2006/547/EC: Commission Decision of  1 August 2006  initiating the investigation provided for in Article 4(3) of Council Regulation 2408/92 on access for Community air carriers to intra-Community air routes  (notified under document number C(2006) 3516)
Date: 2006-08-01
Institutions: European Commission
Subjects: Italy, Sardinia, air transport, airline, competition law, freedom to provide services, services of general interest

5.8.2006

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Official Journal of the European Union

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COMMISSION

COMMISSION DECISION

of 1 August 2006

initiating the investigation provided for in Article 4(3) of Council Regulation 2408/92 on access for
Community air carriers to intra-Community air routes

(notified under document number C(2006) 3516)

(2006/547/EC)

THE COMMISSION OF THE EUROPEAN COMMUNITIES,

— Alghero–Rome and Rome–Alghero

Having regard to the Treaty
Community,

establishing the European

— Alghero–Milan and Milan–Alghero

— Cagliari–Rome and Rome–Cagliari

— Cagliari–Milan and Milan–Cagliari

Having regard to Council Regulation (EEC) No 2408/92 of 23
July 1992 on access for Community air carriers to intra-
Community air routes (1), and in particular Articles 4(3) and
12 thereof,

— Olbia–Rome and Rome–Olbia

— Olbia–Milan and Milan–Olbia.

Whereas:

(3)

On 21 April 2006 the Commission published another
notice concerning the public service obligations imposed
by Decree No 36 (the ‘Notice of 21 April 2006’) (3) on
the following 10 routes:

I. The facts

— Alghero–Bologna and Bologna–Alghero

(1)

On 27 January and 28 February 2006,
the Italian
Republic transmitted to the Commission the Decrees
Nos 35 and 36 of the Ministry of Infrastructure and
Transport of 29 December 2005 (published in the
Italiana on 11
Gazzetta Ufficiale della Repubblica
January 2006)
service obligations
(PSOs) on a total of 16 routes between Sardinia and
the main national airports and requested the Commission
to publish a notice in the Official Journal of the European
Union in accordance with Article 4(1)(a) of Regulation
(EEC) No 2408/92.

imposing public

(2)

On 24 March 2006 the Commission published a notice
concerning the public service obligations imposed by
Decree No 35 (the ‘Notice of 24 March 2006’) (2) on
the following six routes:

(1) OJ L 240, 24.8.1992, p. 8. Regulation as last amended by Regu-
lation (EC) No 1882/2003 of the European Parliament and of the
Council (OJ L 284, 31.10.2003, p. 1).

(2) OJ C 72, 24.3.2006, p. 4.

— Alghero–Turin and Turin–Alghero

— Cagliari–Bologna and Bologna–Cagliari

— Cagliari–Florence and Florence–Cagliari

— Cagliari–Turin and Turin–Cagliari

— Cagliari–Verona and Verona–Cagliari

— Cagliari–Naples and Naples–Cagliari

— Cagliari–Palermo and Palermo–Cagliari

— Olbia–Bologna and Bologna–Olbia

— Olbia–Verona and Verona–Olbia.

(3) OJ C 93, 21.4.2006, p. 13.

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Official Journal of the European Union

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(4)

The main features of the PSOs published in the two
notices are as follows:

— The minimum frequency, timetables and capacity to
be offered for each route are specified under point
‘2. ORGANISATION OF THE PUBLIC SERVICE OBLI-
GATIONS’ of the notices of 24 March 2006 and of
21 April 2006.

— Each of the 10 routes published in the Notice of 21
April 2006 and the public
service obligations
imposed upon them must be accepted individually
in their entirety and as a whole by the carrier
concerned.

— The minimum capacity of the aircraft to be used is
stipulated under point ‘3. TYPE OF AIRCRAFT TO BE
USED ON EACH ROUTE’ of the notices of 24 March
2006 and of 21 April 2006.

— The two routes Alghero–Rome and Alghero–Milan
(together) and the two routes Olbia–Rome and
Olbia–Milan (together) constitute a single package
which must be accepted in their entirety and as a
whole by
any
compensation of any kind or origin. The routes
Cagliari–Rome and Cagliari–Milan, on the other
in their
hand, must be
entirety and as a whole by the carriers concerned
without any compensation of any kind or origin.

accepted individually,

concerned without

carriers

the

air

for

the

to ensure the continuation of

— Each single carrier (or leading carrier) which accepts
to fulfill the public service obligations must provide a
performance security for the purpose of guaranteeing
the correct execution and continuation of the service.
This security must amount to at least 5 % of the total
estimated turnover evaluated by ENAC (the Italian
Civil Aviation Authority)
services
scheduled for each package of routes in question.
The security shall be payable to ENAC, which will
use it
the services
concerned in the event of unjustified abandonment,
and shall consist of a first request bank surety (50 %)
and an insurance surety (for the remaining 50 %). To
avoid the overcapacity which would result if several
carriers were to accept a route subject to the obli-
gations, considering the infrastructure limitations and
conditions of
the
behest of the Autonomous Region of Sardinia, has
to
the task of
control the accepting carriers' operating programmes
so as to ensure that they are completely in line with
the travel requirements underlying the obligations
imposed. Such intervention should be aimed at a
fair redistribution of routes and frequencies between
the accepting carriers on the basis of the volumes of
in
traffic on the routes (and packages of routes)
question, ascertained for each of
the
previous two years.

intervening in the public interest

the airports involved, ENAC, at

them over

— The fare structure for all

the routes concerned is
given under point ‘4. FARES’ of the notices of 24
March 2006 and 21 April 2006.
In particular,
regarding reduced fares, point 4.8 of both notices
state that carriers operating on the affected routes
are
reduced fares
(specified under point ‘4. FARES’), to at least people
born in Sardinia, even if they do not live in Sardinia.

legally bound to apply the

Journal of

— According to Decree No 35, sent to the Commission
on 29 December 2005, published in the Gazzetta
Ufficiale della Repubblica Italiana on 11 January
2006 and published in the Official
the
European Union on 24 March 2006, the start and
end of the imposition for the routes concerned was
31 March 2006 and 30 March 2009. However, on
28 February 2006 the Italian authorities informed the
Commission of the adoption on 23 February 2006 of
a decree amending (Permanent Representation Letter
with Protocol No 2321) these dates to 2 May 2006
and 1 May 2009. These were the dates subsequently
published in the Official Journal.

— According to Decree No 36, sent to the Commission
on 29 December 2005, published in the Gazzetta
Ufficiale della Repubblica Italiana on 11 January
Journal of
2006 and published in the Official
the
European Union on 21 April 2006,
the start and
end of
the routes concerned
the imposition for
were foreseen to be determined in the future.
Therefore the publication in the Official Journal did
not contain any definitive start and end dates for the
imposition.

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— Carriers intending to accept the public service obli-
gations must present a formal acceptance to the
competent Italian authority within 30 days of publi-
the
cation of
European Union.

the notice in the Official

Journal of

decree amending Decree No 35, of 29 December 2005,
whereby the Decrees of 1 August 2000 and 21
December 2000 were repealed as from 2 May 2006.

(5)

(6)

(7)

referred to in this Decision,

It should be noted that prior to imposing the public
the
service obligations
Italian Republic had imposed public service obligations
by the Decrees of 1 August 2000 and of 21 December
2000 on six routes between the Sardinian airports and
Rome and Milan. Those obligations were published in the
Official Journal of the European Communities on 7 October
2000 (1) (the ‘Notice of 7 October 2000’). In accordance
with Article 4(1)(d) of Regulation (EEC) No 2408/92, the
routes concerned were put to tender to select the carriers
authorised to operate them on an exclusive basis with
financial compensation (2).

carriers

The
in
authorised to operate
accordance with the public service obligations imposed
were:

routes

the

— Alitalia: Cagliari–Rome.

(9)

the Italian authorities

In a communication to the Commission dated 22 March
the PSOs
2005,
published in the Notice of 7 October 2000 were being
applied ‘on a voluntary basis’. This was the first time that
the Italian authorities informed the Commission that
those PSOs were still being applied.

stated that

II. Essential elements of the rules on public service
obligations

(10)

The rules on public service obligations are laid down in
Regulation (EEC) No 2408/92 (the ‘Regulation’), which
defines the conditions for applying the principle of
freedom to provide services in the air transport sector.

— Air One:

Cagliari–Milan, Alghero–Milan

Alghero–Rome.

(11)

and

Public service obligations are defined as an exception to
the principle of the Regulation that ‘subject to this Regu-
lation, Community air carriers shall be permitted by the
Member State(s) concerned to exercise traffic rights on
routes within the Community’ (5).

— Meridiana: Olbia–Rome and Olbia–Milan.

Following a decision of

These arrangements were replaced by the public service
obligations imposed by the Italian Decree of 8 November
2004 and published in the Official Journal of the European
‘Notice of 10
Union of 10 December 2004 (the
December 2004’) (3).
the
Regional Administrative Tribunal of Lazio of 17 March
2005 which annulled partially the Decree of 8 November
2004, the Italian authorities informed the Commission
that they had ‘suspended’ those obligations. A notice to
the
this effect was published in the Official
European Union on 1 July 2005 (4). On 6 December
2005 the Italian authorities informed the Commission
that
the Decree of 8 November 2004 had been
repealed with effect from 15 November 2004.

Journal of

(8)

On 28 February 2006 the Italian authorities informed the
Commission of the adoption on 23 February 2006 of a

(1) OJ C 284, 7.10.2000, p. 16.
(2) OJ C 51, 16.2.2001, p. 22.
(3) OJ C 306, 10.12.2004, p. 6.
(4) OJ C 161, 1.7.2005, p. 10.

(12)

The conditions for imposing them are defined in Article
4. They are interpreted strictly and in accordance with
the principles of non-discrimination and proportionality.
They must be adequately justified on the basis of the
criteria laid down in the same Article.

(13) More precisely, the rules governing public service obli-
gations provide that these may be imposed by a Member
State in respect of scheduled air services to an airport
serving a peripheral or development region in its territory
or on a thin route to any regional airport, provided the
route is considered vital for the economic development
of the region in which the airport is located and to the
extent necessary to ensure on that route the adequate
satisfying fixed
provision of
standards of continuity, regularity, capacity and pricing,
standards which air carriers would not meet if they were
solely considering their commercial interest.

scheduled air

services

(5) Article 3(1) of Regulation (EEC) No 2408/92.

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Official Journal of the European Union

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(14)

The adequacy of scheduled air services is assessed by the
Member States having regard to the public interest, the
possibility of having recourse to other forms of transport,
the ability of such forms to meet the transport needs
under consideration and the combined effect of all air
carriers operating or intending to operate on the route.

— It must be recognised that the route is vital for the
economic development of the region in which the
airport served is located.

— The principle of adequacy, assessed having regard to
the existence of other means of transport or alter-
native routes, must be observed.

(15) Article 4 provides for a two-phase mechanism:

in the
first phase (Article 4(1)(a)) the Member State concerned
imposes a public service obligation on one or more
routes, which is open to all Community carriers,
provided they meet the obligations. Where no carrier
applies
to operate the route on which the public
service obligation has been imposed, the Member State
can move on to a second phase (Article 4(1)(d)) which
limits access to that route to only one carrier for a
renewable period of up to three years. The carrier is
selected by
tender procedure. The
selected carrier can then receive financial compensation
for operating the route in accordance with the public
service obligation.

a Community

(16)

By virtue of Article 4(3) the Commission may decide,
the
following an investigation, carried out either at
request of a Member State or on its own initiative,
whether the public service obligation published should
continue to apply. The Commission must communicate
its decision to the Council and to the Member States.
Any Member State may refer the matter to the Council
which, acting by a qualified majority, may take a different
decision.

raising
the
of

to the
as
serious doubts
III. Elements
conformity
obligations
service
public
imposed on routes between the Sardinian airports
and the main national airports with Article 4 of
Regulation (EEC) No 2408/92

(17) Article 4(1)(a) of the Regulation lists a certain number of
imposing public service obli-

cumulative criteria for
gations:

(18)

In addition, the public service obligations must comply
with the basic principles of proportionality and non-
discrimination (see,
Justice
decision of 20 February 2001,
in case C-205/99,
Asociación Profesional de Empresas Navieras de Líneas
Regulares (Analir) and others v Administración General
del Estado, [2001] ECR p. I-01271).

example, Court of

for

(19)

In the case in point, the notices imposing public service
obligations published in the Official Journal at the request
of the Italian Republic contains several provisions which
raise serious doubts as to their conformity with Article 4
of the Regulation. In particular:

— No adequate explanation has been provided in order
to justify the appropriateness and the proportionality
of the public service obligations in relation to the
objective pursued.

— It is not evident that the routes on which public
service obligations have been imposed are vital for
the
regions of
Sardinia where the airports concerned are located;
considering in particular:

economic development of

the

— The nature and the number of routes concerned.

— The existence of alternative air routes which allow
to be
and continuous
an adequate
provided to the airports concerned, via the main
Italian hubs, linked in a satisfactory manner with
Sardinia.

service

— Type of route eligible: routes to an airport serving a
peripheral or development region in the territory of
the Member State concerned or on a thin route to
any regional airport in that territory.

— The relationship between the PSOs and the traffic
between the different airports affected by the new
routes.

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(20)

(21)

The requirement that interested carriers operate six of the
routes to which the public service obligations apply as
packages may be particularly restrictive of the freedom to
provide services. It seems to have no basis in Article 4(1)
of the Regulation and could be in breach of the prin-
ciples
non-discrimination;
considering in particular that:

proportionality

and

of

— It

is not established that bundling those routes
together is vital for the economic development of
the
airports
concerned are located.

regions of Sardinia

in which the

(23) No adequate explanation has been given in order to

justify why:

— The fare structures are so different when compared to
the PSOs published in the Notice of 10 December
2004. It is now specified that references to Rome and
Milan should be understood as references to their
respective airport systems, which means that
the
carriers which do not accept
the PSOs cannot
operate from any airport within these systems.

— 50 % of the connections between Sardinian airports
and Rome and Milan must be operated from and to
Fiumicino and from and to Milan.

— There does not seem to be any obvious legal basis or
in
operational
terms of the geographical
location of the airports
concerned), given that the imposition refers to non-
compensated PSOs.

justification for these bundlings (e.g.

IV. Procedure

— The

risk of unjustified discrimination between
carriers, where only the largest ones have the
means to operate in such conditions.

The possibility mentioned in point 1.6 of both Notices
that,
if several carriers accept the operation of a route
subject to PSOs, ENAC shall ‘intervene’ in order to avoid
‘overcapacity’ by ‘redistributing routes and frequencies’
among the carriers concerned appears to have no basis
on Article 4(1) of the Regulation and could be contrary
to Article 3(1)
the
freedom of each carrier to choose which routes and
frequencies
the
existence of ‘overcapacity’ seems to indicate that there
is no need of regulatory intervention to ensure that
transport operators meet basic demand.

insofar as these measures restrict

Furthermore,

it wishes

to serve.

the

Italian authorities

(24) Despite calls from the Commission drawing the attention
of
and
expressing doubts as to the conformity of the notices
imposing public service obligations with the Regulation,
the Italian Republic decided to have them published.

to these problems

(25) As soon as these were published, several

interested
parties contacted the Commission to informally express
their concerns and complaints regarding the dispropor-
tionate and discriminatory nature of the public service
obligations.

(26)

In the light of the above, and by virtue of Article 4(3) of
the Regulation, the Commission may carry out an inves-
tigation to determine whether the development of one or
more routes is unduly restricted by the imposition of
public service obligations,
in order to decide whether
these obligations should continue to be imposed on
the routes in question.

(22)

in point 4.8 of both Notices,

that
The requirement,
solely
reduced fares must be applied to passengers
because of their place of birth (in this case Sardinia)
does not appear to have a legitimate justification and
may constitute prohibited indirect discrimination for
reasons of nationality (see for example case C-338/01
Commission v Italy [2003] ECR p. I-00721).

(27) On 9 March 2006 the Commission requested the Italian
authorities, as provided in Article 12 of the Regulation,
to supply certain information with respect to the public
service obligations in issue. The reponse provided by the
Italian authorities on 22 March 2006 was incomplete.

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HAS ADOPTED THIS DECISION:

Article 1

The Commission will carry out an investigation, as provided for
in Articles 4(3) of Regulation (EEC) No 2408/92, in order to
determine whether the public service obligations imposed on
routes between the Sardinian airports and the main national
airports, published at the request of the Italian Republic in
Official Journal of the European Union C 72 of 24 March 2006
and C 93 of 21 April 2006, should continue to apply to these
routes.

— An explanation of how the requirement to be born in
Sardinia in order to qualify for a reduced fare will be
enforced in practice.

— The justification for the requirement

to provide the
performance security and the method for establishing
its amount.

— The justification for the differences between the new fare
structures and those imposed by the public service obli-
gations published on 10 December 2004.

Article 2

1.
The Italian Republic shall transmit to the Commission,
within one month following the notification of this Decision,
all the information necessary for examining the conformity of
the public service obligations referred to in Article 1 with
Article 4 of Regulation (EEC) No 2408/92.

— An explanation of the reasons why the public service
obligations apply with respect to the airport systems of
Rome and Milan, rather than with respect to individual
aiports within those systems, and of the reasons why
the connections between Sardinian airports
50 % of
and Rome and Milan must be operated from and to
Fiumicino and from and to Milano–Linate.

2.

In particular, the following shall be transmitted:

— The legal basis and the justification for bundling together

the following two sets of routes into packages:

— A detailed explanation of

the socio-economic objectives
pursued by the imposition of the public service obligations
referred to in Article 1 and a justification of how such
obligations are adequate and proportionate in order to
attain these objectives — in particular with respect to the
new 10 routes not covered by the Notice of 7 October
2000.

— Alghero–Rome, Rome–Alghero, Alghero–Milan and

Milan–Alghero, and

— Olbia–Rome,
Milan–Olbia.

Rome–Olbia,

Olbia–Milan

and

— A detailed explanation of how the measures envisaged in
point 1.6 of the two Notices referred to in Article 1 with a
view to avoiding ‘overcapacity’
if several carriers accept a
route subject to public service obligations will operate in
practice and of their justification under Article 4(1) of Regu-
lation (EEC) No 2408/92.

— A detailed analysis of the economic relations between the
regions of Sardinia and the other regions of Italy where the
airports concerned by the public service obligations referred
to in Article 1 are located.

— A legal analysis, with regard to Community law, justifying
the different conditions contained in the public service obli-
gations referred to in Article 1, and particularly:

— A detailed analysis of the current supply of air transport
Italian
between the Sardinian airports and the other
service obligations
airports
referred to in Article 1 including the supply of
indirect
flights, as well as an indication of when Decree No 36
entered into force.

concerned by

the public

— The justification for applying reduced fares to persons
born in Sardinia, even if they do not live in Sardinia,
particularly in view of
the already existing available
discounts for flights for students that fall within this
category of passengers.

— A detailed analysis of the availability of other means of
transport and their capacity to meet the transport needs
under consideration.

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— An analysis of the current demand for air transport for each
the
financial

route
operating forecasts
(passenger
forecasts, etc.) communicated by the carrier or carriers.

these obligations,

concerned by

including

freight,

traffic,

apply following the suspension and repeal of the obligations
published in the Notice of 10 December 2004 and, if so, on
which legal base, as well as of the reasons why the Italian
authorities
failed to inform promptly the Commission
thereof.

— A precise description of the journey times and frequency
required to connect by road the different Sardinian
airports concerned by these obligations.

Article 3

— A description of the situation on the day of notification of
in
this Decision regarding the operation of
services
the
accordance with the obligations and the identity of
carrier or carriers operating services under the PSO regime.

1.

This Decision is addressed to the Italian Republic.

This Decision shall be published in the Official Journal of

2.
the European Union.

— Any claims existing before the national courts on the day of
notification of this Decision and the legal situation of the
notice imposing the public service obligations.

Done at Brussels, 1 August 2006.

— An explanation of whether the public service obligations
published in the Notice of 7 October 2000 continued to

For the Commission

Jacques BARROT
Vice-President