Communication from the Commission — Community guidelines on financing of airports and start-up aid to airlines departing from regional airports   (Text with EEA relevance)
Date: 2005-12-09
Institutions: European Commission
Subjects: State aid, air transport, airport, competition, control of State aid, transport company

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I

(Information)

COMMISSION

COMMUNICATION FROM THE COMMISSION

COMMUNITY GUIDELINES ON FINANCING OF AIRPORTS AND START-UP AID TO
AIRLINES DEPARTING FROM REGIONAL AIRPORTS

(2005/C 312/01)

(Text with EEA relevance)

1.

INTRODUCTION

(2)

In addition, a number of measures have been taken in
areas such as allocation of slots (2), groundhandling
services (3) and computerised reservation systems (4), in
order to underpin this market liberalisation and allow
businesses to compete on a level playing field. New
targeted proposals will shortly be made in relation to
slots (for
time, a market mechanism for
allocation of slots will be proposed to increase mobility
in saturated airports), equal access to computerised
reservation systems and groundhandling services. The
latter proposal is aimed at boosting competition between
service providers by increasing their access to the market.

the first

(3) At the same time, the opening-up of the industry, which
has obviously had a major impact on the activities and
behaviour of traditional airlines or flag carriers, has been
accompanied by strict
aid. The
application of the principle of single aid for restructuring
(one time-last time) has thus allowed the more adaptable
airlines to make the transition from a relatively protected

control of State

1.1. General context

(1) These guidelines form part of the general plan to create a
single European airspace, a subject on which the
Commission has been working for over 10 years. The
liberalisation measures known as the ‘third air
set of
package’, in force since 1993, has enabled all air carriers
holding a Community licence to have unrestricted access
to the intra-Community market, with freedom of tariffs,
since April 1997 (1). As a corollary, to guarantee citizens
continuous quality service at affordable prices through-
out their territory, those Member States that wish to do
so have established public service obligations relating to
frequency, service punctuality, availability of seats or
preferential rates for certain categories of users within a
clear legal framework. These public service obligations
have enabled air
to make a significant
contribution to economic and social cohesion and to
balanced development in the regions.

transport

(1)

Council Regulation (EEC) No 2407/92 of 23 July 1992 on
licensing of air carriers (OJ L 240, 24.8.1992, p. 1), Council
Regulation (EEC) No 2408/92 of 23 July 1992 on access for
Community air carriers to intra-Community air routes (OJ
L 240, 24.8.1992, p. 8) and Council Regulation (EEC)
No 2409/92 of 23 July 1992 on fares and rates for air services
(OJ L 240, 24.8.1992, p. 15).

(2)

(3)

(4)

Council Regulation (EEC) No 95/93 of 18 January 1993 on
common rules for
the allocation of slots at Community
airports (OJ L 14, 22.1.1993, p. 1).
Council Directive 96/67/EC of 15 October 1996 on access to
the groundhandling market at Community airports (OJ L 272,
25.10.1996, p. 36).
Council Regulation (EEC) No 2299/89 of 24 July 1989 on a
code of conduct for computerised reservation systems (OJ
L 220, 29.7.1989, p. 1).

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operating regime to competing as normal players in the
market. This has led to a significant restructuring of the
whole air industry, a measure that became even more
necessary after the events of 11 September 2001, the
consequences of which on air transport were significant.
Examples of consolidation in the industry are the recent
alliances such as Air France/Alitalia, Lufthansa/Austrian
Airlines and Iberia/British Airways, and the recent
merger of Air France and KLM.

(4) The Open Skies (1) judgments of the Court of Justice have
also given a new impetus to the air
industry by
international
the Community has
confirming that
negotiating powers in the field of civil aviation. The
importance of these judgments is considerable, since they
will promote consolidation among European airlines and
enhance their ability to face competition from third-
country airlines on a Community basis.

(5) There have been two other major developments on the
European air transport market in recent years. One of
these is the emergence of a number of new Community-
wide companies offering promotional rates supported by
a low-cost structure. The other development is the drive
by airports in recent years to secure new air links.

1.2. Developments in the airport sector

(6) The initial development of airports was often determined
by purely territorial considerations or,
in some cases,
military requirements. These land-use planning consid-
erations may still persist in some cases, but in many
others airports have been transferred from State to
regional control, in some cases to be operated by public
companies, or even to the private sector. The process of
transfer to the private sector has normally taken the form
of privatisation or a progressive opening-up of capital.

(7) The Community's airport industry has therefore under-
gone fundamental organisational changes that reflect not
only the active interest of private investors in the airport
sector but also a change of attitude on the part of the
public authorities regarding the contribution of private
investment to airport development. This development
has led to greater diversification and complexity of the
functions undertaken by airports.

(8) However,

this development affects the EU's airports
differently. The seven largest EU airports account for over
a third of all EU traffic, and the 23 largest account for
more than two thirds (2). Although they are primarily
providers of infrastructure to the air transport industry,
these airports have become highly efficient commercial
operators. On the other hand, most small airports in the
EU are still owned and operated by public authorities in
the public interest. As a result, the influence of one
airport's activity on that of other airports and on trade
between Member States varies greatly according to the
category it belongs to (see Types of Airport, section 1.2.1
below).

(9) Moreover, it is generally accepted that airports can have
an impact on the success of local economies and on
maintaining local services such as education and health.
They also play a major role in the integration of the
outermost regions of Europe. Passenger and freight
services can be crucial for competitiveness and develop-
in some regions. Airports that provide good
ment
for airlines and thus
services can act as a magnet
promote business activity as well as economic, social and
regional cohesion within the EU.

(10) However, the Commission notes that air transport is not
the only driver of development in terms of regional
accessibility. High-speed train connections also make a
significant contribution to social and economic cohesion
in the EU, particularly between large regional cities. As
emphasised in the 2001 White Paper (3), rail/air inter-
modality, with rail and air travel complementing rather
than competing with each other and high-speed trains
connecting cities, is bound to boost capacity significantly.

1.2.1. Types of airport

industry there are currently several
(11) In the airport
different
levels of competition between the different
types of airport. This is a key factor when investigating
State aid, and makes it necessary to examine the extent to
which competition could be distorted and the single
market affected. Competition scenarios are evaluated case
by case, based on the markets in question. However,
research (4) has shown that, generally, major international
the
hubs are competing with similar airports in all

(1)

Cases C-466/98 to C-469/98, C-471/98 and C-472/98
Commission v the United Kingdom, Denmark, Sweden, Finland,
Belgium and Luxembourg respectively [2002] ECR I-9427 to 9741.

(2)

(3)

(4)

Based on data for EU-25 in 2004 from the Airports Council
International.
European Transport Policy for 2010: time to decide, COM
(2001) 370, 12.9.2001.
‘Study on competition between airports and the application of
State aid rules’ — Cranfield University, June 2002.

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transport markets concerned, with the level of competi-
tion depending on factors such as congestion and the
existence of alternative transport, or, in certain cases (see
below), with large regional airports. Large regional airports
may be competing not only with other large regional
airports but also with the major Community hubs and
land transport, especially if there is high-quality land
access to the airport. This research has also shown that
small airports do not generally compete with other
airports except,
in some cases, with neighbouring
airports of a similar size whose markets overlap.

(12) In practical terms, the Decision of the Council and of the
European Parliament on Community guidelines for the
development of the trans-European transport network (1)
defined three categories of airport:

— international connecting points (generally with an
than

volume of no less

annual passenger
5 000 000),

— Community connecting points (generally with an
annual passenger volume of between 1 000 000
and 4 999 999), and

— regional connecting points and accessibility points
(generally with an annual passenger volume of
between 250 000 and 999 999).

— 57 airports of 1 to 5 million passengers accounting
for approximately 17 % of European air traffic,

— 67 airports of 200 000 to 1 million passengers
accounting for approximately 4 % of European air
traffic (3).

(14) According to the Committee of the Regions, regional
airports generally fall into the latter two categories, but
some airports in the intermediate category may also be
considered regional airports.

(15) The Commission considers that there is a broad overlap
between these two classification schemes, and for the
purposes of these guidelines has defined the following
four categories:

— category A, hereinafter ‘large Community airports’,
with more than 10 million passengers a year,

— category B comprises ‘national airports’, with an
annual passenger volume of between 5 and 10
million,

— category C comprises ‘large regional airports’, with
an annual passenger volume of between 1 and 5
million,

(13) The Committee of the Regions, for its part, proposed five
categories of European airports in its Outlook opinion of
2 July 2003 on regional airport capacities (2):

— category D, hereinafter ‘small regional airports’,
with an annual passenger volume of less than 1
million.

— major hub airports (over 25 million passengers,
four airports), accounting for approximately 30 %
of European air traffic,

1.3. Low-cost companies

— national airports (10 to 25 million passengers, 16
airports), accounting for approximately 35 % of
European air traffic,

— 15 airports of 5 to 10 million passengers account-
ing for approximately 14 % of European air traffic,

(16) Compared with traditional air carriers, the market share
of low-cost airlines has risen from just 4,0 % in 1998 to
20,8 % in 2004, although this share varies considerably
between Member States (4). In 2004, the three main low-
cost airlines transported over 62 million passengers in
the EU (5).

(1) Decision of the European Parliament and of the Council of
23 July 1996 on Community guidelines for the development of
the trans-European transport network (OJ L 228, 9.9.1996,
Annex II, section 6).

(2) Outlook opinion of the Committee of the Regions of 2 July
2003 on the capacity of regional airports (CdR 393/2002 fin).

(3)

NB: There are approximately 200 airports with fewer than
200 000 passengers per year.

(4) Over 40 % in the United Kingdom, Ireland and Slovakia, 38 %
in Spain, over 25 % in Belgium, Germany,
Italy, Austria,
Hungary and Sweden, 19 % in France and Greece, 18 % in the
Czech Republic and less than 15 % in the other Member States.
Source: OAG Summer Schedules 2004, seats available on intra-
EU flights.
Ryanair, Easyjet, AirBerlin. Source: Airclaims.

(5)

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(17) The Commission welcomes

this development and
appreciates the contribution made by these companies
to the general reduction in the price of air travel
in
Europe, the wider range of services available, and the
accessibility of air travel
to a wider public. As the
guardian of the Treaty, it must nevertheless ensure that
internal market rules are complied with,
in particular
competition rules, especially concerning State aid. The
negotiating methods used by the low-cost airlines to
obtain aid from public authorities, whether directly or
through the airport operator, have raised a number of
questions regarding the application of competition rules
under the EC Treaty and have been the subject of several
complaints to the Commission. This led the Commission
to adopt its recent decision on the establishment of
Ryanair at Charleroi (1). This has led to expectations
within the market of a clear legal framework defining the
rules applicable to these new practices.

2. OBJECTIVES OF THESE GUIDELINES
AND CHANGES COMPARED
WITH THE 1994 GUIDELINES

(18) The Commission's 1994 guidelines on the application of
Articles 92 and 93 of the EC Treaty and Article 61 of the
EEA Agreement to State aid to the aviation sector (2)
(hereinafter the aviation sector guidelines) do not cover
all the new aspects relating to the financing of airports
and start-up aid for new routes.

(19) They relate almost exclusively to the conditions for
granting State aid to airlines, by limiting direct operating
aid to airlines solely to public service obligations and aid
of a social nature. Part II.3 of the guidelines relates to
public investment in airport infrastructure. It states that
‘the construction of (airport)
infrastructure projects…
represents a general measure of economic policy which
cannot be controlled by the Commission under the
Treaty rules on State aid. This general principle applies
only to the construction of infrastructures by Member
States, and does not apply to aid resulting from
preferential treatment of certain companies for the use
of the infrastructures.’ These guidelines therefore add to,
rather than replace, those from 1994 by specifying how
the competition rules must be applied to the various

(1)

(2)

Commission Decision 2004/393/EC of 12 February 2004
concerning advantages granted by the Walloon Region and
Brussels South Charleroi Airport to the airline Ryanair in
connection with its establishment at Charleroi
(OJ L 137,
30.4.2004, p. 1).
Community guidelines on the application of Articles 92 and 93
of the EC Treaty and Article 61 of the EEA Agreement to State
aids in the aviation sector (OJ C 350, 10.12.1994, p. 5).

means of financing airports (see section 4), and start-up
aid for airlines leaving from regional airports (see
section 5).

(20) To this end,

the Commission takes account of

the
contribution that developing regional airports makes to
numerous Union policies. Thus:

traffic congestion at
In its White Paper

— increased use of regional airports is an asset in
combating air
the major
‘European
European hubs.
transport policy for 2010: time to decide’ (3), the
Commission explains that ‘there is already a specific
action plan on congestion of the sky, but conges-
tion on the ground is not yet receiving the necessary
attention or commitment. However, almost half of
Europe's fifty largest airports have already reached
or are close to reaching saturation point in terms of
ground capacity.’

— more access points

for

intra-European flights

increase the mobility of European citizens;

— developing these airports also helps develop the

regional economies concerned.

However, regional airports often face a less favourable
situation when developing their services than the major
European hubs such as London, Paris or Frankfurt. They
do not have a large reference airline that focuses its
operations on that airport in order to offer passengers as
many connections as possible and to take advantage of
the significant economies of scale that such a structure
allows. They may not have reached the critical size
needed to be sufficiently attractive. In addition, regional
airports often have to overcome a poor image and low
profile due to their location in the outermost regions of
the Community (e.g. the Azores) or in areas affected by
economic crisis (e.g. Charleroi,
the site of a former
coalfield).

(21) This is why in these guidelines the Commission has taken
a positive approach to developing regional airports,
while at the same time ensuring strict compliance with
the principles of transparency, non-discrimination and
proportionality so as to prevent any distortion of
competition which would not be in the common interest
in terms of public funding to regional airports and State
aid to airlines.

(3) White Paper, European Transport Policy for 2010: time to

decide. COM(2001) 370 final.

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(22) This approach must also fit in with the general aims of
in particular intermodality with rail-
transport policy,
In recent years the Community has made a
ways.
significant contribution,
in terms of both policy and
financing, to the pursuit of ambitious programmes to
develop a high-speed rail network. High-speed rail offers
a highly attractive alternative to air travel in terms of
time, price, comfort and sustainable development.
Notwithstanding the work that remains to be done to
extend the high-speed rail network to the whole territory
of the EU, we should therefore seek to benefit from the
capacity of high-speed rail travel to provide efficient,
high-quality connections, and encourage rail and air
operators to cooperate in accordance with Article 81 of
the EC Treaty in order to develop complementarity
between the two modes in the interest of users.

(23) In so far as these guidelines take a stand on issues such as
the absence or presence of aid,
for
information purposes, the Commission's general inter-
pretation of these issues at the time of drafting. This is
purely indicative, and without prejudice to the inter-
pretation of this concept by the Court of Justice and the
Court of First Instance.

they set out,

(27) In its communications and other measures on regional
aid, the Commission has indicated the conditions under
which regional aid can be considered compatible with
the common market in accordance with Article 87(3)(a)
and (c). Operating aid (1) granted to airports or airlines
(such as start-up aid) can only be declared compatible
under exceptional circumstances and under strict condi-
tions in underprivileged regions, i.e. regions covered by
the derogation set out in Article 87(3)(a) of the EC Treaty,
the most remote regions and sparsely populated areas (2).

(28) In accordance with Article 87(3)(b), aid to promote the
execution of an important project of common European
interest may be considered to be compatible with the
common market. Particular reference is made to projects
relating to trans-European networks, which may include
airport projects.

(29) When the above provisions are not applicable,

the
Commission will evaluate the compatibility of the aid
given to airports and start-up aid under Article 87(3)(c).
The following provisions set out
the principles the
Commission will follow in carrying out its assessment.

3.

SCOPE AND COMMON COMPATIBILITY RULES

3.2. Existence of State aid

3.1. Scope and legal basis

3.2.1. Airports' economic activity

(24) This framework specifies to what extent and how public
financing of airports and State aid for starting up air
routes will be assessed by the Commission in the light of
Community rules and procedures on State aid. The
Commission will base its assessment on Article 86(2) or
Article 87(3)(a), (b) or (c) of the Treaty.

(30) The Treaty adopts a neutral stance on the question of
whether a State opts for public or private ownership of
airports. As regards the existence of State aid,
the
essential point is whether the beneficiary is engaged in an
economic activity (3). There can be no doubt that airlines
are engaged in an economic activity. Likewise, once an

(25) Article 86(2) of the Treaty allows Member States to
derogate from the Community rules on State aid in
respect of undertakings entrusted with the operation of
services of general economic interest if the application of
such rules obstructs the performance, in law or in fact, of
the particular tasks assigned to them and provided the
development of trade is not affected to such an extent as
would be contrary to the interests of the Community.

(26) Article 87(3) of the Treaty lists the aid that may be
declared to be compatible with the common market.
Article 87(3)(a) and (c) provide for derogations for aid
granted to promote or facilitate the development of
certain areas and/or certain economic activities.

(1)

(2)

(3)

In the guidelines on State aid for the regions, operating aid is
defined as aid ‘intended to reduce the undertaking's current
expenditure’ (point 4.15), while initial investment aid relates to
‘an investment in fixed capital relating to the creation of a new
establishment, the extension of an existing establishment, or
the commencement of an activity that involves a fundamental
change in the product or procedure provided by an existing
establishment’ (point 4.4).
See point 4.15 et seq. of the guidelines on State aid for the
regions.
According to Court of Justice case-law, any activity consisting in
offering goods and services on a given market is an economic
activity. See Case C-35/96 Commission v Italy [1998] ECR I-
3851 and Cases C-180/98 to C-184/98 Pavlov [2000] ECR I-
6451.

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airport engages in economic activities, regardless of its
legal status or the way in which it
it
constitutes an undertaking within the meaning of
Article 87(1) of the EC Treaty, and the Treaty rules on
State aid therefore apply (1).

is financed,

3.2.2. Airport activities
economic interest

constituting services of general

(31) In the ‘Aéroports de Paris’ case (2), the Court of Justice
ruled that airport management and operation activities
consisting in the provision of airport services to airlines
and to the various service providers within airports are
economic activities because they consist in the provision
of airport facilities to airlines and the various service
providers, in return for a fee at a rate freely fixed by the
manager, and do not fall within the exercise of its official
powers as a public authority and are separable from its
activities in the exercise of such powers. Thus, the airport
operator, in principle, is engaged in an economic activity
within the meaning of Article 87(1) of the EC Treaty, to
which the rules on State aid apply.

(32) However, not all the activities of an airport operator are
necessarily of an economic nature. It is necessary to
distinguish between its activities and to establish to what
extent its activities are of an economic nature (3).

(33) The Court of Justice has held that activities that normally
fall under State responsibility in the exercise of its official
powers as a public authority are not of an economic
nature and do not fall within the scope of the rules on
State aid. Such activities include safety, air traffic control,
police, customs, etc. Generally speaking, the financing of
these activities must be strictly limited to compensation
of the costs to which they give rise and may not be used
activities (4). As
instead to fund other
explained by the Commission in its Communication of
10 October 2001 following the attacks of 11 September
2001, ‘It goes without saying that, if certain measures are
imposed directly on airlines and other operators in the
sector such as airports, suppliers of groundhandling
services and providers of air navigation services, the
financing of such measures by the public authorities
must not give rise to operating aid incompatible with the
Treaty.’

economic

(1)

(2)

(3)

(4)

Cases C-159/91 and C-160/91, Poucet v AGF and Pistre v Cancava
[1993] ECR I-637.
Case T-128/98, Aéroports de Paris v Commission of the European
Communities [2000] ECR II-3929, confirmed by Case C-82/01
[2002] ECR I-9297, points 75-79.
Case C-364/92 SAT Fluggesellschaft v Eurocontrol [1994] ECR I-
43.
Case C-343/95 Calì & Figli v Servizi ecologici porto di Genova
[1997] ECR I-1547. Commission Decision N 309/2002 of
19 March 2003, Aviation security — compensation for costs
incurred following the attacks of 11 September 2001.
Commission Decision N 438/2002 of 16 October 2002, Aid
in support of public authority functions in the port sector.

(34) Certain economic activities carried out by airports can be
considered by the public authority as constituting a
service of general economic interest. In this case, the
authority imposes on the airport operator certain public
service obligations in order to ensure that the general
public interest is appropriately served. In such circum-
stances, the airport operator may be compensated by the
public authorities for the additional costs deriving from
the public service obligation. It is not impossible for the
overall management of an airport, in exceptional cases,
to be considered a service of general economic interest.
In this case, the public authority might impose public
service obligations on an airport, for example, an airport
located in an isolated region, and might decide to pay
compensation for these obligations. However, it should
be noted that the overall management of an airport as a
service of general economic interest should not cover
activities which are not directly linked to its basic
activities and listed in paragraph 53(iv).

judgment

(35) In this connection, the Commission draws attention to
in the Altmark case (5), which
the Court
established case-law in this regard. The Court ruled that
compensation for public service does not constitute State
aid within the meaning of Article 87 of the EC Treaty
provided that the following four criteria are met:

1.

the recipient undertaking must actually have public
service obligations to discharge and the obligations
must be clearly defined;

2.

the parameters on the basis of which the compen-
sation is calculated must be established in advance
in an objective and transparent manner;

3.

the compensation cannot exceed what is necessary
to cover all or part of the costs incurred in the
discharge of public service obligations, taking into
account the relevant receipts and a reasonable profit
for discharging those obligations; and

(5)

Case C-280/00 Altmark Trans and Regierungspräsidium Magde-
burg v Nahverkehrsgesellschaft Altmark [2003] ECR I-7747.

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the selection of

4. where the undertaking which is to discharge public
service obligations, in a specific case, is not chosen
pursuant to a public procurement procedure which
would allow for
the tenderer
capable of providing those services at the least cost
the level of compensation
to the community,
needed must be determined on the basis of an
analysis of the costs which a typical undertaking,
well run and adequately provided with means of
transport so as to be able to meet the necessary
public service requirements, would have incurred in
discharging those obligations, taking into account
the relevant revenues and a reasonable profit for
discharging the obligations.

(36) When it complies with the conditions established by the
Altmark judgment, compensation for public service
obligations imposed on an airport operator does not
constitute State aid.

(37) Public financing of airports other than those referred to
above may constitute State aid within the meaning of
Article 87(1)
if it has an effect on intra-Community
competition and trade.

3.2.3. Effects of financing given to airports on competition and

trade between Member States

(38) Competition between airports can be assessed in the light
of airlines' criteria of choice, and in particular by
comparing factors such as the type of airport services
provided and the clients concerned, population or
economic activity, congestion, whether there is access
by land, and also the level of charges for use of the
airport infrastructure and services. The charge level is a
key factor, since public funding granted to an airport
could be used to maintain airport charges at an
artificially low level in order to attract traffic and may
significantly distort competition.

(39) However, on the basis of these guidelines, the Commis-
sion considers that
the categories identified in sec-
tion 1.2.1 can provide an indication of the extent to
which airports are competing with one another and
therefore also the extent to which public funding granted
to an airport may distort competition.

(40) However, beyond these general

it is not
possible to establish rules covering every possible case,
particularly for airports in categories C and D.

indications,

For this reason any measure which may constitute State
aid to an airport must be notified so that its impact on
competition and trade between Member States can be
examined, and, where appropriate, its compatibility.

(41) By way of exception, when airports in category D are
entrusted with a mission of general economic interest,
the Commission has decided to exempt the public service
compensation constituting State aid granted to them
from the prior notification obligation and declare them
compatible, as
they comply with certain
conditions (1).

long as

3.2.4. The principle of private investor in a market economy

(42) Article 295 of the Treaty of Rome states that the Treaty
in no way prejudices
in Member States
governing the system of property ownership. Member
States can accordingly own and manage undertakings,
and can purchase shares or other interests in public or
private undertakings.

the rules

(43) This principle means that

the Commission's action
cannot penalise or give more favourable treatment to
public authorities which subscribe to the capital of
certain companies. Similarly, it is not for the Commis-
sion to make any judgment on the choices made by
undertakings between different types of financing.

(44) Consequently,

these guidelines make no distinction
between the different types of beneficiaries in terms of
their legal structure or whether they belong to the public
or private sector, and all references to airports or the
companies which manage them include all types of legal
entity.

(45) Moreover, these principles of non-discrimination and
equality do not exempt public authorities or public
companies from applying competition rules.

(46) In general, whether the public funding benefits airports
indirectly by the public
or
authorities
the Commission will assess
whether it constitutes aid by considering whether ‘in

is granted directly or

to airlines,

Thus, public financing granted to national and Commu-
nity airports (categories A and B) will normally be
considered to distort or threaten to distort competition
and to affect trade between Member States. Conversely,
funding granted to small regional airports (category D) is
unlikely to distort competition or affect trade to an
extent contrary to the common interest.

(1)

Commission Decision of 13 July 2005 on the application of
Article 86 of the Treaty to State aid granted in the form of
public service compensation to certain undertakings entrusted
with management of services in the general economic interest.

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similar circumstances a private shareholder, having
regard to the foreseeability of obtaining a return and
regional-policy and sectoral
leaving aside all social,
considerations, would have subscribed the capital
in
question’ (1).

(47) The Court has ruled that ‘the principle of equality, to
which the Governments refer in connection with the
relationship between public and private undertakings in
general, presupposes that the two are in comparable
(…) private undertakings determine their
situations.
strategy by taking into
industrial and commercial
account
requirements of profitability.
Decisions of public undertakings, on the other hand,
may be affected by factors of a different kind within the
framework of the pursuit of objectives of public interest
by public authorities which may exercise an influence
over those decisions.’ (2) Thus the concept of foreseeable
profitability for the operator who effectively provides the
funds as a market player is of central importance.

in particular

(48) The Court has also ruled that the conduct of a public
investor must be compared with that of a private investor
pursuing a structural policy, whether general or sectoral,
and guided by prospects of profitability in the longer
term (3). These considerations are particularly pertinent
to investment in infrastructure.

(51) In terms of start-up aid, it is possible that a public airport
gives an airline financial advantages from its own
resources generated by its business activity, which would
not constitute State aid if it proves to be acting as a
private investor, for example by providing a business plan
the profitability forecasts for its airport
setting out
economic activity. Conversely, if a private airport gives
funding which in fact is no more than a redistribution of
public resources given to it for this purpose by a public
body, these subsidies must be considered as State aid if
the decision to redistribute public resources is taken by
the public authorities.

(52) Applying the principle of

the private investor, and
therefore that there is no aid, presupposes the reliability
of the whole economic model of the operator acting as
an investor: an airport which does not
finance its
investments or does not pay the corresponding fees, or
whose operating costs are partly covered by public funds,
over and above a task undertaken in the general interest,
cannot usually be considered as a private operator in a
market economy, subject to a case-by-case assessment; it
is therefore extremely difficult to apply this reasoning to
such an operator.

4.

FINANCING AIRPORTS

(49) All State resources used by Member States or public
authorities to benefit airport operators or airlines must
therefore be assessed with regard to these principles. In
cases where Member States or public authorities act as
private economic operators would, these advantages will
not constitute State aid.

(53) Airport activities can be categorised as follows:

(i)

construction of airport infrastructure and equip-
ment (runways, terminals, aprons, control tower) or
facilities that directly support them (fire-fighting
facilities, security or safety equipment);

(50) If, on the other hand, public resources are made available
to a company under more favourable conditions (i.e., in
economic terms, at a lower cost) than would be provided
by a private economic operator to a company in a
comparable financial situation and facing similar com-
petition,
that company is receiving assistance which
constitutes State aid.

(1)

(2)

(3)

Case 40/85 Kingdom of Belgium v Commission [1986] ECR I-
2321.
Joined Cases 188/80 to 190/80 French Republic, Italian Republic
and United Kingdom of Great Britain and Northern Ireland v
Commission of the European Communities [1982] ECR 2571, point
21 of the Grounds.
Case C-305/89 Italy v Commission (Alfa Romeo) [1991] ECR I-
1603, point 20. Case T-228/99 Westdeutsche Landesbank
Girozentrale v Commission [2003] ECR II-435, points 250-270.

(ii) operation of

the infrastructure, comprising the
infra-

maintenance and management of airport
structure;

(iii) provision of airport

services ancillary to air
transport, such as groundhandling services and
the use of
fire-fighting
related infrastructure,
services, emergency services, security services, etc;
and

core activities,

(iv) pursuit of commercial activities not directly linked
including the
to the airport's
construction, financing, use and renting of
land
and buildings, not only for offices and storage but
also for the hotels and industrial enterprises located
within the airport, as well as shops, restaurants and
car parks. As these are not
transport activities,
public financing of them is not covered by these
guidelines and will be assessed on the basis of the
relevant sectoral and general rules.

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(54) These guidelines apply to all airport activities, with the
exception of safety, air traffic control and any other
activities for which a Member State is responsible as part
of its official powers as a public authority (1).

mutandis, to the sale or provision of infrastructure by
public authorities.

4.1.

Financing of airport infrastructure

(55) This section concerns aid for the construction of airport
infrastructure and equipment or facilities that directly
support them as defined in paragraphs 53(i) and 54
above.

(56) Infrastructure is the basis for the economic activities
carried out by the airport operator. However,
it also
represents one of the ways in which the State can affect
regional
land-use planning
policy, transport policy, etc.

economic development,

(57) Any airport operator engaging in an economic activity
within the meaning of the Court judgment referred to in
paragraph 30 should finance the costs of using or
building the infrastructure it manages from its own
resources. Consequently, the provision of airport infra-
structure to an operator by a Member State (including
regional or local authorities) not acting as a private
investor without adequate financial consideration or the
granting to an airport operator of public subsidies
intended to finance infrastructure can give that airport
operator an economic advantage over its competitors
and must therefore be notified and examined in the light
of the rules on State aid.

(58) The Commission has already had occasion to spell out
the conditions under which operations such as the sale of
land or buildings (2) or the privatisation of an under-
taking (3) does not, in its opinion, involve the possibility
of State aid. This is generally the case if these operations
are made at market prices, in particular where the price is
the outcome of a sufficiently well-publicised, open,
unconditional and non-discriminatory bidding procedure
which ensures
that potential applicants are treated
equally. Without prejudice to the obligations deriving
from the rules and principles applicable to public
procurement and concessions, when these are applicable,
the same kind of reasoning applies in principle, mutatis

(1)

(2)

(3)

See Commission Decision N 309/2002 — France: Air Safety —
compensation for costs following the attacks of 11 September
2002.
Commission Communication on State aid elements in sales of
land and buildings by public authorities, OJ C 209, 10 July
1997, pp 3-5.
European Commission report on competition policy, 1993,
paragraphs 402 and 403.

(59) In any case, it is not possible to rule out the possibility
that particular cases may contain elements of aid. For
example, there might be aid if
the infrastructure in
question were allotted to a predetermined manager
if an
which gained undue advantage therefrom, or
unjustifiable difference between the sale price and a
recent construction price were to give the purchaser an
undue advantage.

(60) In particular, when additional infrastructure, which was
not planned when the existing infrastructure was
allotted, is made available to the airport operator, the
operator must pay rent at market values commensurate
with the costs of the new infrastructure and the duration
of
the
infrastructure was not provided for
in the original
infrastructure must be closely
contract, the additional
linked to use of the existing infrastructure and the subject
of the manager's initial contract must stay the same.

further development of

its use. Moreover,

if

(61) If it is not possible to rule out the possibility of State aid,
the measure in question must be notified.
is
confirmed that the measure involves aid, such aid may be
declared compatible, in particular pursuant to Articles 87
(3)(a), (b) or (c) or 86(2) and, where applicable, their
implementing provisions. To that end, the Commission
will in particular examine whether:

If

it

— construction and operation of

the infrastructure
meets a clearly defined objective of general interest
(regional development, accessibility, etc.),

— the infrastructure is necessary and proportional to

the objective which has been set,

— the infrastructure has satisfactory medium-term
prospects for use, in particular as regards the use
of existing infrastructure,

— all potential users of the infrastructure have access

to it in an equal and non-discriminatory manner,

— the development of trade is not affected to an extent

contrary to the Community interest.

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4.2. Aid for operation of airport infrastructure

— the operators and the territory in question,

(62) In principle, the Commission considers that an airport
operator, like any other business, should meet the normal
costs of running and maintaining the airport infrastruc-
ture from its own resources. Any public financing of
these services would reduce the expenses normally borne
its current
by the airport operator in carrying out
operations.

(63) Such funding does not constitute State aid if

it

is
compensation for public services allocated for manage-
ment of the airport in accordance with the conditions
established by the Altmark judgment (1). In other cases,
operating subsidies are State operating aid. As stated in
part 3.1 of these guidelines, such aid may be declared
compatible only on the basis of Articles 87(3)(a) or (c),
under certain conditions, in disadvantaged regions, or on
the basis of Article 86(2) if it meets certain conditions
which ensure that it is necessary for the operation of a
service of general economic interest and does not affect
trade to an extent contrary to the Community interest.

(64) As regards the application of Article 86(2), as stated in
paragraph 40 of these guidelines, the Commission has
decided to consider compensation for public services
constituting State aid granted to category D airports to
be compatible,
to certain conditions. Any
compensation for public services constituting State aid
granted to larger airports (categories A, B or C) or failing
to meet the criteria and conditions of this Decision
should be notified and examined on a case-by-case basis.

subject

(65) To that end, the Commission will verify that the airport
really has been entrusted with the operation of a service
of general interest and that the compensation does not
exceed what is necessary to cover the costs incurred in
discharging the public service obligations, taking into
account the relevant receipts and a reasonable profit.

(66) The award of public service missions to the airport must
be recorded in one or more official documents, the form
of which may be determined by each Member State.
These documents should contain all the information
needed to identify the specific costs of the public service,
and must in particular specify:

— the precise nature of the public service obligation,

(1)

See footnote 3, page 8.

— the nature of any special or exclusive rights granted

to the airport,

— the arrangements for calculating, monitoring and

reviewing compensation,

— the means of preventing and correcting any over or

under-compensation.

(67) When calculating the amount of compensation, the costs
and revenue to be taken into consideration must include
all costs and revenue linked to performance of the service
of general economic interest. If the airport operator in
question has other special or exclusive rights associated
with this service of general economic interest,
the
associated revenues must also be taken into account.
Consequently, there must be a transparent accounting
system and separation of the accounts for the operator's
different activities (2).

4.3. Aid for airport services

(68) Groundhandling services are a commercial activity open
to competition over a threshold of two million passen-
gers annually pursuant to Directive 96/67/EC (3).

An airport operator acting as a provider of groundhand-
the
ling services may charge different
for
these
groundhandling charges invoiced to airlines if
different rates reflect cost differences linked to the nature
or scale of the services provided (4).

rates

(69) Up to the threshold of

the
airport operator acting as service provider may offset its
various sources of revenue and losses between purely

two million passengers,

(2)

(3)
(4)

Although not applicable to the transport sector, the Commu-
nity framework for state aid in the form of public service
compensation of 13 July 2005 can provide indications of how
paragraphs 65 to 67 apply.
See footnote 3, page 1.
the decision to initiate the proceeding
Paragraph 85 of
‘With regard to
concerning the case of Ryanair at Charleroi:
groundhandling tariffs, the Commission believes that econo-
mies of scale could be applied when an airport user makes
significant use of a company's assistance services. It comes as
no great shock that the tariff applied to some companies will be
lower than the general tariff, in so far as the service requested
by these companies will be less than for other clients’.

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activities

its groundhandling
(such as
commercial
activities or the management of a car park), with the
exclusion of public resources granted to it as airport
authority or operator of a service of general economic
interest. However, in the absence of competition in the
take
provision of groundhandling services,
particular care not to infringe national or Community
provisions, and in particular not to abuse its dominant
market position, thereby infringing Article 82 of the
Treaty (which prohibits undertakings in a dominant
position within the common market or in a substantial
part of
to
equivalent transactions with different airlines, thereby
placing them at a competitive disadvantage).

from applying dissimilar conditions

it must

it

(70) Above the threshold of two million passengers, ground-
handling services must be self-financing and must not be
cross-subsidised by the airport's other commercial
revenue or by public resources granted to it as airport
authority or operator of a service of general economic
interest.

5.

START-UP AID

5.1. Objectives

which they do not wish to lose. Furthermore, in many
cases, airport and air traffic policies and investment have
for years concentrated traffic at major national cities.

(74) As a result, airlines are not always prepared, without
appropriate incentives, to run the risk of opening routes
from unknown and untested airports. This is why the
that public aid be paid
Commission can accept
temporarily to airlines under certain conditions, if this
provides them with the necessary incentive to create new
routes or new schedules from regional airports and to
attract the passenger numbers which will enable them to
break even within a limited period. The Commission will
ensure that such aid does give any advantage to large
airports already largely open to international traffic and
competition.

(75) However,

in the light of

the general objective of
intermodality and optimising the use of infrastructure
described above, it will not be acceptable to grant start-
up aid for a new air route corresponding to a high-speed
train link.

(71) Small airports often do not have the passenger volumes
necessary for them to reach critical mass and the break-
even point.

(76) Finally, in accordance with the Commission's constant
practice in this area, some special arrangements will be
accepted for the outermost regions which are penalised
by their poor accessibility.

(72) There are no absolute figures with regard to the break-
even point. The Committee of the Regions evaluates it at
one and a half million passengers per year, while the
University of Cranfield study mentioned above, which
cites two different figures ((500 000 and one million
passengers per year), shows that there are variations
according to the country and the way in which the
airports are organised (1).

(73) While certain regional airports can perform well when
sufficient numbers of passengers are brought
in by
airlines carrying out public service obligations (2), or
when social aid schemes are established by the public
authorities, airlines prefer tried and tested hubs in good
locations which provide rapid connections, have an
established passenger base, and where they have slots

(1)

(2)

‘Study on Competition between airports and the
Report
application of State Aid Rules’, Cranfield University, September
2002, points 5.33 and 6.11.
Ibid. points 5-27: ‘To some extent, subsidisation of air services
within the PSO framework can be interpreted, as an indirect
subsidy to an airport. In relation to some remote airports in
Scotland and Ireland, they are almost exclusively reliant on
subsided PSO air services.’

the
The Commission has laid down guidelines for
such regions (3). Their
harmonious development of
development strategy is based on three main principles:
helping to make them more accessible, increasing their
competitiveness and bolstering their regional integration
in order to reduce the impact of their remoteness from
the European economy, as they are closer
to the
geographical markets of the Caribbean, America and
Africa.

For these reasons the Commission accepts that start-up
aid for routes from the outermost regions is subject to
more flexible compatibility criteria, in particular in terms
of intensity and duration, and will not raise any objection
to such aid for services to neighbouring non-member
countries. Similar provisions in terms of intensity and
duration will also be accepted for the regions referred to
in Article 87(3) and for sparsely populated regions.

(3)

Commission communications of 26 May 2004 (COM(2004)
343 final) and 6 August 2004 (SEC(2004) 1030) on a stronger
partnership for the outermost regions.

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5.2. Compatibility criteria

(77) Financial start-up incentives, except in cases where the
public authorities act as would a private investor working
in a market economy (see section 3.2.4), advantage
beneficiary undertakings and can therefore directly create
they reduce the
distortions between companies as
beneficiary's operating costs.

(78) They can also indirectly affect competition between
airports by helping airports to develop or by encouraging
a company to ‘relocate’ from one airport to another and
transfer a route from a Community airport to a regional
one. For these reasons they usually constitute State aid
and must be notified to the Commission.

(79) In view of

the above objectives and the significant
difficulties which can result from launching a new route,
the Commission may approve such aid if it fulfils the
following conditions:

(a) Recipients: the aid is paid to air carriers with a valid
operating licence issued by a Member State pursuant
to Council Regulation (EEC) No 2407/92 on
licensing of air carriers.

(b) Regional airports: the aid is paid for routes linking a
regional airport in category C or D to another EU
airport. Aid for routes between national airports
(category B) can be considered only in duly
substantiated exceptional cases, in particular where
one of the airports is located in a disadvantaged
region. These conditions may not apply to routes
departing from airports
located in outermost
regions and bound for neighbouring third coun-
tries, subject to a case-by-case assessment.

(c) New routes: aid will apply only to the opening of
new routes or new schedules, as defined below,
which will lead to an increase in the net volume of
passengers (1).

This aid must not encourage traffic simply to be
transferred from one airline or company to another.
In particular, it must not lead to a relocation of
traffic which is unjustified with regard to the
frequency and viability of existing services leaving
from another airport in the same city, the same
conurbation (2) or
the same airport system (3),
which serve the same or a similar destination under
the same criteria.

Also, start-up aid must not be paid when the new
air route is already being operated by a high-speed
rail service under the same criteria.

The Commission will not accept cases of abuse in
which a company seeks to circumvent the tempor-
ary nature of start-up aid by replacing a line
receiving aid with a supposedly new line offering a
similar service. In particular, aid will not be able to
be granted to an airline which, having used up all
the aid for a given route, applies for aid for a
competing route departing from another airport in
the same city or conurbation or the same airport
system and serving the same or a similar destina-
tion. However, the mere substitution, during the aid
period, of one route for another leaving from the
same airport and expected to generate at least an
equivalent number of passengers, will not call into
question the continuation of payment of aid for the
complete period, as long as this substitution does
not affect the other criteria under which the aid was
initially granted.

(d)

Long-term viability and degressiveness: the route
receiving the aid must ultimately prove profitable, i.
e. it must at least cover its costs, without public
funding. For
this reason start-up aid must be
degressive and of limited duration.

(e) Compensation for additional start-up costs:

the
amount of aid must be strictly linked to the
additional start-up costs incurred in launching the
new route or frequency and which the air operator
will not have to bear once it is up and running.
Examples of such costs are the marketing and
advertising costs incurred at the outset for publicis-
ing the new link; they may include the installation
costs incurred by the airline at the regional airport
in question in order to launch the route, provided
the airport falls within category C or D and aid has
not already been received in respect of the same
costs. Conversely, aid cannot be granted in relation
to standard operating costs
such as hire or
depreciation of aircraft, fuel, crew salaries, airport

(1)

This concerns in particular a seasonal route being made
permanent or a non-daily frequency becoming at least daily.

(2)
(3)

Council Regulation (EEC) No 2408/92.
As defined under Article 2(m) of Regulation (EEC) No 2408/92.

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charges or catering costs. The remaining eligible
costs must correspond to real costs obtained in
normal market conditions.

(f)

Intensity and duration: degressive aid may be
granted for a maximum period of three years. The
amount of aid in any one year may not exceed 50 %
of total eligible costs for that year and total aid may
not exceed an average of 30 % of eligible costs.

i.e.

regions,

the regions

the
For routes from disadvantaged regions,
referred to in
outermost
Article 87(3)(a), and sparsely populated regions,
degressive aid may be granted for a maximum
period of five years. The amount of aid in any one
year may not exceed 50 % of total eligible costs for
that year and total aid may not exceed an average of
40 % of eligible costs. If the aid is granted for five
years, it may be maintained at 50 % of total eligible
costs for the initial three years.

In any event, the period during which start-up aid is
granted to an airline must be substantially less than
the period during which the airline undertakes to
operate from the airport in question, as indicated in
the business plan required in paragraph 79(i).
Furthermore, the aid should be stopped once the
objectives in terms of passengers have been reached
or when the line breaks even, even if this is achieved
before the end of the period initially foreseen.

(g)

Link with the development of
the route: aid
payments must be linked to the net development
of
the number of passengers transported. The
amount per passenger must, for example, decrease
with the net increase in traffic for the aid to remain
an incentive and to avoid adjusting ceilings.

(i)

(j)

application,

Impact on other routes and business plan: when
submitting its
any airline which
proposes a service to a public body offering to
grant start-up aid must provide a business plan
showing, over a substantial period, the viability of
the route after the aid has expired. The public body
should also carry out an analysis of the impact of
the new route on competing routes prior
to
granting start-up aid.

Publicity: States must ensure that the list of routes
receiving aid is published annually for each airport,
in each instance indicating the source of public
funding, the recipient company, the amount of aid
paid and the number of passengers concerned.

(k) Appeals:

in addition to the appeal procedures
provided for by the ‘Public Procurement’ Directives
89/665/EEC and 92/13/EEC (1), where applicable,
appeal procedures must be provided for at Member
State level to ensure that there is no discrimination
in the granting of aid.

(l)

Penalties: penalty mechanisms must be implemen-
ted in the event that a carrier fails to keep to the
undertakings that it gave in relation to an airport
when the aid was paid. A system for recovering aid
or for seizing a guarantee initially deposited by the
carrier will allow the airport to ensure that the
airline honours its commitments.

(80) Cumulation: start-up aid cannot be combined with other
types of aid granted for the operation of a route, such as
aid of a social nature granted to certain categories of
passengers and compensation for discharging public
services. In addition, such aid cannot be granted when
access to a route has been reserved for a single carrier
under Article 4 of Regulation (EEC) No 2408/92, and in
in
particular paragraph 1(d) of
accordance with the rules of proportionality, such aid
cannot be combined with other aid granted to cover the
same costs, including aid paid in another State.

that Article. Also,

(81) Start-up aid must be notified to the Commission. The
Commission calls on the Member States to notify start-
up aid schemes rather than individual cases since this
results in greater coherence across the Community. The
Commission may carry out a case-by-case assessment of

(1)

(h) Non-discriminatory allocation: any public body
which plans to grant start-up aid to an airline for
a new route, whether or not via an airport, must
make its plans public in good time and with
adequate publicity to enable all interested airlines to
offer
in
particular include the description of the route as
well as the objective criteria in terms of the amount
and the duration of the aid. The rules and principles
relating to public procurement and concessions
must be respected where applicable.

services. The notification must

their

the laws,

Council Directive 89/665/EEC of 21 December 1989 on the
coordination of
regulations and administrative
provisions relating to the application of review procedures to
the award of public supply and public works contracts (OJ
L 395, 30.12.1989, p. 33). Council Directive 92/13/EEC of
25 February 1992 coordinating the laws, regulations and
administrative provisions
application of
Community rules on the procurement procedures of entities
operating in the water, energy, transport and telecommunica-
tions sectors (OJ L 76, 23.3.1992, p. 14).

relating to the

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aid or a scheme which fails to fully comply with these
criteria, but
end result of which would be
comparable.

the

6. RECIPIENTS OF PREVIOUS UNLAWFUL AID

(82) When unlawful aid, on which the Commission has
adopted a negative decision involving a recovery order,
has been granted to a company and the aid has not been
recovered in accordance with Article 14 of Council
Regulation (EC) No 659/1999 of 22 March 1999 laying
down detailed rules for the application of Article 93 of
the EC Treaty (1), the assessment of all airport infra-
structure aid or start-up aid should take account of both
the cumulative effect of the earlier and the new aid and
the fact that the earlier aid has not been repaid (2).

7. APPROPRIATE MEASURES WITHIN THE MEANING
OF ARTICLE 88(1)

(83) In accordance with Article 88(1) of

the Treaty,

the
Commission proposes that Member States amend their
existing schemes relating to State aid covered by these
guidelines to conform to these guidelines by 1 June 2007
at the latest. Member States are asked to confirm in
writing that they accept these proposals by 1 June 2006
at the latest.

(84) Should a Member State fail to confirm its acceptance in
writing before that date, the Commission will apply
Article 19(2) of Regulation (EC) No 659/1999 and, if
necessary, initiate the proceedings provided for in that
Article.

8. DATE OF APPLICATION

(85) The Commission will apply these guidelines from the
date of their publication in the Official Journal of the
European Union. Notifications registered by the Commis-
sion prior to that date will be examined in the light of the
rules in force at the time of notification.

The Commission will assess the compatibility of all aid to
finance airport infrastructure, or start-up aid granted
without its authorisation and which therefore infringes
these
Article 88(3) of
guidelines
the
guidelines were published in the Official Journal of the
European Union. In other cases, the Commission will carry
out an assessment based on the rules applicable when the
aid started to be paid.

the Treaty, on the basis of

the aid started after

if payment of

(86) The Commission informs

the Member States and
interested parties that it intends to undertake a detailed
assessment of the application of these guidelines four
years after the date of their implementation. The results
of that study may lead the Commission to revise these
guidelines.

(1) OJ L 83, 27.3.1999, p. 1. Regulation amended by the 2003 Act

(2)

of Accession.
Case C-355/95 P Textilwerke Deggendorf v Commission [1997]
ECR I-2549.