal
measures concerning shipping operations with ships
registered in the Community, was approved by the
Commission under Articles 87 and 88 of the Treaty.

(75) Past investments not relating to the restructuring.
(76) Letter from the French authorities dated 15 October 1998.

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(169) Since 1982, the following ships and amounts have been involved:

Ship

Year of subsidy decision

Quiberon

Duc de Normandie

Barfleur

Normandie

Val de Loire

1986

1986

1991

1992

1992

Table 6

Investment subsidies

Contract price of ship
(FRF million)

97,27

101,80

495,10

769,60

700,00

Amount of subsidy

Rate (in %)

8,38

10,11

40,00

40,00

25,00

8,60

9,90

8,00

5,20

3,50

The Quiberon and the Val de Loire were acquired
secondhand in Sweden and the Duc de Normandie
secondhand in the Netherlands. The Normandie and the
Barfleur were ordered from Masa-Yards of Finland.

(170) Lastly, the French authorities indicate that investment
aid of FRF 40 million was granted to BAI in 1987 for
the ferry Bretagne.
In addition, FRF 70 million of
shipbuilding aid was granted to Chantiers de l’Atlantique
to build the ferry on the basis of a contract price
notified to the Commission of FRF 450 million and in
accordance with the decision taken by the Commission
and notified to the French authorities.

4.5. CrØdit Agricole

(171)

In their correspondence of 16 July 1998 the French
authorities explained that the CrØdit Agricole banking
group is not a public undertaking but a strictly credit
institution. The capital of the Caisse nationale du CrØdit
Agricole (CNCA) is held exclusively by the 56 regional
banks (caisses rØgionales (cid:151) CRCA) and their directors.
The capital of the CRCA is held by the 2 775 local
banks
locales (cid:151) CLCA) or by individual
members. The capital of the CLCA is in turn held by
some 5,5 million members, either natural or
legal
persons.

(caisses

(172) CrØdit Agricole’s decisions are taken on an entirely
internal basis and loans are granted using funds of
private origin deriving from private savings. It is also
indicated that the State provided no guarantee for the
loans granted to Brittany Ferries by CrØdit Agricole du
FinistŁre.

(173) According to the same letter, Brittany Ferries asked
CrØdit Agricole for sums corresponding to the amount
of aid expected from the State, which would not be
rapidly available to it on account of administrative
payment
French
authorities, this step was taken without any intervention
by the State, which had no reason to be informed.

procedures. According

the

to

(174) The

French authorities

also indicated that CrØdit
Agricole acted in accordance with the principle of an
investor in a free market economy, taking into account
both Brittany Ferries’
and the
declared intention of the French State to support the
company in the implementation of
its restructuring
plan.

recovery prospects

(175) CrØdit Agricole, which holds mortgages on the ships as
surety for the loans advanced to Brittany Ferries, indeed
had every interest
in preventing the company from
going bankrupt between late 1996 and early 1997.
Calling in the mortgages at this time would not have
enabled CrØdit Agricole to recover the value of what
was owed to it. Although Brittany Ferries’ fleet is the
most modern in the Channel and therefore has high
intrinsic value, the ship supply market was in a very
depressed phase at
the time, with older ships being
offered at lower prices.

(176) Regarding CrØdit Agricole’s relationship with the EIGs,
the French authorities point out that, in any event, the
as
financing mechanisms
intermediaries, as described above, come under common
law.

in which the EIGs

act

4.6. ACOMO

(177) By letter dated 16 July 1998 the French authorities
informed the Commission that up to 1997 Brittany
Ferries
and
modernisation aid in view of the international nature of
its operations, but that there were no plans to extend
such aid beyond 1 January 1998.

consolidation

regularly

received

had

4.7. Reduction of port charges

(178) The French authorities have indicated that there was no
reduction of port charges as such, but rather a system
of discounts on turnover, negotiated between the port
concessionaires,
and
industry ((cid:145)CCIs(cid:146)) and the shipping companies.

chambers of

commerce

the

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(179) According to the French authorities,

this

type of
is common where shipowners operate a
agreement
scheduled route generating a large turnover, as in the
case of
include
ferry companies. Such agreements
obligations both for the port and for the shipowner, the
to guarantee minimum
latter undertaking,
takings to cover the port’s financial commitments. They
may also stipulate that, should actual takings be higher
than the (cid:145)guaranteed(cid:146) amount, the companies may enjoy
a discount on any turnover in excess of the (cid:145)guarantee(cid:146).
It is in this context that Brittany Ferries concluded such
agreements with the CCIs of the ports it serves: Roscoff,
Saint Malo, Caen and Cherbourg.

inter alia,

(180) According to the French authorities, Brittany Ferries is
not the only company to have concluded agreements of
this type with the CCIs: by way of example,
they
indicate that Irish Ferries concluded one with the CCI of
Morlaix for the port of Roscoff, and P & O with the CCI
of Cherbourg.

(181) The French authorities also point out that

the ports
served by Brittany Ferries fall into the category of (cid:145)ports
of national interest(cid:146). They are operated under a (cid:145)public
equipment(cid:146) concession granted by the State to the CCIs,
which legally are administrative public
institutions
administering an (cid:145)industrial and commercial public
service(cid:146) and which constitute a privately managed public
service operating according to the rules applying to
private undertakings. Accordingly,
agreements
which the industrial and commercial services conclude
with their users are common law contracts over which
the public authorities exercise no control.

the

5. ASSESSMENT OF THE AID

5.1. Legal basis of the assessment

(182) Article 87(1) of

the Treaty stipulates that

(cid:145)any aid
granted by a Member State or through State resources
in any form whatsoever which distorts or threatens to
distort competition by favouring certain undertakings or
the production of certain goods shall,
in so far as it
affects trade between Member States, be incompatible
with the common market(cid:146).

refer

transport,

of maritime

in respect
to the
Community guidelines on State aid for rescuing and
restructuring firms in difficulty (78). The only basis for
granting a derogation for rescuing and restructuring aid
granted to firms in difficulty is Article 87(3)(c). By
virtue of this Article, the Commission can authorise (cid:145)aid
to facilitate
the development of certain economic
activities (cid:133) where such aid does not adversely affect
trading conditions to an extent contrary to the common
interest(cid:146). Aid compatibility is analysed according to five
main criteria, namely the existence of restructuring aid,
the
the return to viability via a restructuring plan,
prevention
the
proportionality of the aid and, lastly, implementation of
the restructuring plan.

competition,

distortions

of

of

(185) Furthermore,

the Commission communication to the
Member States on the application of Articles 87 and 88
of
the EC Treaty and of Article 5 of Commission
Directive 80/723/EEC to public undertakings in the
in
manufacturing
individual cases or in sectors which are unrelated to the
manufacturing industry, in so far as the principles of the
communication are applicable to those sectors and if
the Commission considers it is essential to determine
whether State aid exists.

sector (79) may

applicable

be

such aid with the Treaty.

(186) There follows an examination of the various elements of
dossier C 31/98 in respect of the existence of State aid
within the meaning of Article 87 and the possible
compatibility of
In this
context, and so as to verify the extent to which the
restructuring of Brittany Ferries will
in an
operation which will not require aid in the future, there
follows an analysis of
the mechanism by which the
ships operated by BAI are financed and of the parallel
aid
the
complainant, notably in its correspondence of 29
French
February 2000 and as
authorities and Brittany Ferries at
the meetings with
them and in the documents they submitted.

explained by the

in the past,

described by

received

result

as

5.2. BAI and SPCs: a single economic group

(183) However, Article 87(2) and (3) of the Treaty stipulates
that some State aid is compatible or may be considered
to be compatible with the common market.

(184) For assessing restructuring aid to shipping companies,
the Community guidelines on State aid to maritime
transport (77), which interpret Article 87 of the Treaty

(77) OJ C 205, 5.7.1997, p. 5.

(187) The judgment of the Court of Justice of the European
Communities in the Intermills case (80) confirms that
such an approach is acceptable:

(cid:145)It must therefore be accepted that, in spite of the
fact that the three manufacturing companies each

(78) OJ C 368, 23.12.1994, p. 12.
(79) OJ C 307, 13.11.1993, p. 3.
(80) Judgment of 14 November 1984 SA Intermills v Commission, aid
for the conversion of a paper-manufacturing undertaking, Case
323/82, ECR 1984, p. 3809.

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has a legal personality separate from the former SA
Intermills, all those undertakings together form a
single group, at least as far as the aid granted by the
Belgian authorities is concerned. The Commission
was therefore justified in considering the entire
group to be a single (cid:147)undertaking(cid:148) for the purposes
of the application of Article 92 [now 87] of the
Treaty.(cid:146)

(cid:145)Moreover, it should be noted that the applicants, in
stressing that the restructuring carried out by means
the aid in question constituted an indivisible
of
whole,
from an industrial and financial point of
view, have implicitly acknowledged that the original
undertaking and the new manufacturing companies
form a single economic unit.(cid:146)

(188)

activities

and operating

In the light of the explanations given in section 2 and
the above indications, and since it is essential for an
analysis of restructuring to consider an undertaking’s
investment
the
Commission believes it must in any case take account of
all of BAI’s assets and liabilities, as reflected in the
accounts of the SPCs. Moreover, as the SPCs are closely
linked to Brittany Ferries’ operations, the Commission
believes that in examining the granting of State aid it is
to analyse the whole of the Brittany Ferries
relevant
(economic) group.

together,

considers that they constitute a general measure, given
that they are common in France, can be set up in all
sectors of economic activity and come under common
law.

the

explained,

(194) Regarding CrØdit Agricole’s operations in respect of the
BAI group, both as a creditor and as a minority
shareholder in the SPCs, it should be noted that, as the
institution’s
French authorities have
capital has, since privatisation, been held by a large
number of members, most of them private. It is true
that mutual agricultural credit institutions are subject to
particular checks by the public authorities and that the
to CNCA
CRCA and CLCA are themselves
checks, as stipulated for instance by certain provisions
of the (cid:145)Code rural(cid:146). However, such checks are only to
they
ensure that
regulatory
comply with
the
requirements, and do not extend to decisions
(cid:145)Caisses(cid:146)
their credit
take autonomously as part of
institution
the Commission
considers that
the State is no answerable for CrØdit
Agricole’s activities and that there is therefore no need
to check for the existence of other features inherent in
the notion of State aid within the meaning of Article
87(1).

their books are in order and that
statutory

activity. Accordingly,

current

subject

or

(189) Accordingly,

the Commission will not analyse the
group’s internal relations from the point of view of
State aid, as it wishes to avoid counting the State aid
twice (once to the group and once within it).

(190) Nonetheless, the analysis presented in section 2 (see in
particular Tables 1 and 2) shows that the rent-charging
mechanism applied within the Brittany Ferries group
(BAI-SPCs) is in line with market practice, including in
terms of the amount of rent charged.

(191)

In short, the above analysis serves both to clarify the
transfers and to show that group
group’s
practice is in line with market practice in the sector
concerned.

internal

(195)

should be pointed out here that

It
the SPCs are
controlled by the public authorities and therefore have
access
to funds of State origin. The Commission’s
could
analysis has
involve State aid within the meaning of Article 87 of
the Treaty: (a) the ship-financing mechanism employed
by the Brittany Ferries group (BAI-SPCs) and (b) the
guarantees provided for that financing.

following measures

shown the

(196) To determine any aid element involved in operations
BAI conducted as a result of (public) financing of ships
via the SPCs prior to 1996,
the aspects below are
considered with reference to the principle of an investor
interpreted in
in a free market
particular
in the Commission’s position on the
application of Articles 92 and 93 of the EC Treaty to
public authorities’ holdings (82).

economy (81), as

5.3. Existence of aid in the form of financing of the
BAI-SPC group

(192)

In addition to the restructuring aid granted by the
French Government, the Commission must check for
the existence of any other aid resulting from BAI’s
partnership with the SPCs.

(193) Firstly, with regard to economic interest groupings and
the tax advantages they may confer, the Commission

5.3.1. Financing mechanism and return on investment

(197)

It should be borne in mind that from the creation of the
SPCs up until the appearance of the difficulties which
led to the restructuring (the 1996 unilateral capital
increase being part of that restructuring), the financial

(81) Commission communication to the Member States on the
application of Articles 92 and 93 of the EEC Treaty and of Article
5 of Commission Directive 80/723/EEC to public undertakings in
the manufacturing sector (OJ C 307, 13.11.1993, p. 3).

(82) EC Bulletin 9-1984.

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situation of the Brittany Ferries group (BAI-SPCs) was
return was earned. The group
such that a normal
expected to achieve a return on investments via its
operating revenue and via the residual value achieved
upon the sale of
the ships, covering the capital
originally used to make the investments in question. The
Commission can conclude,
is
common and accepted practice in the industry for
shipowners to rent their ships to operators and to make
a profit when they resell them.

in this regard,

that

it

(198) On this point,

the
Commission’s position on public authorities’ holdings is
relevant:

the third indent of point 3.2 of

is State aid involved where fresh capital

is
(cid:145)Nor
contributed in circumstances that would be acceptable
to a private investor operating under normal market
economy conditions. This can be taken to apply (cid:133)
where the public holding in a company is
to be
increased, provided the capital injected is proportionate
to the number of shares held by the authorities and
goes together with the injection of capital by a private
shareholder;
the private investor’s holding must have
real economic significance.(cid:146)

(199)

(200)

to increase

capital were

It should be pointed out here that until 1995 all
linked to new
decisions
investments, with BAI
capital
increases in proportion to its holding in the SPCs (83).
As required by the criteria set out above, BAI’s holding
as a private investor does indeed have real economic
significance, involving a major holding for BAI and the
SPCs (between 44,8 % and 49,98 % up until 1996).

subscribing to the

of

and

have

value

assets

acquired

increased

reinvestment

significantly
Investment
the Brittany Ferries group,
enhanced the value of
including
as
operations expanded, the building-up of a market and a
clientele (which had not previously existed as such) and
the acquisition of maritime transport know-how, all of
which has also earned the company an excellent market
image (clearly identified by Dynamar and NERA).
Moreover, since the restructuring the group’s value is
underpinned by the prospect of long-term viability and
by the sustainability of the operations it has built up
and has now been operating for over 20 years (84).

(83) See letter from the French authorities dated 25 June 1999.
(84) This means that if the group were to be sold,

its public and
private shareholders would obtain a return from the value of the
group as a whole,
including not only its assets, but also other
elements of value such as the market and clientele which have
been built up and the group’s excellent image, which is recognised
on the market.

(201) Given that the Brittany Ferries group’s operation enables
the SPCs to balance their budgets using the rental
income from BAI and, upon the sale of ships, earned
the group capital gains of around 7 % to 8 % a year per
ship (85) before
the difficulties which led to its
the said operation may be considered
restructuring,
appropriate and in line with market practice in the
sector in question.

(202) The Commission concludes that the profits made by the
group have enabled it to increase its value significantly,
so that its return may be said to be normal in terms of
dividends or capital gains (86).

(203) The Commission therefore considers that

the public
capital
increases (prior to 1996) were carried out in
accordance with market principles and that there are no
elements of State aid in the way the Brittany Ferries
(BAI-SPC) group’s ships were financed prior to 1996.

(204)

In view of the foregoing, the Commission has decided
not to cast doubt on the financing mechanism described
above, which has been analysed in order to supplement
the analysis of the Brittany Ferries group’s (BAI-SPCs)
restructuring.

5.3.2. Guarantees

that

the Commission notes

(205) With regard to the guarantees provided to the SPCs in
1983 and 1987,
the
measures taken prior to 1989 were not covered by the
initiation or the extension of
the procedure or by
requests for information sent to the French authorities
before April 1999. As indicated in the initiation of
proceedings C 31/98, the first letters the Commission
sent to the French authorities before that date (in 1996
and 1997) dealt not with the question of guarantees
provided to the SPCs, but with (cid:145)the intention of the
French authorities to grant financial support to Brittany
Ferries(cid:146). Accordingly, as from 16 April 1999, the date
on which Regulation (EC) No 659/1999 entered into
force, the limitation period laid down in Article 15 of
the Regulation has expired, in the absence of any action
to interrupt that period. It follows that the aid sums
relating to the guarantees of 1983 and 1987 are to be
deemed (cid:145)existing aid(cid:146).

(206) Regarding the FRF 10 million guarantee provided in
1992, and in view of the fact that in 1992 the group
was not yet in difficulties, the Commission considers
that the fact that, as the recipient admits, there was no

(85) See Tables 1 and 2.
(86) See
the

aforementioned Commission

authorities’ holdings.

position

on

public

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proper return on the guarantee in line with market rates
constitutes State aid according to the Commission
notice of 11 March 2000 (87) on the application of
Articles 87 and 88 of the EC Treaty to State aid in the
form of guarantees (88).

(211)

In order to establish the exact amount of
this aid
in the FRF 10 million guarantee granted in
element
1992, the Commission invites France to quantify it with
reference to the market
the
rate in the light of
Commission communication of 11 March 2000 (91).

(207)

should be mentioned that, according to BAI’s
It
argument (89), the element of subsidy deriving from this
last guarantee should be deemed regional aid under the
guidelines on State aid for regional purposes, this being
an (cid:145)initial investment(cid:146). BAI also refers to the Community
guidelines on State aid to maritime transport (90), which
it says allow investment aid in favour of shipping
companies within the framework of regional aid.

(208)

In this respect, the Commission refers nonetheless to the
text of the guidelines, section 5 of which indicates that
the Commission has never been favourable to this type
of aid and that (cid:145)regional aid for maritime companies in
disadvantaged regions, which often takes the form of
investment aid to companies investing in the regions,
may only be permitted where it is clear that the benefits
will accrue to the region over a reasonable time period.
This would, for example, be the case if the investment
related to the construction of dedicated warehouses or
purchase of fixed transhipment equipment (cid:133)(cid:146). Such aid
must also comply with the regional aid rules. Moreover,
there is no guarantee that investments financed in this
way will comply with the Community shipbuilding
rules, as the text also requires.

5.4. Existence of restructuring aid

5.4.1. The amounts of FRF 70 and 80 million

(212) The French authorities notified the amounts of FRF 70
and 80 million in restructuring aid as part of the BAI
restructuring plan.

5.4.2. Injection of public capital (FRF 246 million)

(213)

In 1996, as part of the restructuring of Brittany Ferries
and to that same end, the SPC shareholders provided a
capital
increase of FRF 250 million (mainly public
money). However, this capital increase is quite distinct
from those predating 1996, as
it was carried out
essentially be the public authorities using public funds
totalling around FRF 246 million and was not matched
by a concomitant increase from private funds, as had
been the case prior to 1996.

(209) The Commission concludes from the text that only fixed
investments are acceptable under the rules on regional
aid in the
aid to shipping
companies. Mobile investments such as ships may not
be subsidised in this way.

investment

form of

(210) Accordingly,

the

aid element deriving

from the
guarantee provided in 1992 is deemed incompatible
with the Treaty and must
therefore be recovered in
accordance with Article 14 of Regulation (EC) No
659/1999.

(214) The said capital

increase thus constitutes a unilateral
injection of public capital
into the Brittany Ferries
group. Contrary to practice prior to 1996, the increase
was not an across-the-board subscription as it did not
involve the private shareholder BAI. The result was that
the public holding reached a significantly higher level
than originally, even though in 1996 the group was in
financial difficulty. The Commission notes
the
conditions laid down in the third indent of point 3.2 of
its position on public authorities’ holdings are not met
and that the group’s situation is in fact that described in
the fifth indent of point 3.3 of the said position:

that

(cid:145)There is State aid (cid:133) where the injection of capital into
companies whose capital is divided between public and
private shareholders makes the public holding reach a
significantly higher level than originally and the relative
disengagement of private shareholders is largely due to
the companies’ poor profit outlook (cid:133)(cid:146).

(87) OJ C 71, 11.3.2000.
(88) With regard to this, CrØdit Agricole has indicated, by way of
illustration, that in view of BAI’s financial situation in 1992, a FRF
10 million bank guarantee should normally have carried an
interest rate of 1 % per year.

(89) Document registered at
number A/51686.
(90) OJ C 205, 5.7.1997.

the Commission on 30.1.2001 under

(215)

In view of the foregoing, the Commission concludes, on
this point, that the unilateral capital increase of around

(91) With regard to this, CrØdit Agricole has indicated, by way of
illustration, that in view of BAI’s financial situation in 1992, a FRF
10 million bank guarantee should normally have carried an
interest rate of 1 % per year.

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FRF 246 million by the SPCs’ public shareholders in
1996 constitutes State aid.

(223) The investment aid granted for the acquisition of certain
ships is set out in Tables 4 (section 2) and 6 (section 4).

(216) Accordingly, and given that

the injection of public
capital was made as part of a restructuring programme,
the Commission considers that the said injection must
be deemed restructuring aid to a firm in difficulty.

(217) The question of the proportionality and compatibility of

the aid is examined below.

5.4.3. Redundancy programme

(218) Given that

the parallel measures by the

French
authorities have either already been approved or fall
into the category of general measures applicable in
France, and since the Commission regards the social
costs of restructuring in a favourable light,
it would
appear
aid already
approved, no State aid is to be identified within the
meaning of Article 87(1) of the Treaty under this item.

from the parallel

aside

that,

5.4.4. Reduction of port charges

(219)

It should be recalled that the question the Commission
initially raised with the French authorities was whether
the measure relating to the inter-port solidarity fund
was to be introduced. When the French authorities
indicated that
the
Commission asked for (cid:145)more information on the ports
the reasons for these reductions and the
concerned,
beneficiaries(cid:146).
is
summarised in section 4 above.

it had not been introduced,

authorities’

French

reply

The

(220) Regarding the ports, it should be remembered that the
Commission wanted to know whether an (cid:145)inter-port
solidarity plan(cid:146) had been introduced. When France said
it had not,
the Commission asked for additional
information on the operation of those ports. On the
basis of
the
Commission has no reason to suppose that Brittany
Ferries is not paying market rates.

information in its possession,

the

(221)

It may therefore be concluded that, as regards this
aspect of the current dossier, Brittany Ferries has not
received State aid within the meaning of Article 87(1) of
the Treaty.

5.5. Existence of aid in another form

(224) The other aid involves Brittany Ferries’ application of
schemes approved by the Commission. Since ACOMO,
the investment aid up to and including 1997,
the
reimbursement of business tax and the ECA have all
been approved by the Commission, there is no need to
pronounce on them, even though these sums of parallel
aid are duly taken into account for the proportionality
of the restructuring aid. It should also be noted that the
ACOMO scheme was discontinued at the beginning of
1998.

(225) The Commission has no comments to make regarding
the aid the French authorities indicate they paid to BAI
in 1987 in accordance with the Commission’s
(cid:145)shipbuilding(cid:146) decision (letter SG(88) D/01376 dated 5
February 1988), given that
the aid was paid in
compliance with the aforementioned decision.

(226) As for the investment aid the French authorities indicate
they granted in 1986, given that such aid was not
prohibited at
favourable decisions
were taken on similar schemes during the 1990s, and in
the
view of
Commission considers that the beneficiary was able to
have legitimate confidence in the aid (92).

the time and that

time which has

elapsed,

since

the

5.6. Compatibility (cid:151) restructuring plan and return
to viability

(227)

the

this

context,

In
(pound
sterling/French franc parity, market development) and
internal factors relating to the group’s restructuring are
analysed below.

external

factors

5.6.1. Parity between the pound sterling and the French franc

(228) According to M & G’s April 1998 diagnosis (93), a fall
of FRF 0,50 in the value of the pound automatically
reduces BAI’s results by at least FRF [(cid:133)], quite aside
from any impact on forecast traffic and passenger yield.
In March 1999, around one year later, NERA noted that
franc/sterling parity should remain at around 9 FRF for
one pound sterling for the next few years at least. NERA
based this on OECD and United Kingdom Treasury
forecasts.

(222) The various aid paid to the Brittany Ferries group has
been placed in two categories: restructuring aid (in
which restructuring aid proper and parallel aid paid
during the restructuring period have been cumulated)
and aid paid before the restructuring period, which
cannot be treated as restructuring aid (see Tables 4 and
5 in section 2).

(229) On the basis of this information, the Commission notes,
firstly, that NERA based its findings on exchange rate

(92) Judgment of the Court of Justice, RSV, Case 223/85, ECR 1987, p.

4617.

(93) See M & G report, especially pp. 5 and 12 of the summary.

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forecasts by recognised, reliable institutions. Secondly,
given that a strong pound helps Brittany Ferries, the
Commission recognises that a stronger exchange rate
should help both BAI
Ferries
(economic) group return to viability.

and the Brittany

(235) Now that

they have been reduced,

reallocated and
explained, and represent an acceptable proportion, the
Commission considers the central costs to be justifiable
and not
individual
liable to threaten the viability of
routes.

5.6.2. Market development

5.6.4. Analysis by profit centre

(230) As various experts have estimated that Brittany Ferries’
market
structural
in the Channel does not have
overcapacity, as confirmed notably by a rise in prices at
the beginning of 2000, and moreover that some growth
potential seems realistic both on that market and on the
other routes Brittany Ferries operates, the Commission
accepts
relevant
market does not have structural overcapacity.

that Brittany Ferries’

the argument

(231) The Commission also finds that the growth potential
offered by this market should be an external
factor
conducive to the development of both the company and
the Brittany Ferries (economic) group.

5.6.3. General costs

(232) As described in section 2, the non-allocated costs are,
firstly, clearly covered by the group’s various revenue
and, secondly, explained in part by BAI’s excellent
image (94), which Dynamar (95)
and NERA both
recommend it should maintain.

(233)

In addition, NERA considers that a company ought in
principle to hold onto the asset of a strong brand which
brings market benefits.
the satisfactory
analytical findings regarding the group’s profitability (see
below), NERA concludes here that the Brittany Ferries
group passes this market test.

In view of

(234)

In addition, general costs have been reduced (by
effectively reducing non-allocated costs and through
reallocation to profit centres), as advocated by Dynamar,
for instance (96).

(94) In its business strategy analysis, Dynamar defines Brittany Ferries

as being the (cid:145)strongest brand(cid:146).

(95) Dynamar report, p. 10.
(96) See letter from the French authorities dated 12 May 1999, which
included NERA’s comments. Regarding Dynamar’s comments on
this point referring to a comparison between BAI and a reference
company, NERA stresses three factors in particular:
(cid:151) Brittany Ferries has to carry out all its management operations
by itself, while the reference company may enjoy certain
(synergetic) advantages by having a management which, at least
in part, fits into that of a larger group,

(cid:151) Brittany Ferries is responsible for operations in a larger number

of ports than the reference company,

(cid:151) Brittany Ferries has a larger

turnover

than the reference

company.

the
(236) Dynamar noted that one necessary element of
restructuring analysis would be an analysis of
the
company’s profit centres. NERA considered this point
and analysed the Brittany Ferries group from that angle
(its profit centres basically being the routes it operates).

all

(237) To this end, NERA compared costs and revenue (97) by
route for passenger and freight traffic, and found that,
a positive net
individually,
routes made
the
to
In addition,
contribution to the group’s profits.
examine the various routes’ profitability in closer detail,
NERA reallocated the port charges among the various
routes BAI operates and found the positive net result to
be maintained on all routes (98).

of

non-allocated

(238) On the basis of this detailed analysis, and given the
proportionality
the
the
Commission recognises the profitability of the various
(positive net
routes BAI
the group’s
contribution) of
the group’s
overall profit. However,
profit development goes beyond the viability of
the
various routes, as can be seen from Table 7.

those routes explains
the analysis of

operates. The

viability

costs,

(239) Aside from the individual viability of each route,
Brittany Ferries and NERA (99) maintain that the routes
as a whole constitute the core of Brittany Ferries for a
number of reasons: regarding the Irish and Spanish
routes, closure of a route would result in all BAI’s traffic
to those destinations being lost.

(240) Compared with the other routes, the Plymouth/Roscoff
route serves a relatively distinct market. While some
routes,
traffic might divert
the
especially

to the central Channel

Cherbourg/Poole,

reduction

in

a

(97) Revenue: Ticket sales, revenue from restaurants, bars, duty-free
and other sales, and entertainment activities (films, videos, etc.).
Costs: Travel agency commissions, port taxes, insurance, costs of
preparing cabins, cleaning, food, drinks and other purchases, staff
working in restaurants, bars and shops, loading of lorries, cost of
fuel and oil, pilotage, seamen’s wages, accommodating and feeding
the crew, ships’ rent, maintenance and amortisation of on-board
equipment. See NERA, pp. 28(cid:151)30.
are:
Caen/Portsmouth, Cherbourg/Poole,
Roscoff/Cork, NERA, p. 33.
(99) Particularly section 5, pp. 27(cid:151)41.

St. Malo/Portsmouth,
and

Plymouth/Santander

Roscoff/Plymouth,

(98) The

routes

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Plymouth/Roscoff route would result in users of that
service choosing other travel destinations or travelling
by air if the route were no longer operated.

what it was before restructuring. BAI has indicated that
the acquisition of the ship will be 20 % self-financed by
the Brittany Ferries group.

for one another, as

(241) NERA considers that Brittany Ferries’ central Channel
routes do not necessarily provide good substitute
alternatives
they serve distinct
geographical markets.
If one of these routes were to
close, passengers and freight would therefore divert to
Brittany
trip and
excursionist traffic would be lost and the reduction of
one or more routes would prevent Brittany Ferries from
increasing its high-season revenue on its other routes.
This would mean the loss of high-yield sales at peak
times.

Ferries’ main competitor,

day

(242)

In conclusion, in view of what has just been explained
and the proportionality of the central costs (see above),
the Commission can accept
the
that
profitability of
routes BAI
the various
operates is assured and that these routes constitute a
profitable ensemble for the group (see Table 7).

the argument
individual

5.6.5. Replacement of a ship

(243) As

the investment

indicated in section 2,

in the
Normandie 2 is necessary in order to balance out the
service on the Caen/Portsmouth route, on which
capacity is uneven from day to day. With the new ship
in service it will be possible to substitute the Duc de
Normandie
the
operation of the Roscoff/Plymouth route. Moreover, as
indicated in section 2, even after the acquisition of the
Normandie 2, Brittany Ferries’ capacity will remain below

the Quiberon and so optimise

for

the Commission concludes

the
(244) On this point,
in this ship is justified by the need to
investment
balance and homogenise the fleet, and since another
ship will be withdrawn at the same time BAI’s capacity
will remain at around 5 % below its capacity at the start
of restructuring in 1995 and 1996.

that

(245) The Court

of

European
Communities has recognised the legitimacy of such
investment (100).

Instance

First

the

of

(246)

In view of the above, the Commission can accept this
investment as part of the restructuring.

5.6.6. The financial forecast (cid:151) viability

(247) The group’s financial evolution includes the sums of FRF
70, 80 and 250 million. The return to viability forecast
in the table below has been confirmed up to the end of
2000 by the French authorities’ announcement (101)
that BAI has indeed returned to (cid:145)better fortunes(cid:146) and is
starting to pay back (internally within the group) the
sum of FRF 250 million to the SPCs in maximum
tranches of FRF 50 million a year for the three SPCs,
while continuing to pay them rent as normal.

(248) With most of

the restructuring measures already in
place,
the restructuring may be considered complete
once the Normandie 2 has been acquired and the ships
reassigned (102).

(100) Judgment of 25 June 1998, Air France, Joint Cases T-371/94 and

T-394/94, point 102.

(101) Letter from the French authorities dated 4 December 2000.
(102) The Normandie 2 is due to be acquired in 2002.

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(249) Regarding the Brittany Ferries (BAI-SPC) group’s economic and financial evolution up to 2006,

NERA (103) forecast the following data up to 2006 (104):

Table 7

BAI-SPC group

(in FRF million)

Year

1998

1999

2000

2001

2002

2003

2004

2005

2006

Total balance

Turnover

[(cid:133)]

[(cid:133)]

[(cid:133)]

[(cid:133)]

[(cid:133)]

[(cid:133)]

[(cid:133)]

[(cid:133)]

[(cid:133)]

[(cid:133)]

[(cid:133)]

[(cid:133)]

[(cid:133)]

[(cid:133)]

[(cid:133)]

[(cid:133)]

[(cid:133)]

[(cid:133)]

Operating profit

[(cid:133)]

[(cid:133)]

[(cid:133)]

[(cid:133)]

[(cid:133)]

[(cid:133)]

[(cid:133)]

[(cid:133)]

[(cid:133)]

Retained profit for the year

[(cid:133)]

[(cid:133)]

[(cid:133)]

[(cid:133)]

[(cid:133)]

[(cid:133)]

[(cid:133)]

[(cid:133)]

[(cid:133)]

Cumulated profit (with inflation)

[(cid:133)]

[(cid:133)]

[(cid:133)]

[(cid:133)]

[(cid:133)]

[(cid:133)]

[(cid:133)]

[(cid:133)]

[(cid:133)]

Net cash position

[(cid:133)]

[(cid:133)]

[(cid:133)]

[(cid:133)]

[(cid:133)]

[(cid:133)]

[(cid:133)]

[(cid:133)]

[(cid:133)]

EBIT/interest cover ratio

[(cid:133)]

[(cid:133)]

[(cid:133)]

[(cid:133)]

[(cid:133)]

[(cid:133)]

[(cid:133)]

[(cid:133)]

[(cid:133)]

Debt/equity ratio

Return on equity

Operating return on capital
employed

[(cid:133)]

[(cid:133)]

[(cid:133)]

[(cid:133)]

[(cid:133)]

[(cid:133)]

[(cid:133)]

[(cid:133)]

[(cid:133)]

[(cid:133)]

[(cid:133)]

[(cid:133)]

[(cid:133)]

[(cid:133)]

[(cid:133)]

[(cid:133)]

[(cid:133)]

[(cid:133)]

[(cid:133)]

[(cid:133)]

[(cid:133)]

[(cid:133)]

[(cid:133)]

[(cid:133)]

[(cid:133)]

[(cid:133)]

[(cid:133)]

(250) According to NERA’s forecast,
to improve
continue

the group’s operating
varying
significantly,
profit
between FRF [(cid:133)]
in 2006,
in 1998 and FRF [(cid:133)]
though the planned replacement of ships will offset the
trend temporarily in 2002.

(251) The progression of retained profit for the year will take
it to a level of FRF [(cid:133)] in 2006. The relatively modest
impact may also be seen of the investments planned
around 2002; this will be rapidly overcome.

(252) The net cash position goes from FRF [(cid:133)] in 1998 to
in 2006. As the NERA study allows for
investment

financing amounting to 80 % of

FRF [(cid:133)]
external

(103) As indicated above, and further

to M & G’s work, NERA
produced a financial model which pointed to the group’s
long-term financial viability. The positive development from the
short-term viability suggested by M & G in April 1998 to the
long-term viability suggested by NERA in March 1999 is due,
inter alia,
to the rise and stabilisation of French franc/pound
sterling parity at over 9 francs to the pound in 1998 and 1999,
NERA’s analysis of
the economic group as a whole and the
different perspective offered by the passage of time. While M &
G’s analysis focused mainly on the period 1996-98, NERA
produced
group’s
requirements and future options for the period 1998 to 2006,
which led it to conclude that the group would be viable in the
long term.

complementary

analysing

study

the

a

costs, it may be considered that the impact of acquiring
new ships will remain modest in 2002.

(253) The study establishes an EBIT/interest cover ratio which
starts off
in 1998 but then rises to rates
deemed reasonable (between 2 and 4) between 2000
and 2004, and from 2005 improves further to rates
deemed ample (above 4,0).

low ([(cid:133)])

(254) The debt/equity ratio is initially high ([(cid:133)] %), but then
falls to levels of 40 % to 60 %, deemed acceptable, as
the ship-related debts are repaid (even though those
debts represent 80 % of the investment costs). The ratio
rises by around 20 percentage points between 2001 and
2002, but stabilises immediately before resuming a
downward trend. According to NERA, this ratio will be
similar in other ferry companies.

(255) As for the firm’s profitability, the operating return on
capital employed develops positively to reach [(cid:133)] % and
is therefore commercially respectable.

(256) Still regarding the firm’s profitability,

the company’s
return on equity is, at between [(cid:133)] % and [(cid:133)] %, also
considered to be commercially respectable.

(104) Regarding the item (cid:145)return on equity(cid:146): The 1998 figure includes a
provision of FRF 150 million for possible repayment of aid. The
figure would otherwise be 14,7 %. The provision is cancelled in
1999.

(257) On the strength of this analysis NERA concludes that
the Brittany Ferries group will be viable in the long
term.

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(258) To check the validity of NERA’s forecasts for 1998
onwards, the Commission obtained confirmation from
the French authorities that BAI has indeed returned to
(cid:145)better fortunes(cid:146) and is starting to pay back (internally
within the group) the sum of FRF 250 million to the
SPCs in maximum tranches of FRF 50 million a year for
the three SPCs, while continuing to pay its normal rent.

these ships comes to around FRF [(cid:133)]. Even without
compensation of FRF 80 million, it should be possible
to absorb that
sum in 2002 to 2003 given the
abovementioned results, and even more so from 2004
to 2005 onwards, given the entirely satisfactory results
expected in those years: net results of FRF [(cid:133)] (FRF [(cid:133)]
cumulated) and FRF [(cid:133)] (FRF [(cid:133)] cumulated) with a
net cash position of FRF [(cid:133)] and [(cid:133)] respectively in
those two years.

the whole of

the other two SPCs so as to assist

(259) With the restructuring measures now essentially in
place, and Sabemen’s operation to be aligned with that
the group’s
of
viability, and taking account of
the
Brittany Ferries (economic) group, its capacity to finance
ships in the years ahead and the likelihood of external
factors developing positively (e.g.
the evolution of
Brittany Ferries’ market and of macro-economic factors),
the Commission can accept that the above forecasts up
to 2006, as confirmed by Brittany Ferries’ actual
economic performance up to the end of 2000, have
been produced realistically and may be considered
reliable.

(260) The Commission therefore concludes that the long-term
(economic) group
the Brittany Ferries

viability of
appears to be realistic.

(261)

that
of
last
it wishes to be kept

the Commission may monitor
elements
remaining
the
informed of

the
In order
of
application
restructuring,
the
alignment of Sabemen’s operation on that of Senacal
and Senamanche in respect of the agreement linking it
the internal repayment of FRF 250
to BAI, and of
million between BAI and the SPCs, the acquisition of
the Normandie 2 and the subsequent reorganisation of
ships, as planned.

5.6.7. Viability in the light of the readjustments to be made

(262) The Commission believes the group’s long-term viability
would also be assured even if the aid of FRF 80 million
could not be paid.

(264)

In view of the above,
it may be considered that the
group’s long-term viability would not be affected if the
FRF 80 million tranche of additional aid could not be
paid.

(265) This view has been confirmed both by the French
authorities (105), which confirm BAI’s return to (cid:145)better
fortunes(cid:146), and by BAI at
the beginning of 2001,
referring to its viability (without the sum of FRF 80
million) in the light of the more positive course taken
by external factors (exchange rate between the pound
sterling and the French franc) compared with the
forecasts of the restructuring plan.

5.7. Compatibility (cid:151) prevention of undue
distortion of competition

rescuing and restructuring firms

(266) Under the abovementioned Community guidelines on
State aid for
in
difficulty, another condition placed on restructuring aid
is that measures (e.g. reducing the business’s capacity)
be taken to mitigate as far as possible the adverse
consequences for competitors. Otherwise,
the aid is
(cid:145)contrary to the common interest(cid:146) and cannot qualify for
a derogation under Article 87(3)(c) of the Treaty. To
determine both the extent
to which the common
interest is complied with and whether the undertaking
needs to reduce its capacity, the Community guidelines
require examination of three aspects: the capacity of the
market, the risk of a monopoly and assisted areas.

5.7.1. Market situation

(263) Given that in 2002 to 2003 the group’s net result will
be positive at FRF [(cid:133)] (FRF [(cid:133)] cumulated since 1998)
and FRF [(cid:133)] (FRF [(cid:133)] cumulated) and that the forecast
net cash position will be FRF [(cid:133)] and [(cid:133)] respectively
for those two years, the absence of FRF 80 million in
aid would not
the group
insuperable difficulties.
It should be noted here that
these results also reflect the investment in the Coutances
and the Duc de Normandie. The 20 % self-financing of

seem likely to cause

(267)

It should first of all be recalled that, as shown in the
descriptive section above, BAI has already shed capacity
(two out of nine ships, two out of eight routes, reduced
frequencies, sale of assets, etc.). To know whether the

(105) Letter from the French authorities dated 4 December 2000.

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Commission needs to ask BAI to reduce its capacity
further, the issues need to be examined of any excess
capacity in the market, the risk of monopoly and the
regional development aspect (106).

imminent price rise of 10 % in the central and western
Channel and of 25 % in the strait.

(268) Firstly, it must be noted that, according to Dynamar, the
Channel market (107) shows no substantial structural
overcapacity (108). This view is shared by NERA (109),
which states
traffic
rose by 78 %
(western/central Channel and strait)
between 1991 and 1998. This trend is confirmed, inter
alia, by the start-up of Condor Ferries’ operations in
1998 and by the opening of a fast
link between
Cherbourg and Portsmouth (110).

cross-Channel passenger

that

(273) According to the Commission’s

information,

ticket
prices for cross-Channel maritime traffic indeed appear
to have risen by around 20 % in late 1999 and early
2000. While this price rise is seen mainly in the strait,
some impact on the central and western Channel sector
also seems plausible given the indications of growth on
the central and western Channel routes (see above).

(269)

even if

should be

recalled that,

central/western Channel

It
there were
overcapacity in the
sector
(which is not
that situation would have
in the strait, given the
minimal
one-way substitutability explained in the descriptive
section.

impact on prices

the case),

(270) As for freight, Brittany Ferries indicates that this is a
growth market: between 1995 and 1998,
the total
amount of freight carried across the Channel rose by
almost 33 % (111). NERA confirms this trend, stating
that between 1991 and 1999 the number of
lorries
carried rose by 112 %.

(271) Secondly, according to NERA,

in the peak season
Brittany Ferries operates at almost full capacity in the
central and western Channel market.

(272) The

apparent

on the
cross-Channel market was
inter alia, by
Dynamar in December 1998 (112), which predicted an

in priced

identified,

upward

trend

(106) The guidelines state that (cid:145)where on an objective assessment of the
demand and supply situation there is a structural excess of
in the European
production capacity in a relevant market
Community served by the recipient, the restructuring plan must
make a contribution, proportionate to the amount of aid
received, to the restructuring of the industry serving the relevant
market in the European Community by irreversibly reducing or
closing capacity (cid:133)(cid:146).
there is no structural excess of
Where, on the other hand,
production in the relevant market,
the Commission will not
normally require a reduction in capacity in return for the aid.
However, it must be satisfied that the aid will be used only for
the purpose of restoring the firm’s viability and that it will not
allow production capacity to be expanded, except in so far as is
essential for restoring viability, without thereby unduly distorting
competition.
To ensure that the aid does not distort competition to an extent
contrary to the common interest, the Commission may impose
any conditions and obligations as may be necessary.

(107) That

is,

the western/central Channel and the strait, but not
including the North Sea sector, which has no bearing on this
dossier.

(274)

In short, both NERA and Dynamar confirm that the
passenger and freight markets are growing (113) and also
that
structural
sign of
overcapacity in the western/central Channel and strait
transport market.

substantial

is no

there

(275) As it may be concluded that the cross-Channel market,
and particularly the central and western Channel sector,
is not suffering structural overcapacity (see above),
it
should be concluded that
the Commission cannot
require any further capacity reduction.

5.7.2. Reduced capacity of the Brittany Ferries Group

(276)

It should again be recalled at this point that Brittany
Ferries has already shed capacity. As shown above,
the
between the financial years 1995 and 1998,
company’s passenger capacity was reduced by 12 %
(ﬂ 1 375 passengers), its berth capacity by 9 % (ﬂ 539
berths) and its garage capacity by 17 % (ﬂ 1 480 lane
metres). Between the financial years 1995 and 2003,
once the Quiberon is replaced by the Normandie 2 on the
Caen/Portsmouth route in mid-2002, Brittany Ferries’
overall capacity will remain below its pre-restructuring
capacity, i.e. a reduction of 5 % in passenger capacity
(ﬂ 554 passengers), 9 % in berth capacity (ﬂ523 berths)
and 4 % in garage capacity (ﬂ 367 lane metres) (114).

(277)

In view of these measures, the Brittany Ferries indicates
that the service it supplies, measured in terms of sailings
and rotations, will remain constant in 2001 compared
with 1998, and well below what it was in 1995 before
restructuring, without
the company being able to
increase the number of sailings, enter new routes or
assign additional ships to existing routes.

(108) Dynamar, p. 13.
(109) NERA, p. 15.
(110) According to the (cid:145)Comments from Brittany Ferries(cid:146) dated 31
March 1999, p. 12, this rapid ferry can carry 900 passengers and
175 cars.
(cid:145)Comments from Brittany Ferries(cid:146) dated 31 March 1999, p. 14.

(111)
(112) Dynamar, pp. 11(cid:151)12.

(278) This reminder strengthens the argument that no further

capacity reduction can be asked of BAI.

(113) NERA, pp. 22(cid:151)23.
(114) See correspondence from BAI dated 9.7.1999, p. 2.

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5.7.3. Risk of monopoly

that no capacity reduction other
than that already
carried out by BAI may be required of the group as part
of its restructuring.

rescuing and restructuring firms

(279) Moreover, according to the Community guidelines on
State aid for
in
difficulty, even where there is structural overcapacity on
the market, a relaxation of the principle of requiring a
proportionate capacity reduction may be allowed if such
a reduction is likely to cause a manifest deterioration in
the structure of the market, for example by creating a
monopoly or a tight oligopoly situation.

(280) Brittany Ferries competes chiefly with P & O on the
routes it operates in the western and central Channel
and on its route to Spain (115). On the connections with
Ireland, it competes with Irish Ferries.

(281) Given the small number of competitors in the various
sectors of BAI’s market, it should be borne in mind that
the disappearance of Brittany Ferries could lead to a
tight oligopoly situation, or even monopoly,
in those
sectors. For the central and western Channel and for the
Spanish market it would be P & O which would be left
as virtually the only operator on those markets, while
on the Irish routes it is Irish Ferries which would be
handed the entire market. This risk of monopoly, too,
argues against asking BAI to reduce its capacity any
further, especially as
the market has no structural
overcapacity, as shown above.

5.7.5. Conclusions on the prevention of undue distortion of

competition

(285) Given that the market in question shows no structural
overcapacity, that the disappearance of BAI would be
liable to lead to a monopoly situation in the market and
that the Brittany Ferries group has already reduced its
capacity significantly,
it may be considered that no
further reduction in its capacity is required. Account
may also be taken here of the fact that the group is
located in an assisted area.

5.8. Compatibility (cid:151) proportionality of the aid

(286) The cumulated measures taken during the restructuring
the Brittany Ferries group FRF

phase will have cost
1 392 million.

The total cumulated aid received during this period is
FRF 581 million.

The intensity of the aid cumulated during restructuring
is 42 %.

5.7.4. Assisted areas

The intensity of the restructuring aid is 30 %.

(282) The Community guidelines on State aid for rescuing and
restructuring firms in difficulty allow the Commission to
show more flexibility in assisted areas with regard to the
requirement for a reduction in capacity in the case of
markets
regional
development needs so justify, it will require a smaller
capacity reduction than in non-assisted areas.

overcapacity.

structural

in

If

(287)

In view of the fact that the public aid was paid and used
in order to finance practical and necessary restructuring
measures, that these measures were implemented as part
of a restructuring plan which has already returned the
group to short-term financial viability and that
the
financial
return to long-term
indicate
viability, the Commission can approve the restructuring
aid of FRF 70 million and around FRF 246 million.

forecasts

a

Ille-et-Villaine

(283) Given that, under the 1999 classification of eligibility
for State aid, the regions of Brittany (C(cid:244)tes-d’Armor,
FinistŁre,
and Lower
Normandy (Calvados, La Manche and Orne) are eligible
for State aid under Article 87(3)(c), the Commission can
show more flexibility with regard to the requirement for
a reduction in capacity in the case of a market
in
overcapacity.

and Morbihan)

(288) The restructuring aid of FRF 80 million is not deemed
necessary for the restructuring of Brittany Ferries, on the
one hand because the group’s economic progress has
been relatively rapid (sustained in particular by the
positive trend in external factors) (116) and on the other
because the group could use the sum to bring forward
investments not
the
restructuring concept.

to be part

considered

of

(284)

In view of the conclusions reached in the two previous
points
the
situation, market
Commission believes the regional argument confirms

structure),

(market

(289) The aid element of the final guarantee paid in 1992 (see
above) does not fit into the restructuring framework.
to
The Commission must
the Commission
determine, with

therefore

France

help

ask

the

of

(115) According to Dynamar, Condor Ferries, which also operates in
the Channel via the Channel Islands, does not affect this balance
in any substantial manner, given that operator’s capacity and
frequency.

(116) BAI’s lawyers have also indicated (letter dated (cid:133) that the sum of
FRF 80 million was no longer necessary for the return to viability
(see descriptive section above).

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communication of 11 March 2000, the amount of aid
relating to the FRF 10 million guarantee paid in 1992,
which is not compatible with the Treaty.

context,
the principle that restructuring aid may be
granted only once during a given period. The subsidies
granted prior to 1988 are deemed to be existing aid.

that,

subtracting

the
(290) The Commission concludes
non-payable aid sums,
the restructuring aid element
cumulated with the parallel aid granted during the
restructuring period and approved in advance by the
Commission reveal an aid intensity of 42 % during the
restructuring period, which is considered acceptable.
The more so as the 30 % intensity of the restructuring
aid proper is justified by a restructuring leading to the
group’s long-term viability (117).

(296)

In analysing the restructuring, the Commission had to
examine the group’s financing system,
including its
practice before restructuring began in 1995, and has
voiced no doubts on this point.

(297) The Commission is taking account of the fact that the
disappearance of BAI would be liable to lead to a
monopoly situation in the various market segments in
which it currently operates,

5.9. Compatibility (cid:151) full implementation of the
restructuring plan, monitoring and annual report

HAS ADOPTED THIS DECISION:

(291) The Commission considers that, overall, the documents
submitted to it relating to the restructuring and to
long-term viability
Brittany
constitute a coherent restructuring concept compatible
with the Community guidelines on State aid for
rescuing and restructuring firms in difficulty.

Ferries’ prospects

for

(292) According to the Commission’s information, the bulk of
the restructuring measures have already been put
in
place (118). Nonetheless, the Commission needs to be
informed of the course of future events, including the
internal reimbursement of funds between BAI and the
SPCs and the reorganisation of ships on the various
routes following the introduction of the Normandie 2
and the withdrawal from service of the Quiberon.

5.10. Conclusions and conditions

(293)

In conclusion, the Commission considers the sum of
FRF 80 million in restructuring aid to be incompatible
with Article 87 of the Treaty.

(294) The Commission invites France, with the help of the
Commission communication of 11 March 2000,
to
determine the amount of aid relating to the FRF 10
million guarantee paid in 1992.

the BAI-SPC restructuring plan meets

(295) All the other aid granted by the French Government to
the
support
criteria set by the Community guidelines on State aid
for rescuing and restructuring firms in difficulty and by
the Community guidelines on State aid to maritime
in this
transport. The Commission would point out,

(117) Nor does this intensity seem in any way disproportionate in the
light of other cases in which the Commission approved aid of far
higher intensity (notably 81 % in Case C 70/97).

Article 1

1.
The aid of FRF 70 million implemented by France at
central administration level and the public capital increase of
around FRF 246 million carried out by French regional and
local authorities in favour of the Bretagne Angleterre Irlande
company ((cid:145)BAI(cid:146) or (cid:145)Brittany Ferries(cid:146)) were granted in violation
of Article 88(3) of the EC Treaty. However, these aids are
compatible under Article 87(3)(c) of the Treaty.

The notified restructuring aid of

2.
constitutes restructuring aid incompatible with the Treaty.

FRF 80 million

3.
The guarantee provided by the Conseil gØnØral de la
Manche in 1992 was provided in violation of Article 88(3) of
the EC Treaty. The aid element
to be quantified with the
French authorities with reference to the market rate constitutes
State aid incompatible with the Treaty.

This aid element must be recovered with interest calculated on
the basis of the reference rate applying at the time of the grant
in accordance with the procedures of national
law. This
interest shall be calculated from the date on which the aid was
made available to the beneficiary until that of its recovery.

France is nonetheless invited to quantify, with the help of the
Commission communication of 11 March 2000 on the
application of Articles 87 and 88 of the EC Treaty to State aid
in the form of guaranties (119) and on the basis of objective
criteria, the amount of aid relating to this guarantee.

The capital

4.
increases carried out prior to 1996 in the
and
(SPCs)
semi-public
Sabemen,
Senamanche and the funds allocated to Brittany Ferries by
CrØdit Agricole Caisse RØgionale du FinistŁre as from the

companies

Senacal

(118) See in particular the (cid:145)1999 to 2003 plan(cid:146), p. 3.

(119) OJ C 71, 11.3.2000.

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privatisation of CrØdit Agricole in 1988 do not constitute State
aid within the meaning of Article 87(1) of the EC Treaty.

BAI and the SPCs, the acquisition of the Normandie 2 and the
in the
ensuing reorganisation of
restructuring concept.

ships, as provided for

5.
The aid granted under the ACOMO scheme and schemes
for the reimbursement of business tax, early cessation of
employers’
activities
contributions, and the investment aid measures up to and
including 1997 have been approved separately by the
Commission.

reimbursement

(ESA)

and

the

of

Aid granted up to 16 April 1989, i.e. ten years before
6.
Regulation (EC) No 659/1999 entered into force, is deemed to
be existing aid in accordance with Article 15(3) of
that
Regulation.

Article 2

France shall ensure that Sabemen’s operation is aligned
1.
on that of Senacal and Senamanche in respect of
the
agreement linking it to BAI and shall inform the Commission
of the measures taken in this respect.

2.
France shall inform the Commission each year regarding
the internal reimbursement of the FRF 250 million between

Article 3

France shall inform the Commission, within two months from
the date of notification of this Decision, of the measures taken
to comply therewith.

Article 4

This Decision is addressed to the French Republic.

Done at Brussels, 8 May 2001.

For the Commission

Loyola DE PALACIO

Vice-President

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ANNEX

BAI’S MARKET