2007/332/EC: Commission Decision of 23 April 2007 on public service obligations on certain routes to and from Sardinia under Article 4 of Council Regulation (EEC) No 2408/92 on access for Community air carriers to intra-Community air routes (notified under document number C(2007) 1712)
Date: 2007-04-23
Institutions: European Commission
Subjects: air transport, airline, carrier, intra-EU transport, market access, provision of services, services of general interest

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(Acts adopted under the EC Treaty/Euratom Treaty whose publication is not obligatory)

II

DECISIONS

COMMISSION

COMMISSION DECISION

of 23 April 2007

on public service obligations on certain routes to and from Sardinia under Article 4 of Council
Regulation (EEC) No 2408/92 on access for Community air carriers to intra-Community air routes

(notified under document number C(2007) 1712)

(Only the Italian text is authentic)

(2007/332/EC)

THE COMMISSION OF THE EUROPEAN COMMUNITIES,

(2)

In its letter dated 28 February 2006 the Italian Republic
specified that:

Having regard to the Treaty
Community,

establishing the European

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 Article 4(3) thereof,

Whereas:

I. FACTS

(1)

On 27 January and 28 February 2006,
the Italian
Republic sent the Commission Decrees Nos 35 and 36
issued by the Ministry of Infrastructure and Transport on
29 December 2005 (published in the Italian Official
Gazette on 11 January 2006) (Decrees Nos 35 and 36)
providing for public service obligations (PSOs) on a total
of 16 routes connecting the three airports in Sardinia
with several national airports on mainland Italy, and
asking the Commission to publish an opinion in the
Official Journal of the European Union, in accordance with
Article 4(1)(a) of Regulation (EEC) No 2408/92 on access
for Community air carriers
to intra-Community air
routes (the Regulation).

— Decree No 36 had been amended by the Decree
the
the Cagliar-

on 8 February 2006 concerning

time slots and capacity of

issued
frequency,
i–Turin route,

— it also requested the publication in the Official Journal
of the European Union, C series, of an opinion indi-
cating that, in accordance with the imposed PSO and
without requesting financial compensation, if within
thirty days following the publication of the PSOs, no
air carrier had agreed to provide scheduled air
services on each of the routes listed in Decree No
36, Italy could limit access to these routes to a sole
carrier and grant, via a tender procedure, the right to
operate these services, under the procedure laid down
in Article 4(1)(d) of Regulation (EEC) No 2408/92.

(3)

Journal of

On 24 March 2006, the Commission published in the
the European Union, a notice on the
Official
in Decree No 35 (2) on the
PSOs provided for
following six routes:

— Alghero–Rome and Rome–Alghero,

— Alghero–Milan and Milan–Alghero,

— Cagliari–Rome and Rome–Cagliari,

(1) OJ L 240, 24.8.1992, p. 8. Regulation as last amended by Regu-

lation (EC) No 1791/2006 (OJ L 363, 20.12.2006, p. 1).

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

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— Cagliari–Milan and Milan–Cagliari,

— Olbia–Rome and Rome–Olbia,

— Olbia–Milan and Milan–Olbia.

(4)

On 21 April 2006, the Commission published in the
Official Journal of the European Union a notice on the
PSOs laid down in Decree No 36 (1) on the following 10
routes:

— Alghero–Bologna and Bologna–Alghero,

— 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.

(5)

Journal of

On 22 April 2006, the Commission published in the
the European Union an invitation to
Official
tender issued by Italy concerning the PSOs imposed
under Decree No 36. This invitation stated that
the
Italian Republic intended to follow the procedure laid
down in Article 4(1)(d) of Regulation (EC) No 2408/92
for each of the ten routes concerned by the Decree if no
air carriers had committed themselves to accepting the
PSOs on these routes. (2)

(6)

The main features of the PSOs published on 24 March
and 21 April 2006 are as follows:

— 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

— each of the ten routes published in the notice of 21
April 2006 and the PSOs imposed upon them must

(1) OJ C 93, 21.4.2006, p. 13.
(2) OJ C 95, 22.4.2006, p. 9 to 27, 30.

be accepted individually in their entirety and as a
whole by the carrier concerned,

— the carrier accepting to take on these obligations
must provide a service over a period of 36 conse-
cutive months and may not
the service
unless it provides notice of at least six months to
ENAC (the Italian national civil aviation body) and
to the Autonomous Region of Sardinia,

interrupt

— the carrier (or main carrier) taking on these obli-
gations must provide a performance security for the
purpose of guaranteeing the correct performance and
continuation of the service,
the amount of which
must be equal to at least 5 % of the total turnover
the connections
of scheduled air services for all
concerned,
evaluated by ENAC. The security is
payable to ENAC, which will use it to ensure the
continuation of the services concerned in the event
of unjustified abandonment, and consists of a first
request bank surety (50 %) and an insurance surety
(for the remaining 50 %),

the

adjust

obligations,

— to avoid the overcapacity which would result
if
to
several carriers were to accept a route subject
the
infrastructure
considering
limitations and conditions of the airports involved,
ENAC, at the behest of the Autonomous Region of
Sardinia, has the task of acting in the public interest
to
operating
programmes so as to ensure that they are completely
in line with the mobility objectives of the obligations
imposed. The purpose of this should be to redis-
tribute routes and frequencies fairly between the
accepting carriers on the basis of the volumes of
traffic on the routes (or packages of
in
question for each of them over the previous two
years,

carriers’

accepting

routes)

the

— the minimum frequency, time slots and capacity to be
provided for each route are laid down in point 2
‘Detail of
the
notices of 24 March and 21 April 2006,

the public service obligations’ of

— the minimum capacity of the aircraft used is set out
in point 3 ‘Type of aircraft used for each route’ of the
notices,

— the fare structure for all the routes concerned is given
under point 4 on ‘Fares’.
In particular, regarding
reduced fares, point 4.8 of both notices state that
carriers operating the routes concerned are legally
bound to apply the reduced fares (specified under
point 4 ‘Fares’) at least to people born in Sardinia,
even if they are not resident there,

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— in accordance with Decree No 35,

sent

to the
Commission on 29 December 2005 and published
in the Italian Official Gazette on 11 January 2006,
the PSOs should apply to the routes concerned
from 31 March 2006 to 30 March 2009. However,
on 28 February 2006, the Italian authorities informed
the Commission of
the adoption on 23 February
2006 of a decree (Permanent Representation letter
with the reference No 2321) amending these dates
to 2 May 2006 and 1 May 2009. These dates were
published on 24 March 2006 in the Official Journal of
the European Union,

— in accordance with Decree No 36,

sent

to the
Commission on 29 December 2005, published in
the Italian Official Gazette on 11 January 2006 and
the European
published in the Official
the Italian Republic
Union on 21 April 2006,
stated that the start and end of the validity period
for the PSOs on the routes concerned would be set at
a later date. Therefore the publication in the Official
the European Union did not contain any
Journal of
definitive start and end dates,

Journal of

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

the notice in the Official

Journal of

Before imposing the PSOs covered by this Decision, the
Italian Republic had, by the Decrees issued on 1 August
and 21 December 2000,
imposed PSOs on six routes
in Sardinia with Rome and Milan.
linking airports
These obligations were published in the Official Journal
the European Union on 7 October 2000 (1).
In
of
accordance with Article 4(1)(d) of the Regulation, the
routes concerned were put out to tender to select the
carriers authorised to operate them on an exclusive basis
with financial compensation (2).

Regional Administrative Tribunal of Lazio of 17 March
annulled the Decree of 8
2005, which partially
November 2004,
the Italian authorities informed the
Commission that they had ‘suspended’ those obligations.
An opinion on this matter was published in the Official
the European Union on 1 July 2005 (4). On
Journal of
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.

(10)

(11)

(12)

II. PROCEDURE

The Commission wrote a letter to the Italian Republic on
9 March 2006 (registered as No 204756) voicing its
concern about the PSOs imposed by Decrees Nos 35
and 36. It requested more detailed information on the
grounds and methods for implementing the PSOs. The
Italian Republic replied with an initial letter containing a
draft reply on 22 March 2006, then by letter of 4 April
2006.

The Commission wrote to ENAC on 27 April 2006
requesting further details and asking about the current
status of the PSOs, before the new PSOs entered into
force.

ENAC replied by letter of 9 May 2006 confirming that
the PSO regime applicable from Sardinia to Rome and
Milan up to 2 May 2006 was the regime from 2000,
which had remained in force since the 2004 Decree,
which was due
regime, had been
to amend the
repealed. The new regime provided for in Decree No
35 applies from 2 May 2006. The reply also explained
that the PSOs applied in full to all the airports in Milan
airport system, as laid down in the notice published in
2000.

carriers

The
accordance with the PSOs were:

authorised to operate

the

routes

in

(13) On 4 August 2006, the Italian Republic sent another
reply to the Commission’s letter of 9 March containing
additional, but no significantly new, information.

(7)

(8)

— Alitalia for the Cagliari–Rome connection,

— Air One for the Cagliari–Milan, Alghero–Milan and

Alghero–Rome connections,

— Meridiana for
connections.

the Olbia–Rome and Olbia–Milan

(9)

This system was replaced by the PSOs imposed by the
issued on 8 November 2004 and
Italian Decree
published in the Official
the European Union
on 10 December 2004 (3). Following a decision of the

Journal of

(14) Acting on its own initiative, the Commission adopted the
Decision to open an inquiry under Article 4(3) of the
Regulation (5) on 1 August 2006. The Italian Republic
this Decision on 1 August 2006
was notified of
(Document No C(2006) 3516).
In the same Decision
the Commission asked the Italian authorities to provide
answers to several points within a deadline of one
month.

(15)

The Italian authorities replied by letter of 31 August
2006. The reply covered most of the questions raised.

(1) OJ C 284, 7.10.2000, p. 16.
(2) OJ C 51, 16.2.2001, p. 12 to 22.
(3) OJ C 306, 10.12.2004, p. 6.

(4) OJ C 161, 1.7.2005, p. 10.
(5) OJ L 215, 5.8.2006, p. 31.

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(16) However the Commission requested further information
in its letter to the Italian Permanent Representation of
2 October 2006.

However the Italian Republic explained that it had not
yet allocated these routes due to the Commission’s
ongoing inquiry.

(17) On 6 October 2006, the Italian Republic provided a long
reply containing several points in reply to the additional
questions from the Commission.

(18)

The Commission (Unit TREN.F.1) held a meeting with
the Italian authorities (Ministry of Transport, Permanent
Representation, Government of Sardinia and ENAC) in
Brussels on 17 October 2006.

(19)

The reply confirmed,
in particular, that the following
routes were already operated in accordance with the
PSOs imposed under Article 4(1)(a) of the Regulation:

— Olbia–Rome: Meridiana,

— Olbia–Milan: Meridiana,

— Alghero–Rome: Air One,

— Alghero–Milan: Air One,

— Cagliari–Rome: Air One and Meridiana,

— Cagliari–Milan: Air One and Meridiana,

— Cagliari–Bologna: Meridiana,

— Cagliari–Turin: Meridiana,

— Cagliari–Verona: Meridiana,

— Olbia–Bologna: Meridiana.

However no carrier had agreed to operate the six
in
remaining routes under
Article 4(1)(a) of the Regulation. The Italian Republic
in
therefore intended to launch a call
accordance with Article 4(1)(d). At present,
the
following carriers are eligible for the tender:

the regime provided for

tenders

for

— Olbia–Verona: Meridiana,

— Alghero–Bologna: Air One,

— Alghero–Turin: Air One,

— Cagliari–Florence: Air One and Meridiana,

— Cagliari–Naples: Air One and Meridiana,

— Cagliari–Palermo: Air One and Meridiana (1).

III. ANALYSIS

1. Legal framework

(20)

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

(21)

PSOs are defined as an exception to the principle of the
Regulation that ‘subject to this Regulation, Community
air carriers shall be permitted by the Member State(s)
concerned to exercise traffic rights on routes within the
Community’ (2).

(22)

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 that Article.

(23) More precisely, the rules governing PSOs 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, any such route being considered
vital
the region in
which the airport is located, to the extent necessary to
ensure on that route the adequate provision of scheduled
air services satisfying fixed standards of continuity, regu-
larity, capacity and pricing, which standards air carriers
would not assume if they were solely considering their
commercial interest’ (3).

for the economic development of

(24)

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
intending to operate on the
carriers operating or
route’ (4).

(1) See the replies given by the Italian Republic dated 6 October and 15
November 2006 and the press release issued by ENAC on 23 May
2006.

(2) Regulation (EEC) No 2408/92, 23 July 1992, Article 3(1).
(3) Regulation (EEC) No 2408/92 of 23 July 1992, Article 4(1).
(4) Regulation (EEC) No 2408/92 of 23 July 1992, Article 4(1)(b).

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

in the
first phase (Article 4(1)(a)) the Member State concerned
imposes PSOs on one or more routes, which are open to
all Community carriers, provided they meet
the obli-
gations. Where no carrier applies to operate the route
on which the PSOs have 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
tender procedure. The
selected by
selected carrier can then receive financial compensation
for operating the route in accordance with the PSOs.

a Community

(26) Under Article 4(3)

the Commission may decide,
following an investigation, carried out either at
the
request of a Member State or on its own initiative,
whether the PSO published should continue to apply.
The Commission must communicate its decision to the
Council and to the Member States.

(31) On the basis of

the

the
Commission’s analysis does not call
into question the
vital need for the connections concerned, as emphasised
by the Italian authorities.

information available,

3. Adequacy of the PSOs

3.1. General considerations

(32)

In accordance with Article 4(1)(a) of
the Regulation,
Member States may only impose PSOs ‘to the extent
necessary
adequate
satisfying fixed
provision of
standards of continuity, regularity, capacity and pricing,
which standards air carriers would not assume if they
were solely considering their commercial interest’.

to ensure on that
scheduled air

services

route

the

(33)

The adequacy of the services is assessed having regard to
the criteria laid down in Article 4(1)(b) of the Regulation:

2. Type of route eligible

— the public interest,

(27)

The Italian Republic based its intention to impose the
PSOs on the need for the development of Sardinia,
which has to overcome the disadvantages of being an
island.

— the possibility,

in particular for island regions, of
having recourse to other forms of transport and the
ability of such forms to meet the transport needs
under consideration,

(28)

(29)

(30)

In addition, the Autonomous Government of Sardinia
has committed itself to promoting the mobility of its
residents. Connections between Sardinia and mainland
Italy are not operated evenly all year round, despite the
fact that the mobility principle should adequately and
continuously serve the residents of Sardinia all year
round. Moreover, the Italian Republic has emphasised
the length of journeys both in terms of distance and in
terms of time between the various airports in Sardinia, a
region that suffers from inadequate infrastructure. This is
also the reason they give for the PSOs to cover all three
airports in Sardinia.

(34)

— the air fares and conditions which can be quoted to

users,

— the combined effect of all air carriers operating or

intending to operate on the route.

In addition, the public service obligations must comply
with the basic principles of proportionality and non-
discrimination (see,
Justice
judgment 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 I-01271).

example, Court of

for

The Commission believes
be
considered a peripheral region due to its island location
and lack of real alternative methods of transport.

Sardinia may

that

(35)

In this case, the Commission is of the opinion, based on
the information provided by the Italian authorities, that
imposing PSOs concerning frequency, capacity and fares
may be necessary to ensure the adequate provision of
services for the routes concerned.

In addition, Sardinia’s development deficit compared to
other Italian regions is well documented. Its isolation and
low population, exacerbated by high emigration, explains
why economically the island lags behind, putting it on a
par with the Mezzogiorno.

(36) However, the Commission considers that some of the
conditions imposed by Decrees Nos 35 and 36 are
unduly restrictive or disproportionate.

(37)

(38)

(39)

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3.2. Obligation to submit acceptance of the PSOs within 30

(41)

days

of

Journal

Point 8 of the PSOs, as provided for in Decrees Nos 35
and 36, provides that ‘carriers intending to accept the
PSOs contained in the Annex must present a formal
acceptance to ENAC within 30 days of publication in
the Official
the
Commission communication on imposing these public
service obligations.’ This obligation even constitutes a
condition for excluding any carrier
that sends their
acceptance one day ‘too late’. Thus carriers that do not
send their acceptance of all the conditions of the PSO
within this deadline risk being excluded for the whole
period.

the European Union of

The requirement of a minimum period of operation is in
in the case in point, with Article 4(1)(c)
accordance,
‘in instances where other forms of
which states that
transport cannot ensure an adequate and uninterrupted
service, the Member States concerned may include in the
public service obligation the requirement that any air
carrier intending to operate the route gives a guarantee
that it will operate the route for a certain period, to be
specified,
the
public service obligation’. The Commission considers
that since Sardinia is an island and,
its
distance from the mainland, other means of transport
do not ensure an adequate alternative service.

in accordance with the other terms of

in view of

The Commission considers that this condition has no
legal basis under Article 4(1)(a) of the Regulation and
deems it to be unduly restrictive. Article 4(1)(a) of the
Regulation does not authorise Member States to limit the
number of carriers that may have access to these routes,
but merely to impose a general PSO applicable to all
carriers operating or intending to operate those routes.
The number of carriers may only be limited in this way
under Article 4(1)(d).

(43)

(42) Nonetheless,

the Commission

the
minimum duration of three years set by Decrees Nos
35 and 36 is excessive and disproportionate.

considers

that

The Commission can understand the need to ensure
continuity of service and to obtain a commitment from
the carriers to operate for a certain period. However, as
previously mentioned,
the authorities
responsible for implementing PSOs to sideline potential
from operating them. PSOs without an
candidates
exclusive concession or compensation may in no event
lead to the definitive or long-term closure of the market.

is not

for

it

Thus, any carrier intending to accept the PSOs imposed
under Article 4(1)(a) of the Regulation must be able to
operate the route, regardless of the period in which it
intends to commence service provision. If by a certain
date no carrier has commenced scheduled air services on
a route in accordance with the PSOs imposed on that
route under Article 4(1)(a), Member States may limit
access to that route in accordance with Article 4(1)(d).
However if one or more operators have commenced
operations within the deadline, Member States may not
exclude from that route other carriers who declare their
the
intentions
deadline. The entry of new operators may however
require changes to be made to the PSOs imposed on
each carrier (see Section 3.4 below).

to operate the route any time after

(44) Operation of

the year. On these routes, carriers

routes characterised by high seasonal
variations may be legitimately imposed for certain
periods of
risk
having the natural
tendency to limit or concentrate
their offer on the weeks in which there is a sufficient
frequency to ensure that the service is profitable, and to
abandon services at other times of the year. However the
Commission considers that, under these circumstances,
upholding the principle of proportionality should mean
limiting to a maximum of one year the duration of the
period during which a continuous service under the PSO
regime under Article 4(1)(a) must be ensured.

3.3. Obligation to operate the route for a three-year period

(40)

Point 5 of the PSOs as provided for in Decrees Nos 35
and 36 states that ‘in accordance with Article 4(1)(c) of
Regulation (EEC) No 2408/92, the carrier which accepts
the public service obligations shall guarantee service for a
period of at least 36 consecutive months and shall not
suspend such service without giving a six-month prior
notice
to ENAC and the Autonomous Region of
Sardinia’.

(45)

the Commission considers that

In addition,
there is
nothing to stop the authority responsible for applying
PSOs
this
from regularly assessing the adequacy of
duration. As mentioned below, such reviews should be
carried out
a new carrier
commences or is about to commence services on the
route concerned.

in any case whenever

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(46)

3.4. Distribution of routes and frequencies by ENAC

Point 1.6 of Decrees Nos 35 and 36 states that ‘to avoid
the overcapacity which would result if several carriers
were to accept a route subject
to the obligations,
considering the infrastructure limitations and conditions
of the airports involved, ENAC, at the behest of the
Autonomous Region of Sardinia, has the task of acting
in the public interest so as to adjust
the accepting
carriers’ operating programmes to ensure that they are
completely in line with the mobility objectives of the
obligations imposed. The purpose of this should be to
redistribute routes and frequencies fairly between the
accepting carriers on the basis of the volumes of traffic
on the routes (or packages of routes) in question for each
of them over the previous two years’.

the combined effect of all air carriers operating or
intending to operate on the route’.

(50)

The Commission considers that this principle must be
checked not only at the time of imposing the PSO but
also throughout the whole duration of the regime. Thus,
each time a new operator commences, or is about to
commence, operating a route, the level of capacity and
frequency imposed by the PSO on each operator must be
adjusted, so that the total frequency and capacity offered
on each route does not exceed that which is strictly
necessary to provide an adequate service.

(47)

By virtue of its powers, ENAC may arbitrate and promote
an agreement between several carriers operating on the
same route. For Sardinia, ENAC held a round table of
operators interested in certain routes and defined with
them the distribution of traffic.

(51) With regard to the PSOs imposed under Article 4(1)(a) of
the Regulation, carriers are not obliged to undertake to
individually ensuring the level of frequency or capacity
but all operators together may ensure that a minimum
service is provided.

(48)

it was ‘perfectly legitimate that

The Italian Republic defends this power of intervention
which, in its opinion, ensures continuity of service whilst
sheltering PSOs from the risks of other operators that
may be less interested in accepting PSOs without any
compensation from taking on and then abandoning
services. In particular it cites the ruling of the Regional
Administrative Tribunal of Lazio dated 17 March 2005,
which held that
the
Decree (of 2004) could define a scenario in which, for
individual
all routes subject to PSOs, there are several
carriers in competition with each other. However such
a possibility must be clearly stated and a minimum
objective criterion must be provided for the prior allo-
cation of time slots depending upon the number (one,
two or more than two) of carriers accepting the PSOs in
order to avoid detrimental overcapacity of supply and,
above all, that the allocation of time slots does not result
in the arbitrary introduction of and de facto exclusivity of
operations, which the provisions of the Decree expressly
rejected’ (1).

(52)

(53)

(49)

imposed under Article 4(1)(a) must

The PSOs
take
account of all carriers operating or intending to operate
the route concerned. This is confirmed in Article 4(1)(b)
which states that ‘the adequacy of scheduled air services
shall be assessed by the Member States having regard to

The Commission recognises that it may be necessary for
the authority responsible for the PSOs to ensure that the
level of frequency and capacity enables the PSOs to be
met. Nonetheless this authority must in no cases limit
the possibility for carriers who wish to provide a higher
level of service in terms of the capacity and frequency
required under
the PSOs, which should only be
minimum obligations. As a result, in so far as the rules
adopted by ENAC aim to prevent carriers from providing
additional
and
contrary to the Regulation.

they are unduly restrictive

services,

In this connection, the Commission welcomes the fact
that the Italian Republic confirmed in its letter of 15
November 2006 that its administration would regularly
assess the situation on an annual basis and would analyse
any requests made by carriers willing to operate routes
under
the Italian
Republic confirmed that ‘nothing stops a Member State
from verifying (including during the validity period for
PSOs) the adequacy and the need for the PSOs and as a
result
the PSOs, unless their
usefulness or legitimacy is re-established’ (3).

to amend and/or annul

the PSO regime (2).

It notes

that

(1) Ruling of the Regional Administrative Tribunal of Lazio No 2436 of

17 March 2005.

(2) Letter of the Italian Republic dated 15 November 2006, p. 2.
(3) Letter of the Italian Republic dated 15 November 2006, p. 11.

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3.5. Grouping of

the routes Alghero–Rome and Alghero–
and

and Olbia–Rome

one

Milan on the
Olbia–Milan on the other hand

hand

(54)

Italian Republic

justifies grouping the

The
routes
Alghero–Rome and Alghero–Milan on the one hand
and Olbia–Rome and Olbia–Milan on the other hand
on the grounds that their operations are complementary
and interdependent. According to the Italian authorities,
the volume of traffic on these routes is objectively low
for two-thirds of the year due to the highly seasonal
nature of
there is no
traffic flows. Considering that
provision for financial compensation for these routes, it
is up to the administration to ensure that carriers’
operations are sustainable despite not being economically
attractive. Thus it is a question of putting into place ‘a
virtuous circle of operational interdependence’ to enable
‘aircraft to be rotated during the winter, given the scarcity
of demand’ whilst
‘planning coupled routes helps to
routes’.
to
attract
Moreover, according to the Italian Republic, the supply
required in the summer could be better met by jointly
operating a group of routes. The Italian Republic lastly
the Regulation itself provides scope for
argues that
combining fluctuations of demand, for example, within
the same week. This grouping would therefore enable
costs to be contained and capacity to be optimised,
whilst better meeting the requirements of demand.
this grouping would not constitute a market
Thus
restriction but conversely would be likely to attract
more operators.

carriers willing

operate

these

(55)

The Commission believes that grouping routes is incom-
patible with Article 4(1)(a), (b) and (c) of the Regulation.
the PSOs
The eligibility and adequacy criteria for
‘the
provided for therein explicitly mention, each time,
route’, with no provision anywhere for groups of routes.
Therefore each of these criteria must be assessed sepa-
rately with regard to each individual route.

(56)

this

in line with the
interpretation is
In addition,
principle of proportionality. Grouping routes in this
way would enable Member States to impose PSOs on
routes where they are not necessary to ensure an
adequate provision of service. Thus Article 4(1)(d) does
not provide scope for grouping routes, but states that the
right to operate such services shall be offered by public
tender ‘either singly or for a group of such routes’. On
the contrary,
this clear mention in Article 4(1)(d)
excludes the application of such a grouping to Article
4(1)(a),
fails to produce a
single air carrier that has commenced or is about to
commence operating scheduled air services on a route,
in accordance with the PSOs imposed on that route, the
Member State may limit access to one carrier for a

(b) and (c).

the market

If

maximum period of three years and may publish a call
for tender to cover a group of routes. To sum up,
routes may be considered to be a
grouping several
the market and a
response to a clear disruption of
like direct
form of
compensation,
is only eligible under Article 4(1)(d). In
no cases under a PSO regime under Article 4(1)(a) may
the purpose of grouping be to make two separate routes
profitable so as to favour the operations of one or more
carriers.

compensation which,

indirect

(57) What

is more,

forward by the
the explanations put
Italian authorities are not based on any technical or
economic figures to support their analysis.

The following counter-arguments can be put forward:

— the capacity and frequency required must reflect the
need, route by route, and not be organised in such a
way that their efficiency can only be improved if the
routes are grouped,

— the obligations in terms of frequency linked to the
pairing of routes are so heavy that
they dissuade
many potential operators from accepting the PSOs
and providing services to and from Sardinia but
which, since their operations are not based in one
of the two cities, are de facto denied the possibility
to provide this service. Thus the effect of grouping is
to block the market,

— it is clear that the PSOs grouped in this way would
enable only a few existing operators to meet
the
requirements. Therefore applying PSOs has sidelined
companies operating or intending to operate routes
from Rome and Milan to each of the two airports
concerned, Olbia and Alghero. Consequently, even if
they had wanted to, these carriers were unable to
apply to provide a service that would be too costly
for their operations. Therefore these groupings are
such that they sideline other potential operators.

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These restrictive effects are magnified when account is
taken of
the markets concerned (total
number of passengers in 2005 — figures provided by
the Italian Republic):

the size of

— Olbia–Rome and Olbia–Milan: 731 349 (390 186 in

summer and 341 163 in winter).

— Alghero–Rome

and

Alghero–Milan:

502 820

(184 273 in summer and 318 547 in winter).

Under these circumstances, it is unlikely that these routes
between Italy’s two main cities and the Sardinian airports
in Olbia and Alghero are so unattractive that they need
to be grouped in order to attract operators.

(58)

the Commission considers

Therefore
that grouping
certain routes is incompatible with the Regulation and
unduly restrictive.

3.6. Preferential

fares for persons born in Sardinia but not

resident there

(59) Decrees Nos 35 and 36 require carriers to apply prefer-
ential fares for persons born in Sardinia but not resident
there. According to the estimates made by the Italian
Republic, applying these provisions would affect a
maximum of 220 000 persons, which in reality would
be closer
these people are
estimated to travel once a year.

to 110 000 if 50 % of

(60)

In practice, such a measure favours European citizens of
Italian nationality over citizens of other nationalities.
Consequently it can be considered discriminatory at
first sight on the grounds of nationality and therefore
contrary to the Treaty. Such a measure may only be
eligible as part of a PSO regime where differential
irre-
treatment
spective of
the persons concerned
and proportionate to the legitimate objective pursued
by national law.

is based on objective considerations

the nationality of

resident

to travel

there, without

retain ties with their original cultural community (1).
However, even if such a goal may be a legitimate
objective of public interest under Article 4(1)(b)(i) of
the Regulation, the measure is clearly disproportionate.
Firstly, the measure is applicable to all persons born in
Sardinia, but not
it being
necessary to show any remaining link, such as family
ties, between the person concerned and their region of
origin. Secondly, the measure is applicable irrespective of
the financial means of each emigrant. Thirdly, unlike
residents of Sardinia, who have
to the
mainland regularly in order
to receive certain basic
services (education, health) or to carry out economic
the development of Sardinia,
activities necessary for
(a
to Sardinia occasionally
travel
emigrants only
maximum of 50 % of persons potentially travel once a
year, according to the Italian authorities). Therefore the
total
relatively low
compared to the costs incurred by residents of Sardinia
and may be easily covered,
in most cases, by the
emigrants, without the need for the reduction provided
for in Decrees Nos 35 and 36. Lastly, where certain
emigrants lack the necessary means to pay the price of
an annual trip to Sardinia, a more adequate and less
restrictive measure would be
to offer aid to the
emigrants concerned.

costs of occasional

travel

are

(62) Under these circumstances,

the Commission considers
this measure to be disproportionate and incompatible
with the Regulation.

3.7. Application to all airports

(63) Decrees Nos 35 and 36 provide for the application of the
PSOs to all the airports in the Rome and Milan systems,
as listed in Annex II to the Regulation, i.e.:

— Fiumicino and Ciampino airports for Rome,

— Linate, Malpensa and Bergamo for Milan.

(64)

It should be noted that the PSOs for the year 2000
covered the airports of ‘Rome (Fiumicino) and Milan’.
By setting up the Milan airport system in accordance
with Article 8 of and Annex II to the Regulation, Italy
automatically extended the scope of the PSOs to the
whole airport system concerned.

(61) However the Italian Republic explains that the measure is
necessary essentially to enable Sardinian emigrants to

(1) Letter of the Italian Republic dated 6 October 2006, p. 72 to 74.

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(65)

(66)

choice

justified its

Italian Republic

solely on
The
technical grounds, which automatically means that all
the airport systems are covered. However it confirmed
that the main interest of the PSOs covered the airports of
Rome-Fiumicino and Milan-Linate, favoured by the bene-
ficiaries of the PSOs due to their proximity with the city
centre concerned, which justified the provision in the
PSOs that ‘subject to slot availability, at least 50 % of
the connections scheduled from the Sardinian airports
and Rome and Milan must be operated from and to
Fiumicino and from and to Linate’ (1).

The Italian Republic acknowledged that it was ‘objectively
proven that Fiumicino airport
for Rome and Linate
airport for Milan were the destinations representing the
highest level of convenience, service and attraction to
users, being the closest airports with the best links to
‘in
the respective city centres’.
It also explained that
order to ensure a better service and better meet
the
demands of users, it was deemed important to prevent
the carriers taking on the PSOs from having the freedom
to totally abandon these airports in favour of other
airports (less convenient and attractive to users) in the
same system.’ (2).

(67)

The facts also showed that flights in winter only operated
from Fiumicino and Linate.

(68)

In this case, the Commission doubts the need for this
measure, which it deems disproportionate
to the
objectives of ensuring mobility to the mainland and terri-
torial cohesion. The direct effect of this measure is to
sideline
the
principle of the PSOs, and to contribute to a definitive
closure of the market to new operators on competitive
routes, notably during the summer.

carriers, without

occasional

affecting

(69) However the Italian Republic recognised that the airport
hub of Malpensa played an essential role in international
connections, whilst Ciampino and Bergamo airports, as a
hub for
low-cost companies, contributed to the EU
principle of economic and social cohesion and to
achieving the objective of territorial cohesion linking an
island like Sardinia with other European regions.
Therefore the Italian Republic has undertaken to amend
Decree No 35 so that
the PSO does not apply to
Malpensa, Bergamo and Ciampino airports (3).

(70)

The Commission considers that this commitment does
raised and that
allay

the doubts

could be

that

(1) Point 1.2 of the Notice of 24 March 2006.
(2) Letter of the Italian Republic dated 6 October 2006, p. 78.
(3) Letter of the Italian Republic dated 15 November 2006, p. 3.

amending the Decree in this way would substantially
help to reduce
restrictions
imposed by the PSOs by meeting the mobility needs of
Sardinia without placing disproportionate restrictions on
the markets concerned.

impact of undue

the

(71) Given this commitment made by the Italian Republic, the
Commission does not intend to pursue its analysis of the
disproportionate nature of applying the regime to all
airports in Milan and Rome, whilst reserving the right,
if necessary, to return to this aspect for current and
future PSOs.

IV. CONCLUSIONS

(72) On the basis of the information provided by the Italian
Republic, the Commission does not call into question the
principle of applying a PSO to routes between Sardinia
and mainland Italy, which, regarding frequency, capacity
and fares, may be necessary to ensure an adequate
provision of services on the routes concerned.

(73) Nonetheless, the Commission considers that some of the
conditions imposed by Decrees Nos 35 and 36 of the
Italian Republic are unduly restrictive or dispropor-
tionate.

(74)

The Commission considers that, as a result of the PSOs
imposed under Article 4(1)(a) of
the Regulation, any
carrier intending to accept the PSOs must be able to
operate on this route, regardless of the period in which
it
intends to commence service provision. Therefore
setting a deadline for submitting applications which
from the outset excludes all operators submitting appli-
that deadline is unduly restrictive and
cations after
incompatible with the Regulation.

(75) Although it may appear legitimate to provide for a
duration of continuity of
the Commission
considers that, to comply with the principle of propor-
tionality,
the duration must be set within reasonable
limits and that a PSO regime under Article 4(1)(a) may
not exceed one year.

services,

(76)

The Commission considers that
the powers given to
ENAC to coordinate the activities of operators to avoid
overcapacity are unduly restrictive and incompatible with
the Regulation.

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(77)

(78)

(79)

The Commission notes that grouping the routes Olbia-
Rome and Olbia-Milan on the one hand and Alghero-
Rome and Alghero-Milan on the other
is unduly
restrictive and incompatible with the Regulation.

The Commission considers
the application of
reduced fares for persons born in Sardinia but not
resident
and incompatible
with the Regulation.

is disproportionate

there

that

The Commission doubts the need to apply the PSOs to
all airports in Rome and Milan, which it considers to be
disproportionate to the objectives of ensuring mobility to
the mainland and territorial cohesion. However, given the
commitment made by the Italian Republic to amend
the PSOs do not apply to
Decree No 35 so that
Bergamo, Malpensa
the
Commission will not pursue its analysis, although it
reserves the right, if necessary, to return to this aspect
for current and future PSOs,

Ciampino

airports,

or

HAS ADOPTED THIS DECISION:

Article 1

The Italian Republic may continue to apply the public
1.
service obligations (‘PSOs’)
imposed by Decrees Nos 35 and
36 issued by the Ministry of Infrastructure and Transport on
29 December 2005 (published in the Italian Official Gazette on
11 January 2006) on a total of 16 routes connecting the three
airports in Sardinia with several national airports on mainland
Italy, published respectively on 24 March 2006 (Decree No 35)
and 21 April 2006 (Decree No 36) in the Official Journal of the
European Union,
in accordance with Article 4(1)(a) of Council
Regulation (EEC) No 2408/92 on access for Community air
carriers to intra-Community air routes, subject to compliance
with the following conditions:

(a) All air carriers intending to accept the PSOs must be able to
operate the route concerned, regardless of the period in
which they notified their intention to commence service

provision and whether or not notification was sent during
or after the 30-day period set in the Decrees.

(b) Air carriers must not be obliged to provide a duration of
continuity of service under the PSO regime in excess of one
year.

(c) The Italian authorities must reassess the need to maintain a
PSO on a route and the level of obligations imposed on
each carrier as soon as a new carrier commences operations
or gives notification of its intention to operate that route
and, in any case, once a year.

(d) The Italian authorities must not prevent air carriers from
providing a higher level of services on the routes than the
minimum requirements provided for by the PSOs with
regard to frequency and capacity.

(e) Air carriers must not be obliged to offer preferential fares to

persons born in Sardinia but not resident there.

(f) The Italian authorities may not make the right to provide
services on a route between two cities subject to an obli-
gation to operate on another route between two cities.

2.
The Italian Republic must notify the Commission of the
measures taken to implement this Decision by 1 August 2007
at the latest.

Article 2

This Decision is addressed to the Italian Republic.

Done at Brussels, 23 April 2007.

For the Commission

Jacques BARROT
Vice-President