2004/166/EC: Commission Decision of 9 July 2003 on aid which France intends to grant for the restructuring of the Société Nationale Maritime Corse-Méditerranée (SNCM) (notified under document number C(2003) 2153) (Text with EEA relevance)
Date: 2003-07-09
Institutions: European Commission
Subjects: Corsica, France, State aid, aid for restructuring, control of State aid, financial aid, maritime transport, transport company

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Official Journal of the European Union

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COMMISSION DECISION

of 9 July 2003

on aid which France intends to grant for the restructuring of the Société Nationale Maritime
Corse-Méditerranée (SNCM)

(notified under document number C(2003) 2153)

(Only the French text is authentic)

(Text with EEA relevance)

(2004/166/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,

Having invited the interested parties to submit their comments
in accordance with the said Articles (1), and having regard to
those comments,

Whereas:

1. PROCEDURE

1.1. Procedural overview

By letter of 18 February 2002, the French Government
notified a plan to grant aid for the restructuring of the
Société Nationale Maritime Corse-Méditerranée (SNCM).
This case was registered as N 118/2002. The notification
was supplemented by letters from the French authorities
dated 3 July 2002 (2).

investigation procedure provided for

On 19 August 2002, the Commission decided to initiate
the formal
in
Article 6 of Council Regulation (EC) No 659/1999 of
22 March 1999 laying down detailed rules for
the
application of Article 93 of the Treaty (3); the case was
registered as C 58/2002.

(1)

(2)

(3)

By fax of 11 September 2002, the French authorities
asked for the correction of a number of factual errors in
the decision of 19 August 2002.

(8)

(1) OJ C 308, 11.12.2002, p. 29.
(2) Registered as TREN A/61846.
(3) OJ L 83, 27.3.1999, p. 1.

(5)

(6)

(7)

By letter of 11 September 2002, registered as TREN
A/65862, the French authorities asked for extra time to
of
submit
19 August 2002. By letter of 17 September 2002, the
Commission granted France an additional month to
prepare its reply.

comments

decision

their

the

to

By letter of 8 October 2002, sent on 15 October with
annexes and registered as SG(2002) A/10050,
the
French authorities
to the Commission
submitted
observations on the decision of 19 August 2002
opening the procedure, stressing the need for progress
in implementing the restructuring plan.

By letter of 15 October 2002, registered as SG(2002)
A/10252, the French authorities emphasised that it was
a matter of urgency that
the decision opening the
investigation procedure be published in the
formal
Official Journal of the European Communities.

By fax of 19 November 2002, the French authorities
transmitted a copy of cash advance agreements between
et
SNCM and the Compagnie Générale Maritime
Financière (CGMF) and proof of refunds of the advance
by CGMF to SNCM through two bank transfers of 13
May and 14 June 2002.

the Commission adopted a
On 27 November 2002,
decision amending the decision of 19 August 2002,
which it transmitted to the Permanent Representation of
France to the European Union by letter of 29 November
the Commission's decision to
2002. Following this,
initiate the formal investigation procedure in this case

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could be published on 11 December 2002 in the Official
Journal of the European Communities (4). Interested parties
were invited to submit their observations from that date
on the plan to provide aid.

(9)

The French authorities, at
their request, held a first
working meeting with the Commission on 24 October
2002, followed by a second one on 3 December 2002.

(10)

The Commission has received observations from two
companies, Corsica Ferries and the Stef-TFE group, and
from various local authorities. By letters of 13 and 16
January and 5 and 21 February 2003, it transmitted its
observations to France, asking it for any comments it
might have.

(11)

By letter of 16 January 2003, the Commission sent a
request for additional
information in accordance with
the provisions of Article 5 of Regulation (EC) No
659/1999.

(12)

By letter of 10 February 2003 (5), the French authorities
transmitted to the Commission arguments intended to
show that the plan to provide aid fully complied with
the Community guidelines on State aid for rescuing and
restructuring firms (6)
(hereinafter referred to as ‘the
guidelines') and a description of new commitments
regarding the number of staff and level of wages,
control of intermediate consumption, and SNCM's fares
policy.

(16) On 25 February 2003, at the request of the French
authorities, a working meeting was held between the
Commission
French
representatives
administration.

and

the

of

(17)

(18)

By electronic mail of 14 May 2003 (9),
the French
authorities
the
to
provisional version of SNCM's report of activities for
2002.

the Commission

transmitted

By fax of 27 May 2003 (10),
the French authorities
transmitted to the Commission their comments on the
documents which Corsica Ferries had submitted to the
Commission on 4 February 2003 and which the
Commission had forwarded to the French authorities by
letter of 21 February 2003.

1.2. Title of the aid

(19)

The aid in question is entitled ‘Aid for the restructuring
of SNCM', registered as C 58/2002 (ex-N 118/2002),
following the Commission's decision of 19 August 2002
to initiate the formal
investigation procedure with
regard to the planned aid.

1.3. Recipient of the aid

(20)

The recipient of
the Société Nationale
Maritime Corse-Méditerranée (SNCM) which comprises
several subsidiaries in the maritime sector.

the aid is

(13)

By letter of 13 February 2003 (7), the French authorities
transmitted to the Commission comments on the
observations submitted by Corsica Ferries and Stef-TFE.

1.4. Purpose of the aid

(14)

By letter of 21 February 2003, the French authorities
replied to the additional questions contained in the
Commission's letter of 10 February 2003.

(21)

The main purpose of the restructuring aid is to enable
SNCM to complete its restructuring process so as to
ensure the group's long-term viability.

2. DETAILED DESCRIPTION OF AID

(15)

By fax of 25 February 2003 (8), the French authorities
transmitted a copy of
the shareholders' agreement
linking SNCM and the Stef-TFE group, as requested by
the Commission.

(4) OJ C 308, 11.12.2002, p. 29.
(5) Registered by the Commission as SG(2003) A/1546.
(6) OJ C 288, 9.10.1999, p. 2.
(7) Registered by the Commission as SG(2003) A/1691.
(8) Registered by the Commission as TREN A/21701.

(22)

The compatibility of the aid can be judged only with
some knowledge about the beneficiary of the aid,
its
background, the competitive context in which it has
developed, the causes of its financial difficulties and the
details of the restructuring plan.

(9) Registered by the Commission as TREN A/20745.
(10) Registered by the Commission as TREN A/21531.

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2.1. SNCM and its main subsidiaries

Compagnie Générale Maritime
subsequently
privatised (15).

restructured (13),

(CGM) which was
and

recapitalised (14)

2.1.1. SNCM

(23)

SNCM is a shipping company operating regular services
to Corsica from Nice, Toulon (11) and Marseilles and to
the Maghreb (Tunisia and Algeria) from France (12) and
seasonal services to Sardinia, from April to September.

(24)

(25)

was

renamed

SNCM came into being in 1969 with the merger of the
Compagnie Générale Transatlantique and the Compagnie
de Navigation Mixte, both established in 1850. At the
time called Compagnie Générale Transméditerranéenne,
Nationale Maritime
Société
it
Corse-Méditerranée in 1976, after the Société Nationale
des Chemins de Fer (SNCF) had acquired a share in its
capital. The company had been chosen by the French
Government to implement the principle of territorial
continuity with Corsica, bringing maritime transport
fares in line with SNCF fares for rail transport on the
basis of an agreement concluded on 31 March 1976 for
a period of 25 years. The French Government had
to the Compagnie
already
Générale Transatlantique
to
Corsica through an earlier agreement of 23 December
1948.

for operating services

assigned responsibility

In addition to operating public services, SNCM also
operates regular crossings to Algeria and Tunisia and
seasonally,
to Sardinia.
Between 1990 and 2002, SNCM, through its subsidiary
Corsica Marittima, also provided passenger
transport
services between Corsica and Italy.

to September,

from April

2.1.1.1. S N C M ' s s h a r e h o l d e r s

(27) When it was established in 1977, the wording of CGMF's
objective was such as to authorise all operations of
maritime transport, outfitting and chartering of ships
and the acquisition of shares and all commercial or
indirectly connected
industrial operations directly or
with this objective. Today CGMF mainly plays the
following roles on behalf of the State:

— it holds an 80 % share in SNCM (the remaining
20 % being owned by SNCF, held by the French
State),

— it

is the guarantor of social security obligations
(including pensions and health insurance funds) for
the personnel of its former subsidiary CGM (16),

— it has assumed responsibility for a leasing agreement
the time was

to finance a building which at
concluded by CGM.

2.1.1.2. A c t i v i t i e s o f S N C M

(28)

SNCM carries passengers, cars and lorries on the
following links:

— between Marseilles and various ports on Corsica:
Bastia and Ajaccio (daily, both ways), Porto-Vecchio,
Balagna
a week,
including CMN's
round trips) with additional
crossings during the peak period,

and Propriano (three

times

— between Nice and Bastia: SNCM runs continuous
services during the low season (two or three return
trips each week), with more frequent services from
the end of March to October,

— between Marseilles and Sardinia (Porto Torres),

— between Bastia and Sardinia (Porto Torres) with one
the Compagnie

its own ships and a ship of

of
Maritime de Navigation (CMN),

(26)

Currently 80 % of SNCM's shares are held by CGMF,
which took over the shares of the Compagnie Générale
Transatlantique, and 20 % by SNCF. The French State
has a direct 100 % share in CGMF. SNCM became a
taking over from the
subsidiary of CGMF in 1992,

(11) Services from Toulon are now sporadic.
(12) A service between Spain and the Maghreb is currently run on a

trial basis.

(13) The restructuring plan was adopted by the company in December

2002.

(14) The first instalment of aid to CGM was paid in 1993.
(15) It was privatised in 1996.
(16) For instance, in 1996, CGMF, which at the time had a 94 % share
in CGM, took over responsibility for the measures ensuing from
the social plans set up by CGM when it was privatised. See also
Commission Decision 97/14/EC of 17 July 1996 on aid granted to
the Compagnie Générale Maritime in the context of a restructuring
plan (OJ L 5, 9.1.1997, p. 40).

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— between Marseilles and Tunis: at least one round trip

(c)

two high-speed vessels operating mainly from Nice:

a week with one of its ships,

— between Marseilles and Algiers: several times a week

in the high season with the Île de Beauté.

— the Liamone (capacity 1 116 passengers and 250
cars, power 65,0 MW, speed 42 knots) which
also operates crossings from Toulon,

2.1.1.3. T h e f l e e t

— the Aliso (capacity 530 passengers and 148 cars,

power 26,0 MW, speed 37 knots).

(29)

The SNCM fleet
following ships:

for Corsica currently comprises the

(30)

(a)

five car ferries:

— the Napoléon

2 150
passengers and 708 cars, power 43 MW, speed
23,8 knots), large luxury car ferry,

Bonaparte

(capacity

— the new Danielle Casanova, delivered in May
2002 (capacity 2 204 passengers and 700 cars,
power 37,8 MW, speed 23,8 knots), also a large
luxury car ferry,

— the Île de Beauté (capacity 1 554 passengers and
520 cars, power 37,8 MW, speed 21,5 knots),
taken into service in 1979 and rebuilt
in
1989/1990,

— the Méditerranée (capacity 2 254 passengers and
800 cars, power 35,8 MW, speed 24,0 knots),

(31)

— the Corse

(capacity 2 150 passengers

and

600 cars, power 27,56 MW, speed 23,5 knots);

(b) four passenger cargo vessels (freight and passengers):

— the Paglia Orba

(capacity 500 passengers,
2 000 linear metres for freight and 120 cars,
power 19,7 MW, speed 19 knots),

In 2002 the fleet serving the Maghreb consisted of the
car ferry Méditerranée, since 24 June 2002, which will be
used between Marseilles and Tunis. The entry into
service of this vessel marks a qualitative and quantitative
the Tunisian
shipping services
improvement of
capital. This comfortable and fast ship has a total
capacity of 2 250 passengers and 760 cars (compared
with 1 600 passengers and 500 cars on the car ferry
increase in the
Liberté).
number of places available for passengers while at the
same time offering space for freight transport, a market
which is likewise growing considerably.

represents a significant

for

It

2.1.2. The public service delegation contract

shipping

services between the ports of
Regular
mainland France and Corsica have since 1948 been
operated as a public service (17). The SNCM and CMN
were the concessionaires of the service between 1976
and the end of 2001 under a framework agreement
initially concluded for 25 years (18). The French Act of
30 July 1982 transferred the management of territorial
continuity to Corsica's Assembly in a
contractual
framework with the French State. Subsequently, Act
91-428 of 13 May 1991 on the status of the Corsica
territorial collectivity (19) granted full responsibility to
the Assembly for services to the island. Since 1991, the
Corsica territorial collectivity has replaced the French
State
service
concessions
obligations (20).

in granting

for public

— the Monte

d'Oro

(capacity 508 passengers,
1 615 metres for freight and 130 cars, power
14,8 MW, speed 19,5 knots),

— the Monte Cinto

(capacity 111 passengers,
1 200 metres for freight, power 8,8 MW, speed
18,0 knots),

— since May 2003, the Pascal Paoli (capacity 594
passengers, 2 300 metres for freight and 130
cars, power 37,8 MW, speed 23 knots);

(32)

Community legislation on maritime cabotage makes it
incumbent on Member States to open up their national
cabotage markets. With regard to public service, this
imposes an obligation on Member States to comply with
all
the

non-discrimination

priniciple

among

of

(17) Shipping links between Italy and Corsica have always been exempt

from all public service obligations or contracts.

(18) See recital 24.
(19) Official Journal of the French Republic 111 of 14 May 1991.
(20) Under the abovementioned French Act of 13 May 1991.

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Community shipping companies. However, a transitional
period is provided for in respect of existing public
service contracts which can be maintained in force until
they expire (21).
In accordance with the Community
rules in force, the territorial collectivity of Corsica issued
a European tender in order to select the operator which
from 1 January 2002 should, under a five-year contract,
implement the public service obligations for crossings to
and
financial
compensation. The collectivity has taken the view that,
given the development of competition from Toulon and
Nice, only services operated from Marseilles should be
subject to strict public service obligations.

from the

return

island

for

in

(33)

(34)

(35)

SNCM and CMN were jointly awarded this contract for
the period from 2002 to 2006 after Corsica Ferries
in a bid. Moreover,
to put
eventually decided not
obligations with regard to the frequency of services have
been imposed on all operators of services to the island
from Toulon and Nice for the benefit of particular
categories of passengers receiving social welfare (22).

From 1997 to 2001, the grant allocated to SNCM for
‘territorial continuity' rose from EUR 80,1 million to
EUR 86 million. At the time, it covered all links from
the three ports of mainland France (Nice, Toulon and
Marseilles).

lays

The

contract

reductions

for particular

The current contract provides for an obligation to run
services at predetermined frequencies, obligatory service
according to season, and
quality, maximum fares
categories of
mandatory
passengers.
financial
compensation, referred to as reference compensation,
for every year from 2002 to 2006, in the case of SNCM
decreasing from EUR 69,1 million to EUR 61,4 million.
This compensation is adjusted by up to 4 % in line with
the difference between actual revenue and the reference
revenue also laid down in the contract. The reference
compensation/reference revenue ratio should decrease
from 88 % in 2002 to 75 % in 2006.

down

(36)

In 2002, the first year of the public service delegation
contract, financial compensation amounted to EUR 72,1
million, a decrease compared with previous years,
account being taken of the fact that only services from
Marseilles to Corsica now benefit from this grant. By
comparison, the grant in 2001 for the Marseilles-Corsica
line amounted to EUR 64,79 million with a net revenue

(21) See Article 4(3) of Council Regulation (EEC) No 3577/92 of 7
December 1992 applying the principle of
freedom to provide
services to maritime transport within Member States (maritime
cabotage) (OJ L 364, 12.12.1992, p. 7).

(22) See recital 155 of this Decision.

of EUR 73,17 million in 2001, about EUR 41 million of
which for passengers
(733 400) and catering and
EUR 32 million for freight and cars (762 000 linear
metres).

2.1.3. SNCM's main subsidiaries

2.1.3.1. C o m p a g n i e M é r i d i o n a l e d e

N a v i g a t i o n

The SNCM has a non-majority share in CMN, which
operates three passenger cargo ships between Corsica
and Marseilles, namely the Girolata, the Kalliste and the
Scandola, under a public service delegation contract. It
also serves Sardinia (Porto Torres) from Marseilles and
Propriano.

the end of

CMN, set up in 1931, remained a family shipping line
until
the 1970s when the Compagnie
Générale Transatlantique acquired a 49 % share to
enable a branch of the founding family to withdraw. In
the meantime, CGM has taken over this share. Neither
of
these two large companies has intervened in the
management of CMN which has remained fully in the
hands of the Rousset and Rastit families.

Since 1956, CMN has through an agreement been
linked with the Compagnie Générale Transatlantique,
SNCM's predecessor for services to Corsica.
In 1976,
CMN was granted a concession for services to Corsica
only for freight while SNCM obtained a concession for
the carriage of freight and passengers to Corsica. From
1980, CMN has, through delegation from SNCM, also
carried passengers after purchasing passenger cargo
ships. As a quid pro quo, SNCM was CMN's general
agent for passenger transport.

the

faced with substantial

cashflow
In 1992, CGM,
difficulties, tried unsuccessfully to sell its share in CMN
to a third party. As its attempt was not successful, CGM
asked SNCM, which was its subsidiary until 1992, to
take over
it held in CMN. Two-tier
shareholding was created in order to shift the majority
interest to SNCM while enabling private shareholders to
retain effective control of CMN through two holdings.
The Rousset and Rastit families seized this opportunity
to reduce their share for the benefit of the Société de
(STIM
Travaux

et Maritimes d'Orbigny

Industriels

share

(37)

(38)

(39)

(40)

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d'Orbigny) which was subsequently incorporated in the
Stef-TFE group. The merger between CGM and SNCM
could have been contemplated at the time because of
the very strong links between the two companies, but

retention of private

among CMN's
the
shareholders and their wish to retain control of this
company no doubt put a brake on moves towards a
merger between the two companies.

investors

(41)

Effective control of CMN has thus since 1992 been in the hands of the Stef-TFE group which owns
49 % of the Compagnie Méridionale de Participations (CMP) and acts in concert with the Rousset
and Rastit families who hold 6 % of shares in CMP.

2.1.3.2. C o m p a g n i e G é n é r a l e d e To u r i s m e e t

2.1.3.3. S u d - C a r g o s

d ' H ô t e l l e r i e

(42)

The Compagnie Générale de Tourisme et d'Hôtellerie
(CGTH)
is a holding company fully owned by SNCM
which has the following subsidiaries and holdings:

(43)

— 45 % in CMP, the main shareholder (55 %) in CMN,

— 100 % in Comptoirs du Sud, which runs shops on

board SNCM's ships,

is

transport

a French goods

Sud-Cargos
shipping
company which is based in Marseilles and specialises in
is an equal
to the Maghreb.
running services
subsidiary of two large transport groups, SNCM and
Delmas. In 2001 it operated eight roll-on roll-off cargo
vessels and container ships and had a EUR 67,3 million
turnover, carrying 90 000 tonnes, 38 000 TEU and
18 000 trailers. Together with its subsidiaries,
it has
about 100 employees.

It

— 50 % in Société

civile
(non-movable assets sold off or being sold off),

immobilière

Schuman

— 100 % in Société Méditerranéenne d'Investissements
et de Participations (SMIP), whose only asset is the
time
ship Southern Trader which operates under
charter.

(44)

Sud-Cargos has built up its development strategy on the
five following principles:

— proximity to customers by having their own
facilities in the main ports of the Mediterranean,

— versatility, with a fleet of diversified ships carrying

all types of goods,

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— a global network with containers available in all

commercial areas worldwide,

transport: services to Corsica and services to Maghreb,
from France and subsidiarily from Italy and Spain.

— overland transport and transhipment

facilities to
from
in the world to the main French
Italian (Genoa) and Spanish (Valencia

transport, overland or by sea, containers
anywhere
(Marseilles),
and Barcelona) loading ports,

2.2.1. Services to Corsica

— up-to-date cargo information.

(50)

2.1.3.4. S A R A

SNCM mainly operates services to Corsica and Maghreb
from mainland France. On the basis of
the market
research study provided by the French authorities
survey'), a quite
(hereafter
the different
accurate description can be given of
markets in question.

referred to as

‘market

(45)

(46)

Société

Aubagnaise

The
et
d'Approvisionnement (SARA) supplies SNCM's ships. In
2002, its turnover was EUR 8,58 million, entirely with
SNCM, making a EUR 0,19 million profit.

Restauration

de

2.1.3.5. F e r r y t o u r

Its turnover

is
The Ferrytour partnership is a tour operator that
100 %-owned by SNCM.
in 2002 was
EUR 11,2 million making a very modest profit of
EUR 0,21 million. It organises trips by sea to Corsica,
Sardinia
to many
destinations. In addition to its main line of business, it
also organises mini-cruises and offers business travel
services.

and Tunisia but

also flights

2.1.3.6. C o m p t o i r s d u S u d

(47)

Comptoirs du Sud, a subsidiary set up in 1996 which is
100 %-owned by SNCM, manages all shops onboard its
ships. The company has a turnover which fluctuates
between EUR 2 and 4 million, with a net business result
of between EUR 0,08 and 0,12 million. Over 72 % of
sales are made on Maghreb routes.

2.1.3.7. S o t r a m a t

(48)

Terre

Transmondiale Mer Air

Société
Voyages
(Sotramat), a 100 % subsidiary of SNCM, are travel
agents managing 17 agencies throughout France.
In
2001 they sold a total of EUR 42,53 million in services,
of which 40 % in SNCM tickets, representing 8,5 % of
SNCM's sales. Sotramat made a EUR 0,58 million profit,
with EUR 3,80 million in commission.

2.2.1.1. M a r k e t c h a r a c t e r i s t i c s

(51) Air travel makes up 43 % of overall passenger transport
in 2001 (with about 2,4 million out of 6 million
crossings in each direction). Transport by sea has in
recent years shown an upward trend thanks to the
improved supply of maritime transport services.

(52)

Passenger transport by sea between mainland Europe
and Corsica has the following features:

— highly seasonal

traffic:

the months of

July and
August have traditionally accounted for 50 % of
traffic. There are also strong fluctuations
annual
during
and particular
school holiday periods
weekends. The seasonal variation is accentuated by
asymmetry of traffic during peak periods between
crossings in both directions at the beginning and the
end of the week,

— a supply which for structural reasons has to exceed
demand (occupancy which in terms of monthly
average fluctuates from 20 % in winter — with 5 to
10 % in slack periods — but peaks of 100 % in
summer and particular holiday weekends),

— SNCM's decline on the sea transport services market
between Corsica and mainland Europe: 46 % market
share in terms of number of passengers in 2001,
decreasing in relation to its main competitor,
Corsica Ferries, which has a 44 % share, the rest of
the market being shared between Moby Lines (5 %),
CMN (3 %) and Happy Lines (2 %),

2.2. Relevant markets

(49)

SNCM mainly operates on two clearly different markets,
transport and goods
in terms of both passenger

— a slight 2,4 % increase a year, but sea links are
becoming steadily more important compared with
air traffic,

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27.2.2004

— structurally low occupancy averaged over a year:
about 40 % for SNCM, 33 % for Corsica Ferries, but
66 % for CMN which in the period 1999-2001 only
operated passenger cargo ships which by definition
have a higher occupancy rate for passengers. The

average occupancy rate of ships has apparently
always been low on account of the characteristic
features of this market, even before Corsica Ferries
started operating services between Corsica and
mainland France, as shown in table 1.

TABLE 1

Trend in average occupancy rate of SNCM ships

Year

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

Average occupancy of ships

38,1

40,1

35,2

34,9

38,2

41,5

41,8

n.a.

n.a.

43,4

(in %)

(53)

The traffic trend between Marseilles and Corsica is the
weakest of the three links to Corsica from mainland
France, as shown in table 2.

TABLE 2

Trend between the ports of mainland France and Corsica

Passengers

2000

2001

2002

(in thousands)

%
1/2000

%
2/2001

(56)

Nice/Corsica

791

786

904

– 0,6 % 15,0 %

Toulon/Corsica

122

403

460 230,3 % 14,1 %

Marseilles/Corsica

827

840

914

1,6 %

8,8 %

Total

1 740

2 029

2 278

16,6 % 12,3 %

high-speed

36 %. This increase was connected with the fact that
two
the
Toulon–Corsica lines in 2001,
increasing traffic from
mainland France without any reduction in transport
services run by this company from Italy.

entered

service

ferries

on

In 2002 Corsica Ferries became the market leader in
links to Corsica (24) and its activities are now more or
less equally divided between Corsica and Sardinia:
it
carries 800 000 passengers a year between the French
mainland and Corsica, 800 000 between Italy and
Corsica and 800 000 between Sardinia and the Italian
mainland. The company has about 1 000 seamen sailing
under the Italian flag. The company's head office is in
Bastia and it has an office in Savona. It has 11 ships and
a 12th is on order.

2.2.1.2. S N C M ' s c o m p e t i t o r s

(57)

SNCM's other competitors on sailings to Corsica are as
follows:

(54)

(55)

SNCM had to face a competitor for the first time in
1996 on services to Corsica from mainland France
when Corsica Ferries started sailings between Nice and
Bastia and Calvi in the high season (23). Since 18 March
1999 these services have been run as weekly round
trips. Since 1 April 2000 SNCM has had to face
competition on services from Toulon to Bastia and
Ajaccio.

in passenger

to
SNCM's main competitor
Corsica is Corsica Ferries, which operates
to
Corsica from Toulon and Nice in France and from
Savona and Livorno in Italy.
Its market share has
steadily risen, reaching 44 % in 2001, a considerable
increase compared with 2000 when it was still only

transport
links

— CMN, which is a competitor but also a partner
the public service
from
only
links

associated with SNCM under
concession. CMN operates
Marseilles. Its market share is 3 %,

— Moby Lines operates

from Genoa, Livorno and
Piombino.
Its market share in sailings to Corsica
dropped from 8 % in 2000 to 5 % in 2001 due to
its ageing fleet,

— Happy Lines operates a car ferry with 1 100 places
Its market

from Genoa, La Spezia and Livorno.
share is 2 %,

(23) The market was de facto open to operators flying the French flag.

(24) From Italy and the French mainland. SNCM remains the market
leader on services between the French mainland and Corsica.

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— TRIS, with two car ferries with 800 and 1 300
places, and Linee Lauro, with a car ferry with 670
places, focus on crossings to Sardinia and operate
occasional links to Corsica. Their market shares are
negligible.

(62)

SNCM's market share in passenger transport to Corsica
was 46 % in 2001 as against 52 % in 2000. This market
share steadily diminished in the 1990s to the benefit of
Corsica Ferries, thanks to the entry into service of two
mega-express ships of Corsica Ferries.

(58)

CMN, for freight transport, and its Italian competitors,
to optimise their
links
between the European mainland, Corsica and Sardinia.
However, the number of passengers carried on these
sailings is very marginal between Corsica and Sardinia.

services, operate triangular

(59)

SNCM and CMN have a de facto monopoly for general
cargo transport
the public
service delegation contract,
the two firms operate
frequent sailings from Marseilles to all Corsican ports.

(unaccompanied). Under

(63) According to the market survey, no operator other than
SNCM and CMN is capable, with regard to the carriage
of unaccompanied general cargo,
to meet the public
service constraints and operate profitably outside the
concession already
survey
considers
the SNCM-CMN partnership should
therefore be continued in SNCM's long-term interest.

allocated. The market

that

(60)

trailers (25)

accompanied

For
loaded onto ferries,
accounting for 24 % overall general cargo transport
measured in linear metres (26),
there is competition
among all the passenger transport operators. SNCM and
CMN also have the main share of the market in this
accompanied
in
particular Corsica Ferries, have a 10 % share, i.e. 2 % of
the overall market.

transport. The

operators,

other

(64) According to the market survey, continuation of the
public service contract will enable SNCM and CMN,
with regard to general cargo transport from Marseilles
to Corsica, to capture most of the growth in traffic: […]
linear metres in 2006 as against 1 490 000 in 2000.
this activity will be ensured through
Profitability of
efficient management of a range of ferries and passenger
cargo ships operated by the two companies, with overall
optimisation of passenger and freight transport. There is
no price competition as prices are controlled in the
framework of the public service concession.

2.2.1.3. M a r k e t t r e n d s

(65)

(61) With regard to the demand for passenger transport by
sea to Corsica, the market survey estimates that the
growth will be sustained: […] (*) million passengers are
expected in 2006 compared with 3,4 million in 2001.
The increase in shipping at the expense of aviation will
lead to a […] % share for shipping. On the supply side,
there should be continued qualitative improvement of
supply by the main actors, with possible marginalisation
of particular Italian operators because of their ageing
for Moby Lines which is beginning to
fleet, except
renew its fleet.

(*) Business secret.
(25) The driver accompanies the vehicle combination on the crossing.
In some cases, a driver loads the vehicle before departure and
is entered as
it upon arrival. This
another driver unloads
accompanied transport
transport
roll-on roll-off
as
operations in which the trailer travels without a tractor.

against

(26) This unit corresponds to operators' billing.

Italy's

The market survey estimates that, depending on the
strength of Moby Lines' commercial policy on links
between Italy and Corsica,
share in overall
transport will drop from […] % in 2001 to […] % in
2006 if Moby Lines is very active or from […] % to
[…] % if it makes no investment. SNCM will be in the
top range with more frequent crossings and more varied
destinations (secondary Corsican ports)
than Corsica
Ferries. SNCM should set itself an objective of retaining
least […] %. Balance between
its market share of at
supply and demand will improve for SNCM, with one
ferry withdrawn in 2002, a new passenger cargo ship
and modernisation of two others. For Corsica Ferries,
the balance between supply and demand will be brought
about by achieving ambitious forecasts of growth in
activity in double figures which, according to the
market survey, will a posteriori justify current supply. In
price terms, the continuation of fierce competition from
its
Corsica Ferries will oblige SNCM to improve
productivity.

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2.2.2. Services to the Maghreb

(66)

three micro-niche markets
The Maghreb comprises
from one another on which,
relatively closed off
according to the market survey, SNCM appears to be
the challenger.

for SNCM of getting involved in
the importance
operating services to Oran, a market segment in which
it does not currently play a role. According to the
survey, SNCM should be able to recover
its initial
market share of 35 % by 2006.

(67)

(68)

(69)

(70)

(71)

2.2.2.1. S e r v i c e s t o A l g e r i a

The market survey indicates that air transport accounts
for 92 % of overall passenger transport between the EU
and Algeria. Unlike for Corsica,
there is no specific
growth in maritime passenger transport to Algeria.

de

Transport Maritime

In maritime shipping, SNCM's sole competitor is the
de
Entreprise Nationale
Voyageurs (ENTMV), an Algerian public undertaking
with a virtual monopoly, with 89 % of
the market.
SNCM's market share in passenger transport to Algeria
is 11 %, considerably reduced since 1990 when it was
still 35 %. SNCM's position can be explained from the
cessation of SNCM's services in 1995 (27), administrative
constraints since that year and the absence of a political
will to reinstate this link.

(72)

(73)

2.2.2.2. S e r v i c e s t o M o r o c c o

The overall market share of aviation is 77 %. This share,
distinctly lower than that for Algeria, is connected with
the importance of short-haul sea transport, virtually
road transport, across
the Strait of Gibraltar via
southern Spain.

shares:

Comarit

is much more

This market
competitive, highly
fragmented, with a 5 % growth rate a year for services
between Morocco and Europe (95 % to Spain) with the
following main market
23 %,
Transmediterranea 22 %, Comanav 20 %, Euroferrys
18 % and Ferrimaroc 17 %. Many Moroccan and Spanish
companies are involved in this short-distance shipping
link: Comanav, Comarit, Euroferrys,
Ferry Maroc,
Limadet and Transméditeranea. None of them have a
market share of more than 23 %. Competition is fierce,
in particular in terms of fares, with old ships already
amortised.

in the short

It is not likely that any new competitors will arrive on
term. Even though SNCM
the market
continues to be a general agent
for ENTMV in its
country of origin and vice versa, ENTMV has developed
its own network in France (and in other European
countries) while SNCM is developing its network in
Algeria. […]

should expand considerably:

In the light of economic and political trends in Algeria,
this market
in 2006
maritime passenger transport should be between […]
and […] passengers. However, according to the market
survey ENTMV's fleet
is old and not certain to be
renewed. According to the authors of the market survey,
the order of two new ships by ENTMV seems to have
run into financial difficulties.

In sailings to the Maghreb, SNCM strengthened its
position with the entry into service in 2002 of the ferry
Île de Beauté, withdrawn from the link with Corsica,
which will do well in competition with ENTMV's ageing
fleet. According to the market survey, the success of this
link will be ensured by controlling operating costs
which should enable SNCM to offer attractive fares to
recover a part of the market. The market survey stresses

(74)

The only long-distance service is operated by Comanav,
from Sète to Tangiers or Nador. Accordingly,
it has
100 % of the market on these links, which however
represent only 5 % of maritime transport overall.

transport

It seems important

involved in maritime passenger

(75) As emphasised in the market survey, SNCM is currently
not
to
for SNCM to gain a
Morocco.
foothold in the long-distance traffic market between
France and Morocco. By seeking to capture a small part
of this virtual road transport (which currently passes
through southern Spain) rather than taking passengers
away from Comanav, SNCM could help to double
passenger transport by sea from France, which would
nevertheless remain marginal compared with sailings
across the Strait of Gibraltar.

2.2.2.3. S e r v i c e s t o Tu n i s i a

(27) Following the taking of hostages on the Algiers-Paris flight in

(76)

December 1994.

Aviation retains a dominant position, with 96 % of the
passenger transport market. The relative importance of

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tourist traffic to Tunisia explains this share which is
even higher
almost
exclusively go there by plane.

than for Algeria

tourists

as

(77) Only two Member States

to
Tunisia: France, from Marseilles and Toulon, with 47 %,
and Italy from Livorno and Genoa with 39 % and from
Sicily with 14 %.

run shipping services

(78)

(79)

(80)

The principal actor on this market which is growing by
7 % a year is the Compagnie Tunisienne de Navigation
(CTN) with a 58 % market share, followed by SNCM
with 21 %. CTN has a relatively modern fleet and makes
optimal use of it on links from France and Italy. The
other competitors are: Linee Lauro, Tirrenia and Ustica
Lines, the last two operating sailings from Sicily only.

Competition on the sea links varies according to
Member State. CTN's fares from Italy are 30 % lower
than from France, although crossing time is the same.
However, CTN and SNCM have identical
fares from
France.

SNCM had a 21 % market share in 2000 in passenger
transport by sea to Tunisia. This share has gone down,
with the transport increase catered for by CTN. On links
between France and Tunisia alone, SNCM's market share
is 50 %. The best way for SNCM to increase its overall
market share is to start running services to Tunisia from
Italy, provided that its fares are competitive.

(81) According to the market survey, sea transport to Tunisia
will continue to grow, reaching over […] passengers in
2006. SNCM's services from Italy will enable it to also
increase its market share: the market survey considers a
for SNCM for
[…] % market share a realistic target
2006.

(84)

(85)

(86)

(87)

cargo ship with between 200 and 500 places for
passengers. On the Maghreb link, there are virtually no
more ferries with less than 1 500 to 2 000 places. The
supply benchmark for a regular service is therefore
between 1 500 and 2 000 places a week.

The substantial seasonal variation (28), with monthly or
daily (29) peak volumes that can reach 10 times those of
the lowest off-peak months, oblige operators to run a
fleet of sufficient capacity to absorb peak traffic. Half
the turnover is in general achieved in July and August
alone. Moreover,
there is an imbalance according to
travel direction, even during peak periods. For instance,
early July crossings from the mainland to Corsica reach
a peak and return sailings to the mainland run virtually
empty, with the phenomenon reversing at the end of
August. At some weekends in summer and at particular
holiday weekends, the combined fleet of all shipping
companies operating services to Corsica is insufficient to
absorb peak passenger traffic.

services

in particular

to Corsica's
For
to Corsica,
secondary ports necessitated by the
island's weak
transport infrastructure, the public service constraints in
fact create an excessive supply of places in relation to
demand during the low season. Moreover, all operators
practise ‘exclusive' (30) sales for cabin places, which
strongly reduces the apparent occupancy coefficients of
ships.

In 2001, moreover, Corsica Ferries embarked upon an
the
aggressive policy to conquer a larger share of
market. Under this strategy, it offered overcapacity for
one or two years to attract new customers.

The market survey concludes that there is no structural
excess capacity on links between mainland Europe and
Corsica or to the Maghreb and that the apparent surplus
of places is intrinsically linked with the nature and
characteristics peculiar to this business.

2.2.3. Balancing supply and demand

2.3. The restructuring plan

(82) A quick look at the gross figures for supply and demand
could lead one to conclude that there is excess capacity
on all the links studied. According to the market survey,
however, things are not as simple as they seem.

(88)

The restructuring plan has, on the one hand, an
operational component covering the sale of four ships,
the closure of two subsidiaries, staff cuts, reduction of

(83)

It is not possible to fine-tune maritime transport supply
to demand. To Corsica, the minimum unit is a passenger

(28) On this subject, see recital 52.
(29) There are also substantial weekly variations in demand for sea

transport (end-of-week peaks).

(30) Possibility for one to three persons to occupy a cabin intended for

four.

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services to Corsica and increase of services to the
Maghreb and, on the other hand, a financial component
covering the refund, through recapitalisation, of a part
of the debts borne by SNCM. Apart from the initial
notification, SNCM's restructuring plan (31) presented by
the French authorities consists of a set of documents
referred to in section 1.1 which were transmitted to the
Commission both before and after the opening of the
procedure. The content of
this set of documents is
described in more detail in the present section.

(89)

Following the observations made by the Commission in
its decision of 19 August 2002, the French authorities,
in their
letter of 31 January 2003, provided a
description of improvements made to the restructuring
plan on the following points:

— commitments and details concerning wage policy,

— a plan for reducing costs in intermediate purchases,

— a commitment that SNCM will not initiate a fares
war with its competitors operating services
to
Corsica.

2.3.1. Analysis of factors that have led to the company's

financial difficulties

(90)

The French authorities have mentioned four factors to
explain the company's financial difficulties.

the

and

— Since 1996, SNCM has faced competition between
Corsica
French mainland, which is
something the public company never had to face in
the past and which has led to chronic operating
deficits as a result of
the public
service agreements of the period.

the rigidity of

— SNCM has had to ‘face heavy social demands and
conflicts harming it economically and slowing down
its growth'.

— Its growth has
complicated
administrative
allocation of the public service delegation contract.

reportedly been disrupted by
French
in connection with the

proceedings
courts

before

the

(91)

(92)

The Commission notes that the French authorities have
to which these
been unable to quantify the extent
factors have contributed to the company's operating
losses, nor have they investigated through cost analysis
whether there were any other causes explaining the
main sources of the company's losses.

In response to the argument adduced in the decision of
19 August 2002 that the ship acquisition policy may
have had an impact on SNCM's accounts and have led
to difficulties (32),
the French State transmitted the
following observations to the Commission in its letter of
8 October 2002.

trend towards modernisation of

(93) According to the French authorities, by taking these
steps to renew its fleet SNCM was only acting in line
with a general
the
Mediterranean fleet, thus ensuring that it could continue
to operate its links on these markets without excessive
risk of being marginalised. The French authorities
emphasise that the fleets of other major Mediterranean
shipping companies have improved in quality: Corsica
Ferries, Grimaldi, Tirrenia, Moby Lines, Trasmed and
CTN in particular have acquired and continue to acquire
medium- or high-capacity fast ships and car ferries that
are increasingly well equipped.

(94)

The French authorities argue that by renewing several of
its ships SNCM has merely pursued the clear strategic
objective required to offer a high-quality service from
Marseilles in accordance with the distinctive features of
the
this link and with the expectations of Corsica,
authority allocating the public service and a high-speed
shuttle service from Nice.

— SNCM, constrained by its public service obligations
between 1976 and 2001, has also had to cope with
two external shocks: suspension of sealinks with
Algeria in 1995 and the strong drop in services to
Corsica in 1995 and 1996.

(95) According to the French authorities,

the commercial
results obtained by these ships have been convincing. At
Nice, SNCM's high-speed ships have, together with the
significantly
‘Corsica

of Corsica

Express'

Ferries,

(31) This plan is referred to as the ‘industrial project' by the company's
management. It was adopted on 17 December 2001 by the SNCM
management board.

(32) From the decision of 19 August 2002: the Commission's doubts
are strengthened by the SNCM's ambitious programme for the
purchase of ships to renew its fleet while the group's operating
results remained relatively weak during the period 1997-2001.

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increased traffic on the Nice-Corsica link: from 304 000
passengers in 1995 to 780 000 — of whom 550 000
on high-speed ships — in 2001. As for the Napoléon
Bonaparte,
its occupancy rates in summer bear out its
excess, even after the arrival of Corsica Ferries at Toulon
in 2002 (33). The quality level offered by this ship has
in fact enabled SNCM to consolidate and indeed
improve its passenger revenue in this segment of an
extremely competitive market marked by a downward
trend in prices.

proceeds and EUR […] million appreciation. The Liberté
and Southern Trader (35) have been or will be disposed of
in 2003 for net proceeds and appreciation of EUR […]
million. The total net proceeds of the disposal of these
four vessels was EUR 1,2 million in excess of the sum
expected. The high-speed ship Asco, expected to yield
EUR […] million in net proceeds and EUR […] million
appreciation has not yet been disposed of.

(96) According to the French authorities, it was therefore the
‘increase in competition and concomitant fleet renewal'
that brought SNCM into financial difficulties, without
the company having any alternative options.

(100) These disposals have been partly offset by the entry into
service in June 2002 of the car ferry Danielle Casanova,
with lease financing, the passenger cargo vessel Paglia
in 2002 and
Orba, converted for
delivered in 2003, and the passenger cargo vessel Pascal
Paoli, ordered in January 2001,
likewise lease-financed
and delivered in May 2003.

its new duties

2.3.2. Reduction of capacity

(97)

In its restructuring plan, SNCM makes provision for
laying up and selling four of its vessels in 2002:

(101) At the same time, the company had in its restructuring
plan intended to dispose of the movable assets present
(Marseilles offices). These were
in its
disposed of
for EUR 12 million in 2003, with
EUR 5,1 million appreciation.

subsidiaries

— the Napoléon (34),

— the Liberté,

— the Monte Rotondo,

— the high-speed ship Asco.

2.3.3. Reorganisation of services

(102) The reduction, with effect from 2002, of the public
service activity and the increase in competition have led
SNCM to substantially limit the services it supplies.

(98) All these ships have now been sold, except for the Asco.
should be added the disposal,
To these disposals
currently in progress, of
the Southern Trader, a ship
leased by SMIP, one of SNCM's subsidiaries, under a
time charter.

(103) The restructuring plan provides for a reduction in the
number of crossings from 4 138 in 2001 (3 835 by
SNCM and 303 by Corsica Marittima) to 3 410 in 2003,
i.e. an overall decrease of 18 %, with the following
changes to its services:

(99)

expected proceeds

from these disposals were
The
EUR 40 million,
representing a cash injection (net
proceeds of disposal) of EUR 21 million, taking account
of residual refunds. The Monte Rotondo and Napoléon
in 2002 for EUR […] million net
were disposed of

(33) For instance, the following passenger and car occupancy rates (in

percentages) were recorded in 2002:

(in %)

Weekend

Passengers

From 28.6 to 30.6

From 26.7 to 28.7

From 2.8 to 4.8

From 30.8 to 2.9

78,7

84,6

102,8

100,1

Cars

72,2

82,0

96,7

94,8

(34) Not to be confused with the Napoléon Bonaparte which is another

— adaptation of services operated between Marseilles
the new
service

to the
laid down in the public

requirements of

and Corsica
specifications
contract,

— withdrawal of

the Toulon-Corsica (36)
link, which
can still be run with occasional crossings depending
on the availability of the Napoléon Bonaparte and the
Danielle Casanova during the transition period to
deal with delays on rotations between Marseilles and
Corsica,

(35) The Southern Trader is currently subject to an offer to sell.
(36) There were reportedly 83 crossings in 2002 compared with 187

vessel of the SNCM fleet.

in 2001.

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— reduction of services between Nice and Corsica (37),

— closure of

the Livorno-Bastia line with dedicated

equipment (38),

— expansion of services to Algeria and Tunisia with
the Méditerranée, the Ile de Beauté and the Corse,

(104) Overall, as shown in table 3,

the restructuring plan
seeks to reduce the number of crossings by 18 % and
places by 28 % through:

— 20 % and 37 % reductions, respectively, on services

to Corsica,

— 23 % and 43 % increases, respectively, on services to

— suspension of services between Genoa and Tunis.

the Maghreb.

TABLE 3

Trend in SNCM services

Number of crossings

Places available

Linear metres available

2001

> 2003

2001

> 2003

2001

> 2003

Marseilles-Corsica

Toulon-Corsica

Gulf of Genoa

1 881

187

1 768

[…]

[…]

[…]

1 723 050

303 650

1 708 700

[…]

[…]

[…]

1 469 000

0

0

[…]

[…]

[…]

Subtotal Europe

3 836

3 067

3 735 400

2 357 500

1 469 000

2 154 000

Maghreb

302

372

444 000

635 000

0

0

Total

4 138

3 439

4 179 400

2 992 500

1 469 000

2 154 000

(105) The redeployment of

services

to the Maghreb will
for
the
generate EUR 9 million additional
costs
company, of which EUR 6 million for
technical
adaptations on the Danielle Casanova and the Île de
Beauté and EUR 3 million for the costs of promoting the
new services.

— reduction in size of the fleet (cutting […] full-time

jobs),

— increase in crew productivity (cutting […] jobs),

2.3.4. Closure of subsidiaries

— effects of changing over to 35-hour week (increase

by […] jobs),

(106) Under its restructuring plan, SNCM intended to close
two of
its subsidiaries in January 2002 which had
become redundant following the reorganisation of its
services: the Compagnie Maritime Toulonnaise, which
operated overland services to Toulon, and the Corsica
Marittima company, which operated links between
remaining
Corsica and Italy. The limited range of
activities of these companies are run by SNCM itself.

2.3.5. Reduction of staff costs

(107) The restructuring plan seeks to reduce staff from 2 430
the following

to 2 130 in 2003 on the basis of
measures:

(37) There were reportedly 1 157 crossings in 2002 compared with

1 345 in 2001.

(38) Reportedly there were only 54 crossings with 9 400 passengers in
2002 compared with 290 with 64 000 passengers in 2001 under
Corsica Marittima's flag.

— developing new ‘tourist' activities (increase by […]

jobs),

— reduction of onshore personnel

through natural
wastage or early retirement and mobility leave
(reduction by […] jobs).

(108) Staff

is reduced through natural wastage and early
retirement on the basis of age criteria (early cessation of
work), mobility leave and non-replacement of temporary
contracts. However, for SNCM they entail an estimated
cost of EUR 20,4 million.

(109) The figures supplied by the French authorities show the

following expected trend in productivity:

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TABLE 4

Expected trend in productivity of SNCM

2001

Passengers Corsica

1 376 000

Passengers Maghreb (coefficient 3) (39)

495 000

(165 000 × 3)

Freight (coefficient 0,5)

408 000

(816 000 × 0,5)

Total TU

Staff FTP

Productivity (TU/FTP)

Productivity increase

2 279 000

2 430

938

[…]

[…]

[…]

2004

[…]

[…]

[…]

2 353 000

2 130

1 105

+ 17,8 %

(110) Accordingly, staff productivity appears to be up by
17,8 % while the company has to remedy the adverse
effects of an initial drop in activity in 2002 and 2003
and consequently weaker coverage of the fixed costs
generated.

(111)

Following the decision of 19 August 2002, the French
authorities provided, by letter of 10 February 2003,
additional details on management of staff expenditure:

(112) Overall,

staff costs have dropped from EUR 116,9
million in 2001 to EUR 114,4 million in 2002. Staff
numbers have followed the same trend, dropping from
2 423 to 2 392 full-time equivalents. The measures
referred to in recitals 107 and 108 should make it
possible to reduce costs from EUR 61,8 million in 2001
to EUR […] million on average from 2003 to 2006.
Onshore staff costs would move from EUR 50,3 million
in 2001 to EUR […] million over the same period.

— there has been no general

increase in onboard
personnel since 1999, with average wages having
risen only between 0,8 and 1 % a year since 2000,
and the average wage of onboard personnel of
SNCM,
is also within the
average of earnings recorded for three other French
shipping companies,

i.e. EUR 33 345 a year,

(113)

— for onshore personnel,

average

earnings have
increased from 1,7 to 2 % a year since 2000,
basically as a result of progression in seniority and
technical qualifications (40), as general increases have
been limited to 0,06 %, 0,75 % and 0,77 % for
2000, 2001 and 2003 respectively.

(39) Traffic units (TU) have been determined on the basis of their per
capita contribution in terms of net
revenue. The passenger
(including his vehicle) on the Corsica line serves as the reference
(1) for these traffic units. The unit revenue for Maghreb is three
financial
times
compensation) and the relative weight of time units is increased
automatically.

for Corsica (twice as

far and without

that

(40) These salary increases result from the automatic effect of staff
seniority progression or additional qualifications acquired by
members of staff for which automatic salary increases are granted
in accordance with industrial or company agreements.

2.3.6. Reduction in purchase cost of intermediate

consumption

letter of 10 February 2003,

In their
the French
authorities enhanced the restructuring plan by making
firmer
to managing
intermediate consumption.
In this framework, SNCM
has undertaken upon specific action with the help of
specialised consultants.

commitments with

regard

— The first action, called ‘Buy better',

is intended to
manage purchase costs through better control of the
purchase operations, training for the staff involved,
redefining needs and renegotiating with suppliers.
The gain expected for
the whole of 2003 is
EUR 3 million over a total of EUR 73 million in
purchases in 2001. At the end of September 2002
the gain for the whole year was EUR 1,6 million.

— The second action, called ‘Consume less', is intended
to limit consumption, in particular on board ships,
with other factors (purchase performance, activity)
crews
remaining
performing particular maintenance duties previously

constant.

includes

ships'

It

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Official Journal of the European Union

27.2.2004

outsourced and monitoring of seventeen expenditure
headings by consumption reduction monitoring
committees involving the staff concerned. The gain
expected for the whole year is EUR 2 million. It has
been noted that at the end of September 2002 a
attained through
gain of EUR 340 000 was
EUR 158 000 investment (return on investment in
less than six months).

market, given the expenditure required by the high
quality of its services. Customer surveys have confirmed
the importance of fares as a criterion in the customer's
intermodal and intramodal choices. According to these
surveys, 90 % of Corsica Ferries' customers chose this
company because of its fares. SNCM has always been
aware of the relative importance of this criterion and
endeavoured to highlight other criteria involved in
choosing a shipping company such as comfort, ease of
access and availability.

(114) These actions, combined with fleet

reduction, have
already led to a reduction of maintenance expenditure
from EUR 26,9 to 23 million between 2001 and 2002.

2.3.7. Fares policy

(115)

formal

a
the

commitment (41),

letter of 10 February 2003,

the French
In their
authorities
gave
in
expectations
accordance with
indicated in its decision of 19 August 2002, that SNCM
would not initiate a fares war,
in other terms that it
would not become a price leader to Corsica. The French
authorities have made the following comments on this
commitment.

Commission's

(119) According to the French authorities, SNCM's attitude in
recent years has always been to try to respond to
Corsica Ferries' fares attacks in order to safeguard its
market
the 2002 season
fares
transmitted to the Commission show that the average
fare charged by SNCM is higher than that of Corsica
Ferries.

share. SNCM's

for

(120) According to the French authorities, the chronological
sequence of decisions shows clearly that SNCM's fares
policy has been confined to responding to the services
offered by Corsica Ferries:
launch of Corsica Ferries
price offer on 15 January 2002 followed by the
announcement of SNCM's price offer on 5 February
2002.

(116) The French authorities state that

‘SNCM makes this
commitment without reservations as it considers that a
fares war would not be in line with:

(121) With regard to freight charges, the levels are, apart from
a number of details, those required by the public service
delegation specifications and apply equally to SNCM and
its partner CMN.

— its strategic positioning,

— its interest, as it would lead to a drop in revenue,

— its usual practice and its savoir faire'.

(122) According to the French authorities, price leadership
status can be judged in the light of average unit
revenue. When SNCM responded in 2002 to Corsica
Ferries'
fares
determined in accordance with the abovementioned
to
method,
Marseilles and Toulon increased from EUR 73,69 in
2001 to EUR 74,26 in 2002.

revenue per passenger

its average unit

introducing

attack by

special

fares

(117) According to the French authorities,

the nautical
resources which SNCM has built up reflect a policy of
offering high-quality services, moving upmarket. These
choices,
requirements of
successive specifications of maritime public services
between Corsica and mainland France and by the
expectations of customers from the island, are not
compatible with a low-fares policy.

largely dictated by

the

(123) There is frontal competition between SNCM and Corsica
Ferries in Nice, covering very similar products with
high-speed vessels supplemented by day or night ferries.
According to the French authorities, SNCM had no
other choice in 2002 than to approximate its fares and
charges to its competitor's and highlight
the specific
attractive services it could offer.

(118) Consequently, SNCM will continue to implement a
business policy mainly focused on socio-professional
categories of an above-average level and operating
prices in line with the quality of its services. It would be
for SNCM to compete on the low-fares
inconsistent

(41) On this subject, see also the comments of the French authorities

on the observations of Corsica Ferries, in section 4.1.

2.3.8. Determining the amount of recapitalisation

(124) The French authorities intend to inject EUR 76 million
into SNCM by raising the capital to be subscribed by
CGMF, a company in which the French State has a
100 % share and which itself has an 80 % share in
SNCM. This cash injection is intended to fund the

27.2.2004

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L 61/29

restructuring measures

the
operational
excessively high level of debt which the company could
not settle with its own resources, even if account is
taken of future financial compensation provided for in
the public service delegation contract.

and reduce

(125) The French authorities have presented three methods to
calculate SNCM's cash requirement and have adopted
three
the
methods.

figure determined through these

lowest

2.3.8.1. M e t h o d b a s e d o n c o s t s b o r n e b y

S N C M

(126) This first method consists of aggregating the costs of all
restructuring measures. It leads to a EUR 90,9 million
financing requirement based on the following:

— accumulated debts from 1991 to 2001,

totalling

EUR 41,7 million (42),

— a

drop

in

resources

through

depreciation in the same period,
24 million (43),

exceptional
totalling EUR

— appreciation

during
disposal
restructuring, namely EUR 21 million, deducted
from the financing requirement,

generated

of

— the cumulative effect of restructuring costs, totalling

EUR 46,2 million, broken down as follows:

— the social plan of the restructuring programme:

EUR 20,4 million,

— laying-up costs of vessels being sold off: EUR

1,8 million,

— costs of

redeploying activities

towards

the

Maghreb: EUR 9 million,

— depreciation of the high-speed vessel Liamone:

EUR 15 million.

(42) Namely: – EUR 29 million (FRF 190 million) from 1991 to 1999,
a figure validated by the Commission in its Decision 2002/149/EC
of 30 October 2001 on State aid paid by France to the Société
nationale maritime Corse-Méditerranée (OJ L 50, 21.2.2002,
p. 66), – EUR 6,1 million for 2000 and – EUR 6,6 million, before
restructuring expenses, for 2001.

(43) This item drops from EUR 86 to 62 million on the balance sheet
for the period, reflecting the lengthening of
the amortisation
period from 12 to 20 years, the reduced use made of this resource
and the use of leasing for the latest units delivered.

2.3.8.2. M e t h o d b a s e d o n c a p i t a l r e q u i r e d t o

f i n a n c e t h e e x i s t i n g f l e e t

for financing of

(127) The second method consists of determining which
would be the amount of capital required by the banks
for the entire fleet, given that
the
purchase of a ship the banks in general require capital
corresponding to 20 to 25 % of the ship's value. On the
basis of the total sum of EUR 843 million representing
the past cost of ships acquired for the fleet, the French
authorities have calculated a capital
requirement of
between EUR 157 and 196 million. After deducting
existing capital at the end of 2001, this method leads
to a
recapitalisation requirement of EUR 101 to
140 million.

2.3.8.3. M e t h o d b a s e d o n a c o m p a r i s o n w i t h
t h e l e v e l o f c a p i t a l i s a t i o n o f o t h e r ,
s i m i l a r s h i p p i n g c o m p a n i e s

(128) This last method consists of calculating the financing
the average capital/debt
requirement on the basis of
five European shipping
ratio recorded in 2000 for
these
companies. Even though the balance sheets of
companies
the average
show substantial disparities,
adopted by the French authorities is 79 %. The French
authorities maintain that the financial model leads to an
average of 77 % for the period 2002 to 2007, before
dividend, with capital reaching EUR 169 million in
2007. The French authorities point out that it is in fact
such a level of capital that should be attained through
this EUR 76 million recapitalisation in 2002 and, of
course, the success of the measures provided for in the
restructuring plan.

(129)

In their letter of 3 July 2002, the French authorities
added two new firms
shipping
companies, as a result of which the average capital/debt
ratio was 83 % instead of 79 %.

to the panel of

(130) Since the figure of EUR 76 million is the lowest
produced by the three methods, it was adopted by the
French authorities
amount of
recapitalisation.

in determining the

2.4. Results expected from the restructuring aid

(131) The French authorities have examined not only the
results expected from the restructuring plan according

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Official Journal of the European Union

27.2.2004

to various scenarios but also the consequences which a
reduction of public service obligations would have
beyond 2007.

enabling SNCM to reach targets previously beyond its
reach. The best-case scenario would improve:

2.4.1. Expected results of the restructuring plan

(132) The French authorities have studied the likely trends in
SNCM's financial position according to three different
scenarios summed up in table 5: a best-case, worse-case
and
the
intermediate
restructuring plan adopted.

corresponding

scenario

to

— the current

result which on average rises from

EUR […] million to EUR […] million,

— the company's capital at the end of the period in
question, rising from EUR […] million to EUR […]
million.

2.4.1.2. Wo r s t - c a s e s c e n a r i o

(137) This scenario assumes a downturn in the economic and
social situation in France. Trade with Corsica and the
Maghreb stagnates. Traffic is lower than expected.

2.4.1.1. B e s t - c a s e s c e n a r i o

(138)

(133) For

attraction

this
island's

to Corsica,
of

scenario assumes an
services
through
improvement
the
investment and communication policies.
In this way,
Corsica would remain a favourite tourist destination.
The shipping component increases compared with air
transport (longer stay of families with car) and French
sea transport benefits from the frequency and variety of
services on offer.

(134) The result

is very good price and traffic volume
performance
than
generating higher net
expected. However, the increase on the Nice-Corsica link
is limited by the reduction of capacity undertaken by
SNCM.

revenue

In such a scenario, SNCM could market only one-third
of all possible links. On top of this negative trend in
traffic, there would from 2003 be a 9 % increase in the
price of
to a
deterioration:

scenario would

fuel. This

lead

— in the current results, on average dropping from

EUR […] million to EUR […] million,

— in the company's capital at the end of the financial
year, dropping from EUR […] million to EUR […]
million. In this scenario, SNCM replaces the Ile de
Beauté by a second-hand vessel and does not replace
the Corse,
lengthening the period in which it
remains in service.

(135) For services to the Maghreb, this scenario envisages no
major disruptions of
the growth trend in Maghreb
markets. The qualitative and quantitative improvement
of supply combined with a more expanding market
enables SNCM to expect higher net
revenue than
in the restructuring plan, mainly during the
forecast
high season. Here,
too, the capacity on offer during
peak periods limits possibilities for growth.

2.4.1.3. E x a m i n a t i o n o f t h e d i f f e r e n t

s c e n a r i o s

(139) The best-case and worst-case scenarios may appear very
similar, but the following points should be stressed:

(136)

In its restructuring plan, SNCM envisages the sale of
half of its capacities on offer. In this case, SNCM could
market
two-thirds of all possible links thanks to its
growing reputation on the key markets for mini-cruises
and business travel and the beneficial effects of the entry
into service of a new ship and a sizeable capacity

— on the one hand, the assumptions regarding traffic
make it possible to meet
the
the
restructuring plan without
programme of services or the fleet used. A greater
decrease or increase in traffic would exceed these
limits and necessitate other combinations of services
the
and consequently a different composition of
to economic
fleet.

the objectives of
either

in particular,

altering

this

led,

If

27.2.2004

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L 61/31

the public service delegation,

the
disruption of
safeguard clause laid down in the public service
delegation contract might be activated, leading to a
redefinition of the corresponding service;

instance,

convergent or divergent. For

— on the other hand, services to Corsica and to the
Maghreb follow different criteria. Their trends may
be
the
Corsican market may depend on the situation on the
island. Serious disturbances there may immediately
impact on the growth of trade with Algeria. The
to be more stable but
Tunisian market
competition there is fierce. Overall,
it is not very
likely that all these markets will show a trend in the
same direction. Accordingly, the assumptions on the
whole seem to present a situation that
is quite
representative of possible developments.

seems

course,

staying within the general
i.e. 11 ships and maintenance of
the company will

framework
Of
the links
adopted,
operated,
fine-tune its supply to
demand in order to retain its balance. This could be the
case in particular in the worst-case scenario on the
Nice/Corsica and Maghreb lines. A number of possible
measures are given below by way of example:

— increased use in June and September of the small
Liamone:

high-speed
improvement of result by EUR […] million,

replacing

vessel

the

— reduction in the number of vessels operated during
improvement of result

particular weeks in winter:
by EUR […] million,

(140) The profit budgets of the best- and worst-case scenarios
have been drawn up with supply remaining constant in
order to highlight clearly the effects of economic trends.

— on crossings to Algeria, reduction of the number of
trips during the low season (one every two weeks):
improvement of result by EUR […] million.

TABLE 5

Hypotheses in the scenarios

Shipping market from France

Corsica

Algeria

Tunisia

SNCM passenger traffic

Marseilles/Corsica

Toulon/Corsica

Gulf of Genoa

Maghreb

Average net revenue of SNCM in 2003/2006
(in million EUR)

Marseilles/Corsica

Toulon/Corsica

Gulf of Genoa

Algeria

Tunisia

Tourism

Worst-case
scenario

Scenario of
restructuring
plan

Best-case
scenario

[…]

[…]

[…]

[…]

[…]

[…]

[…]

[…]

[…]

[…]

[…]

[…]

[…]

[…]

[…]

[…]

[…]

[…]

[…]

[…]

[…]

[…]

[…]

[…]

[…]

[…]

[…]

[…]

[…]

[…]

[…]

[…]

[…]

[…]

[…]

[…]

[…]

[…]

[…]

(141) The different scenarios lead to the following simulations which the French authorities have
transmitted to the Commission. These simulations show that SNCM should become profitable again
in each of the three scenarios.

L 61/32

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Official Journal of the European Union

27.2.2004

TABLE 6

Trend of the main financial indicators of SNCM

Average 2003/2006

Passengers

Cars

Freight (ml)

Gross operating margin
(in thousand EUR)

Financial compensation
(in thousand EUR)

Current result
(in thousand EUR)

Company capital

Overall debt

2007
(in million EUR)

Capital (a)/(cash loans + leasing) ratio

(a) This ratio takes account of lease purchasing of particular vessels.

Worst-case
scenario

Scenario of
restructuring
plan

Best-case
scenario

[…]

[…]

[…]

[…]

[…]

[…]

[…]

[…]

[…]

[…]

[…]

[…]

[…]

[…]

[…]

[…]

[…]

[…]

[…]

[…]

[…]

[…]

[…]

[…]

[…]

[…]

[…]

2.4.1.4. E x p e c t e d t r e n d i n S N C M ' s f i n a n c i a l s i t u a t i o n i n t h e s c e n a r i o a d o p t e d

(142)

In their restructuring plan, the French authorities have included a more detailed financial model for
the period 2002 to 2007 based on the intermediate scenario adopted, with the following relatively
conservative assumptions: forecast growth of gross internal product 1,5 %, borrowing rate 5,5 %,
rate of investment income 4,5 % and rate of short-term debts 5 %. This model, presented in table 7,
presents forecasts for the profit and loss accounts and balance sheets for the next six years between
2002 and 2007. It shows a return to profitability from 2003.

TABLE 7

Financial model for 2002 to 2007

2000
Realised

2001
Realised

2002
Plan

2002
Realised

2003
Plan

2004
Plan

2005
Plan

2006
Plan

2007
Plan

(in million EUR)

Turnover

204,9

204,1

178

205,8

[…]

[…]

[…]

[…]

[…]

Operating subsidies

85,4

86,7

74,5

77,7

[…]

[…]

[…]

[…]

[…]

Current result

–14,7

–5,1

–6,2

–40,4

1,2

23

–5,8

[…]

[…]

[…]

[…]

[…]

4,2

[…]

[…]

[…]

[…]

[…]

Net result

Capital

Net financial debt
(excl. leasing)

Financial ratios

Current results/
turnover + subsidies

Capital/debt on balance
sheet

67,5

29,7

119

33,8

[…]

[…]

[…]

[…]

[…]

135,8

134,5

67,7

144,8

[…]

[…]

[…]

[…]

[…]

–5 %

–2 %

0 %

–2 %

[…]

[…]

[…]

[…]

[…]

50 %

22 %

176 %

23 %

[…]

[…]

[…]

[…]

[…]

Figures for 2000 and 2001 taken from SNCM's annual report 2001.
2002 results taken from provisional accounts transmitted by SNCM on 15 May 2003.

27.2.2004

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L 61/33

(143)

In this scenario, turnover relating to activities to the
Maghreb would rise from about EUR […] million in
2001 to EUR […] million from 2003 (44). The current
result of this network should be maintained at a level of
EUR […] to […] million over the period 2002-2005.

dedicated to public service, which was negative in 2001
and 2002, should rise to EUR […] million in 2003,
then to about EUR […] million in 2004 to 2005 and
finally EUR […] million in 2006.

(144) The turnover

for

the Nice-Corsica network, where
competition is strongest, is around EUR […] million, to
which must be added about EUR 5 million in public
compensation from social assistance. Because of its high
quality level and consequently the proportionately high
purchase price of the main vessel used on this service,
the high-speed vessel Liamone, proceeds from operating
this link would not cover all the amortisation costs of
the vessel (included in lease paid) and would produce a
to […] million. The
current
exceptional EUR 14,8 million depreciation on the vessel,
included in the restructuring plan and in the 2001
annual accounts, will adjust
the
company and offset the future lease annuities by EUR
1,8 million, more or less balancing the Nice-Corsica
services (45). The
the
company has
alternative solution to disposing of the Liamone would
not, on closer examination, be favourable because of the
market
associated with early
termination of the lease.

situation and losses

result of EUR […]

its use value for

indicated that

(145) For

traditional activity on the line
the company's
between Marseilles (and,
for the record, Toulon) and
Corsica, expected turnover was EUR 84 million in 2002
and should vary between EUR […] and […] million
during the following years. It should be noted that the
overall turnover of services to Corsica is expected to
drop by EUR 9 million, i.e. 8 %, in 2002 compared with
2001. The 2002 accounts confirm this expected drop
(EUR 10 million less in passenger revenue). As a result,
SNCM's market share diminishes by 4 percentage points
(from 25,9 % to 21,8 %) from 2001 to 2002 to the
benefit of its competitors (5,6 point increase to 16,8 %).

(146) For services from Marseilles, which is now the only one
covered by the public service delegation, the expected
subsidy should have been limited to about EUR 69
million in 2002, dropping to EUR 61-63 million during
the period covered by the plan, representing a notable
decrease compared with the EUR 87 million obtained in
the network
2001. However,

the current

result of

(44) This trend was confirmed from 2002 with an increase of over
EUR 9 million in passenger revenue in this area. In spite of the
stability of fares, unit revenue improved, showing a better spread
of the different fares.

(45) Note: rentals, included in the current result, will remain at their
previous
carryover of
there will be
amortisation of EUR 1,8 million at the level of the exceptional
result in order to obtain this effect in net result.

an annual

level but

(147)

from variations

In 2002, the current result attained by the company
would reportedly be – EUR 5,8 million, in line with that
lower than the figure indicated in the
of 2001 but
restructuring plan. Apart
in some
headings of the profit and loss account, this current
result could be explained from the absence of a refund
of the maritime professional tax (EUR 2,4 million), for
which there will be an abatement at source in 2003,
of
and
employers' Assedic
partial
contributions (unemployment
insurance contributions)
and family allowances, i.e. a EUR 3,5 million shortfall.

refund

the

(148) According to the French authorities, the EUR 76 million
cash injection and the turnaround to profitability,
expected from 2003, should make it possible to raise
the company's capital from its current level of about
EUR 30 million to EUR 120 million in the short term
(2003) and then to EUR […] million at the end of the
period covered by the plan (2006 to 2007). This will
lead to a reduction of
indebtedness from its current
level (EUR 145 million) to levels of EUR […] million
from 2003 to 2005. In the last years of the plan, an
increase in indebtedness is forecast by the company
because of the renewal
(fully owned) of one or two
vessels.

2.4.2. Scenarios beyond the restructuring plan

(149)

It is important to know what will be the company's
competitive position in 2006 at the end of the current
public service delegation contract and how viable the
company will be. The fact is, however, that it is difficult
today to foresee the content of the future public service
delegation contract after 2006.

(150) For SNCM, compared with the current situation in
which it operates four cargo passenger ships and two
car ferries, a situation in which, for instance, a […]
would no longer be needed would generate revenue
losses of EUR […] million (and EUR […] million in
subsidy). Reducing labour costs, other operating costs
and capital costs (amortisations and financial charges)
would make it possible to limit the drop in results to
about EUR […] million, i.e. […] of the profit planned

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Official Journal of the European Union

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for the end of the period. From a financial viewpoint,
the costs of restructuring, which are estimated at EUR
20 million for 260 employees, would be more than
compensated by the sale of the vessel concerned, e.g.
the […] whose disposal would generate EUR […]
million in cash and EUR […] million depreciation
before tax.

of

on

i.e.

[…]

used

currently

resources

(151) The French authorities have also devised a more
extreme scenario with only […] cargo passenger ships,
i.e.
the
Marseilles-Corsica line, which would continue to be
covered by the public service delegation contract, plus
one car ferry operated on a competitive basis with
social assistance (46).
In this case, expected revenue
losses would be EUR […] million (and EUR […] million
the
in subsidy),
Marseilles–Corsica service. The reduction in labour
costs,
costs
(amortisations and financial charges), however, would be
insufficient to guarantee a positive result: with about
EUR […] million less than the plan, SNCM would suffer
a limited loss of about EUR […] million. Restructuring
costs, estimated at EUR 34 million for 450 employees,
however, would be compensated for by the sale of two
vessels, e.g. the […] and the […] whose disposal would
generate EUR […] million in cash and EUR […] million
depreciation before tax.

[…] % of

operating

revenue

capital

other

costs

total

and

for

(152) The French authorities did not want

to study more
austere scenarios, considering that any scenario leading
to a reduction of more than 50 % of SNCM's activity
into question the object of the company.
would call
However, the French authorities have stressed that this
plan should make it possible to prevent an extreme
situation by swiftly making the company competitive
and thus enable it to acquire at least a part of a future
public service obligation contract.

2.5. Other aid for SNCM

(153) SNCM has in the past received the following individual

aid:

— operating grants to compensate for its public service
obligations amounting to EUR 787 million for the
period 1991 to 2001. This aid was approved by the
Commission on 30 October 2001 for
this
period (47),

(46) See recital 155.
(47) Abovementioned Decision 2002/149/EC.

— rescue aid in the form of a refundable advance of
EUR 22,5 million which was approved by the
Commission on 17 July 2002 (48) and has in the
meantime been fully refunded by SNCM.

(154) SNCM currently receives

financial compensation for
performing its public
service obligation on lines
between Marseilles and Corsica for the period 2002 to
2006 under its contract (49), with a total sum which
may reach up to EUR 321,5 million for the entire
period.

(155)

It has in the past received, and should in the future
receive, funds under the following aid schemes which
are open to all shipping companies:

— indirect aid under the individual social assistance
scheme for shipping services to Corsica intended for
particular categories of passengers, a scheme which
was approved by the Commission in 2002 (50);

— the business

tax refund scheme

for

shipping

companies (51).

2.6. Grounds for initiating the procedure

2.6.1. Doubts on the relevance of the restructuring plan

(156)

In its decision of 19 August 2002, the Commission
expressed doubts on the
it
provided no analysis of the causes of the company's
losses. In particular, the Commission raised questions
concerning the following points:

restructuring plan as

— the connection between the company's losses and its

public service obligation,

(48) Commission decision of 17 July 2002, case NN 27/2002, ex-N
849/2001, rescue aid for SNCM (not yet published in the Official
Journal).

(49) On this subject, see section 2.1.2. See also Decision 2002/149/EC.
(50) Commission decision of 2 July 2002, case N 781/2001, on the
scheme for individual social assistance for shipping services to
Corsica.

(51) Commission decision of 7 December 2000, case N 593/2000, on
the maritime component of business tax. This

the refund of
scheme has been amended twice.

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— the impact of SNCM's policy of ship purchases on

its profit and loss account,

— the measures planned to enhance the company's

productivity.

72,8 million cashflow. Moreover, Corsica Ferries stresses
that of the EUR 40,6 million losses recorded by SNCM
in 2001, EUR 15 million relate to the depreciation of
the high-speed vessel Liamone.

(157) The Commission also pointed to certain gaps in the

restructuring plan:

— the absence of specific measures to reduce the

amount of intermediate consumption,

— the absence of any indications concerning SNCM's

future fares policy.

2.6.2. Doubt about the relevance of the calculation of the

amount of aid

contrary

to what

Ferries notes

(161) Second, Corsica Ferries questions SNCM's capacity to
become profitable on its non-subsidised lines. Moreover,
is
that,
Corsica
announced in the restructuring plan (53), services to
Livorno are still operational. About the services from
Nice and Toulon, Corsica Ferries expresses doubts on
SNCM's capacity to make these lines profitable. With
regard to services to the Maghreb, it notes that SNCM
will have to face fierce competition from CTN and
ENTV. On the subject of cost reduction, Corsica Ferries
regrets
to particular
it does not have access
components of the restructuring plan. However, it asks
the Commission to see that the questions which the
latter raised in its decision of 19 August 2002 receive
convincing answers from the French authorities.

that

(158) The Commission also wondered not only about

the

the
the calculation method adopted by the
relevance of
French authorities
amount of
to determine
recapitalisation but also about particular hypotheses
adopted for financial simulations. The method adopted
by the French authorities to justify the amount of EUR
76 million for capitalisation is based on a financial
simulation which does not clearly bring out all
the
underlying hypotheses and does not show how the
capital/long-term indebtedness ratio leads on average to
the reference ratio of 79 %.

(162) Third, Corsica Ferries stresses the need to ensure that
the planned aid does not lead to undue distortion of
competition. In its opinion, the aid should not serve to
facilitate the struggle against competitors by allowing a
more aggressive supply of
services. Corsica Ferries
considers the 79 % capital/debt ratio adopted by the
French authorities (54) as exaggerated in relation to the
ratios which it recorded itself on a panel of 10 shipping
companies. These ratios vary from 23,69 % (for Moby
Lines) via 49,7 % for CMN to 55,09 % (for Grimaldi).

3. COMMENTS FROM INTERESTED PARTIES

3.1. Comments from Corsica Ferries

(163) According to Corsica Ferries, the calculation leading to
the amount of EUR 76 million is purely fictitious. It
argues that EUR 76 million corresponds to the FRF
500 million which the company would lose from its
territorial continuity grant for the new period 2002 to
2006.

3.1.1. First letter with comments

(159) By letter of 8 January 2003 (52), the law firm Scapel,
Scapel-Grail and Bonnaud sent their observations to its
client, Corsica Ferries.

(164) According to Corsica Ferries, SNCM could itself have
had such an amount at its disposal by using its latent
appreciation on the fleet or by selling off some of its
shares.

(160) First, Corsica Ferries disputes that SNCM is a firm in
difficulty within the meaning of the guidelines. It points
out that the public service delegation contract allocates
a public grant to the company of EUR 64,3 million on
average a year, making a total of EUR 321,5 million
over five years. It argues that Article 5 of the public
service delegation contract guarantees for SNCM a EUR

(52) Registered by the Commission on 15 January 2003 as DG TREN

A/10962.

(165) With regard to SNCM shares, Corsica Ferries notes that
some of the subsidiaries are of no use to the shipping
company's
following
specifically:

activities, mentioning

the

(53) The decision to initiate the procedure indicated that one of the
measures laid down in the restructuring plan was ‘the closure of
the Bastia-Livorno line with dedicated equipment'.

(54) See recital 128 of this Decision.

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— the 50 % share

in the

Sud-Cargos

shipping

3.1.2. Second series of comments

company,

— the 13 % share in Amadeus, a firm specialised in air

transport booking systems,

— the 59,25 % share in CMN,

(168) By

of

16

January

electronic mail

the
Director-General of Corsica Ferries sent the Commission
a copy of a press release from Agence France Presse and
a press file concerning the press conference held by the
SNCM chairman on 14 January 2003 on SNCM's new
scale of fares for 2003.

2003,

— CGTH's real estate holdings.

3.1.3. Meeting of Corsica Ferries and the Commission

(166) Corsica Ferries concludes that

the plan to grant aid
circumvents the cabotage regulation and renders the
invitation to tender for Marseilles to Corsica services
meaningless.
It suggests that restructuring aid should
not be granted until 2007 and only if SNCM loses the
next tender in 2006, which would be the only scenario
that would genuinely put the public shipping company
in difficulty.

(167) A considerable number of documents (copies) (55) were

enclosed with the letter of 8 January 2003.

(item 2),

timetables of

(55) An article in the Le Marin newspaper of 7 June 2002 entitled
‘SNCM: a record deficit
the
in 2001'
passenger cargo ship at Bastia for 2003 to 2006 (item 3), a list of
SNCM subsidiaries compiled by Cofacerating (item 4), an article
from the La Tribune daily of 21 December 2001 entitled ‘State
grants EUR 76 million to SNCM' (item 5), an article from the La
Provence newspaper of 7 February 2002 entitled ‘Faced with
competition in its waters, SNCM goes international'
(item 6),
report of activities of the port of Nice of November 2002 (item 7),
statistics on the 2002 season from the Corsica regional transport
monitoring authority (item 8), an article entitled ‘SNCM obliged to
cut all fares' (item 9), an undated article entitled ‘SNCM discusses
its industrial plan' (item 10), a Fazi report of 16 September 2002
on SNCM's restructuring plan, an article from the Le Marin
newspaper of 7 June 2002 entitled ‘SNCM: record deficit in 2001'
(item 11), an article from the la Provence daily of 7 December 2002
entitled ‘SNCM agrees to talk on Corsica [with STC]' (item 12), an
article from the L'antenne newspaper of 11 December 2002
entitled ‘Details of SNCM/STC agreement' (item 13), an undated
article from an unidentified newspaper entitled ‘SNCM to receive
EUR 76,2 million in exceptional State aid' (item 14), a story from
AOL Mail of 21 December 2001 entitled ‘SNCM social plan
without
showing the
a
capital/debt ratio for 10 shipping companies (item 16), report with
final comments from the Chambre Régionale des Comptes of May
2002 on the management of the Office des Transports de Corse
(item 17), an article from the La Provence daily of Saturday
4 December 2002 entitled ‘Head of Corsica Ferries attacks SNCM'
(item 18), an article from the La Provence daily of Saturday
4 January 2003 entitled ‘SNCM chairman goes on the attack on
Corsica Ferries' (item 19).

summary table

(item 15),

layoffs'

(169) At a meeting held on 4 February 2003 between the
Commission and representatives of Corsica Ferries
convened
Ferries
transmitted transparencies showing graphs of SNCM's
potential appreciations. By letter of 21 February 2003,
these documents were sent to the French authorities for
comment.

request, Corsica

latter's

the

at

(170) The representatives of Corsica Ferries stated orally that
the market of sailings between mainland France and
Corsica was doing well, with a 17 % increase between
2000 and 2001 and 13 % increase between 2001 and
2002. They indicated that their company did not attack
Decision 2002/149/EC on compensation for public
service obligations, stressing that there was no need to
go back on the past but
it would give close
attention to the conditions which the Commission will
impose in the present case.

that

(171) The representatives of Corsica Ferries welcomed the
Commission's efforts to liberalise the cabotage market.
According to them, the cabotage regulation has made it
possible to put an end to agreements which benefitted
the traditional operators.
It has cleared the way for
competition which has led the traditional operator to
raise substantially the quality of its services to Corsica.
According to the representatives,
the inhabitants of
Corsica had suffered for too long from poor quality
service onboard SNCM's ships when they were the only
firm operating crossings to Corsica.

(172) The representatives of Corsica Ferries expressed their
concern that SNCM would use the aid to reduce its fares
between Toulon/Nice and Corsica. They stated orally
that while on paper SNCM's fares and those of Corsica
Ferries were more or
the same, SNCM had
less
nevertheless greatly increased the number of days of the
low-fares period.

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(173) At this meeting, the representatives of Corsica Ferries
highlighted the three main structural causes why,
in
their opinion, SNCM had to bear higher costs than
Corsica Ferries:

3.2. Comments from the Stef-TFE chairman

— purchase of vessels from a shipyard with price levels

above market prices,

— more costly crews because they are better paid than

required by French industrial agreements,

— excessive numbers of onshore personnel: at equal
traffic levels, Corsica Ferries allegedly has three
it
times
fewer employees onshore than SNCM;
argues
that many of SNCM's onshore activities
should be outsourced in the same way as Corsica
Ferries does.

(174) At the meeting, the representatives of Corsica Ferries
further criticised the restructuring plan on three points:

— the plan does not envisage any real reduction in
staff numbers: staff cuts are too cautious as most of
the 300 posts cut correspond to natural wastage,

— SNCM shareholdings have not been included in the
restructuring endeavour: large numbers of shares in
various companies are dormant in SNCM's accounts,
with a market value well above the book value
recorded on SNCM's balance sheet,

— appreciations on vessels have not been taken into
account. Because of
speeded-up amortisation of
vessels, the book value of vessels in the assets of
shipping companies is often lower than their market
value, thus distorting the picture which the balance
sheet may present. Corsica Ferries evaluates SNCM's
ships
latent
EUR
on
at
148 million. The real value of
the vessels has
allegedly enabled SNCM to obtain mortgage loans or
lease-back contracts for sums exceeding the EUR
76 million restructuring aid.

appreciations

old

his

comments

transmitted

(175) By letter of 7 January 2003 (56), the chairman of the
a company specialised in cooling
Stef-TFE group,
logistics,
SNCM's
restructuring plan to the Commission. He emphasises
that his group was the main shareholder in CMN as it
controlled the company's board. He explains that the
capital
links between SNCM and CMN result from a
redistribution of CGMF's shares in 1992 (57). According
to Stef-TFE, SNCM's shares in CMN should be analysed
as purely financial assets.

on

from Marseilles,

(176) Moreover, the letter with comments stresses that the
two companies, CMN and SNCM, are independent and
in competition with each other on the links other than
those
are
co-contractors under
service delegation
contract. According to Stef-TFE, co-contracting has been
tender
necessary because of
the
specifications which obliged the two companies
to
submit a joint bid as neither of them could meet all the
requirements on their own.

even
the public

structure of

though

both

the

(177) The letter

that

indicates

the Stef-TFE group would
undertake ‘to buy back all or part, and preferably the
whole, of SNCM's shares in CMN', whose value it
estimates at EUR 15 to 17 million, if the Commission
were to take the view, under conditions it could impose
in its final decision, that ‘such a transfer is necessary to
ensure that the restructuring plan is properly balanced'.

(178) An overview of

the past development of CMN's
shareholding and the Stef-TFE group's annual report for
2001 are appended to the letter.

3.3. Comments from representatives of local
authorities

(179) By letter of 18 December 2002 (58), the mayor of the
City of Marseilles stressed the economic importance of

(56) Registered by the Commission on 8 January 2003 as DG TREN

A/10304.

(57) On this subject, see section 2.1.1.1.
(58) Registered by the Commission on 3 January 2003 as DG TREN

A/10021.

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Official Journal of the European Union

27.2.2004

SNCM for the regional economy, explaining that each
year the company injects EUR 160 million into the
economy and that
it employs 1 800 workers in the
Provence-Alpes-Côte d'Azur region.

economy,

the wish that

(180) By letter of 9 January 2003 (59), the chairman of the
general council of Bouches-du-Rhône emphasised the
economic importance which the SNCM has for the
the
expressing
regional
Commission would approve the planned aid and thus
allow SNCM to successfully complete its restructuring.
Also on 9 January 2003, a general councillor of
Bouches-du-Rhône was received by the Commission at
his request. At this meeting, he spoke on behalf of his
authority and its chairman. He highlighted SNCM's
economic weight
in the economy of Marseilles. He
argued that only SNCM was able to run reliable services
to Corsica. He acknowledged that SNCM had perhaps
not been properly managed in the past but that recently
it
towards
considerable
modernisation under the guidance of its chairman, even
though he felt that further progress still had to be made.
On behalf of the whole political staff of the Marseilles
region, he expressed the wish that
the Commission
would give SNCM a last chance to adapt itself to a
relatively new competitive framework. He also said that
SNCM,
like all French companies operating passenger
transport services by sea, was weighed down by the
existence of more favourable social and tax schemes in
other Member States, in particular Italy (60) whose flag
is flown by the vessels of Corsica Ferries,
its main
competitor.

had made

progress

council

(182) By letter of 9 January 2003 (62), the chairman of the
executive
of Corsica
transmitted the proceedings of a debate in the Assembly
of 18 December 2002. In this debate, the Assembly had
delivered ‘a favourable opinion' on the plan for the
recapitalisation of SNCM.

the Assembly

of

3.4. Comments from the Corsica transport office

(183) By letter of 10 January 2003 (63), the Director-General
of the Corsica transport office (OTC) emphasised, on
behalf of its chairman, that the tender issued for the
public service delegation contract had led to only one
bid being submitted, namely that of
the CMN and
SNCM group. The OTC is, together with the territorial
collectivity of Corsica, the awarding authority of
the
public service delegation contract.

(184) First of all, the OTC notes that the disappearance of
SNCM ‘would immediately lead to a major reduction in
services' as it is currently the only company capable of
meeting the requirements of the contract with regard to
passenger transport.

(185)

It is recalled in the letter that Corsica has long suffered
from inadequate shipping services and that it was only
in 1976, with the implementation of the principle of
‘territorial continuity',
that services were offered that
were geared to actual needs. Wishing to maintain a
reliable high-quality service, the territorial collectivity of
financial
Corsica
mechanisms for compensation or correction linked with
the efficiency and reliability of services.

included

contract

has

its

in

(181) By letter of 9 January 2003 (61), the chairman of the
Provence-Alpes-Côte d'Azur regional council emphasised
that
the procedure initiated by the Commission was
designed to ascertain that the proposed restructuring
plan would eventually guarantee the viability of a
company which was in difficulty today. He recalled the
measures provided for in the restructuring plan. He
considered that the conditions for this plan to guarantee
the viability of the company were met. According to
this regional council, only SNCM is able to provide
sufficient services to ensure territorial continuity with
Corsica. Moreover, the chairman points out that SNCM's
the
activity
Provence-Alpes-Côte
the
continuation of this company is vital for the regional
economy.

people
and

to
d'Azur

gives work

in
that

region

2 000

(186) Moreover,

it is noted in the letter that the territorial
collectivity of Corsica has taken account of the trend
since 1996 in the supply of services from ports in
mainland France to limit the public service obligations
to services operated from Marseilles.

(187)

Finally, the letter highlights SNCM's importance for the
economy of Corsica, emphasising that it is the shipping
company established in Corsica ‘which employs the
largest number of Corsican residents (600 sailors and

(59) Registered by the Commission on 10 January 2003 as DG TREN

(62) Registered by the Commission on 16 January 2003 as TREN

A/10567.

(60) On this subject, see section 5.3.1.
(61) Registered by the Commission as DG TREN A/11872.

A/11084.

(63) Registered by the Commission on 16 January 2003 as TREN

A/11085.

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to the

(according

company's

170 onshore personnel) and with most purchases in
Corsica
information
between EUR 25 and 30 million annually)'. It adds that
‘the Commission's rejection of
the restructuring plan
proposed by the French state would therefore have very
socioeconomic
the
grave
equilibrium'.

consequences

island's

for

(188)

First,

the OTC expected

In a second letter dated 10 February 2003 (64), the OTC
pointed to the two areas in which it expected progress
from SNCM as the authority awarding the public service
delegation contract.
an
improvement of the internal social dialogue, pointing to
an ‘abnormally high' number of
industrial conflicts
which have affected shipping services to Corsica, even
though the situation has improved in recent years. In
this regard, the OTC has laid down explicit provisions
in the public service delegation contract for financial
penalties to be imposed if the company fails to carry
out particular services as a result of a cause coming
under
second concern is
information during periods of
improving customer
disruption. The OTC adds, however, that with regard to
information SNCM does not show worse
passenger
performance
in general,
although SNCM ought to continue its efforts in this
area.

responsibility. OTC's

than transport

companies

its

— comments from the City of Marseilles (letter of 16

January 2003),

— comments from the OTC (letters of 16 January and

21 February 2003).

4.1. Comments from France on the comments from
Corsica Ferries

(190) The French authorities have indicated that some of the
data submitted by Corsica Ferries concerning SNCM's
services were inaccurate.

4.1.1. SNCM's fares policy

(191) By fax of 27 May 2003, the French authorities sent the
Commission details to refute Corsica Ferries' allegations
about SNCM's fares policy.

4. COMMENTS FROM FRANCE

(192) SNCM's services on the Nice-Corsica link show the

following trend:

(189) The Commission has sent the following documents to
the French authorities for their comments in accordance
with Article 6(2) of Regulation (EC) No 659/1999:

TABLE 8

Trend of services supplied by SNCM between 2002 and
2003

(in %)

— comments from Corsica Ferries (letters of 13 and 16

January 2003),

SNCM services

2003/2002
over 12 months

— comments from Stef-TFE (letter of 16 January 2003),

— comments

from the Provence-Alpes-Côte d'Azur

region (letter of 5 February 2003),

— comments from the territorial collectivity of Corsica

(letter of 16 January 2003),

— comments

council
Bouches-du-Rhône (letter of 16 January 2003),

from the

general

of

(64) Registered by the Commission on 11 February 2003 as TREN

A/12979.

Crossings

Passenger places available

Vehicle places available

– 3,7

– 1,8

+ 0,3

(193) The French authorities also point out that SNCM's fares
on the Nice-Corsica link have risen slightly compared
with 2002. As part of the company's business policy,
the length of periods in which fares remain valid has
been adjusted to reduce divergence with fares offered by
Corsica Ferries. According to the French authorities, the
trend in SNCM fares reported by Corsica Ferries (from
– 14 % to – 24 %) bears no relation to reality and,
contrary to what has been alleged, Corsica Ferries' fares
are well below SNCM's.

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Official Journal of the European Union

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(194) According to the French authorities, Corsica Ferries tries
to show that SNCM has initiated an aggressive fares
policy by fixing fares below its own. The French
authorities argue that the conclusions from this analysis,
which are based on very incomplete data, are wrong.

4.1.1.1. C o n c e r n i n g p r o m o t i o n a l f a r e s

in

the

same

vehicle.

travelling

by Corsica Ferries even though it represents a significant
its sales. This fare may cover one to four
part of
passengers
The
supplement charged to them is that of the basic fare to
which these passengers are entitled.
If the additional
passengers are children or young people, which is often
the case in vehicles with four or five persons,
the
supplement paid on top of the basic fare is EUR 2,5 in
each direction during the ‘orange' period (66). If these
passengers fall in a ‘social' category (67), the supplement
is EUR 5.

(195) Corsica Ferries' basic promotional

fare is called the
‘Jackpot', which is a fixed price for two passengers and
one vehicle (65). The French authorities emphasise that
this fare does not appear in the documents submitted

(196) This fares configuration, which is quite different from

SNCM's, produces the following disparities:

Comparison between SNCM's and Corsica Ferries' scales of fares in 2003

TABLE 9

SNCM

2 passengers (b) + 1 vehicle

3 passengers (b) + 1 vehicle

4 passengers (b) + 1 vehicle

Corsica Ferries

2 passengers + 1 vehicle

3 passengers + 1 vehicle
(of which 1 social) (c)

4 passengers + 1 vehicle
(of which 2 social) (c)

3 passengers + 1 vehicle
(of which 1 child) (d)

4 passengers + 1 vehicle
(of which 2 children) (d)

Blue

100

130

150

99

109

119

104

109

Green

White

135

165

180

135

151

167

143

151

170

190

200

145

163

181

154

163

(in EUR (a))

Red

215

270

330

199

233

267

216

233

(a) Prices excluding tax.
(b) All passenger types.
(c) Senior citizens, young persons (aged 12 to 25), residents, students, parents with children.
(d) Children aged 4 to 12.

(197) The promotional fares of SNCM and Corsica Ferries vary
according to the yield management method. Because of
the relative lack of transparency of fares charging by
computerised booking systems, the French authorities
cannot provide the Commission with the number of
places benefiting from Corsica Ferries' special
fares.
Finally, the French authorities wish to draw attention to
the fact
that SNCM does not offer the ‘Plein Soleil'
formula on all its crossings whereas Corsica Ferries does
offer this type of product on all its sailings.

4.1.1.2. C o n c e r n i n g t h e s c a l e o f f a r e s

(198) The French authorities note that SNCM's scale of fares
for Nice-Corsica is systematically higher than or equal
to that of Corsica Ferries.

(199) As regards the ‘colours' of

is
correct
that SNCM has lengthened the blue period
between April and September, partly in order to close

fares (see table 10),

it

(65) SNCM's equivalent promotional offer is called ‘Plein Soleil'.

(66) See table 10 for details of fares periods.
(67) See recital 155 of this Decision.

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Official Journal of the European Union

L 61/41

the fares gap separating SNCM from Corsica Ferries.
However,
it applies only to sailings in the less busy
direction.

(200) The French authorities have supplied the following table
10, comparing the distribution of voyages per fares level
between the two companies on the Nice/Corsica service
in April to September 2003.

(203)

TABLE 10

Comparison between the lengths of fares periods between
SNCM and Corsica Ferries in 2003

(in %)

SNCM

Corsica Ferries (a)

2003 Overall

2003 Overall

Very expensive

Red

18

100

(Blue)

Expensive

White

19

84

(Green)

10

17

Average

Green

33

65

(Yellow)

24

Not expensive

Blue

32

32

(Orange)

49

100

90

73

49

(a) The colours used by Corsica Ferries differ from those used by SNCM,

but the principle remains the same.

(201) The public

includes

a
service delegation contract
safeguard clause to attenuate the possible effects of an
inaccurate estimate of the additional costs of carrying
out public service tasks. According to the French
authorities, the contract does not remove all risks for
SNCM and CMN, as Corsica Ferries has alleged, for the
following reasons:

— fluctuation of revenue within a range of 2 % above
or below the basic data do not give rise to any
adjustment of compensation,

— adjustment of compensation for

fluctuations

in

revenue outside this range is only partial,

— overall, adjustments are restricted to 1,66 % of
financial compensation for the whole term of the
contract.

(202) The French authorities note that

the public service
contract in no way guarantees operating profits; on the

contrary, the contract provides for a maximum level of
capital yield. The sole objective of the public service
the costs resulting from
grant
executing the public service task. Consequently,
the
grant cannot be construed as a ‘cashflow guarantee'.

is in fact

to offset

In their comments, the French authorities question the
well-foundedness of Corsica Ferries' statement that CMN
is among Europe's most profitable shipping companies.
They argue that there is no justification for this claim
today: the average net result of this company during the
five financial years 1997/2001 is EUR 1,27 million for
an average turnover prior to compensation of EUR
36,4 million. Moreover, the company's performance is
largely linked with the Marseilles/Corsica public service
delegation contract in which, as co-contractor of the
public service delegation, it complements SNCM's main
contribution with three vessels.

4.1.2. Services to Corsica from Nice and Toulon

(204) The French authorities have drawn attention to the

following:

— SNCM has discontinued regular services between
Corsica and Toulon; sporadic recourse to the port of
Toulon is due to technical considerations connected
with the services between Marseilles and Corsica
(number of Toulon-Corsica sailings: 187 in 2001; 83
in 2002; nine in the first two months of 2003),

— SNCM's Nice-Corsica sailings have been greatly
reduced, in particular during the low season, which
combined with SNCM's general management savings
justifies expectations
the
that
Nice-Corsica sector will be balanced, as indicated in
the financial models.

the accounts

for

(205) According to the French authorities,

abolition of SNCM's services
would have the following consequences:

the complete
from Nice to Corsica

— disruption

of

the

complementary

relationship
between Nice and Marseilles and accordingly an
imbalance in SNCM's
services, whereas Corsica
Ferries sails to Corsica from four continental ports
(Toulon, Nice, Savona and Livorno),

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Official Journal of the European Union

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— disruption of the necessary complementary nature
of night services (from Marseilles) and day services
(from Nice) whereas Corsica Ferries supplies both of
these services,

— establishment of a virtual monopoly of Corsica

Ferries from Toulon to Livorno,

— simultaneous

sale, difficult

to implement under

acceptable conditions, of three high-speed vessels.

— the action plan to reduce intermediate consumption

is beginning to bear fruit,

— the employment component of the industrial plan is

steadily being implemented.

(210)

In 2001, SNCM earmarked EUR 21,3 million to finance
the scheme to
restructuring measures,
safeguard jobs:

in particular

4.1.3. Services to the Maghreb

(206) With regard to SNCM's activities in north Africa, the
French authorities
regard as unacceptable Corsica
inaccurate,
Ferries' unfounded, and also sometimes
comments regarding the ‘indifference' of SNCM in the
face of its shrinking market share or SNCM's lack of
consideration for its Algerian customers.

— establishment

a monitoring
and operation of
mechanism, training assistance of EUR […] million,

— introduction of new technologies and changes to
work areas to enhance the company's economic
efficiency and enable job cuts of EUR […] million,

— implementation of measures for people leaving the
company (about 90 employees), mobility leave
(about 30) and switching to part-time working
(about 25) amounting to EUR […] million,

(207) France points out that the drop in SNCM's services to
Algeria basically results from decisions taken by the
State which, after completely suspending maritime
relations between France and Algeria at the beginning of
1995 (following the hijacking of Air France's Airbus in
Marseilles), has
recovery
accompanied by
security measures which though
indispensable have placed an extra burden on this line.

allowed only

gradual

a

(208) Finally,

it has noted that the level of activity to the
Maghreb which SNCM indicates in its restructuring plan
cautious
is particularly
and consistent with the
conclusions of
the market survey commissioned by
SNCM.

— conducting

procedures

and
provision for litigation expenses, amounting to EUR
[…] million.

negotiations

and

(211)

In conclusion, the French state is of the opinion that,
contrary to the allegations of Corsica Ferries,
the
restructuring plan has been devised in such a way as to
turn around SNCM as soon as possible and create the
right conditions to ensure its medium- and long-term
viability.

4.1.5. Calculation method to determine the amount of

recapitalisation

4.1.4. Cost reduction programme

(212) With regard to determining the amount of aid,

the
French authorities have presented two comments in
response to Corsica Ferries' observations.

(209) The French authorities note that a part of

the cost

reduction programme has already been implemented:

(213)

— the number of vessels has been reduced and the
programme for the disposal of assets is going ahead
according to plan,

First of all, they confirm that a 0,79 capital/debt ratio is
quite typical for the balance sheets of most shipping
companies, except in special situations. As an indication,
the French authorities specify that this ratio is (in 2001):

— 0,847 for Lota Maritime consolidated,

— services have been redeployed,

— 0,835 for Corsica Ferries France SA.

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(214) The 0,497 ratio announced by Corsica Ferries for CMN
in 2001 is incorrect because it fails to take account of
liquid assets on the balance sheet. With the appropriate
correction, CMN's ratio is 0,557 […].

4.2. Comments from France on Stef-TFE's
observations

4.2.1. Comments from France on Stef-TFE's letter of

7 January 2003

(215)

letter of 13 February 2003,

In their
the French
authorities presented various comments on Stef-TFE's
observations.

4.2.1.1. P a r t n e r s h i p t o c a r r y o u t t h e p u b l i c
s e r v i c e d e l e g a t i o n c o n t r a c t

(219) The

explain that,

French authorities

to
Stef-TFE's observations, the two companies, SNCM and
CMN, are neither independent nor in direct competition.
Such a situation would be in conflict with the very
principle of the single public service delegation contract
to which they are co-signatories.

contrary

(220) The French authorities indicate that this is not simply a
question of ‘coordinating timetables' but that there is a
single timetable jointly committing the two companies
on services to Ajaccio and Bastia throughout the year
and in particular periods also on services to secondary
ports. For
service to Bastia is
the ‘basic'
alternately operated every two days by each of the two
companies.

instance,

(221) Similarly,

it is not simply ‘coordination of the general
scale of fares'; there is in fact a single scale of fares. The
partnership agreement
lays down the procedures to
arrive at this identical scale and strictly demarcates the
in this respect. The
margin left
the fares
agreement adheres
decision taken for 2002. With the procedure for
working out the fares now completed, the situation is as
follows:

to the companies

spirit, witness

to this

(216) According to the French authorities,

the decision of
SNCM and CMN to enter into a joint venture in which
they are jointly and not severally responsible has in no
way ‘been rendered obligatory by the overall character
of the consultation', contrary to Stef-TFE's observations.
According to the French authorities, the tender issued
by the territorial collectivity of Corsica fully permitted
bids per
It was
therefore legitimate for SNCM, and for CMN, to submit
a bid for parts of this tender, if necessary by looking for
appropriate partnerships.

shipping line or groups of

lines.

— SNCM has gone along with CMN's proposal to fix,
within the limits permitted by the public service
contract, the level of freight charges,

— CMN has gone along with SNCM's proposal to fix,
within the limits permitted by the public service
contract, the level of passenger fares.

(217) The decision to set up a joint SNCM-CMN venture is the
result of an analysis made by the two companies which
showed that bidding in this form, in this traditional and
natural partnership, gave them the best chances,
in
particular in terms of competitiveness, to win the tender
in view of the fact that Corsica Ferries had for months
made it clear that it would submit a bid and in view of
the possibility of other European operators doing so
too.

(222) This procedure has led to the establishment of a single
scale of fares for the two companies. The special fares,
offering reductions on basic passenger fares ranging
from 20 to 50 %, are likewise jointly managed. For this
purpose, CMN uses SNCM's ‘package' products and its
computerised booking
Finally, CMN uses
SNCM's embarkation checking system for passenger
handling in Corsican ports and in Marseilles.

system.

(218) CMN's entry into this joint venture therefore resulted
from a well-considered decision on its part based on an
evaluation of its own interest and not on an obligation
arising out of the tender as such.

(223) On the

subject of pooling resources,

the French
authorities emphasise that the two companies frequently
pool their efforts in their relations with suppliers. For
instance, work on enlarging and modernising two

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vessels, SNCM's Paglia Orba and the CMN's Kalliste, was
carried out in 2002 by the same shipyard, producing
significant savings for both companies. These vessels
had been built according to a single design but because
of different timetables and workloads the companies had
commissioned the vessels to two different shipyards.

increased

substantially

(224) As noted by Stef-TFE, CMN's share of the passenger
market
in 2002. Without
disputing the quality of the services provided and efforts
made by CMN, the French authorities consider that this
increase occurred purely as a result of the contents of
the new public service
contract and not of any
commercial conquest made by CMN on other operators.
The increased use of cargo passenger ships with a
capacity of 500 passengers and the reduced use of car
ferries,
service
obligations, have led to a redistribution of the places
offered, which has been favourable to CMN. These data
have obviously been incorporated in the joint bid
submitted by the two companies.

from the

resulting

public

both

(225) The French authorities maintain that SNCM's share in
CMN's capital cannot be construed as a purely financial
asset, as Stef-TFE appears to allege, on the following
grounds:

— SNCM's cash position in 2002 in no way enabled it
to contribute to covering CMN's cash needs (68),

— SNCM already shared in the financing of specific
cash needs of CMN in 1999, at the time covering
66 % of its needs, alongside Stef-TFE,

— SNCM did not receive from CMN a request for a
counter-guarantee for the security paid under the
tender,

participation to receive shares for employees as a
new shareholder
in CMN (even though the
percentage of voting rights it held would have
enabled it to oppose these plans). In a note to its
Board, CMN's management subsequently proposed
to transfer 2,25 % of the shares it held in SNCM for
the benefit of CMN's
French
authorities indicate that they decided to postpone
this operation when they heard that Stef-TFE was
preparing to contact the Commission on this subject
as part of the formal investigation procedure.

employees. The

(226) The French authorities conclude that

the description
which Stef-TFE has given of relations between SNCM
and CMN in executing the public service contract is not
consistent with reality.

4.2.1.2. P r o p o s a l f o r a t r a n s f e r o f S N C M ' s

s h a r e s i n C M N

(227) The

the

that

idea of

French authorities

a
state
disinvolvement between the two companies lacks all
industrial logic. The companies pursue the same activity,
with identical tools, under the terms of a single public
service contract. Moreover,
the potential gain from
closer cooperation between the two companies may be
estimated to be within a range from EUR […] to EUR
[…] million per year.

(228) The question of relations between SNCM and CMN
should also be examined from a strategic angle. The
Commission has considered SNCM's position after 2006
when the current public service contract comes to an
end. SNCM's position will depend partly on the level of
Corsica-Marseilles public service for which it may then
be responsible.

— SNCM did not object to CMN's plan to offer 5 % of
its shares to its employees. At CMN's extraordinary
general meeting on 27 June 2000, SNCM first of all
fund for worker
gave

its backing to a joint

(68) In this connection,

the French authorities have provided the
Commission with a copy of the letter from SNCM's chairman to
CMN's chairman dated 23 May 2002.

(229) The French authorities consider that the maintenance of
a strong partnership between SNCM and CMN give
them the best chances for success in being allocated
public service activities from 2007. Such a partnership
factor for SNCM's viability and its
is an important
maintenance seems essential.

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(230) The uniqueness (69) and size of the fleet of the two
companies are two major assets, enabling them to offer
high-quality services to all Corsican ports. CMN's three
ships enable SNCM/CMN as a whole to cross a critical
supply threshold, which in the eyes of
the French
authorities is decisive in ensuring competitiveness in the
years to come.

was then compensated by permanent commitments by
the shareholders with regard,
to the
conclusion of partnership agreements binding the
companies (71).

in particular,

(231) For a competitor these three vessels could be an extra
asset enabling it to compete effectively on all or part of
the links between Corsica and the mainland. The
adoption of measures to ‘enhance the economic and
financial independence of the operators' and pointing in
a direction ‘conducive to the pursuit of sound and well
though-out competition' (70) would undoubtedly create
the conditions
the partnership
for a disruption of
between the two companies, greatly reducing SNCM's
chances to compete effectively for a new tender for
services to Corsica.

(232) An examination of the accounts of the Stef-TFE group
(in which CMN is consolidated under
equity
method, given the 49 % share of Stef-TFE in CMP)
shows that a […] hypothesis cannot be excluded.

the

(233)

to

an

industrially

In the recomposition of CMN's capital, SNCM made the
approach was
effort. The original
main financial
intended
effective
establish
SNCM-CMN configuration. By taking up the majority
share, SNCM decided to occupy a position as a solid
partner of CMN. For reasons of public image connected
with the political context at
the SNCM
redistributed into two
majority
minority shareholdings (twice 45 %) at two levels of the
adopted structure.

shareholding was

the time,

(234) To this end, SNCM not only subscribed to CMP's capital
and that of
the Compagnie Méridionale Financière
(CMF), set up to take full control of CMN, but also gave
a 100 % guarantee for the bank loan which CMF had
had to take up to complete the financing of
the
purchase.

(235) SNCM's lack of effective control of CMN (apart from the
minority blocking vote at two levels of the structure)

(69) In particular the cargo passenger ships for 500 passengers and

2 300 linear metres for freight.

(236) SNCM has

always

taken an interest

in CMN's
development and has always been involved in it, even to
increase passenger capacity on CMN's passenger cargo
vessels to the detriment of SNCM's own market share
with a view to enhancing the quality of
the overall
service supplied by the two companies.

(237) CMN's

of

aid

SNCM's

interesting position today, with regard to
passengers and freight, has been largely established with
the
legal
(establishment of
the joint venture) and functional
(providing a sales network) resources. On the other
hand, Stef-TFE, with an initial minimum capital
input
involving little risk, now controls the management of a
company that is well established in its sector.

financial,

strategic,

(238) The French authorities have pointed out that SNCM's
personnel is well informed about these matters and are
fully aware of what is at stake. This convergence of
views on a issue that
is of strategic importance to
SNCM will enhance the quality of social dialogue within
the company and thereby strengthen its viability.

(239) An examination of the financial aspects should not be
confined to evaluating the cash injection resulting from
the transfer but should also take into account
the
revenue which SNCM is likely to derive from its share
in CMN.

(240) CMN is a company with homogeneous and regular
activities. It benefits from a public service compensation
which gives it a good return on investment. SNCM's
share in CMN should start having a positive impact on
its social accounts. As a result of the clear improvement
of CMN's
SNCM could draw
dividends from CMN from 2003, which could rapidly
become substantial from the 2004 financial year and
exceed EUR […] million, even if account is taken of a
weak distribution ratio of 30 %.

financial position,

(70) The terms quoted are taken (in translation) from Stef-TFE's letter

(71) The French authorities enclosed a copy of the latest agreement

of 7 January 2003.

with their letter of 13 February 2003.

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(241) Subsidiarily, it should be noted that a discontinuation of
the partnership would deprive SNCM of its activity as
CMN's general agent (7,5 % of revenue and an average
cash effect amounting to EUR 2 million).

authorities have stated that he had tried to benefit from
SNCM's current situation in order to obtain a transfer of
SNCM's shares in CMN, which is in no case provided for
in the provisions of the shareholders' pact.

(242)

In conclusion,
SNCM's
France's position is
participation in CMN is strongly strategic in nature. In
its opinion, the transfer of these shares would not only
industrially but would also be
make no sense
tantamount to a major strategic error.

that

4.2.2. France's response concerning the nature of links

between CMN and SNCM

4.2.2.2. S t r u c t u r e o f S N C M ' s s h a r e h o l d i n g i n

C M N

(247) The French authorities have recalled that it is through
CGTH, a holding company which is 100 % owned, that
SNCM holds shares in CMN. CGTH owns 45 % of CMP,
which is the main shareholder (55 %) in CMN.

4.2.2.1. E x i s t e n c e o f a s h a r e h o l d e r s ' p a c t

4.2.2.3. C o n t r o l o f C M N

(243) On the basis of information supplied by Stef-TFE, the
Commission suspected that there existed a shareholders'
pact between Stef-TFE and SNCM for the control of
CMN. Accordingly, by letter of 16 January 2003 the
Commission asked the French authorities if there existed
such a pact for CMP's shares, the control holding of
CMN, and also,
if the answer was in the affirmative,
whether this shareholders' pact could be transmitted to
In their fax dated 25 February 2003, the French
it.
authorities confirmed that such a document existed and
transmitted a copy to the Commission, emphasising its
confidential nature. This shareholders' pact, concluded
on 7 March 1992 between the chairman of SNCM and
the
de Navigation
d'Orbigny (CNO) as part of the implementation in 1992
of
covers mutual
commitments between SNCM and CMN and industrial
cooperation between the two groups.

the Compagnie

chairman of

shareholding

structure,

its

(244) At

a more

fundamental

level, with a

view to
strengthening a complex configuration whose details did
not reflect the reality of the strategic choices made, it
was decided between the partners that ‘shareholding …
[had] been conceived in a spirit of cooperation …'
[…] (72).

(248) The French authorities have confirmed that

through
action supported by the founding families (73),
the
Stef-TFE group (74) exercises effective control over CMP
they have
and consequently over CMN. However,
stressed that SNCM has a minority blocking vote at two
levels of the shareholding structure and rights derived
that
from the shareholders' pact but
it does not
intervene
of CMN, whose
the management
management comes under the Stef-TFE group.

in

(249) The

the

specified

French authorities have

exact
composition of CMN's current board of management,
whose composition is based on a two-thirds/one-third
distribution of the number of managers, and this has
been the case since the redistribution of CMN's shares in
five managers
from
1992. The board consists of
the
the Rastit
Stef-TFE, one representative of
chairman of CGMF,
the chairman of SNCM and a
retired officer of CMN. The management board is
chaired by one of the managers from Stef-TFE.

family,

4.2.2.4. C M N ' s s h a r e o f f e r

(245) The French authorities also point out that CNO, which
has become Société de Travaux Industriels et Maritimes
d'Orbigny (STIM d'Orbigny), has no means of acquiring
SNCM's shares in CMN without
the latter's explicit
agreement, […].

(250)

(246) With regard to Stef-TFE chairman's suggestion to buy
from SNCM the shares it holds in CMN, the French

indicated

reply of 25 February 2003,
SNCM had
that

the French
In their
authorities
voluntarily
cooperated in offering CMN's shares to its employees
and also that
the
implementation of
its proposals as soon as it had
learned about the Stef-TFE group's intervention in the
this
it as
investigation procedure
intervention violated the basic principles of
the
shareholders' pact of 7 March 1992.

it had wished to postpone

initiated against

(72) […].

(73) Who own 6 % of CMP's capital.
(74) Which owns 49 % of CMP's capital.

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(251) On this point, the French authorities replied that the
upgrading of CMN was being studied by SNCM as part
of the decision to offer CMN's shares to its employees.

that

in his proposal

(252) The French authorities have drawn the Commission's
attention to the fact
to the
Commission the chairman of Stef-TFE had given an
estimate of the share held by SNCM whereas at the
meeting of CMP's board on 3 February 2003 the
chairman of CMP, who is also chairman of CMN,
informed the managers of his decision to transfer 5 % of
CMN's shares to a common investment fund reserved to
employees at a price upgrading CMN to EUR 24 million.

Recapitalisation of a company which is in such a
precarious financial position and which after all has
very limited prospects of becoming profitable cannot be
treated on a par with the action of a well-informed
private investor in a market economy. Incidentally, the
increase is not
Commission notes
subscribed by SNCF, the second largest shareholder in
SNCM.

the capital

that

(255) Since 1 January 1999, the cabotage market has been
completely open within the Community. Moreover,
there is competition among Community operators on
sea links between the Community and the Maghreb.
Consequently,
restructuring SNCM is
therefore likely to create distortion of competition
affecting trade between Member States.

aid for

the

4.3. Comments from France on the observations
submitted by the Provence-Alpes-Côte d'Azur
region

(253) While the French State on the whole agrees with the
the letter of 9 January 2003 from the
contents of
chairman of the Provence-Alpes-Côte d'Azur region,
it
made the two following comments in its letter of 13
February 2003:

— contrary to what is alleged in point 2 of the said
letter (75), the supply of services between mainland
France and Corsica is not ‘in excess of demand',

(256)

that SNCM suffered
It should be noted first of all
substantial deficits between 1991 and 2001 on all
services to Corsica that are subject to public service
obligation. The Commission takes the view that
the
possible deficit in 2002 on the Marseilles-Corsica link
could not be recognised as since 1 January 2002 the
operating fares for services to Corsica from Marseilles
and the amounts of financial compensation have been
agreed between the public authorities and SNCM on a
contractual basis, contrary to the practice followed for
the 1991 and 1996 agreements.

— SNCM's

fares

the
is
commitment it has given of not initiating a fares
war and not being a ‘price leader'.

consistent with

policy

5. ASSESSMENT OF THE AID

5.1. Nature of the measure and the status of public
service compensation of a part of the proposed
financial injection

(254) The injection of EUR 76 million into SNCM constitutes
State aid within the meaning of Article 87 of the Treaty.

(75) In its

the

regional

letter of 9 January 2003,

council of
Provence-Alpes-Côte d'Azur quoted from the market survey which
had been transmitted to the Commission as part of the notification
and of which it clearly had a copy, stressing the following finding:
‘The supply [of services between Corsica and mainland France] is
in excess of demand. The rate of occupancy of vessels varies on
average from 20 % in winter to 50 % in summer.'

to include

approach is

— With regard to the period from 1991 to 1999, the
Commission's
in its
calculation the result before tax for 1991 to 1999
for services to Corsica, as determined in the expert
report drawn up for
for
services to Corsica, deducting the appreciation on
disposal of vessels. This
figure is – FRF 217,0
million, corresponding to – EUR 33,08 million (77).

the Commission (76)

— For 2000 and 2001, which were the last two years
of the 1996 agreement,
the expert report at the
time, because of a lack of available data, could not
the
calculate the result obtained in respect of
Corsica services through analytical accounting. The
Commission has nevertheless adopted the same
approach as the abovementioned expert report and
the analytical
has
profit-and-loss account supplied,
the result before
tax, removing provisions for restructuring already
included in the restructuring costs as notified.
Moreover, the Commission has been able to verify

recalculated, on the basis of

(76) The report referred to was compiled by BDO Consultants in July
2001 at the Commission's request for its preparation of Decision
2002/149/EC. The table included in section 104 of that decision
was taken over from the report.

(77) See the abovementioned Decision 2002/149/EC.

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that according to the company's annual accounts
there was no disposal of vessels during the two
years in question.

(257)

In this way, following the same approach and criteria as
Decision 2002/149/EC, the Commission arrives at the
following table 11:

TABLE 11

Analytical profit-and-loss account for 1991 to 2001

Corsica network

2001

2000

1991 to 1999 (78)

Total 1991 to 2001

FRF

EUR

FRF

EUR

FRF

EUR

FRF

EUR

Result before tax

–302,575

–46,127

–40,256

–6,137 –399,080

–60,839 –741,911 –113,104

(in million)

Allocation to
provision/depreciation
Liamone

Allocation to
provision/Social plan

Correction appreciation on
vessels

Result before tax and
excluding appreciation and
excluding restructuring

96,895

14,771

0,000

0,000

0,000

0,000

96,895

14,771

112,110

17,091

0,000

0,000

0,000

0,000

112,110

17,091

0,000

0,000

0,000

0,000

182,100

27,761

182,100

27,761

–93,571

–14,265

–40,256

–6,137 –216,980

–33,078 –350,807

–53,480

(258)

In total, the aggregated corrected results of appreciations
on vessels sold in this period and restructuring costs is
EUR 53,48 million for the whole of the period 1991 to
2001 (1991 and 1996 agreements).

(259)

Independently of the need to analyse the cash injection
in the form of restructuring aid, this part of the cash
injection is
service
compensation under Article 86(2) of the Treaty and is
therefore compatible with the common market in this
regard.

as public

therefore

justified

(260) The French authorities have notified a plan for cash
(EUR 76 million) as
injection at a higher amount
the reason why the
is
restructuring aid, and this
procedure under Article 88(2) of the Treaty has been
initiated. Accordingly,
the cash injection should be
investigated in its entirety.

5.2. Legal basis of the assessment

(261) Under Article 87(1) of the Treaty, ‘any aid granted by a
Member State or through State resources in any form

threatens

whatsoever which distorts or
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'. However, under Article 87(2) and (3)
of
aid are
compatible or may be considered to be compatible with
the common market.

the Treaty, particular

forms of State

on

for

aid

State

rescuing

guidelines

(262) The Community guidelines on State aid to maritime
transport (79), which give an interpretation of Article 87
of the Treaty with regard to maritime transport, refer to
the
and
restructuring firms in difficulty for an evaluation of
restructuring aid for maritime companies. Under point
‘the only basis whereby aid for
19 of these guidelines,
restructuring firms in difficulty can be
rescuing or
deemed compatible
this
provision, the Commission has the power to authorise
“aid to facilitate the development of certain economic
activities (...) where such aid does not adversely affect
trading conditions to an extent contrary to the common
interest.” ' This compatibility is assessed on the basis of
five main criteria, namely analysis of the presence of
restoration of viability through a
restructuring aid,
restructuring
of
of
avoidance
competition, proportionality of aid, and implementation
of the restructuring plan.

is Article 87(3)(c). Under

distortions

plan,

(78) Data taken from Decision 2002/149/EC.

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

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5.3. Analysis of the causes of SNCM's financial
difficulties

(263) The restructuring plan should normally describe the
circumstances that led to the company's difficulties so as
to enable an evaluation whether the proposed measures
are appropriate. In this section, the Commission tries to
establish the causes of SNCM's financial difficulties.

(264) One difficulty in this exercise is

that SNCM had

analytical accounting not per sea link but per vessel.

5.3.1. Level of aid under the French flag compared with that

under the Italian flag

(265) Because

since 1999 the Cabotage Regulation has
permitted the free choice of flag from among the flags
of the Member States, SNCM which operates under the
French flag faces competition from vessels flying the
Italian flag. The main reason why Corsica Ferries, an
undertaking under French law, opted for the Italian flag
in 1999 was convenience of management (80) for its
fleet as a whole since two thirds of its traffic is with
Italy.

(266) As for the question whether SNCM has a lower level of
aid than that which its competitors sailing under the
Italian flag could benefit from, the Commission wishes
to emphasise the following points concerning the
different aid schemes:

— with regard to social charges, shipping firms under
the French flag benefit
from more substantial
reductions in social charges in France (81) than their
counterparts in Italy and the Italian scheme is also
exclusively applicable to cabotage companies (82),

(80) According to Corsica Ferries, the Italian flag is more flexible for
taking on seamen from other Member States than the French flag.
(81) Commission decision of 30 April 2001, Case N 88/2001: France
— Refund to shipping companies of contributions for child benefit
and Assedic.

(82) Commission decision of 18 August 1999, Case N 396/99: Italy —
Scheme for alleviating social charges in the maritime cabotage
sector for the period 1999 to 2001 by 43 %. Scheme renewed
twice for 2002 and 2003 with a reduction rate of 80 % and 25 %
respectively (Commission decision of 6 September 2002, Case N
519/2002, and Commission decision of 11 March 2003, Case N
19/2003).

— with regard to company taxes, France, unlike Italy,
has since the beginning of this year 2003 had a
scheme
shipping
tax
companies (83).

standard

rates

for

of

of

the

general

according

council
to which

(267) Even though it is very difficult to make comparisons
between the social and tax burden in each case, the
Commission refutes the argument propounded by the
of
representative
Bouches-du-Rhône (84),
the
registration of Corsica Ferries under the Italian flag
enabled it to benefit from a higher level of aid. The
Commission has considered all aid schemes for shipping
companies under the Italian flag as compatible with the
common market. None of the relevant decisions have
been contested before the Court of
the
European Communities. Furthermore, the Commission
it has always exercised its control over
stresses that
derogating
benefiting
social
tax
Community shipping companies to bring these schemes
closer
the
Community guidelines on State
aid for maritime
transport.

application

Justice of

schemes

together

through

and

the

of

(268)

the Commission does not accept

the
In conclusion,
argument that SNCM's main competitor receives more
aid by flying another Community flag.

5.3.2. Vessel purchase policy

(269) On the subject of the possible impact of the renewal of
an apparently significant number of vessels over a
the
relatively short period on the company's results,
Commission notes that SNCM has purchased (85) several
ships since 1996:

— the high-speed Aliso and the Napoléon Bonaparte,

delivered in 1996,

— the high-speed Liamone, delivered in 2000,

— the Danielle Casanova, delivered in 2002,

— the Pascal Paoli, delivered in 2003.

(83) Commission decision of 14 May 2003, Case N 732/2002, France
— Scheme imposing a lump sum on the basis of tonnage for the
benefit of maritime transport companies.

(84) See recital 180.
(85) Fully owned or leased.

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(270) The Commission has wished to supplement

the
explanations
authorities
by
concerning SNCM's vessel purchase policy to ascertain
the rationality of the company's purchasing decisions.
For this reason, the Commission has wished to quantify

provided

French

the

the extent to which the immobilisation of vessels has
impacted on the company's consolidated balance sheets,
also covering vessels purchased on a leasing basis,
including current
immobilisations which very largely
comprise vessels ordered but not yet delivered.

TABLE 12

Net immobilisations of ships

(in million EUR)

Year

1996

1997

1998

1999

2000

2001

2002

Net immobilisations of ships
(including leased)

342,809

307,840

274,520

238,921

267,396

218,536

326,414

Current immobilisations

0,331

0,734

7,249

51,781

19,986

108,437

1,440

Total

343,140

308,575

281,769

290,702

287,382

326,973

327,854

involved. Similar difficulties make it
impossible for
SNCM to have recourse to lease-back operations to
reduce its indebtedness. The Commission's experience in
is
effectively seizing ships or aircraft shows that
difficult to enforce this in practice if such assets are used
for services of national or regional interest.

it

(273) Finally, as regards the allegation that SNCM is obliged to
purchase ships built in France, the Commission notes
that the latest ships delivered new or renovated come
from non-French shipyards.

5.3.3. Chronically negative trading accounts

(274) The Commission has investigated two aspects of

operating
consumption.

costs:

wage

bill

and

the
intermediate

(271) Studying table 12, the Commission observes that recent
acquisitions of ships have not resulted in a significant
increase in mobilisations in the company's consolidated
immobilisations have remained at
assets. In all cases,
levels below that recorded in 1996. The Commission
therefore concludes
that SNCM has not excessively
invested in fleet renewal in recent years.

(272) The Commission notes that SNCM has financed four of
its ships (86) on a lease basis in order to reduce its
indebtedness on its social balance sheet and that three
fully owned ships are still mortgaged (87). With regard
to the remaining ships (88), SNCM has confirmed that
the company has not
found any bank prepared to
accept them under mortgage guarantee. The level of the
company's indebtedness and its weak cash flow, detailed
below, which only just enables it to service its existing
debt, are such that it is unlikely that any bank, acting as
a private lender under market conditions, would be
inclined to offer SNCM an additional loan. The risk that
SNCM would not be able to pay back the instalments of
the sums
the debt would be significant

in view of

(86) The Liamone, the Aliso, the Pascal Paoli and the Danielle Casanova.
(87) The Méditerranée, the Paglia Orba, the Napoléon Bonaparte and the

Asco which is currently being sold off.

(88) The Île de Beauté, the Monté d'Oro, the Monte Cinto and the Corse.

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TABLE 13

Results and operating margin

Year

1997

1998

1999

2000

2001

2002

Average

Operating results in million EUR

– 5,8

– 3,9

– 8,6

– 9,3

– 1,2

– 6,4

– 2,99

Operating margin
operating results/(turnover + territorial
continuity grant)

– 2,27 % – 1,49 % – 3,08 % – 3,21 % – 0,40 % – 2,25 % – 1,09 %

5.3.3.1. Wa g e b i l l

(275)

First of all, the Commission notes that according to a
study it has commissioned (89), the costs of passenger
ship crews are higher under the French flag than under
the Italian flag.

they point out

going from EUR 111,1 million to EUR 114,4 million.
However,
this
amount relates to wages for onshore personnel. This
proportion corresponds to the staff ratio (between 764
and 824 onshore as against 1 519 to 1 599 onboard
personnel for the years from 1999 to 2002).

that about a third of

(276) The

French authorities have

staff
expenditure remained stable between 1998 and 2002,

indicated that

(277) The Commission itself has calculated in table 14 certain
ratios in connection with the trend in SNCM's wage bill.

TABLE 14

Trend in wage bill

Year

1997

1998

1999

2000

2001

2002

Wage bill (in million EUR)

73,681

77,027

77,751

81,014

83,489

83,536

Increase over previous year

4,54 %

0,94 %

4,20 %

3,06 %

0,06 %

Average staff FTE

2 344

2 377

2 283

2 386

2 423

2 392

Wage bill/staff (in EUR)

31 434

32 405

34 057

33 954

34 457

34 923

Increase over previous year

3,09 %

5,10 % – 0,30 %

1,48 %

1,35 %

Turnover before tax (in million EUR)

175,4

180,9

195,0

204,9

204,1

205,8

Territorial continuity grant (in million EUR)

80,1

80,4

84,4

85,4

86,7

77,7

Revenue (turnover + grants) (in million EUR)

255,5

261,3

279,4

290,3

290,8

283,5

Wage bill/revenue

28,84 % 29,48 %

27,83 %

27,91 %

28,71 %

29,47 %

(89) See Annex 7 to the Commission's report on the implementation
of the Cabotage Regulation, COM(2002) 203 final, available on
internet at the following address:
http://europa.eu.int/eur-lex/fr/com/rpt/
2002/com2002_0203fr01.pdf.

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(278) The figures show that the wage bill has remained stable
in recent years. However, the ratio of wages in relation
to turnover seems significant, which is no doubt proof
the other shipping companies have outsourced
that
more secondary activities
reflecting a
management choice connected with the company's
traditional
the
Commission does not
is open to criticism as a
matter of principle.

in public services

than SNCM,

involvement

that

feel

(282)

In particular, the arrival on the scene of a competitor in
1996, after the five-year agreement of 1996 had been
signed, has had negative effects on SNCM's results (93).
SNCM lost passengers to its competitor from Nice and
then also from Toulon, reducing its revenue. Account
being taken of the fact that financial compensation for
SNCM was relatively independent of revenue, the loss of
Ferries has
a part of
automatically led to a deterioration of
the public
company's profits.

custom to Corsica

their

5.3.3.2. I n t e r m e d i a t e p u r c h a s e s

5.4. Verification of compliance with the guidelines

(279) Reducing

to

for

costs

relating

the success of
that

intermediate
consumption (90)
the
is crucial
restructuring plan. The Commission notes
the
benefits expected from the programme for purchase
control entitled ‘Achetons mieux' (‘Buy better') will by
themselves not suffice to rebalance the trading accounts.
In the Commission's opinion, SNCM should continue its
efforts and optimise its purchases during and beyond
the restructuring period.

5.3.3.3. C o m m i s s i o n ' s o p i n i o n o n t h e

t r a d i n g a c c o u n t

(280) The Commission considers that

it

is imperative for
SNCM to achieve sustainable positive operating results
as soon as possible. This has not yet been the case in
2002 (91), contrary to the forecasts of the restructuring
plan. The Commission notes that
the efforts already
made by SNCM to raise its productivity have not yet
produced fully effective results. SNCM should not expect
that their problems will be solved only through revenue
from future
from
appreciation on ships
investment income.

sold or

5.3.4. Public service constraints

(281) The Commission notes that the financial compensation
received under the five-year agreements of 1991 and
1996 have not enabled SNCM to completely make up
its losses, as it has already highlighted in its Decision
2002/149/EC (92).

(90) See section 2.3.6.
(91) SNCM had operating losses of EUR 6,3 million in 2002,

the

highest level in recent years apart from 2000.

(92) On this subject, see Decision 2002/149/EC.

(283)

In its analysis of this case, it has been the Commission's
wish to find a balance between, on the one hand, the
protection of competing interests in view of possible
distortions of competition and, on the other hand, the
risk of a monopoly emerging in services from mainland
France to Corsica. The fact is that the disappearance of
SNCM would lead not only to serious
financial
difficulties for its suppliers and subcontractors (94) but
also a factual monopoly of Corsica Ferries on this
route (95).

aid does not

(284) The Commission recalls that the guidelines stipulate that
restructuring
to the
Community interest if ‘any distortions of competition
will be offset by the benefits flowing from the firm's
survival (in particular, where it is clear that … the firm's
disappearance would result
tight
oligopolistic situation).' (96)

in a monopoly or

run counter

(285)

In its analysis, moreover,
account of the following two points:

the Commission has taken

— on the one hand, SNCM has, over a relatively short
period from 1996 to 2001, ad to cope with a severe
disruption of its traditional market. From its original
monopoly position,
though controlled through
agreements by the State and subsequently by the
territorial collectivity of Corsica, it has ended up in

(93) On this subject, see Decision 2002/149/EC.
(94) As mentioned in section 3.3, the representatives of the territorial
collectivities have pointed out
to the
Commission that SNCM had a major impact on the regional
economy as a whole.

in their observations

(95) In this

regard,

survey provided by the French
the market
authorities emphasises that,
two
‘maintaining the activities of
major operators on these links is imperative for sound economic
reasons'.

(96) See point 28 of

the Community guidelines on State aid for

rescuing and restructuring firms in difficulty.

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a highly competitive environment. Finally, since the
beginning of 2002 it has lost the operating grants
for services from Toulon and Nice to Corsica,

(290)

as

by

all,

required

first of

this time in the light of

It is necessary to examine whether SNCM still meets this
condition,
its most recent
annual report, i.e. that of 2002. The Commission wishes
to point out
the
guidelines (102), that there is no Community definition
of what constitutes a firm in difficulty. Nevertheless, the
Commission has ascertained that SNCM meets the test
provided for in point 5 of the guidelines under which it
can be established beyond doubt
that a firm is in
difficulty.
It has also verified that SNCM's position
includes the signs commonly referred to to ascertain
whether a firm is in difficulty, as listed in point 6 of the
guidelines.

— on the other hand, SNCM has inherited operating
losses which were connected with the execution of
the public service agreements of 1991 and 1996, as
highlighted in Decision 2002/149/EC (97) in which
the losses were indicated as amounting to FRF 217
million after inclusion of appreciation on particular
vessels.

(286)

It
follows from these considerations that, given the
context, the nature of the planned aid is not inherently
a
contrary to the Community interest. However,
condition for granting the aid should be that it complies
with the requirements of the guidelines and with all
obligations which the Commission will see fit to impose
to avert any potentially distorting effects of the aid.

(287) The Commission recalls that it has already authorised
restructuring plans for shipping companies, specifically
for Brittany Ferries,
through Commission Decision
2002/15/EC (98), and CGM, of which SNCM has not
been a subsidiary since 1976,
through Commission
Decision 97/14/EC (99).

5.4.1. Status of firm in difficulty

(288)

In order to be eligible for restructuring aid, the firm
must qualify as a firm in difficulty within the meaning
of the guidelines (100).

5.4.1.1. D i s a p p e a r a n c e o f t h e c o m p a n y ' s

r e g i s t e r e d c a p i t a l

(291) SNCM has a capital, with appraisal increments, of EUR
17,7 million, to be compared with a balance brought
forward in 2002 of – EUR 69,9 million, of which EUR
40,4 million for the net results of 2001 alone, and
reserves of EUR 21,5 million. The company's capital
excluding regulated provisions (103),
still called net
situation under French accounting terminology,
still
remains negative at – EUR 26,5 million in 2002,
following – EUR 30,7 million in 2001. This level reflects
the disappearance of more than half of the company's
share capital, more than a quarter of which disappeared
during the 12 last months following the notification,
thus
sufficient but non-obligatory
condition described in point 5(a) of the guidelines (104),
serving as proof
in
difficulty.

the company actually is

confirming

that

the

(289) This criteria has been ascertained in the Commission's
decision of 17 July 2002 (101) on rescue aid for SNCM
and in its decision of 19 August 2002 initiating the
formal
the
recapitalisation plan on the basis of SNCM's annual
accounts for 2001.

investigation

procedure

against

(97) See point 105 of Decision 2002/149/EC.
(98) Commission Decision 2002/15/EC of 8 May 2001 concerning
the Bretagne
(OJ L 12,

State aid implemented by France in favour of
Angleterre Irlande company (BAI or Brittany Ferries)
15.1.2002, p. 33).

(99) Decision 97/14/EC, mentioned in footnote 16.
(100) See point 30 of the guidelines.
(101) Abovementioned decision.

(102) See point 4 of the guidelines: ‘There is no Community definition
of what constitutes “a firm in difficulty”. However,
the
purposes of these guidelines, the Commission regards a firm as
being in difficulty where it is unable, whether through its own
resources or with the funds it
is able to obtain from its
owner/shareholders or creditors, to stem losses which, without
outside intervention by the public authorities, will almost
to go out of business in the short or
certainly condemn it
medium term.'

for

(103) Regulated provisions are costs entered in the accounts pursuant
to French tax rules, e.g. exceptional amortisation as defined in the
footnote on page 109.

(104) See point 5(a) of the guidelines:

‘In particular, a firm is, in any
event and irrespective of its size regarded as being in difficulty for
the purposes of these guidelines:
(a)

in the case of a limited company, where more than half of
its registered capital has disappeared and more than one
quarter of that capital has been lost over the preceding 12
months.'

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5.4.1.2. O t h e r s i g n s s h o w i n g t h a t S N C M i s i n

d i f f i c u l t y

verified. The Commission also notes worrying signs in
SNCM's financial situation:

(292)

In accordance with the guidelines, ‘the usual signs of a
firm being in difficulty are increasing losses, diminishing
turnover, growing inventories, declining cash flow,
mounting debt, rising interest and falling or nil net asset
value.' (105)

(293)

In this regard,
the Commission has established the
following facts in SNCM's accounts, including its annual
accounts for 2002, even though at the time they were
transmitted to the Commission they had not yet been
formally approved by SNCM's general meeting of
shareholders and they can therefore not be considered
final:

— losses increased by – EUR 6,2 million in 2000 to
– EUR 40,4 million in 2001. Between 2001 and
rose from – EUR 5,1
2002,
million in 2001 to – EUR 5,8 million in 2002, with
net losses in 2002 reduced only through the sale of
a number of ships,

the current

result

— the company's capital remains very weak in relation
to the company's size and financing requirement.
While it was EUR 29,7 million at the end of 2001,
it would be EUR 33,8 million at the end of 2002.
This apparent progression does not result from its
the current 2002 result
operational activity as
remains negative as indicated above. Instead,
it is
connected with the first results of the restructuring
plan and the transfers under the plan which have
generated exceptional appreciations exceeding EUR
5 million, and with the first year of transfer of the
provision allocated in 2001 for
It
these net
should further be pointed out
from the
figures
fiscal depreciation (106).
application of exceptional
Accordingly, this part has in the past generated a
fiscal advantage which will disappear in the future.
It is therefore tantamount to a future tax debt (107)
which, excluding reportedly deferred depreciation,
amounts to EUR 20 million at the end of 2001 and
still EUR 16,8 million at the end of 2002. Taking
account of these data, net capital will be only about
EUR 10 million at
the end of 2001 and EUR
17 million at end 2002,

EUR 60 million originate

the Liamone.

that of

— passenger

turnover between 2000 and 2001
diminished by EUR 2,3 million while the passenger
transport market between Corsica and mainland
France rose by nearly 17 %,

— net financial debt, excluding leases, went from EUR
135,8 million in 2000 to EUR 144,8 million in
2002,

— financial charges (interest and similar charges) went
from EUR 7,0 million in 2000 to EUR 9,268
million,

— capital diminished by EUR 36 million between 2000

and 2001.

(294) A large number of signs — which are not cumulative
— provided in the guidelines have been positively

(105) See point 6 of the guidelines.

— the EUR 33,8 million capital at end 2002 should be
compared with net fixed assets of EUR 285 million
at end 2001 and EUR 283 million at end 2002,
which means that virtually all of
the company's
ensured through debts.
long-term financing is
Financial debts, excluding leasing, accounted for
EUR 134,5 million at the end of 2001 and EUR
144,8 million at end 2002. This very fragile
financial position prevents
company from
finding other resources on the market,

the

— analysis of the company's internal financing capacity
(EUR 29 million in 2001 and EUR 24,7 million in
2002) reveals the same weaknesses: its level hardly
covers refund commitments on existing debts (EUR
27,5 million in 2001 and EUR 21,3 million in
financing capacity can therefore
2002).
provide no security to a new lender.

Internal

(106) Exceptional depreciation is the difference between straight-line
depreciation, deducted from assets on the balance sheet, and
diminishing balance depreciation authorised by tax law.
If
diminishing balance depreciation is not used to enter depreciation
into the accounts,
the difference between it and cumulated
straight-line depreciation is entered under liabilities (exceptional
depreciation), traditionally included in French accounting under
capital. Total depreciation at the end of the accounting period
remains the same and the system therefore does not make it
possible to anticipate and generate a tax reduction in the first
years.

(107) Outlined in the annexes to the 2001 annual accounts (p. 24) and

the 2002 provisional accounts (note 2.18).

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(295) Moreover, the French authorities have confirmed to the
Commission that the banks are now refusing to lend
money to the company because of
its indebtedness,
even though SNCM has proposed to put up its newest
vessels, unencumbered by mortgage or other servitude,
as a security for a bank loan.

(300) Similarly, the effect of the measures and the success of
the plan are not dependent on market trends, except for
the
to the Maghreb which
corresponds in particular to a return to the position
which SNCM had in the mid-1990s.

increase of

services

(296) The current public service delegation contract in no way
changes this analysis. While the contract will certainly
enable SNCM, in combination with the success of the
restructuring plan, to attain positive operating results,
the fact
its
growing indebtedness and the cost of operational
measures under the restructuring plan should after a
certain lapse of
time lead the company to cease
payment.

its acute lack of capital,

remains

that

(297) The Commission's conclusion is that SNCM is certainly

a firm in difficulty as defined in the guidelines.

5.4.2. Absence of restructuring aid over the past ten years

(298) The guidelines (108) provide that a company which in
the past has already benefited from restructuring aid
cannot normally receive such aid a second time during
the 10 years following the end of
the restructuring
period. Among the forms of aid already allocated to
SNCM, there is no restructuring aid (109). This is in fact
SNCM's
its
inception in 1976.

restructuring

programme

since

first

5.4.3. Restoration of viability

(299) The restructuring plan, where duration must be as short
as possible, should restore the long-term viability of the
firm within a reasonable timescale and on the basis of
realistic assumptions as to future operating conditions.
The restructuring plan should provide for a turnaround
that will enable the company, after completing its
restructuring,
including
depreciation and financial charges. The expected return
on capital should be enough to enable the restructured
firm to compete in the market place on its own merits.

cover

costs

all

its

to

(301) Restructuring must

the

involve

abandonment of
activities which would remain structurally loss-making
even after
restructuring. With regard to services
between Corsica and the Italian mainland, SNCM has
learned a lesson from its past failures: it has decided to
close down its Italian subsidiary, Corsica Marittima,
which had been making a loss since its inception in
1990 until 1997.

(302) Restoration

of

of

services

profitability

the Liamone

is diminishing and the

from Nice remain more uncertain but
importance

between
Marseilles and Corsica is expected in the short term and
services to the Maghreb are already profitable. Only
its
services
early
relative
depreciation of
in 2001 will make it
possible to turn the company around to positive results
on this link. Moreover,
the Commission accepts the
argument that a presence, even a reduced one, from
Nice remains necessary for the company's position on
the market as a whole. Redeployment to the Maghreb
will help to reduce the company's dependence on its
traditional routes and should also help it
to restore
viability because of the stronger margins on its Maghreb
services.

(303) With regard to long-term viability, i.e. beyond the term
of the current public service delegation contract, the
Commission takes the view that implementation of the
plan should make it possible for the company to face
competition effectively when contracts are renewed.
Finally, it notes that, even if there is a partial loss (a car
this contract should enable the company to
ferry),
this contract
If
maintain positive results.
should lead to a 40 % or higher drop in company
traditional market, as envisaged in
revenue in its
another scenario,
this
would bring about a situation which few restructuring
plans, with or without public support, could remedy,
and that it is premature to envisage it at this stage.

the Commission believes that

the loss of

(108) See point 48 of the guidelines.
(109) See section 2.5.

(304) The Commission should also determine the time-frame
the restructuring period, entailing a number of
of
obligations incumbent on the aid recipient. Even though

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the restructuring plan comprises actions essentially
covering 2002 and 2003, the fact remains that SNCM
will not have ‘sufficient' capital until 2005 to 2006.
Accordingly, the Commission sets 31 December 2006 as
the end of the restructuring period.

5.4.4. Realistic assumptions

(305) The guidelines require that the restructuring plan should
be based on ‘realistic assumptions as to future operating
conditions' (110).

(306) The Commission considers that the market study is a
serious one and provides a sound basis for scenarios of
company development.

(307) The improvement in viability must derive mainly from
internal measures contained in the restructuring plan
and may be based on external factors such as variations
in prices and demand over which the company has no
great
the market assumptions made are
generally acknowledged. This means that the company's
improvement should not only concern services to the
Maghreb. It should above all be achieved through better
control of production costs and enhanced productivity.

influence if

(308) The restructuring plan should normally take account,
inter alia, of the present state of and future prospects for
supply and demand on the relevant product market,
and
with scenarios
intermediate
specific
strengths and weaknesses.

reflecting best-case, worst-case

assumptions

firm's

and

the

(309) The restructuring plan should enable the firm to
progress towards a new structure that offers it prospects
for long-term viability and enables it to stand on its
own feet.

(310) The plan should provide for a turnaround that will
enable the company, after completing its restructuring,
to cover all its costs including depreciation and financial
charges. The expected return on capital
should be
enough to enable the restructured firm to compete in
the market place on its own merits, even if after 2007

(110) See point 32 of the guidelines.

SNCM is no longer
delegation contract
Marseilles.

allocated the public

service
for services between Corsica and

5.4.5. Avoidance of undue distortions of competition

adverse

(311) Measures must be taken to mitigate as far as possible
any
aid on competitors.
Otherwise, the aid should be regarded as contrary to the
common interest and therefore incompatible with the
common market (111).

effects of

the

(312)

In accordance with the guidelines, this condition should
in the case under discussion take the form of a
limitation on the presence which the company can
enjoy on its traditional market, i.e. services to Corsica,
which is also the one where it faces competition from
companies established in the Community, which is not
the case for services to the Maghreb.

(313) The Commission is of

there is no
excess capacity on maritime services to Corsica in view

the opinion that

is

there

excess

capacity on a given market,

(111) See point 39 of the guidelines: ‘Compensatory measures can take
different forms according to whether or not the firm is operating
in a market where there is excess capacity. In assessing whether
or not
the
Commission can take into account all the relevant data in its
possession:
(i) where there is a Community-wide or EEA-wide structural
excess of production capacity in a market served by the
recipient, the restructuring plan must make a contribution, in
proportion to the amount of aid received and its impact on
that market, to the improvement of market conditions by
irreversibly
capacity. A capacity
production
reduction is irreversible when the relevant assets are rendered
permanently incapable of achieving the previous rate of
output, or are permanently converted to another use. The
sale of capacity to competitors is not sufficient in this case,
except if the plant is sold for use in a geographic market in
which its continued operation is unlikely to have significant
effects on the competitive situation in the Community. The
capacity reduction requirements must
to a
reduction in the recipients firm's presence on its market or
markets;

contribute

reducing

served by the

the firm concerned,

(ii) where, on the other hand, there is no Community-wide or
EEA-wide structural excess of production capacity in a
market
the Commission will
recipient,
nevertheless examine whether compensatory measures should
be required. Where any such compensatory measures involve
a reduction in the capacity of
the
necessary reduction could be achieved through the hiving-off
subsidiaries. The Commission will have to
of assets or
compensatory measures proposed by the
examine
the
form they take, and
Member State concerned, whatever
determine whether they are sufficient in scope to mitigate the
potentially distortive effects of the aid on competition.
In
examining
the
Commission will take account of the state of the market, and
in particular its level of growth and the extent to which
demand is met.'

compensatory measures,

the necessary

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the highly seasonal character of

the significant
of
growth in traffic (112). The Commission also notes that
the average occupancy rate on ships of SNCM's main
competitor is lower than that of the public company. As
there is no excess capacity on the market within the
is no need to
meaning of
contribute to its improvement. The sale of ships, rather
than their demolition, therefore constitutes a reduction
in capacity admissible in the light of the guidelines.

the guidelines,

there

(314) The

compulsory

reduction of

the
limitation or
company's presence on the relevant market(s) does
represent a compensatory factor
its
competitors. This factor should be in proportion to the
distortive effects which the aid will cause or is likely to
cause.

in favour of

(315) The restructuring plan significantly reduces the firm's
its

presence on its market
competitors, because of the following elements:

to the direct benefit of

— the closure of

the Corsica Marittima subsidiary
(82 000 passengers in 2000) which was responsible
for services between Italy and Corsica, and thereby
the withdrawal of the SNCM group from the market
of services between Italy and Corsica,

(317) However, the Commission believes that these measures,
although of considerable scope, should be combined
with conditions designed to limit possible distortions of
competition. Specifically, care must be taken to ensure
that the company devotes its surplus liquid assets to
aggressive activities that are likely to cause distortions
on the market (116). Accordingly, it should be stipulated
that during the restructuring period SNCM cannot
finance any new investment other than the costs of
redeploying its activities to the Maghreb incorporated in
the restructuring plan. This condition, detailed below,
regarding the absence of investment in new ships, even
to replace existing ones, will prevent any adverse effects
of the aid on the main competitors or at least keep such
effects to the absolute minimum.

5.4.6. Aid limited to the minimum

(318) The amount of the aid must be limited to the strict
to be
minimum needed to enable
existing financial
undertaken in the
light of
resources of
the
business group to which it belongs, without thereby
hampering its chances of restoring viability.

shareholders or

the company,

restructuring

the

its

— the virtual withdrawal of services between Toulon
and Corsica, a market which in 2002 accounted for
as many as 460 000 passengers,

(319)

— limitation of the total number of places on offer and
the number of round trips made each year from
2003, specifically on services between Nice and
Corsica (113),

— the sale of four ships (114).

significant

In the case under investigation, the Commission notes
first of all, in the light of point 40 of the guidelines, that
sales of
the restructuring plan includes
essentially naval assets amounting to EUR 40 million in
sales price and EUR 21 million in net product from
associated debts. Additional disposals are also imposed
by the Commission in section 5.5.2 in respect of assets,
in the form of shareholding, which the Commission
deems
activity.
Nevertheless,
suffice to restore
viability to SNCM whose financial situation remains
characterised by significant liabilities at the end of this
operation.

for
these sales do not

non-strategic

company's

the

(316) Throughout the Gulf of Genoa and from Toulon, SNCM
is lowering its services on offer by more than one
million places a year compared with 2001, i.e. a division
by more than two, which is to the immediate benefit of
its competitors even though it is these services that are
showing the strongest growth (115).

(112) See table 1.
(113) See table 2.
(114) See section 2.3.2.
(115) See tables 1 and 2.

(320)

it had not been convinced of

In its decision of 19 August 2002, the Commission
indicated that
the
relevance of the calculating method presented by the
French authorities to determine the amount of aid.
Notwithstanding the additional explanations supplied by
France, the Commission has made its own evaluation.

(116) In this regard, see section 5.4.1.

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5.4.6.1. A n a l y s i s o f c a l c u l a t i o n m e t h o d s

(324)

p r o p o s e d b y F r a n c e

(321) The Commission's views on the approach adopted by
the French authorities (117), i.e. based on the capital/debt
ratio, are as follows:

the second alternative
In the Commission's opinion,
method (119), based on SNCM's expenditure, seems more
appropriate. However, the Commission should like to
see a revision of the amount of EUR 41,7 million for
previous losses,
the
2002 results and only losses connected with services to
Corsica prior to 1999. The Commission's approach is
set out in section 5.3.6.2.

in particular to take account of

— the panel of

five companies used by the French
authorities is not sufficiently representative of the
maritime cabotage sector,

5.4.6.2. C o m m i s s i o n ' s a p p r o a c h

— the 79 % capital/debt ratio produced by this panel
of companies is in fact in no way a reliable indicator
of a company's health,

these

— the French authorities have not explained what
exactly is covered by the amount of financial debts
of
cannot
guarantee that these data are consistent with the
amount of SNCM's indebtedness as indicated in the
restructuring plan,

companies and therefore

five

to increase

(325) The Commission takes the view that the primary aim of
restructuring aid should not be
the
company's capital (simple financial restructuring) but to
help the company to switch from its monopoly position
under the 1976 agreement to a competitive position.
This is why the Commission is reticent to base the level
of aid on the method adopted by the French authorities,
as it
for
SNCM's capital. The Commission wishes to point out
that by adding or removing certain companies from the
panel chosen by the French authorities,
the average
capital/debt ratio may vary significantly.

to specify the appropriate level

is difficult

— the French authorities have not shown that

the
79 % capital/debt ratio emerging from this panel of
companies is properly taken into account for the
period 2002 to 2007 in the
financial model
included in the restructuring plan.

(322) With regard to the other approaches proposed by
France to show that the figure of EUR 76 million is not
too high, the Commission questions the relevance of the
method used.

the

fleet,

existing

finance
in that

(323) The first alternative method (118), based on the capital
seems
to
necessary
inappropriate
the French authorities have
included in this calculation the value of fleet acquisition
and not its sales value in 2002. The fact is, however,
that if a new company were to start up with the same
fleet as SNCM's such as it exists today it would have to
find capital proportionate to the purchase value of all
the ships together and not
their value when built.
Moreover, such an approach fails to take account of
other major assets such as the computer booking system
and the buildings
its
headquarters.

in which the company has

(326) The Commission considers that

the restructuring aid
may cover the costs of the different actions provided for
in the restructuring plan (operational restructuring), on
the one hand, and the company's losses incurred in
carrying out its public service agreements until the end
of 2001 (financial restructuring), on the other. First, the
Commission accepts that a part of the aid can be used
to finance the costs of operational measures required by
the change in the legal and competitive contexts in
which the company operates. Second,
these
actions alone do not enable the company to improve
the level of its indebtedness rightaway, the Commission
also accepts that the other part of the aid can be used
to repay the debts resulting from undercompensation
from which SNCM suffered under the 1991 and 1996
agreements. Accordingly, the Commission wishes:

since

— to authorise the financing from public funds only
the costs inherent in operational measures under the
restructuring plan,

— to draw a definitive line under the consequences of
the inadequacy of financial compensation under the

(117) See section 2.3.8.3.
(118) See section 2.3.8.2.

(119) See section 2.3.8.1.

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said agreements in view of the operating expenses
and onshore costs recorded for this period on the
sea links covered by the public service obligations.

(327) As

has

already

financial
undercompensation for public service in the period
1991 to 2001 amounted to EUR 53,48 million.

noted,

been

the

(328) For

that

costs

operational

linked with

restructuring
the Commission adopts the figure of EUR
measures,
46,0 million (120). The Commission notes
the
company should make EUR 21 million in the net
revenue from disposals (121) following implementation
of the disposals provided for in the restructuring plan.
Bearing these facts in mind, the Commission therefore
reaches the conclusion that the sum of EUR 76 million
is completely justified to restore the company's viability
in the short term. SNCM is now unable to obtain a
bank loan, even if
ships,
unencumbered by mortgage or other servitudes, as a
the Commission
mortgage
the company is unable to find other
considers that
restructuring
sources
to
capital
programme. Accordingly,
its
of
requirement, amounting to EUR 76 million, should
according to this calculation be provided in the form of
restructuring aid and any revenue from the disposal of
non-strategic shares.

it proposed its newest

guarantee (122).

finance
the

remainder

Finally,

its

of

measures,

restructuring

the end of 2002, as detailed above, a EUR 76 million
cash injection would raise the company's net position,
from about – EUR
all other things remaining equal,
26,5 million to + EUR 49,5 million. Similarly,
the
company's
financial debt would change from EUR
144,8 million (situation at end 2002) – EUR 76 million
(cash injection) + EUR 31,2 million (outflow for
operational
excluding
exceptional depreciation of the Liamone), to about EUR
it would remain equal to
100 million. Consequently,
leading the Commission to
double the net position,
conclude that
this obviates the risk of surplus cash
within the meaning of the guidelines. To the extent that
there is such a risk, the conditions laid down in the
present decision are intended to prevent any distortion
of competition. Even if account is taken of the regulated
provisions of EUR 60 million discussed above, of which
the Commission considers that only part of these are
the company's own resources of
company capital,
remain
approximately
counterbalanced by virtually equivalent debts.
In the
Commission's opinion, the presence of net fixed assets
to be financed to the tune of EUR 283 million at the
end of 2002 fully justifies this level of capital. A
reduction of the aid, e.g. through new mortgage loans
taken out by SNCM, would automatically lead to an
increase in debt and would, because of disrupting this
adequate
to the Commission's
analysis,
leave no scope for the company's financial
restructuring.

EUR 110 million would

according

balance

5.5. Necessity of the conditions imposed by the
Commission

(329) The Commission therefore believes that the amount of
recapitalisation of EUR 76 million notified by the French
authorities in the last analysis seems consistent with the
approach which it has adopted, subject, as will be
indicated below (123),
to the taking into account of
revenue from transfers of non-strategic shares
that
the disposals provided for in the
would supplement
restructuring plan.

(331)

In accordance with the guidelines (124), the Commission
may impose any conditions and obligations it considers
the aid does not
necessary in order to ensure that
contrary to the
competition to an extent
distort
common interest.

(330) Finally, the Commission considers that the aid proposed
does not exceed what is necessary to restore viability.
On the basis of the financial situation as presented at

(120) See section 2.3.8.1. The French authorities have announced EUR
in addition to the costs of
46,2 million, taking into account,
operational
an
(EUR 31,2 million),
expected depreciation of the Liamone of EUR 15 million. This
amount was reduced to EUR 14,8 million in the 2001 accounts,
and the figure adopted is therefore EUR 46,0 million. See also
section 2.4.1.4.

restructuring measures

(121) See section 2.3.2.
(122) See section 5.3.1.2.
(123) See section 5.4.2.4.

(332)

In the case under review, the Commission decides to
impose a number of conditions with the dual purpose
limiting the company's capacity and preventing it
of
from adopting an aggressive fares policy that would be
harmful to its competitors in services to Corsica.

(124) See point 42 of

itself

the guidelines, which stipulate

the
‘(i) to take certain
Commission may require the Member State:
measures
to other
Community operators); (ii) to impose certain obligations on the
recipient
to refrain from acting as price leader on
certain markets); (iii) to refrain from granting other types of aid
to the recipient firm during the restructuring period.'

to open up certain markets

firm (e.g.

(e.g.

that

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5.5.1. Reduction of capacity

it is recalled that the guidelines allow ‘a
connection,
relaxation of the need for compensatory measures ... if
such a reduction or limitation is likely to cause a
manifest deterioration in the structure of the market, for
example by having the indirect effect of creating a
monopoly or a tight oligopolistic situation' (126).

(333) However, the reduction of the fleet (125) provided for in
the restructuring plan should be balanced in the light of
the ship purchase policy which SNCM has pursued in
recent years, acquiring two new ships in 2002/2003, a
car ferry and a passenger cargo ship of average capacity.

(339)

(334) Moreover,

the

in the

increase

company's

capital
following recapitalisation could give its management
room for manoeuvre to purchase, where appropriate,
new ships and/or acquire new shares contrary to the
very objective of restructuring which is to focus on
internal efforts to turn the company around.

In view of the expected duration of the restructuring
plan (127), the Commission deems it reasonable to fix
the deadline for the constraints set out above at 31
December 2006, by which time there will be the hoped
for restoration of ‘normal' net results for a maritime
company of SNCM's size and of a reasonable level of
company
turnaround,
however, will not bring the end of the period in which
these constraints will have to maintained forward in
time.

capital. A possibly

earlier

(335) Bearing this in mind,

the Commission is obliged to
impose additional conditions to ensure compliance with
the condition concerning reduction of capacity.

5.5.2. The company's contribution to the restructuring effort

(336) The Commission should guarantee that the fleet of the
SNCM group does not exceed the current total number
of ships following disposal of four ships. Moreover, the
Commission should prohibit
from
renewing its ships during a particular period, except for
reasons beyond the company's control,
requiring a
Commission decision.

company

the

(340)

In accordance with the guidelines,
the company in
difficulty should ‘make a significant contribution to the
restructuring plan from [its] own resources,
including
through the sale of assets that are not essential to the
financing at market
firm's survival, or from external
conditions' (128).

(337) The Commission also deems it necessary, in accordance
with the restructuring plan notified by the French
authorities, to limit the number of round trips on the
various sea links to Corsica.

(338) The Commission considers that it is not appropriate to
impose more drastic conditions with regard to capacity
reduction because of, first, the company's obligations
under its public service delegation contract and, second,
traffic increase to Corsica and North
prospects for
Africa and, finally, the risk of bringing about a situation
in which its direct competitor has a monopoly position
on links between mainland France and Corsica. In this

(125) See section 2.3.2.

it

finds

(341) The Commission notes SNCM's efforts in the form of
the disposal of assets (EUR 40 million in sales price and
from disposal).
EUR 21 million in net proceeds
However,
that SNCM holds an important
portfolio of shares in various companies which are
either not directly related to the company's object or are
not intrinsically connected with the services which the
shipping company provides. The fact is that none of
these shares have been included in the programme for
disposing of assets laid down in the restructuring plan.
The Commission takes the view that
the company
should dispose of all non-strategic shares in an open
and transparent procedure and that the restructuring
plan proposed by France ought to have made provision
for this disposal. Moreover, the Commission considers
that
should
proportionately reduce the requirement for aid in view
of the need to keep the amount of aid to a minimum.

from this

proceeds

disposal

the

(126) See point 38 of the guidelines.
(127) See recital 304.
(128) See point 40 of the guidelines.

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5.5.2.1. D e t e r m i n i n g n o n - s t r a t e g i c h o l d i n g s

(345) The Schuman company covers various fixed assets. In
the Commission's opinion, the holding in this company
is not of strategic importance for SNCM's activities and
should therefore be sold off.

(342) To

its

counterbalance

of
recapitalisation, the Commission decides to oblige the
company to dispose of all its holdings in the following
subsidiaries:

conditional

approval

— Amadeus

France,

and
marketing a computerised booking system, in which
SNCM has a 13 % share (129),

company developing

a

(346) Someca is specialised in the transport of cement

to
Corsica on a bulk cargo ship. Bulk transport provides
little synergy with ro-ro freight and the small volume of
cement transported to Corsica does not justify keeping
shares
subsidiary.
highly
Accordingly, the Commission considers that this holding
it
is not of strategic importance to SNCM and that
should therefore be disposed of.

specialised

such

in

a

— the Compagnie Corse Méditerranée, an airline in

which SNCM has a 7 % share (130),

— the real estate company Schuman, in which CGTH

has a 50 % share,

— Someca,

— SMIP; failing this, SNCM could sell SMIP's sole asset,
and close down this

the Southern Trader (131),
subsidiary.

(343) With regard to all of these holdings, the Commission
the French authorities have never in the
they are of
the procedure indicated that

notes that
course of
strategic importance for SNCM's survival.

services

(4,75 %),

to Corsica.

(344) The Compagnie Corse Méditerranée (CCM), known
is an aviation
under its business name CCM Airlines,
company operating air
is a
It
semi-public limited company with a capital of EUR
10 335 520.
Its main shareholders are the territorial
collectivity of Corsica (60,37 %), Air France (11,95 %),
the Caisse des Dépôts et
Crédit Agricole (7,55 %),
Consignations
SNCM (6,78 %), TAT EA
(2,52 %), TAT SA (1,68 %), the Caisse de Développement
de la Corse du Sud (1,21 %), the Chambre de Commerce
of
de Haute-Corse
11 members: the Assembly of Corsica (seven members),
Air France (one member), Crédit Agricole (one member),
Caisse des Dépôts et Consignations (one member) and
SNCM (one member). The Commission takes the view
that there is no need for a shipping company such as
SNCM to have any holdings in airlines and that SNCM's
holding is CCM are not of strategic importance.
It
should therefore be disposed of as a condition for
recapitalisation.

(0,84 %).

consists

board

Its

(347) SMIP's sole activity is leasing the Southern Trader. This
activity of
leasing ships is far removed from SNCM's
core activity. It is in no way of strategic importance to
the group. SNCM should therefore either dispose of this
subsidiary or sell off its sole asset, the Southern Trader,
and close down this subsidiary.

5.5.2.2. T h e s p e c i a l c a s e o f C M N

(348) The case of CMN is more complex. On the one hand,
SNCM and the French authorities maintain that SNCM's
holding in CMN is of crucial
importance and is
therefore of strategic significance to ensure execution of
the public service delegation contract. On the other
hand, Corsica Ferries and Stef-TFE are of the opinion
that
this holding is not of strategic importance to
SNCM.

(349) The Commission notes that even though SNCM and
the two
CMN are both competitors and partners,
companies participate in carrying out the public service
contract.

(350) Moreover, the two companies have developed synergies
is

to Corsica which go beyond what

on services
required by the public service delegation contract:

(129) According to the SNCM group's annual report of 2001.
(130) See footnote 129.
(131) According to information provided by the French authorities, a

promise of sale has been made for this ship.

— a joint computerised booking system not only for
Corsica but also for the Marseilles-Sardinia links,

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Official Journal of the European Union

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— a joint passenger embarkation control system,

disposal cannot be contemplated without jeopardising
the company's
the
essential roles they play within the group.

short-term viability because of

— coordination of timetables,

— CMN access to SNCM's network of agencies in

Europe.

5.5.2.4. Ta k i n g a c c o u n t o f t h e p r o c e e d s

e x p e c t e d f r o m t h e r e q u i r e d
d i s p o s a l s

(351) The Commission notes that cooperation between the
two companies goes back a long way, to 1954. The
Commission also notes
clearly
complements SNCM's in meeting the requirements of
services to Corsica. The Commission also notes that the
shareholders' pact binding the two companies provides
for cooperation between them.

that CMN's

fleet

(352) The Commission concludes from the above that SNCM's
shareholding in CMN is of crucial importance to SNCM
for its long-term development.

(353) Bearing these facts in mind, the Commission does not
deem it appropriate to require in this decision that
SNCM disposes of its holdings in CMN.

(354) The same applies to the Cofremar company, a joint
subsidiary of SNCM and CMN, which compiles statistics
on freight transport to Corsica.

5.5.2.3. O t h e r s t r a t e g i c h o l d i n g s

(357) The Commission wishes, where appropriate, to reduce
the amount of aid in order to take account of
the
proceeds from the disposal of non-strategic holdings.
However, it does not have the information necessary to
that would accrue from the
determine the amount
required disposals, although a very rough estimate
it will be around EUR 10 million,
suggests
excluding the disposals already envisaged under
the
restructuring plan. The Commission therefore deems it
necessary that a part of the aid, of the order of EUR
10 million, be frozen pending clarification of
this
amount and cannot be granted immediately.

that

the first

the company,

(358) Should it appear that the disposals have generated more
than EUR 10 million for
the second
tranche cannot be granted to SNCM. The Commission
has discarded the option of further reducing the amount
of
to
tranche of aid approved,
encourage SNCM to sell off these holdings at the best
possible price. However, should the required disposals
in the
other
restructuring plan generate less than EUR 10 million,
the remainder will be paid, account being taken of the
proceeds from these disposals. The second payment can,
where appropriate, be authorised by the Commission
only if all other conditions of the present decision are
complied with.

than those

in order

provided

already

for

is

Sud-Cargos

(355) The Sud-Cargos company offers major synergies and
genuine complementarity with SNCM on services to the
a partner of undeniable
Maghreb.
importance if SNCM is to develop ro-ro transport to the
Maghreb. Sud-Cargos also contributes very specific
knowledge of the market of services to North Africa.
The two companies can draw benefit
from pooling
particular onshore structures in Marseilles and in the
Maghreb to achieve economies of
scale. Moreover,
SNCM's business structure provides Sud-Cargos with a
substantial part of the latter's turnover.

5.5.3. Prevention of price leadership

(359)

In the Commission's opinion, the information supplied
by the French authorities enable it
to discard the
allegations that SNCM has been acting as the price
leader (132) on services to Corsica.

(356) SNCM's other subsidiaries contribute significantly to its
activities and can likewise not be severed from the
SNCM group. The Commission takes the view that their

importance to monitor

throughout

(132) On this subject, see sections 2.3.7 and 4.1.1.

(360) Nevertheless,

the Commission deems

it of crucial
the restructuring

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period that SNCM does not pursue an aggressive fares
policy. For this reason, the Commission decides to make
the grant of restructuring aid conditional on the absence
of any fares charged by SNCM below those of
its
competitors on services to Corsica.

5.5.5. Full implementation of the restructuring plan and

compliance with conditions imposed

(361)

for

raise

their

fares

crossings,

the competitors advertise,

In order to avoid situations in which competitors would
the
abnormally
Commission combines this rule with a safeguard clause
to be applied if all
for
equivalent services and identical dates, prices above
those of SNCM's fares in a reference year before the
If SNCM's
arrival of competitors on this market.
competitors were to unfairly increase their fares, SNCM
should be allowed to advertise the lowest fares to bring
about a return to acceptable price levels. To this end,
the Commission chooses 1996 as the reference year, as
it was in this year that SNCM was for the first time
facing competition on its links between the ports of
mainland France and Corsica and because fares have
dropped since. Consequently,
it would not be normal
for prices on the market to exceed those in force in
1996 at any time in the future. The reference prices
should of course be reviewed in the light of inflation
recorded in France.

(362) The condition laid down in recital 361 will be checked
if every day the lowest fares advertised by SNCM exceed
the lowest promotional fares advertised by each of its
competitors for the same destinations and services. The
Commission will investigate any failure to comply with
this condition.

5.5.4. Limitation of round trips to Corsica

(363) The Commission considers

it

that

important

the
compensatory measures offered to SNCM's competitors
can be maintained throughout the restructuring period.
Accordingly,
it decides to make aid conditional upon
strict adherence to the commitment which the French
authorities make in the restructuring plan with regard
to the annual number of round trips on the various
sealinks with Corsica.

(365) SNCM must fully implement the restructuring plan that
has been accepted by the Commission and carry out all
the obligations
laid down in this decision. The
Commission regards failure to comply with the plan or
with all or some of the obligations laid down in the
the aid which will
present decision as an abuse of
automatically lead to a formal
investigation procedure
and eventually to the risk that the Commission claims
back the aid paid in its final decision.

5.5.6. Verification and annual report

(366) The Commission should be enabled to ascertain the
restructuring plan
smooth implementation of
through regular and detailed reports to be submitted to
it by France.

the

‘the

(367) With regard to aid to large firms,
that,

first of

these

the guidelines
provide (133)
reports will
normally have to be submitted to the Commission not
later than six months after approval of the aid. Reports
will subsequently have to be sent to the Commission at
least once a year, at a fixed date, until the objectives of
the restructuring plan can be deemed to have been
achieved. They must contain all
the information the
Commission needs in order to be able to monitor the
implementation of
the
timetable for payments to the company and its financial
position and the observance of any conditions or
obligations laid down in the decision approving the aid.'

the restructuring programme,

6. CONCLUSION

(368)

the Commission considers

In conclusion,
the
recapitalisation is
restructuring aid in the form of
compatible with the common market, provided that the
conditions
laid down in the present decision are
complied with.

that

(364) The annual number of round trips of ships on the
various sealinks to Corsica will be limited until 31
December 2006 to the thresholds indicated in table 3,
save for exceptional
reasons beyond the company's
control which would make it necessary to transfer
particular round trips to other ports and save for a
change in the public service obligations incumbent on
the company.

(369) The Commission asks that France:

— inform the Commission as soon as possible, and not
later than 15 working days after the date on which

(133) See point 46 of the guidelines.

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27.2.2004

this decision is received, of the elements which it
believes should be covered by the obligation of
professional secrecy provided for in Article 25 of
Regulation (EC) No 659/1999,

as

possible, without

— inform the recipient of the aid of this decision as
soon
divulging, where
appropriate, any elements which it considers as
covered by professional secrecy, the communication
of which to the recipient of
the aid could be
harmful to particular interested parties, and indicate
in the version transmitted, where appropriate, any
other elements which it deems to be covered by
professional secrecy and which it has divulged.

(370) The Commission, while reminding France that:

Article 2

From the date on which this Decision is notified and until
31 December 2006, SNCM shall refrain from acquiring new
ships and signing contracts for building, ordering or chartering
new or renovated ships.

From the date on which this Decision is notified and until
31 December 2006, SNCM can only operate the 11 ships
which SNCM already possesses, namely:
the Napoléon
Bonaparte, Danielle Casanova, Île de Beauté, Corse, Liamone, Aliso,
Méditerranée, Pascal Paoli, Paglia Orba, Monte Cinto and Monte
d'Oro.

If for reasons beyond its control SNCM has to replace one of
its ships before 31 December 2006,
the Commission may
authorise such a replacement on the basis of a duly reasoned
notice served by France.

— the

restructuring period for

SNCM ends on

31 December 2006,

Article 3

— under

the

any

individual

guidelines (134),

aid
intended to encourage tangible investment during
the restructuring period for the benefit of SNCM or
one of
an aid scheme
approved by the Commission should be individually
notified to the Commission,

subsidiaries under

its

— under the guidelines, further restructuring aid can
normally not be considered, save in exceptional and
unforeseeable circumstances for which the company
is not responsible, during the 10 years following the
end of
in this case
31 December 2006,

the restructuring period,

i.e.

— any new plan for recapitalisation of SNCM must be
notified to the Commission before the end of the
restructuring period even if the French authorities
consider
this new plan complies with the
principle of a private investor in a market economy,

that

HAS DECIDED AS FOLLOWS:

Article 1

The SNCM group shall dispose of all
holdings in the following companies:

its direct and indirect

— Amadeus France,

— Compagnie Corse Méditerranée,

— Société civile immobilière Schuman,

— Société Méditerranéenne

d'Investissements

et

de

Participations,

— Someca.

Instead of disposing of its holdings in Société Méditerranéenne
d'Investissements et de Participations, SNCM may sell
this
company's sole asset, the Southern Trader, and close down this
subsidiary.

The disposals may be made, at
the French
authorities, either through public auction or through a call for
expressions of interest published in advance, providing for a
minimum period of two months for any response.

the choice of

to the
The restructuring aid which France plans to grant
Société Nationale Maritime Corse-Méditerranée (SNCM)
is
compatible with the common market under the conditions laid
down in Articles 2 to 5.

(134) See points 88 and 89 of the guidelines.

France shall provide the Commission with proof of all these
disposals. The low level of bids which SNCM might receive
cannot be invoked as a reason for not going ahead with the
disposals. If there are no bids and if France can show proof
that all the necessary publicity has been made, the condition
laid down in the first paragraph shall be deemed to have been
complied with.

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Article 4

Article 6

In respect of all links to Corsica, SNCM shall, from the date on
which this Decision is notified and until 31 December 2006,
refrain from pursuing a fares policy in respect of published
fares intended to offer lower fares than those of each of its
competitors
for equivalent destinations and services and
identical dates.

The Commission reserves the right to initiate an investigation
procedure whenever it finds that the conditions laid down in
this Decision have not been complied with, and in particular
the condition laid down in the first paragraph.

The condition laid down in the first paragraph is complied
with if every day the lowest prices advertised by SNCM are
higher than the lowest promotional prices advertised by each
of its competitors for equivalent destinations and services.

The condition laid down in the first paragraph shall no longer
apply if the prices of the said competitors exceed SNCM's fares
that were in force in the reference year 1996, corrected for
inflation.

France is authorised to recapitalise SNCM through a first
payment of EUR 66 million from the date on which this
Decision is notified.

the

restructuring period,

the
i.e. until
Until
end of
31 December 2006,
the Commission may decide, upon a
request from the French authorities, to subsequently authorise
a second payment to SNCM which will correspond to the
difference between the EUR 10 million remaining and the
proceeds
in
accordance with the conditions laid down in the said Article.

required in Article 3,

from the disposals

Such a decision can be taken only if the action required in
Article 3 has been carried out, the proceeds from the disposals
does not exceed EUR 10 million and the conditions laid down
in Articles 2, 4 and 5 have been complied with, without
to initiate, where
prejudice
appropriate, the formal investigation procedure for failure to
comply with any of these conditions. Failing this, the second
instalment of aid shall not be paid.

to the Commission's

right

Article 7

Before 30 June each year, France shall inform the Commission
of all the elements necessary to show that this condition has
been duly complied with in the preceding calendar year in
respect of all crossings to or from Corsica.

the date on which this Decision is
Within six months of
notified, France shall inform the Commission of the measures
taken to comply with it.

Article 5

Article 8

In accordance with the commitments made by the French
authorities in the restructuring plan, the annual number of
round trips of ships on the various sea links to and from
Corsica are until 31 December 2006 limited to the thresholds
indicated in table 3 of
this Decision, save for exceptional
reasons for which SNCM is not responsible that would oblige
it to transfer particular round trips to other ports, and save for
any change made to the public service obligations incumbent
on the company.

This Decision is addressed to the French Republic.

Done at Brussels, 9 July 2003.

For the Commission

Loyola DE PALACIO

Vice-President