2008/948/EC: Commission Decision of 23 July 2008 on measures by Germany to assist DHL and Leipzig Halle Airport C 48/06 (ex N 227/06) (notified under document number C(2008) 3512) (Text with EEA relevance)
Date: 2008-07-23
Institutions: European Commission
Subjects: European Economic Area, Germany, State aid, access to information, air transport, airport, financing

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II

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

DECISIONS

COMMISSION

COMMISSION DECISION

of 23 July 2008

on measures by Germany to assist DHL and Leipzig Halle Airport

C 48/06 (ex N 227/06)

(notified under document number C(2008) 3512)

(Only the German text is authentic)

(Text with EEA relevance)

(2008/948/EC)

THE COMMISSION OF THE EUROPEAN COMMUNITIES,

Having regard to the Treaty
Community, and in particular
Article 88(2) thereof,

establishing the European
subparagraph of
the

first

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

Having called on interested parties to submit their comments
pursuant to the above Articles (1), and having regard to these
comments,

Whereas:

1. PROCEDURE

(1)

concerning the

establishment of

On 5 April 2006 the German authorities notified
the
arrangements
European hub of DHL Group at Leipzig-Halle Airport
(LEJ). On 27 April 2006,
the Commission requested
further information to which Germany replied on 24 July
2006. Meetings between the Commission services, the
Airport, DHL, and the German authorities took place on
26 July and on 21 August 2006.

(2)

By letter dated 23 November 2006,
the Commission
informed Germany of its decision to initiate the proce-
dure provided for in Article 88(2) of the Treaty in respect

(3)

(4)

(5)

(6)

of
these measures. On 12 December 2006 Germany
requested an extension of the deadline for its reply which
was accepted by the Commission. Germany transmitted
its comments on 23 February 2007.

The Commission's decision to initiate the procedure was
published in the Official Journal of the European Union (2).
The Commission invited interested parties to submit their
comments on the measures in question within one
month of the publication date.

It

transmitted the

The Commission received comments on the subject from
interested parties.
to
Germany by letter dated 16 May 2007. Germany was
given the opportunity to respond to them within one
month. The Commission received Germany's observa-
tions by letter dated 13 June 2007.

comments

At the request of the German authorities, a meeting took
place on 18 June 2007 and on 25 September 2007.
These meetings were followed by the dispatch of addi-
tional information, as requested by the Commission, on
19 October 2007 and on 18 December 2007.

Germany sent additional supplementary information to
the Commission by letters dated 7 December 2007,
17 March 2008 and 9 April 2008.

(1) OJ C 48, 2.3.2007, p. 7.

(2) See footnote 1.

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(7)

(8)

(9)

2. DETAILED DESCRIPTION OF THE FACTS

2.1. The parties

2.1.1. Flughafen Leipzig/Halle GmbH

Flughafen Leipzig/Halle GmbH (hereinafter
Leipzig
Airport) is a subsidiary of Mitteldeutsche Flughafen AG
(hereinafter MFAG). MFAG holds a participation of
94 percent in Leipzig Airport. The remaining shares are
owned by Land Sachsen and the communities Delitzsch,
Leipziger Land, and Schkeuditz. The shareholders of
MFAG are: 73 percent Land Sachsen, 14 percent Land
Sachsen-Anhalt, 6 percent Stadt Dresden, 5 percent Stadt
Halle, 2 percent Stadt Leipzig. There are no private
shareholders.

2.1.2. DHL

DHL (owned by Deutsche Post AG) is one of the major
express parcel operators with a worldwide turnover of
EUR 18,2 billion in 2005. Its European hub is currently
located at Brussels Airport (BRU). Following problems
with regulatory permissions for night flights, DHL nego-
tiated with several airports to find a new location for its
European hub. The short
list consisted of Leipzig,
Brussels, and Vatry (XCR) (France). Finally, DHL decided
to move its European hub to Leipzig by 2008.

It should be noted that the DHL investment has been the
subject of a previous state aid decision (N 608/2003). On
20 April 2004 the Commission approved the maximum
regional aid intensity of 28 percent for DHL's investments
at the airport under the 1998 Multisectoral framework
rules (3). Land Sachsen granted an aid amount of
EUR 70,8 million to DHL. On 2 July 2007 the Commis-
sion adopted a partially positive partially negative deci-
sion and approved an amount of EUR 1.58 million with
respect to training aid granted by Freistaat Sachsen and
Land Sachsen-Anhalt to DHL in relation to its operations
at Leipzig Airport (4).

(b) The Framework agreement between Leipzig Airport,
its parent company Mitteldeutsche Flughafen AG
(MFAG) and DHL, which obliges the airport
to
construct the new southern runway, and to honour
further assurances for the entire […] (*)-year duration
of the agreement,
inter alia a continuous 24/7 air
access on the southern runway;

(c) The comfort letter issued by the Land Sachsen in
favour of Leipzig Airport and DHL which guarantees
that Land Sachsen will compensate DHL for damages
up to EUR […] in the event that DHL will no longer
able to operate as foreseen at the airport (e.g. if night
flights will be banned by the regulatory authorities).

2.2.1. Capital Contributions

(11) According to the information at

the
Commission, the planned investments involving the new
southern runway will be financed by a mix of equity
contributions and long-term shareholder debt.

the disposal of

(12)

In the opening of investigative procedure the Commis-
sion calculated that the construction of the new southern
runway would be financed by about EUR 350 million of
public capital contributions.

2.2.2. The Framework agreement

(13)

This is one of two measures notified by Germany on
grounds of legal certainty; Germany maintains that these
two measures do not constitute State aid in favour of
DHL because the public authorities follow the market-
investor principle. The Framework agreement sets out
what Leipzig Airport and MFAG guarantee to fulfil prior
to the construction and operation of the new hub and
subsequently for the operation of the hub. The Frame-
work agreement also includes other agreements on the
operation terms, the airport fees, and the lease of land.

2.2.2.1. War ranty for 24/7 air por t operation

2.2. Measures under investigation

(14) Under the Framework agreement (which has been signed
on 21 September 2005) Leipzig Airport and MFAG have
to fulfil the following conditions:

(10)

The opening decision investigated the following three
measures:

(a) Capital contributions of about EUR 350 million to
Leipzig Airport for financing the construction of the
new southern runway;

(3) 1998 Multisectoral framework on regional aid for large investment

projects (OL C 107, 7.4.1998, p. 7).

(a) Prior to the operation of the new hub on 1 October
2007, Leipzig Airport must complete the construc-
the southern runway and ensure that the
tion of
24/7 operation of
If
Leipzig Airport cannot fulfil the conditions precedent
to the start of the new hub, Leipzig Airport and
MFAG may become liable to pay compensation up to
EUR […] (according to section 5 of the framework
agreement).

the airport will be possible.

(4) State Aid C 18/07 (ex N 874/06) — Training aid to DHL at
Leipzig-Halle, Germany (not yet published in the Official Journal).

(*) Business secret.

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for

continue

to ensure

the following […] years.

(b) Subsequent to the start of operations at the new hub,
Leipzig Airport must
the
24/7 operation of the airport and provide sufficient
capacity to ensure DHL's operations as agreed in the
operating terms
If
Leipzig Airport cannot fulfil the conditions subse-
quent to the start of the new hub, Leipzig Airport
and MFAG are liable to compensate all damages and
losses which DHL incurs. If DHL is essentially limited
in its operations, DHL will also have the right to
terminate the contract and receive compensation for
all direct and indirect costs of moving to an alterna-
tive airport (according to sections 8 and 9 of the
framework agreement). Leipzig Airport and MFAG
have thus an unlimited obligation to compensate
DHL for any resulting losses and damages — inde-
pendently of whether caused by circumstance within
or outside of Leipzig Airport's control. Germany esti-
mates that in case night flights were to be banned by
the regulatory authorities and DHL had to relocate to
another airport, Leipzig airport could be liable to pay
DHL up to EUR […].

2.2.2.2. Air por t fee ar rangements

(15)

The airport fees will be the major source of revenue for
financing the new southern runway. It is estimated that
DHL will pay about EUR […] in 2008 which is the first
full year for the operation of the new hub. The airport
fees are agreed in a separate contract which is attached to
the Framework agreement.

(16) All air carriers — either DHL or any other carrier — will
be entitled to the same landing fees. The amount of the
landing fee will decrease with the total traffic volume of
Leipzig Airport. Therefore an air carrier which only
undertakes a small number of movements will pay the
same landing fee as DHL which will apparently be the
heaviest user of the airport.

2.2.2.3. Lease contracts

(17)

has

two

lease

airport

concluded

The
contracts
with Deutsche Post Immobilien GmbH (hereinafter DPI)
contract with Deutsche Post
and a building lease
Grundstücksvermietungsgesellschaft
&
Co Objekt Leipzig KG (hereinafter DPBS) in respect of
certain constructions at the airport. The latter companies
are part of the Deutsche Post World Net group. They will
rent the properties to DHL by separate contracts.

beta mbH

(18)

Leipzig Airport will build an apron which will exclusively
be used by DHL. The construction costs are estimated to
be about EUR […]. Leipzig Airport will rent the apron to
DPI at the following conditions:

(a) DPI pays the interest for the financing of the costs
for the land and the construction, and a yearly amor-
tisation of […] percent of the construction costs.

(b) Leipzig Airport is obliged to raise a credit to finance
the construction of
the apron. Thereby, Leipzig
Airport must solicit offers from three different banks
including Postbank (which is also a member of
Deutsche Post World Net group) and choose the
most favourable offer.

(c) The contract is concluded for […] years. DPI will be
able to terminate the contract after […] years without
any reason or if DHL terminates the Framework
agreement. If the contract is terminated within the
first
is obliged to pay the rental
charges for […] years less rent already paid.

[…] years, DPI

(19)

The second lease contract concerns further ground hand-
ling areas which Leipzig Airport rents to DPI at the same
conditions as with the foregoing lease contract. The
construction costs are estimated to be about EUR […].

(20)

The building lease contract concerns the plot of land on
which DHL constructs its premises. Leipzig Airport will
rent the building right to DPI at the following conditions:

(21)

(22)

(23)

(a) DPI pays a rent of EUR […] for […] m2 which works

out at about EUR […] per m2.

(b) This rent is fixed until […] and is then adjusted
by […] of the change of the general price index.

further designated land plots until

The lease contract for the apron and the building lease
contract include provisions so that DHL has an option to
rent
[…]. These
options are granted […] until […]. Afterwards DHL has
to pay EUR […] per m2 to keep the option. This option
price will increase until […].

Both contracts include the provision that these land plots
— independently of whether DHL executes its option or
not — shall not be rented to competitors of DHL.
The following companies are explicitly mentioned: […],
and […].

2.2.3. Comfort Letter

The comfort letter guarantees the financial viability of
Leipzig Airport during the term of the framework agree-
ment, and obliges Land Sachsen to pay damages of up to
EUR […] in the event that DHL can no longer use the
airport as planned. In contrast to the framework agree-
ment by which Leipzig Airport and MFAG grant DHL an
unlimited warranty, DHL can only claim compensation
up to EUR […] from Land Sachsen under the comfort
letter. Any compensation claims above EUR […] can only
be addressed to Leipzig Airport and MFAG. Pending
Commission approval
letter has not yet
entered into force.

the comfort

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2.3. Initial assessment by the Commission

2.3.1.3. Comfor t letter

(24)

(25)

(26)

2.3.1. Existence of aid

(28)

2.3.1.1. Capital injection

In relation to the construction costs of the new southern
runway the Commission expressed the opinion that
Leipzig Airport should earn enough revenue from the
investments in the new southern runway as to cover (at
least) its incremental costs, an appropriate contribution
to the fixed costs of the existing facilities. However, on
the basis of the business plan submitted by the German
authorities,
the Commission came to the preliminary
conclusion that the expected increase in revenue from
the operation of the new southern runway will not cover
its incremental costs and that therefore the investment
therein constituted State aid.

Concerning the comfort letter, the Commission's opening
decision stated that the conditions in the Commission
Notice on the application of Articles 87 and 88 of the
EC Treaty to State aid in the form of guarantees (5) (here-
inafter Guarantee Notice), which sets out the circum-
stances under which a guarantee does not constitute
State aid, have not been met. It is required inter alia that
the guarantee would in principle be available at market
conditions from the financial markets without any inter-
vention by the State, and that the guarantee is remuner-
ated at market value. The new Guarantee Notice (6),
which entered into force on 20 June 2008, follows the
same principle and repeats this requirement.

(29)

In the present case neither condition is met: Germany
submitted that Leipzig Airport sought, but was unable to,
cover the risks eventually addressed by the comfort letter
institutions (7). And neither
through private financial
DHL nor the airport is under an obligation to pay a
premium, at market value or otherwise,
for the risk
assumed by the Land Sachsen.

2.3.1.2. Framework Agreement

The opening decision set out that DHL will benefit of
State aid if Leipzig Airport has offered more favourable
contract terms than a private undertaking would have
done. A private airport operator would expect to earn
sufficient revenues from the investments in the new
southern runway to cover (at least) its incremental costs,
and to make an appropriate contribution to the fixed
costs of the existing facilities, as well as offering appro-
the capital employed while
priate remuneration for
reflecting the risks assumed under
the Framework
agreement.

(30)

The opening decision asserted that the expected increase
in revenues from the operation of
the new southern
runway would not even cover its incremental construc-
tion costs and lead in 2006 to a loss of about EUR […]
(see paragraph 70 of
the opening decision). Conse-
quently, Leipzig Airport would not be able to finance the
risks assumed under the Framework agreement out of its
own revenues.

2.3.2. Compatibility of aid

2.3.2.1. Compatibility of capital injection

these

In relation to the investment by the Land Sachsen in the
construction of the new runway through capital contri-
the Commission initially
butions to Leipzig Airport,
concluded
aid. The
that
compatibility of such aid has to be assessed under
Article 87(3) of the EC Treaty and the practice of the
Commission as consolidated by the ‘Community guide-
lines on financing of airports and start-up aid to airlines
departing from regional airports’ (8)
‘the
2005 Guidelines’)

(hereinafter

constituted

State

(27)

In conclusion, the opening decision raised serious doubts
whether a private undertaking would have

(a) Agreed on airport fees and lease contracts which do
not even finance the incremental costs of
the
southern runway;

(b) Assumed the commitments of the Framework agree-
ment which further decrease the expected profitability
of the airport operations;

(c) Concluded lease contracts which do not seem to
correspond to local market conditions and limit the
business opportunities.

2.3.2.2. Compatibility of aid to DHL

(31)

The Commission noted that DHL's investment into its
new European hub at Leipzig Airport has been the
subject of a previous state aid decision (N 608/03). The
Commission approved the maximum regional aid inten-
sity of 28 per cent for DHL's investments at the airport
under the 1998 Multisectoral framework rules (9), where-
upon the Land Sachsen granted an aid amount of
EUR 70,8 m to DHL.

(5) OJ C 71, 11.3.2000, p. 16 (paragraph 4.2).
(6) OJ C 155, 20.6.2008, p. 10.
(7) Submission from Germany, 21 July 2006, p. 7.
(8) OJ C 312, 9.12.2005, p. 1.
(9) 1998 Multisectoral framework on regional aid for large investment

projects (OL C 107, 7.4.1998, p. 7).

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(32) As the Commission had already authorised the maximum
regional aid intensity of 28 per cent for the DHL invest-
ments, any further aid — which DHL could be granted
under the comfort letter or the Framework agreement —
can not be considered compatible with the common
market.

(37)

3. COMMENTS FROM GERMANY

3.1. Aid to the airport

in connection with the

infrastructure developments

(38)

(33)

(34)

3.1.1. Background facts regarding the development of Leipzig

Airport

The German authorities stated that Leipzig Airport was
originally built as a military base with one (Northern)
runway. In 1960 a second (Southern) runway was added
with the two runways forming a V-alignment. The align-
ment of this Southern runway was decided on the basis
of the military airspace structure of the GDR. This design
however did not
take account of environmental or
meteorological considerations: it did not provide favour-
able conditions for take-off and landing and the flight
paths were directly above densely populated areas in
North Leipzig and South Halle.

By 1980 defects began to appear in the Southern runway
which had a detrimental effect on the airport. Remedial
action was taken by laying a new concrete surface on top
of the runway. By the early 1990s it became apparent
that these renovation measures were inadequate — cracks
in the new upper surface caused extensive spalling and
major
the
runway. The resulting buckling of the runway posed a
serious safety risk and required high levels of mainte-
nance.

longitudinal distortions at both ends of

(35) After German reunification a master plan was put in
place for the development of Leipzig Airport as a civil
airport which envisaged the future construction of a
two-runway system as a basis for action. In 1994, an
Advisory Committee, on which the Federal Ministry of
Transport, Land Sachsen and Land Sachsen-Anhalt were
represented, was created to oversee the development of
the airport's infrastructure. The committee was focused
on whether the existing southern runway should be
repaired before the construction of a new northern
runway.

(36)

The decision to develop a system of two parallel runways
was made in 1997. The first step in the development of
this system was the re-construction of
the northern
runway which started immediately. At this stage steps
were taken to enable the airport to support two runways;
for example: the taxiway was aligned and the northern
runway was levelled. Detailed plans for the rebuilding of
the southern runway were drawn up in 2002 as the last
step in the airport's long-term expansion programme.

This was to involve the renovation and realignment
(through 20 degrees) of the existing southern runway.

The final decision on the specifications of the renovated
southern runway was taken on 4 November 2004. It was
nevertheless the result of a lengthy, formal and complex
planning procedure. On that date preparatory construc-
tion measures were already underway, for example preli-
minary
ground,
realignment work and the purchase of additional land.

archaeological

analyses

the

of

The development of
the airport also fits with Land
Sachsen's Development Plan of December 2003, which
identifies the optimisation of
the runway system as
express goals: both in terms of length and direction of
the southern runway and in terms of adequate facilities
for cargo handling.

the development of

(39) Germany submits that by the stage that these decisions
were taken it had become increasingly clear that well
known companies in the air freight sector regarded the
civil airport of Leipzig/Halle as an attractive location and
the southern runway would
that
have been carried out even if DHL had not set up its
European hub in Leipzig. It also argues that the fact that
it was not until 21 September 2005 that the framework
agreement was concluded between DHL and Leipzig
airport is further evidence that the decision to rebuild the
southern runway was taken independently of DHL's
intentions.

3.1.2. Existence of Aid

(40) Germany disputes the Commission's assertion that state
aid rules apply both to the operation and to the construc-
tion of regional airport infrastructure. It maintains that
investment in infrastructure is not an economic activity
but a matter for regional and economic policy. In this
context, airports would not be ‘undertakings’ within the
meaning of Article 87(1) EC. Germany argues that this is
particularly important
in relation to regional airports
which would struggle to reach the necessary passenger
volumes to become self-financing.

(41) Germany disputes the Commission's interpretation of the
Aéroports de Paris judgment on three grounds. Firstly,
Germany argues that the reasoning of the Court is not
such that Article 87 EC should be understood in the light
of Article 82 EC. Secondly, Germany argues that the
Aéroports de Paris judgment refers to the operation of an
airport, not — as in Leipzig/Halle — to the construction
of publicly accessible infrastructure. Finally, according to
Germany, Aéroports de Paris dealt with an international
hub whose economic situation fundamentally differs
from that of a regional airport. It is commonly known
that private financing is not a viable alternative to public
financing
airport
funding
for
infrastructure.

regional

the

of

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(42) Germany submits that the construction of the southern
runway ought to be judged against the applicable Com-
munity rules ‘Application of Article 92 and 93 of
the
EC Treaty and Article 61 of the EEA Agreement to State aids
in the Aviation sector’ (10)
(hereinafter ‘the 1994 Guide-
lines’) which stipulate that ‘The construction or enlargement
of
infrastructure projects (such as airports …) represents a
general measure of economic policy which cannot be controlled
by the Commission under the Treaty rules on State aids’ rather
than the 2005 Guidelines, which subject airport opera-
tors to state aid rules. Germany argues that (a) the appli-
cation of the latter set of Guidelines to this case violates
the principle of non-retroactivity and (b) Paragraph 85 of
the 2005 Guidelines confirms that
they can only be
applied from their date of publication in the Official
Journal (9 December 2005). Given that the decision to
finance the infrastructure was made before that date,
Germany argues that the old guidelines must be applied.

(43)

regional airport

Furthermore, a negative Commission decision would
violate the principle of legitimate expectation. A prudent
airport operator would not have foreseen that state-
funding of
infrastructure would be
assessed against the rules on state aid. This assessment
first made in the 2005 Commission decisions
was
involving German
and Antwerp
Airport (11); which were adopted after the decision to
rebuild the southern runway at Leipzig/Halle.

airports

regional

(44) Germany further argues

in Decision C 27/07
that
concerning Flughafen Berlin Schönefeld (12) the Commission
acknowledged that the Aéroports de Paris decision only
refers to the management of an international hub. The
Commission itself explicitly remarked in Flughafen Berlin
Schönefeld that this approach was expanded to all kinds of
airports by the 2005 Guidelines. Therefore the enlarge-
ment of the scope of application of State Aid law is not
based on case law but on a political decision of the
Commission from 2005, which cannot
therefore be
retroactively applied.

(45)

Finally, Germany argues that there is no recipient of state
aid where the state transfers responsibility of the opera-
tion of
infrastructure to a different body whose sole
reason for existence is the administration of the infra-
structure.

(46) Germany states that in the event that this reasoning is
not accepted, the 2005 Guidelines foresee that the finan-
cing of activities that normally fall within the State's
sovereign responsibilities do not fall within the scope of
state aid rules. This applies to the areas of safety, air

(10) OJ C 350, 10.12.1994, p. 5.
(11) Decision of 19 January 2005, N 644i/02 — German regional airports;

Decision of 20 April 2005, N 355/04 — Antwerp Airport.
(12) Decision of 10 July 2007, C 27/07 — Berlin Schönefeld Airport.

traffic control, police, customs, air navigation etc (see
section 3.1.4 below).

(47) Germany points out that, according to the new state aid
policy of the Commission, the airport operator can be an
undertaking within the meaning of Article 87(1) EC and
therefore recipient of aid. However, at the same time that
operator shall be deemed to be the ‘owner of the infra-
structure’ and donor of aid to DHL by the framework
agreement. In its view these two roles are incompatible.

3.1.3. Application of the market economy investor principle

(48) Germany maintains that

this case is covered by the
thus rendering an
exemption in the 1994 guidelines,
analysis of the facts under the market economy investor
principle unnecessary. In the event that the Commission
comes to the contrary conclusion, Germany conducted
the following analysis of the market economy investor
principle with reference to three scenarios:

(1) status quo;

(2) expansion without knowledge that DHL would base

its operations at Leipzig Airport; and

(3) expansion in the knowledge that DHL would base its

operations at Leipzig Airport.

(49)

In this regard, Germany argues that the test must be
applied to the situation on 9 December 2005, when the
2005 Guidelines came into force, rather than to the
actual decision of the supervisory board of 4 November
2004. Thus Germany submits that the test is whether a
private investor would have continued with the construc-
tion of
the second runway rather than maintain the
status quo given the known facts on 9 December 2005.

(50) Germany's calculations, as presented below in recitals 55
and 56, are based on the Commission's calculations from
the opening of procedure and the company's discounted
value at the end of its lifetime (2042). A distinction is
drawn between investments made before and after
9 December 2005.

(51)

Status Quo: The airport is reliant upon its two runways
but operates within certain limitations: for example there
is a weight restriction in place on the southern runway of
the maximum hourly traffic is limited to
30 tonnes;
38-42 takeoffs and landings
(amounting to around
30 000 annually); and there are only 60 aircraft parking
bays.

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(52)

(53)

(54)

(55)

an

2012,

freight

traffic and night

that DHL would base

Expansion without knowledge
its
operations at Leipzig Airport: Germany argues that even
without DHL choosing to base its operations at Leipzig,
the airport needed increased capacity to support higher
levels of
flights due to the
expected imposition of restrictions on night flights at
Frankfurt/Main Airport.
estimated
In
300 000 tonnes of air
freight were expected to be
displaced from Frankfurt/Main. This estimate is a quarter
of the total volume of air freight and does not include
the carrying of freight on passenger flights (which would
not be impacted by the night flight restrictions). For the
of
years
100 000 tonnes of air freight is expected due to other
reaching capacity
airports
From 2019
onwards,
the German authorities predict an annual
growth rate of 3 %. They argue that this is a conservative
estimate based on a report by ProTransAG (13) which
forecasts annual growth rates of 8 to 10 % in the express
services market.

displacement

2013-2018,

restrictions.

further

a

Expansion with DHL: For the scenario of an expansion
with DHL the effects of the relocation of an express
service provider to the airport Leipzig/Halle are particu-
larly considered as from 2008. The forecast scenario
‘Expansion with DHL’ is stated to be a conservative one, a
realistic middle scenario would reach a considerable
better results. Hence the scenarios of expansion particu-
larly differ in the early stage. Due to the establishment of
DHL at the airport there is a considerably steeper increase
of the development of sales.

(56)

The development of the new southern runway is based
on the same capital outlay in all scenarios, independently
of the DHL settlement with earlier increases in turnover.
Only the extension investments at the freight aprons are
not made until 2012 in the scenario ‘Expansion without
DHL’, according to the capacity requirements.

In order to compare payment flows occurring at different
times, the German authorities have in their calculations
applied a discount factor of 6,5 % (this rate is adjusted
for inflation, the nominal discount rate being 7 %). This
discount factor was determined using the Capital Asset
Pricing Model (hereinafter: CAPM) and was based on the
following assumptions:

(a) Risk-free rate at the end of 2005 of German govern-

ment bonds of 3,75 %

(b) Market risk premium (based on the risk of volatility
or variation of the yield of a portfolio reflecting the
overall market) of about 5 % based on an expert
source (14)

(c) A ‘beta’

‘β’ representing the relation between the
market risk and the risk involved in a specific invest-
ment. The German authorities based their beta of
regional
report of
PriceWaterhouseCoopers amounting to 0,65.

in the published

airports

(d) A rate of inflation of approximately 0,50 % has been

taken into consideration (15).

Table 1

Comparison of the ‘Status Quo’, ‘Expansion without DHL’
and ‘Expansion with DHL’ scenarios

(EUR thousand)

(1)

(2)

(3)

(3-1)

(3-2)

Status
Quo

Expan-
sion
with-
out
DHL

Expan-
sion
with
DHL

Differ-
ence

Differ-
ence

EBITDA 2006-2042

[…]

[…]

[…]

[…]

[…]

Investment costs
2006-2042

Discounted value of
the company at the
end of its lifetime

[…]

[…]

[…]

[…]

[…]

[…]

[…]

[…]

[…]

[…]

Sum

[…]

[…]

[…]

[…]

[…]

that

argue

Furthermore,
a
the German authorities
correction of the status quo scenario should be made in
order to include purchase commitments and deconstruc-
tion costs. The airport had entered into obligations total-
ling EUR 108,3 million, which would have had to be
paid out even if all construction work had been halted.
Furthermore a return to ‘status quo’ would have necessi-
tated
estimated
EUR 100 million.

deconstruction work

costing

an

Table 2

Comparison of the ‘Status Quo’ and ‘Expansion with DHL’
scenarios, taking into account purchase commitments and
deconstruction costs

(EUR thousand)

(1)

(2)

(2-1)

Status Quo

Expansion
with DHL

Difference

[…]

[…]

[…]

[…]

[…]

[…]

[…]

[…]

[…]

[…]

[…]

[…]

[…]

[…]

[…]

[…]

[…]

[…]

EBITDA 2006-2042

Investment costs
2006-2042

Discounted value of the
company at the end of
the lifetime

Purchase commitments

Deconstruction costs

Sum

(13) Expert report commissioned by the competent national authority as

part of the planning approval procedure.

(14) Dimson E./Marsh P./Staunton M: Chapter 10, in Handbook of invest-

(15) Discount factor (real discount rate) = [risk free rate + (market risk

ments: Equity risk premium, Volume 1, 2007.

premium × β)] — rate of inflation.

L 346/8

EN

Official Journal of the European Union

(57)

Furthermore, the German authorities have informed the
Commission by letters of 9 April 2008 that
the
previously carried out calculation in the context of the
market economy principle include investments and oper-
ating costs with regard to security and safety measures
that fall within the public policy remit and are outside
the State aid control. Therefore, those costs should not
be taken into account in the present calculation.

Table 3

‘Expansion with DHL’

Comparison of the ‘Status Quo’, ‘Expansion without DHL’
and
the
investment and operating costs into security and safety
measures

scenarios without

23.12.2008

(EUR)

Total amount of the
investments into security
and safety measures
2006-2042

Status quo

Extension
without
DHL

Extension
with DHL

Control point 2

Control point 4

Control point 1

—

—

[…]

and

control

[…]

[…]

[…]

[…]

[…]

[…]

[…]

[…]

[…]

control

system

—

[…]

[…]

Security
system

Access
south

(EUR thousand)

(1)

(2)

(3)

Integrated control center

[…]

Status Quo

Expansion
without
DHL

Expansion
with DHL

[…]

[…]

[…]

[…]

[…]

[…]

[…]

[…]

[…]

EBITDA 2006-2042

Investment costs
2006-2042

Discounted value of the
company at the end of
its lifetime

Integrated control center
equipment

[…]

Video equipment south

Veterinary border control

—

—

Firefighting

Interim fire
south

brigade

—

[…]

[…]

[…]

[…]

[…]

[…]

[…]

[…]

[…]

[…]

[…]

[…]

Sum

[…]

[…]

[…]

Firefighting and rescue
equipment

[…]

[…]

[…]

3.1.4. Non-commercial activities

(58) While maintaining its position that the financing of the
expansion of
the southern runway at Leipzig/Halle
Airport is a general economic measure which as such is,
as a whole, not subject to state aid control, the German
authorities have provided the Commission with informa-
tion regarding
investments undertaken within the
measure under examination which in their opinion fall
within the areas of safety, air traffic control, police,
customs, air navigation etc (see Table below). These
investments are detailed in recitals 58 to 69.

Table 4

Investments into security and safety measures 2006-2042
in EUR (nominal values)

Total amount of the
investments into security
and safety measures
2006-2042

Status quo

Extension
without
DHL

Extension
with DHL

(EUR)

Public Safety

Fence

Fencestreet

[…]

[…]

[…]

[…]

[…]

[…]

—

—

Operational Safety

Uninterruptible
Power
Supply (UPS) Apron 4/5

Uninterruptible
Power
Supply (UPS) South/West

Uninterruptible
Power
Supply (UPS) South/East

Transformer station

High and low voltage
cabling
German
for
Weather Service (DWS)

High and low voltage
cabling for German air
traffic control (DFS)

Navigation lights

Navigation lights runway
south

Navigation lights new
aprons

—

—

—

—

—

—

—

—

[…]

[…]

[…]

[…]

[…]

[…]

[…]

[…]

[…]

[…]

[…]

[…]

[…]

[…]

[…]

[…]

[…]

[…]

[…]

[…]

Total

[…]

[…]

[…]

23.12.2008

EN

Official Journal of the European Union

L 346/9

(59)

ongoing

expenses

(materials

operational

In addition to investments, the German authorities draw
the attention of the Commission to costs arising from
the
and
personnel costs) for the relevant areas. They refer in this
respect to the 2005 Guidelines, pursuant to which in
general, ‘activities that normally fall under State responsi-
bility in the exercise of its official powers as a public
authority’ do not fall within the scope of the Guidelines
(see points 33 and 54 of the Guidelines). The German
authorities have deducted from these costs the revenue
resulting from security charges according to § 8(3) of the
Aviation Security Act
(Luftsicherheitsgesetz, hereinafter:
LuftSiG). This revenue concerns charges for the passenger
control at the airport.

Table 5

Total operating security and safety cost and revenue
2006-2042 in EUR (nominal values)

Operation security cost
and revenue 2006-2042

Status quo

(EUR)

Extension
without
DHL

Extension
with DHL

(1) material cost

(2) personnel cost

(3) depreciation

(4) other cost

(5) Sum security cost

(1) + (2) + (3) + (4)

(6) Security charges

(7) Total (5)-(6)

[…]

[…]

[…]

[…]

[…]

[…]

[…]

[…]

[…]

[…]

[…]

[…]

[…]

[…]

[…]

[…]

[…]

[…]

[…]

[…]

[…]

(60)

(61)

Public Safety

The safety facilities and the security measures carried
for airport operators
out correspond to obligations
arising from national
legislation, namely the Aviation
Security Act
(LuftSiG), as well as the Air Traffic Act
(Luftverkehrsgesetz, hereinafter: LuftVG) and the recommen-
dations of the International Civil Aviation Organisation
(ICAO) regarding measures to avert danger to aviation in
the planning, construction and operation of commercial
airports.

In order to avoid unauthorised access to the secured area
of the airport all persons, vehicles and goods have to
pass through access control points, which are equipped
with secured gates, x-rays and hand probes. A security
and control system is used to operate and supervise
access to the security area. The security control centre
also allows access to the hazard alert system (i.e. fire
detectors and building technology centre etc.) and the
access control
system (i.e. burglary, hold-up alarm
system, video control monitoring etc.). Because of the
change in the alignment of the new southern runway it
was necessary to re-build the perimeter fence and further-
more to construct two additional access control points
(control points 2 and 4).

(62) Moreover, the security measures listed must be set out by
the operator in an aviation security programme within
the meaning of Article 5(4) of Regulation 2320/2002 (16)
which must be presented for approval to the Aviation
Safety Agency. The operator of a commercial airport is
obliged to perform the security measures provided for in
the approved aviation security programme. The aviation
security programme of
Leipzig/Halle Airport was
approved by the Air Traffic Department of the Ministry
for Economic Affairs and Labour of Land Sachsen on
25 October 2007. In order to comply with the obliga-
tions arising from the Aviation Security Act, the airport
operates its own security department.

(63) As the airport has decided to permit goods traffic from
non-EU countries
to Council Directive
according
97/78/EC of 18 December 1997 laying down the princi-
ples governing the organisation of veterinary checks on
products entering the Community from third coun-
tries (17) a veterinary border inspection post must be
provided at the airport for the handling and possible
storage of animal products and animals.

Firefighting

(64)

The airport is obliged under law to provide fire preven-
tion and rescue services. Airport
fire prevention and
rescue services are one of the pre-conditions in order to
obtain an operating licence. In order to comply with the
applicable regulations for fire fighting and rescue services
it was necessary to provide the new southern runway
with its own fire station. Leipzig/Halle airport is therefore
equipped with two fire stations (18) located in the north
and south areas of the airport respectively.

Operational safety/redundant electrical supply

(65)

The airport
is obliged to have a back-up electricity
supply. Due to the regulatory requirements this can only
be achieved with an Uninterruptible Power Supply (UPS).
For this purpose, diesel dynamic UPS systems have been
installed in each of the three navigation lighting stations
on the southern runway.

(66) According to the German authorities, in order to secure
the power supply including the redundancy capability
and to create capacities for the establishment of further
businesses on Leipzig/Halle Airport, it became necessary
the
this purpose,
to expand the power supply. For
construction of a transformer
station at a cost of
EUR 5 million was planned.

(16) Establishing common rules in the field of civil aviation security

(OJ L 355, 30.12.2002, p. 1).

(17) OJ L 24, 30.1.1998, p. 9.
(18) Both fire stations have identical technical equipment; a replacement

investment is necessary after 15 years.

L 346/10

EN

Official Journal of the European Union

23.12.2008

The airport also incurred expenses (i.e. high and low
voltage cabling) relating to the new orientation of the
southern runway in relation to its obligations under air
traffic control regulations (§ 27(d) LuftVG) and in relation
to its obligations vis-à-vis the German Weather Service
(§ 27(f) LuftVG).

Navigation Lighting

densely populated areas in the North of Leipzig and in
the South of Halle are over-flown. An area of Leipzig,
which is located close to the airport grounds and at the
head of the original southern runway, was particularly
affected by noise. Because the take-off and approach
paths of each runway were aligned differently, the noise
pollution from aircraft was concentrated there. Further-
more,
the
in the
southern runway damage to the environment
densely populated conurbation Leipzig/Halle will be mini-
mised.

is stated that by the new alignment of

it

(67)

(68)

In relation to navigation lighting the rules are set out in
ICAO Annex 14 (19). In Germany, the ‘General Principles
of the Federation and the Länder on the marking and
navigation lighting of airports with instrument flying’
(Gemeinsame Grundsätze des Bundes und der Länder über die
Markierung und Befeuerung von Flugplätzen mit Instrumenten-
incurred
flugverkehr)
expense in relation to the navigation lighting that had to
be installed in relation to the new runway.

rules. The airport

apply these

(69) According to the German authorities

the planned
construction of further aprons in the years after 2010
will necessitate the provision of corresponding navigation
lighting systems for the apron areas. They add that opera-
tional costs need to be taken into account (see table 4
above).

3.1.5. Compatibility of aid

(70)

In the event that the Commission considers that the
investment constitutes State aid, Germany wishes to
point out that the investments consist of ‘existing aid’
within the meaning of Regulation 659/1999 (20), being
‘aid which is deemed to be an existing aid because it can
be established that at the time it was put into effect it did
not constitute an aid, and subsequently became an aid
due to the evolution of the common market’.

(71) Germany also submits

rebuilding the southern
that
runway was in the general interest within the meaning of
Article 87(3) EC, and provides some argumentation in
this regard. Germany states that construction of the new
southern runway will increase the integration of national
and international transport systems, and bring economic
benefits to the region.
International companies, which
use express services to distribute their products, have
located in the Halle/Leipzig region. The air cargo hub has
already attracted a number of internationally active busi-
nesses to the region, which continue to create much-
needed jobs. The freight hub generates a climate which is
conducive to business and investment, and this, in turn,
has a positive effect on employment. Germany refers to
an analysis of Prof. Dr. Juenemann, which forecasts that
the DHL hub in Leipzig/Halle alone will generate jobs for
about 3 500 people directly and for about 7 000 people
indirectly upon completion of the airport in 2008. Most
of these jobs will be the result of specialised companies
locating in the region because of the hub.

(72)

The new alignment of
environmental benefits.

the southern runway also has
in the future
It avoids

that

(19) Annex to the Convention on International Civil Aviation.
(20) OJ L 83, 27.3.1999, p. 1.

(73)

(74)

(75)

(76)

In addition, the old southern runway was not facing in a
direction with favourable meteorological conditions for
take-off and landing. The most common prevailing wind
direction, taken over the year and for individual months,
is south-westerly. Consequently, there is a difference of
around 20 degrees between the alignment of the old
southern runway and the predominant wind direction.
This can be disadvantageous with regard to disruptive
crosswind components. The new alignment
satisfies
meteorological requirements, above all enabling CAT III
(all-weather)
something
which was previously not possible. A distance of more
than 2000 metres between the runways allows indepen-
dent air traffic.

flight operations,

instrument

The German authorities assert that all planning decisions
regarding the airport were made with a view to
long-term demand, and the specific advantages of the
airport, focussing increasingly on freight transport. Fore-
most amongst these advantages is the unrestricted night
flight permission for both runways. There are extensive
night flight restrictions at many European airports. Such
restrictions significantly impact all air cargo operations,
especially in the express sector, while the operation of an
air cargo hub is only possible at airports without night
flight restrictions.

Typically, however, such airports are located in thinly
populated areas with deficient ground transport infra-
structures. Leipzig airport offers the advantage of being
integrated in an excellent road and rail network. The
regional plan for western Sachsen published in 2001
illustrates the planned development of infrastructure in
the area. According to the plan the airport should be
developed so as to enhance the region as part of a trans-
port network for national as well as international freight.

The airport is located at the intersection of two motor-
ways which connect the main catchment areas with the
airport in North-South and East-West direction. The road
network is complemented by main roads which will be
extended according to the development of the airport.
rail connections. The
The airport also has excellent
ICE-Erfurt-Halle/Leipzig is located near to the airport and
makes it easily accessible in combination with intercity
and regional trains.

23.12.2008

EN

Official Journal of the European Union

L 346/11

(77)

(78)

the German authorities,

In the view of
rare
convergence of positive aspects is even more valuable
considering the diminishing capacities and infrastructural
shortcomings of other German airports. Thus Leipzig
airport has decided, in contrast to other German airports,
to specialise in the air cargo business — a niche market.

this

freight

sector, especially express

The air
is
showing considerable growth rates. This development is
forcing the larger express service providers to expand
their operational capacities, while existing airport capaci-
ties continue to decline, and night flight restrictions are
rising.

freight,

(79) With regard to the Commission's misgivings about the
viability of the southern runway renewal, the German
authorities mention the decision in the Antwerp Airport
case, where the Commission stated that in respect of
limitations may not allow
regional airports, regional
airports to generate the revenues needed to provide
adequate airport services or to maintain airports on
economically viable terms. Therefore,
to allow these
airports to operate as regional access points in the public
interest public financial support may be needed.

(80)

(81)

The availability of two independent runways is an indis-
pensable precondition for the operation of a modern
cargo airport. This is all the more true in the case of
central hubs and express services. Without a second
runway Leipzig airport could not function as an air cargo
hub and not focus on the niche market of the express
freight sector as described above. Passenger numbers are
entirely irrelevant as to the question whether a system of
parallel runways is necessary.

for

Furthermore

flight operations.

Because of the alignment of the old southern runway at
the airport
the old southern and the new northern
runway could not operate at the same time. The take-off
paths and the approach paths crossed at a point close to
the airport, meaning that the German Air Traffic Control
had to treat the two runways as if they were a single
runway
adverse
weather conditions or accidents could cause disruptions
to the logistics chain. The availability of a second parallel
runway is thus vital to guarantee the airport's undis-
rupted operation, and to attract air freight service provi-
ders. This assessment was shared by the competent
authority within the planning approval procedure for the
rebuilding of the southern runway. The authority had
obtained an expertise on the question if it was necessary
to turn the southern runway parallel to the northern one,
or if the runways could be used as a V-runway system.
The outcome was that even for passenger flights the
average delays because of the use of a V-runway system
would not be acceptable, and air freight traffic would be
impossible to handle. It was also found that the delays at
an express freight hub would accumulate because the
loading and unloading of air freight from aircraft which
had landed late would inevitably affect
the departure
times of the other aircraft. The logistic chains at the gate-
ways would collapse. The parallel runway system thus

(82)

(83)

increases the flexibility of
more attractive to potential users.

the airport, and renders it

The planning authority confirmed after examining the
relative merits of all the public interests concerned, that
the plans for expansion made good economic sense and
that the economic opportunities by far outweighed the
risks. The planning authority came to the conclusion that
there was, both macro-economically and micro-econom-
ically, a need for an infrastructure which would make the
airport a central hub for air freight. Furthermore, the
turning of the southern runway reduces the risk of colli-
sion. The Federal administrative Court upheld the plan-
ning decision in its judgement of 9 November 2006 and
didn't find any errors of consideration in the decision.

the decision to
The German authorities reiterate that
rebuild the southern runway was made independent of
and before DHL's decision to move its principal opera-
tions from Brussels to Leipzig. In fact DHL was only
the southern runway during two
assured the use of
defined time-slots during the night (corresponding to a
guaranteed share of [10-25] %, in terms of time, for use
of the southern runway), while use of the runway is free
to anyone in the remaining night-time hours, and during
the day.

(84) According to Germany, the measure does not therefore
adversely affect Community trade since capacities in the
market for air cargo transport — especially in the express
sector — are currently extremely limited throughout
Europe.

3.2. Aid to DHL

3.2.1. Framework agreement

3.2.1.1. Market

confor mity

of

guarantees

provided by framework agreement

(85) According to Germany,

the airport has followed the
market economy investor principle when signing the
Framework Agreement because the positive effects and
profitability of the agreement with DHL outweigh the
risks and commitments assumed by the airport. The
remaining risk assumed by Leipzig Airport regarding
obligations in terms of capacity and operation is very
low.

(86) Germany is of the opinion that the airport acted as a
private investor in first taking the decision to build the
southern runway on 21 November 2004 and only a year
later on 21 September 2005 to decide whether or not to
sign the framework agreement. The relevant test is there-
fore whether the airport expected in 2005 to earn a
higher cash-flow in the business scenario ‘expansion with
DHL’ than in the alternative scenario ‘expansion without
the
that
DHL’. Due to the fact
southern runway was already well advanced in September
2005, a stop of the works would not have been anymore
an economically viable alternative.

the construction of

L 346/12

EN

Official Journal of the European Union

23.12.2008

(87)

(88)

(89)

(90)

Contrary to earlier submissions, Germany also introduces
terminal values in the cash-flow calculations, seeking to
demonstrate a higher profitability of
southern
runway. The calculation of the terminal value is based on
a linear expansion of the business results in the years
2038 — 2042 with an average revenue growth of
3 percent.

the

The introduction of the terminal values has a significant
effect on the profitability of the business scenarios. While
Germany calculates a discounted cash-flow for the period
2006 to 2042 of about EUR […] for the expansion with
DHL and of about — EUR […]
the expansion
without DHL,
the terminal values — which are also
discounted to 2006 — amount to about EUR […] and
respectively EUR […]. As can be seen from these figures,
the terminal values increase the profitability of the expan-
sion scenario with DHL by a factor of almost […] and
turn the expansion without DHL from a loss-making into
a profitable project with a cash-flow of about EUR […].

for

Taking the difference in the calculated cash-flow between
the two scenarios, Germany arrives at the conclusion that
the expansion scenario with DHL yields in 2005 a cash-
flow which is about EUR […] higher than the expansion
scenario without DHL (21).

Concerning the risk calculation, Germany advances the
argument that risk insurance is common business prac-
tice and that, in the current case, the risk can be financed
from cash-flow. Germany values the risk arising from the
framework agreement at about EUR […] in the event
that night
into place and
suggests that this risk could be financed from the gain in
cash-flow attributable to DHL (22). A private investor
would have accepted the compensation risk because the
EUR […] positive cash-flow for
the expansion with
DHL-scenario would be enough to cover the risk of
compensation claim of EUR […].

flight restrictions are put

(91)

Besides this consideration for the risk of a night flight
ban, Germany regards a discount rate of 6.5 percent as
reasonable given that the revenues in the calculations are
not adjusted to inflation and the low risks assumed by
Leipzig Airport,. This assessment is backed up by refer-
ences to decisions of the UK airport regulator concerning
the setting of airport fees for the period 2008 to 2013.

(21) This result can also be seen from the calculations in the annex which
show that the cash-flow difference between running the southern
runway with and without DHL amounts in 2005 to about EUR […]
(compare the cash-flows in columns (4) and (5) of Table 1). If you add
to this amount the difference in terminal values between the two
scenarios and carry the sum forward to 2006 at the discount rate of
6,5 percent you also arrive at EUR […].

(22) Germany assumes that the compensation claims will linearly decrease
over time as a result of the amortization of DHL's investments. Starting
from the maximum of EUR […] in year […], this implies e.g. EUR […]
in year […] and EUR […] in year […]. By assuming a probability of
25 percent for a ban of night flights, the expected nominal risk
amounts to EUR […] in year […] and its discounted value to EUR […].
This would be Germany's worst case scenario analysis as a change in
law could only be applicable after 10-15 years (Submission from
Germany, 23 February 2007, pp. 68 and 69).

These calculations relied on comparable costs of capital
(in real terms and pre-tax) of 6.2 percent for Heathrow
Airport and 6.7 percent for Gatwick Airport.

(92)

Furthermore, Germany emphasises that for assessing the
proportionality of the Framework Agreement it has to be
taken into account that (i) DHL assumes major business
risks by investing about EUR 250 million in its new
European hub and tying itself to Leipzig in the long term
and (ii) Leipzig Airport would be compensated if DHL
decided to stop its operations before the expiration of
15 years.

(93) Germany concludes that signing the Framework Agree-
ment carries a greater economic advantage than not
signing it and, therefore, a private investor would have
signed the Framework Agreement with DHL. Conse-
quently, the Framework Agreement has no element of
State aid.

3.2.1.2. Market confor mity of lease contracts

(94) Germany points out

that a lease contract had to be
agreed for the apron because the airport should always
remain the owner of the infrastructure in order to guar-
antee the public access to the apron for reasons of air
transport and planning rules, also in the case the contract
with DHL is cancelled.

(95)

Regarding special provisions established in the above
mentioned lease contracts giving DHL an option right to
rent land plots adjacent to DHL's premises and explicitly
forbidding renting those land plots to DHL competitors
Germany documents firstly that Airport Leipzig possess a
large number of
land plots which are not adjacent to
DHL's premises and are available for the location of
competitors. Secondly, Germany puts forward that the
reservation of adjacent land plots to DHL is in line with
the principle of ‘protection of the economic interests of
tenants’ as recognised by German rent law (23).

3.2.1.3. Market confor mity of air por t fees

(96) According to Germany the airport has acted like a
private investor as the starting and landing fees agreed
with DHL correspond to normal market conditions being
even considered to be in upper boundary compared to
what DHL pays in other European hubs (see also below
the
comments and documentation by DHL). Thus
Germany submits that the landing fees charged to DHL
at Leipzig airport are far from preferential.

(23) See submission of 23 February 2007 by Germany, footnote 68, for an
extensive list of relevant jurisprudence and for an explanation of the
‘protection of
tenants’ provision
(‘Konkurrenzschutzklausel’).

interests of

economic

the

23.12.2008

EN

Official Journal of the European Union

L 346/13

3.2.1.4. Comfor t letter

(97) Germany holds firstly that the Land Sachsen is indirectly
remunerated for the guarantee by way of the additional
profit generated by the investments. Secondly, Germany
considers that the issuing of comfort letters is standard
business practice since the Land Sachsen granted the
comfort letter of EUR […] to DHL in exchange for the
comfort letter of EUR […] provided by Deutsche Post AG,
DHL's parent company, to cover any possible claims of
Leipzig Airport against DHL (e.g. DHL would be liable to
to the sum of
indemnity equal
pay a contractual
it decided to quit Leipzig
[…]-years landing fees if
Airport during the first […] years of
the framework
agreement).

(98)

Furthermore, Germany underlines that the comfort letter
is subject to Commission approval, and has yet to enter
into force.

4. COMMENTS FROM THIRD PARTIES

4.1. DHL

4.1.1. Aid to the airport

(99) According to DHL, the doubts expressed by the Commis-
sion regarding the necessity of the construction of the
new southern runway are in direct contradiction to the
Commission's 2007 ‘Action Plan for Airport Capacity,
Efficiency and Safety in Europe’, which calls for existing
capacities to be increased in a bid to tackle congestion at
European airports. DHL stated that its own protracted
search for a suitable hub supported the observation made
by the Commission that capacities in this sector are
stretched.

(100) The expansion of Leipzig airport would render a signifi-
cant contribution to meeting the capacity crisis. The
Commission having identified air traffic as the ‘engine’ of
economic growth, and air freight as the ‘key’ to growth
in the Common market and foreign trade, an increase in
the capacity of Leipzig airport is in the public interest of
the Member states and the Community as a whole.

(101)

In the opinion of DHL, the upgrading or reconstruction
of already existing secondary runways is much more
rational than a completely new building of a runway on
a totally green-field site. Using a system of parallel
runways avoids delays and switching traffic to other
airports. The avoidance of delays in the air freight trans-
port and especially for the operation of central hubs for
the express freight traffic is more of an issue than for
passenger air traffic.

labour

resources. The development of

and road freight traffic and the availability of resident
local
runways
involves the provision of necessary infrastructure for
public transport as a service of a general interest. This
applies particularly in the case of
the new German
Länder, as the reconstruction of the substandard trans-
port
infrastructure in these areas, was undoubtedly a
public task in the public interest.

(103) The complex planning approval adjudication for

the
there was, both
southern runway ascertained that
macro-economically and micro-economically, a need for
the rebuilding of the southern runway. Therefore it can
be excluded that the southern runway of the Leipzig/
Halle airport was conceived and built in favour of DHL.
This project was realised temporally and factually inde-
pendently of DHL.

(104)

In addition DHL submits that in its opening decision the
Commission failed to have due regard for the specific
requirements of express freight logistics. Unlike passenger
air travel which can be diverted to other airports at short
notice, the rendering of express services necessitates the
construction of hubs at levels of investment so high as to
require permanent establishment. By its very nature
express air freight, being an ‘overnight service’, is heavily
reliant on permanently granted night flight slots. There-
fore the categorisation by the Commission of a funda-
mental precondition as preferential treatment is to ques-
tion the economic basis of all providers of express
services.

(105) DHL also argues that passing the financial responsibility
for the southern runway on to DHL would impose an
unacceptable disadvantage on it in the market for express
services, since its competitors pay standard fees for cargo
flights, without being burdened with investment costs for
runways. In the opinion of DHL, the airport has acted
like a private investor when signing the agreement as the
starting and landing fees, the conditions agreed in the
lease contract of the apron as well as in the building
lease contract correspond to normal market conditions.
The duration of the contract and the foreseen compensa-
tions are well-balanced. The guarantees given in the
framework contract are justified for the nature of risks
assumed and correspond to normal market conditions
too. As regards the letter of comfort it has not been
approved by the Commission yet and therefore it has not
entered into force.

4.1.2. Aid to DHL

(102) From DHL's point of view the most important advantages
of the location of Leipzig/Halle airport are that there is
no ban on night flights, the close network with railway

(106) DHL argues that

the framework agreement does not
provide any preferential treatment for DHL and that it
only contains monetary consideration and conditions
which are customary in the market.

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4.1.2.1. Market

confor mity

of

war ranties

provided by framework agreement

non-fulfilment of
(according to cipher 8.c of the SAB-TNT contract).

such warranty for 20 years

(107) DHL argues that the Commission's questioning whether a
private investor would have agreed to the liability obliga-
tion in the framework agreement is carried out without
the
comparing the totally different economic risks of
parties.

(108) The establishment of

the central hub at

the airport
Leipzig/Halle represents for DHL not only an investment
of more than EUR 250 m but also a complete economic
dependence on the usage and the indispensable avail-
ability of night flight slots in the long term. In case that
night flight slots are no longer available, not only the
investment of EUR 250 m would be devalued but it
would also lead to a long-term impairment of the entire
worldwide DHL express service with non-foreseeable
consequential damages. According to DHL, each private
investor who tries to induce a major customer to make
an establishment with major financial risks would have
to consider such risks in the sense of ‘do ut des’
if it
wants to win the customer.

(109) Additionally, after

the Airport's decision to build a
second runway (which was taken independently from
DHL), the Airports' risks are far lower than those of
the very disproportionate distribution of
DHL. Thus,
economic risks can only be reflected in the liability provi-
sions. Whereas DHL would suffer
form excessive
damages in case of a prohibition or reduction of night
flights, the airport's damages would only amount to the
loss of landing fees which would be easily replaceable by
another user. However, a voluntary leave from DHL is
already improbable because of the very high investment
costs. Consequently, the liability provision in the frame-
work agreement is objectively necessary and therefore
also customary in the market.

(110) The necessity of a warranty for an express

service
operator to conduct night flights is also documented in
the published contract between SAB (operator of Liège
Airport) and TNT concerning the establishment of a
central hub by TNT:

(a) The runways at Liège Airport are reserved for unlim-
ited duration for 140 % of the activity volume of
TNT at a specific point of time between 9 pm and
6 am (according to cipher 32.1 of
the SAB-TNT
contract). This clause, which goes far beyond the
framework agreement
it
warrants a capacity reserve at any time of 40 %,
reflects only the objective necessity to warrant
contractually and permanently essential night flight
slots for the business to secure the high investments
made.

in the present case as

(b) In addition to the above, SAB and the Region of
Wallonia have accepted liability for all damages
without limitation, including loss of profit, in case of

(111) Furthermore,

for DHL,

the unequal distribution of
damages' risks is reflected in the differing regulation
concerning the amount and duration of the obligation to
compensate: Whereas TNT holds the right
to claim
compensation from SAB for the whole contract duration
in case of non-fulfilment of the warranty, the right to
claim compensation from SAB decreases with the length
of duration; in case of termination notice by TNT with
the expiration of 10 years to the simple of the yearly
average of the landing fees (according to cipher 10.3 c of
the SAB-TNT contract).

4.1.2.2. Market
ments

confor mity of

lease

ar range-

in legal

(112) As far as the Commission criticises a missing connection
of the rental fees to the locally customary real estate
prices concerning the apron, DHL points out that the
rental contract does not constitute an ordinary rental
contract
form and
nature, a leasing agreement does not tie up with the
locally customary rental
the
interest rate of the lessor's provided capital. A connection
of the user fee to the locally customary rental fee would
therefore be off-topic and cannot be found in comparable
leasing contracts.

terms. Based on its legal

is orientated at

fees but

(113) As far as the Commission criticises the airport's limited
freedom of action resulting from the rental agreement to
finance the investment costs through credits or equity,
this criticism is based upon an unfounded interpretation
of the rental agreement. As a matter of fact, the contract
only obliges Leipzig Airport to obtain credit offers in
order to receive an objective basis for the calculation of
the user's fee and not to raise a credit. Thus, the airport
is not obliged to make use of such offers but is free in
the financing.

(114) The Commission's consideration concerning the building
lease interest seems to be based on wrong information of
the size of the building lease area according to cipher 1.5
of the building lease contract. In fact, the area amounts
to […] m2 so that
the assumed rent of
instead of
[…] EUR/m2 a rent of […] EUR/m2 is applicable. The
Commission's assumed disproportion between building
lease rent and option fees is therefore not given if the
correct building lease area is taken into account.

4.1.2.3. Market confor mity of air por t fees

(115) The Commission's considerations based upon the incre-
mental costs of the southern runway have to be rejected
as the southern runway has been constructed for the
general public and not only for the use of DHL. Conse-
quently, subject of control can only be the payable
landing fees. In comparison with other European DHL

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Official Journal of the European Union

L 346/15

hub-airports Bergamo (BGY), Brussels (BRU), Cologne
(CGN), and Nottingham (EMA),
the landing fees at
Leipzig Airport (LEJ) are […] percent above average of
the landing fees of European DHL hub-airports; in case
of night flights landing fees remain […] percent above
average (see tables below). Compared with the currently
effective
almost
[…] times more for landing at Leipzig than at Vatry.
Finally, all users of Leipzig airport pay the same landing
fees. DHL concludes that there cannot be any doubt that
landing fees are customary in the market.

at Vatry, DHL pays

landing fees

Table 6

Landing fees for day flights

A300

B757
(100 T)

B757
(93 T)

Durch-
schnitt

[…]

[…]

[…]

[…]

[…]

[…]

[…]

[…]

[…]

[…]

[…]

[…]

[…]

[…]

[…]

[…]

BGY

BRU

CGN

EMA

Durchschn. DHL-Hubs

[…]

[…]

[…]

[…]

Vatry

LEJ

[…]

[…]

[…]

[…]

[…]

[…]

[…]

[…]

The average fee is calculated based on the aircraft types
(A300, B757) used by DHL.

Table 7

Landing fees for night flights

A300

B757
(100 T)

B757
(93 T)

Durch-
schnitt

[…]

[…]

[…]

[…]

[…]

[…]

[…]

[…]

[…]

[…]

[…]

[…]

[…]

[…]

[…]

[…]

BGY

BRU

CGN

EMA

4.2. Mitteldeutsche Flughafen AG

(116) Mitteldeutsche Flughafen AG as owner of Leipzig Airport
begins its observations by stating that it agrees comple-
tely with the observations made by the Federal Republic.

4.2.1. Aid to the Airport

(117)

In the opinion of the airport owner, the fact that compa-
nies are drawn to the airport shows that
the site is
suitable to meet demand. The development of Leipzig
airport, and its integration into the regional transport
network, were and are central to the region's growth, as
supported by the European Union. The airport also
meets the Europe-wide requirement for airport capacity
creation for the preservation in order to maintain the
EU's competitiveness in the air freight sector.

4.3. ADV — Working Group of German Airports

4.3.1. Aid to the Airport

air

(118) According to this trade body, Germany is heavily reliant
on efficient transport links to global centres throughout
the world. Because of the ever greater capital volume tied
up in these goods, shorter transport
times are more
important. Over the last twenty years overnight delivery
services have enjoyed dynamic growth — a trend which
in light of
expected to
continued globalisation is
continue. However, Germany is experiencing a shortage
in the capacity to accommodate the large air freight
carriers — a development which raises concerns for
Europe as a whole. Night flight capacities at the three
largest
in Frankfurt, Munich and
Köln/Bonn are all but exhausted, and the situation is
bound to deteriorate further when Frankfurt airport
discontinues its night flight operations altogether. In the
opinion of the working group this necessitates the crea-
tion of new capacities in order to safeguard the econo-
my's competitiveness on the global market. The expan-
sion of Leipzig airport meets this need while relieving
other airports and enabling them to concentrate on
passenger air travel. At the same time Leipzig airport is
the cornerstone of economic development
in Eastern
Germany. According to the Working Group of German
Airports the construction of a new southern runway at
Leipzig airport was an urgent necessity.

cargo hubs

4.4. Stadt Leipzig

4.4.1. Aid to the Airport

Durchschn. DHL-Hubs

[…]

[…]

[…]

[…]

Vatry

LEJ

[…]

[…]

[…]

[…]

[…]

[…]

[…]

[…]

The average fee is calculated based on the aircraft types
(A300, B757) used by DHL.

(119) According to the city of Leipzig, Leipzig's northern
region is of fundamental importance to the international
competitiveness of three of Germany's federal states as a
commercial and economical centre. Thanks to the expan-
sion of motorways, A-roads, a high-speed rail link and a
commuter railway system, but most of all due to Leipzig
airport, this logistics hub is being put into an excellent
position to compete on a global level in the long term.

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(120) A study carried out by the city of Leipzig, the Chamber
of Industry and Commerce, and the commercial trans-
port centre shows that central Germany/greater Leipzig
could benefit from the creation of 100 000 jobs in the
logistics sector.

(121) According to the city of Leipzig, the airport's southern
runway is an essential public infrastructure facility of
great significance not only to DHL, but to a large number
of undertakings — due in particular to increasing night
flight restrictions elsewhere. The relocation of DHL to
Leipzig is deemed absolutely essential to attract other air
freight companies, and to utilise the capacities of the
airport's infrastructure.

(122) The city of Leipzig also submits that the new southern
thus
runway creates a system of parallel entry lanes,
removing air
from densely populated areas.
According to the city of Leipzig, the airport could not
have been upgraded without public financing. The same
is said to be true of competing European airports.

traffic

4.5. Stadt Schkeuditz

4.5.1. Aid to the Airport

(123) The city of Schkeuditz submits that it is set to become
regional development.
significant
the focal point of
Schkeuditz forms part of a supra-regional development
axis, and over the past decade has become the centre of a
modern transport system. These factors have afforded the
city, particularly by Eastern German standards, extraor-
dinary economic growth. Thanks to the excellent condi-
tions at
this positive trend is expected to
continue.

the site,

(124) Regarding the second runway,

the city of Schkeuditz
points out that the airport had determined on 19 July
1991 that the pace of development in the region necessi-
tated the re-construction of the second runway.

4.6. IHK Leipzig

4.6.1. Aid to the Airport

(125) According to the Leipzig Chamber of

Industry and
Commerce, the State is charged with the provision of an
adequate transport infrastructure, which gives it unrest-
ricted control over its development and puts it under an
obligation to exercise said control
in the name of the
people.

(126) Since 1991, investments were made in the development
of infrastructure and in the technical equipment of the
airport. These measures were complemented by further
investments of
the public authorities to improve the
railway and road infrastructure around the airport. The
close link of air traffic, railway and road connections has
transformed the airport
into a European hub for
passenger and air freight traffic. The airport meets the

latest requirements concerning a logistic site as to func-
tionality, modernity and capacity. In 1993 the economy
actors in Middle Germany began to agitate for the devel-
opment of the airport.

(127) Logistics have emerged as an independent service sector,
growing about 6 % p.a. with considerable potential for
further growth. The eastern enlargement of the European
Union has put the region into centre of the European
economic area.
In the region the industrial cluster
provides good business for logistic service providers. The
industry with approx. 25 000 employees in
chemical
Middle Germany mainly demands services in railway
and
automotive
industry and its components
suppliers with approx.
60 000 employees in 450 companies and the semicon-
ductor industry with approx. 22 000 employees demand
transport services, where time constraints are highly
important.

transport. Meanwhile

intermodal

(128) Every major player in the logistics sector, which gravitates
towards the major transport intersections, is present in
the region, providing about 160 000 jobs. This corre-
sponds to around six per cent of the region's total labour
force. The Chamber of Industry and Commerce predicts
the creation of an additional 100 000 jobs by the year
2015 from the region's transformation into a logistics
hub. This figure corresponds to ten per cent of the total
work force in this region.

4.6.2. Aid to DHL

(129)

resident at

the undertakings

In addition to DHL, the airport has attracted a number of
other air freight and logistics companies. Thus it cannot
be said that competitors are excluded from Leipzig
airport nor that DHL is afforded a favourable position.
Amongst
the site are
NATO's Strategic Airlift Interim Solution (SALIS) and the
Russian cargo carrier Tesis, which operates an air service
to China. A further intercontinental freight carrier at the
airport is Jade Cargo International. On 13 April 2007
the World Cargo Center, with the capacity to handle
200 000 tonnes of cargo annually, was completed at the
airport,
further consolidating the site's identity an air
freight hub.

4.7. IHK Halle-Dessau

4.7.1. Aid to the Airport

(130) The Halle-Dessau Chamber of Industry and Commerce
(IHK) is the economic-political representation of interests
of more than 52 000 business enterprises. According to
the Chamber, in Germany, the provision and financing of
said infrastructure is a matter for the state. This canon of
European and German transport policy is echoed in the
investments at issue in the current case.

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(131)

In the opinion of the Chamber, the airport development:

(a) serves

the implementation of

the goals of
regional planning of Sachsen and Sachsen-Anhalt,

the

(b) was examined and permitted in a complex public
procedure, the results of which were affirmed by the
German Federal Administrative Court,

(c) improves
industry,

the

local

conditions of

the

regional

(d) leads to a higher employment in a region of sustain-

able unemployment,

(e) is built for use by the general aviation,

(f) can satisfy the long-term demand at

the airport

Leipzig/Halle.

(132)

In 1993 the IHK Halle-Dessau and IHK Leipzig released a
common position paper concerning the airport. The two
trade organisations requested inter alia for the construc-
tion of a system of two runways, 3 600 m each, to
increase the capacity of the airport.

(133) Following German reunification, public investment into
transport infrastructure contributed significantly to the
region's economic transformation. The Commission has
recognised the need to assist the region, parts of which
are still Objective 1-areas, in overcoming its significant
disadvantages. Thanks to significant private and public
investment, particularly in infrastructure projects,
the
region is becoming internationally competitive.

(134) However, unemployment figures in the region are still
twice the EU average. This shows that the region is in
need of continued public investment, particularly into an
improved infrastructure to help strengthen competitive-
ness and attract business. Only then can the region make
a worthwhile contribution to the goals set out in the
EU's Lisbon strategy.

4.7.2. Aid to DHL

(135) The Chamber of Industry and Commerce wishes to point
out that the airport's modernisation has been a gradual,
continuous process which began in the early 1990s. In a
time-intensive process, each step had to be publicly
assessed and approved. The
southern runway was
planned and built subject to these same conditions, and
cannot be said to have been constructed for the sole
benefit of DHL.

4.8. Ryanair

(136) Ryanair does not touch upon the specifics of this case
but rather makes more ‘general’ points, voicing concern

the Commission may not

that
fully understand the
airline-airport relationship, and recent developments in
the air transport sector, thus arriving at a number of
is
erroneous
concerned that the Commission will attempt to reinforce
the flawed principles of the Charleroi decision and of the
‘Guidelines on financing of airports and start-up aid to
airlines departing from regional airports’.

Furthermore,

conclusions.

Ryanair

4.9. Panalpina

(137) Panalpina has operated daily cargo flights from Leipzig to
Moscow for more than a decade; Panalpina is committed
to establishing Leipzig as their air freight hub, hoping to
open a gateway to the Indian subcontinent and the Far
East.

4.9.1. Aid to the Airport

(138) Panalpina expresses the fear that many of

the larger
European airports will dedicate any remaining capacity to
passenger air traffic; Panalpina therefore appreciates a
more cargo-focused airport. It also explains that while
being located at the heart of Europe, Leipzig airport is far
enough to the east to reduce flight times to and from
Asia. The airport's 24-hour operation reflects the needs
of the globalised supply chain of goods, and is one of its
greatest assets.

(139) Panalpina commends the decision made in developing
Leipzig into a cargo airport and in offering an infrastruc-
ture being capable in handling future air cargo flows
around the clock. They are convinced that with the
infrastructure
airport
and services provided at
Leipzig/Halle, more companies will settle in the vicinity
of Leipzig, thus creating jobs. They assume that they have
equal access to the overall infra and superstructure at the
airport Leipzig/Halle to the same extent as other market
participants have it.

the

4.10. Jade Cargo International

4.10.1. Aid to the Airport

(140)

In light of the growing capacity crisis, the creation of
new hubs is imperative. Since this infrastructure could
not have been privately funded, Jade Cargo International
submits that it disagrees with the Commission's demand
to realise returns which a private
for
investor would have expected. And the absence of such
infrastructure would have negative effects not only in
Germany's east, but in the EU as a whole.

the operator

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Official Journal of the European Union

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(141)

Jade Cargo International would expect
a negative
Commission decision to threaten the existence of Leipzig
airport, and of its own operations. This, in turn, would
detrimentally affect other economic sectors. Since the
expansion of the airport does not distort competition,
but
Jade Cargo
International pleads for a positive Commission decision.

is in the general economic interest,

4.10.2. Aid to DHL

(142) According to Jade Cargo International, its own operations
will benefit from the new southern runway, and it cannot
agree with the Commission's reasoning that only DHL
stands to profit from its construction. This erroneous
conclusion is all the more incomprehensible in light of
the fact that it is air traffic control, not the airport, which
directs air traffic.

4.11. Condor

4.11.1. Aid to the Airport

(143) Condor considers the airport is well connected to other
transport modes.
investments appro-
In their opinion,
priate to requirements are more sensible at existing and
already cross-linked airports (like Leipzig/Halle) than at
smaller airports which do not have the needed conditions
available.

bottle-necks in transport capacity, to fund the aviation
sector and to achieve positive spill-over affects for the
Leipzig-Halle-Merseburg-Dessau region.

4.12.2. Aid to DHL

(148) Ruslan-Salis disagrees with the Commission's interpreta-
tion that the southern runway and its apron will be
predominantly used by DHL. It also disagrees with the
assertion that the financing, construction and operation
the runway as a ‘dedicated infrastructure’ was a
of
commercial transaction between the owner of the infra-
structure and its user, and must be assessed as any other
commercial transaction. It is furthermore incorrect that
the expected rise in air traffic volume at the heart of the
decision to expand the airport can be traced mainly to
DHL.

(149) Ruslan-Salis uses the southern runway and any new infra-
structures in the same way as DHL and any other
company. No single user is afforded preferential treat-
ment. The construction of the southern runway is in the
general
interest of any air cargo carrier operating at
Leipzig airport. There is nothing to suggest that the infra-
structure was dedicated to DHL, or that DHL enjoys any
privileges.

4.13. BARIG (Board of Airline Representatives in

Germany e.v.)

4.11.2. Aid to DHL

4.13.1. Aid to the Airport

(144) According to Condor,

investments in the expansion of
Leipzig airport should raise no objections from the point
of view of competition. The airport's modernised runway
system will be available to every potential user. And
given demand, modern,
is
essential.

infrastructure

effective

4.12. Ruslan-Salis GmbH

4.12.1. Aid to the Airport

(150) The members of BARIG are airlines with distributional or
operational presence in Germany. They point out that the
European Commission had underlined that European
hubs are highly overloaded. This especially applies to the
air freight sector, where the gap between capacity and
demand is
increasing. The Commission has directly
warned against a ‘Capacity Crunch’ in its communication
of 24 January 2007 (‘An Action-Plan for Capacity, Efficiency
and Safety for airports in Europe’ (24)). According to BARIG,
a negative decision of the Commission would put the
survival of the airport at risk.

(145) According to Ruslan-Salis (an air-cargo operator), no
other airport in Germany and especially Germany's east
was found to be suitable for its operations. For them,
‘assured access’ and ‘assured availability’ to the needed
transport capacity play a decisive role.

(151)

In the opinion of BARIG, the concept of the 2005 Guide-
lines does not fit to situation at Leipzig airport, as the
enlargement of a cargo airport is under consideration,
whereas the Guidelines deal with the competition for
passengers primarily.

its operations

(146) Among the factors taken into account when deciding to
base
the
at
two-runway system, unrestricted 24-hour operation,
direct rail and road links to every important destination
in Central Europe and the repositioned and extended
southern runway.

airport were

Leipzig

(152) To meet the capacity demands of the following years,
cargo transport infrastructure has to be extended in a
timely manner. If these investments are not financed by
public funds, cargo airports would not be built or
enlarged. Private
those
investments.

investors would not make

(147) According to Ruslan-Salis, the runway was built for the
use of the general public and is not dedicated infrastruc-
to relieve
ture. This was necessary and proportional

(24) Communication from the Commission to the Council, the European
Parliament, the European Economic and Social Committee and the
Committee of the Regions An action plan for airport capacity, effi-
ciency and safety in Europe, 24 January 2007, COM(2006) 819 final.

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4.14. Lufthansa AG

4.14.1. Aid to the airport

(153) Lufthansa is in favour of the planned measures at Leipzig
airport, including the rebuilding of the southern runway.
is appropriate to need and economically
The project
sustainable. Lufthansa Cargo AG, a subsidiary of Deutsche
Lufthansa AG, intends to carry out air freight services on
a large scale to and from Leipzig. In addition to the hubs
Frankfurt and Munich, Leipzig Airport is attractive for
Lufthansa.

(154) Lufthansa AG points out the growing market volume for
air freight, and that for Germany a growth of about
5.3 per cent is predicted. That postulates that infrastruc-
tural conditions keep pace with the growth. The invest-
ments at Leipzig Airport comply with the infrastructural
requirements of the airfreight industry in reference to
further
dimension, modernity
expansion.

and possibilities of

(155) The parallel alignment of

the runways allows for an
economically reasonable optimisation of capacities and
an increase of efficiency of
the airport. This offers
medium and long-term growth prospects for all users of
the infrastructure.

based airport infrastructure. They opine that where there
are bottlenecks of capacity at some German airports,
whereas widely spread new small airports are developed,
which are extensively public financed but contend for
passengers. However, Leipzig Airport is not being devel-
oped for the benefit of one single user.

(159) According to BDF, State involvement by investments in
the field of
infrastructure should demonstrate clear
macroeconomic profit and a long-term efficiency, these
conditions are fulfilled in the present case. There is a
genuine demand of clients — passenger — and especially
freight air carriers.

4.17. Cargolux

all

flights

(160) Cargolux uses Leipzig Airport as an offline station on its
from
cargo
intercontinental
Luxembourg. The
transported from Leipzig
freight
airport by Cargolux means a market share of 20.3 % of
the total freight transported from this airport in 2006.
Cargolux believes that it is one of the most important
freight operators in Leipzig Airport and a relevant user of
the infrastructures as well as a direct competitor of DHL.

departing

4.15. ACD (Aircargo Club Deutschland)

4.15.1. Aid to the airport

4.17.1. Aid to the airport

(156) The members of ACD act in managerial positions in the
air freight sector. They add that in their opinion the air
freight sector will further growth in the next years. This
involves the apprehension that the existing infrastructure
of airports is not sufficient.

4.15.2. Aid to DHL

(157) ACD does not see any dependency of Leipzig Airport on
DHL, as because of the strong economic development
around Leipzig and Dresden there is a need for a capable
airport in the region.

(161) According to Cargolux, the improvement of the infra-
structure of regional airports is crucial for the develop-
ment of air cargo traffic in Europe (due to the saturation
of major passenger hubs). The amount of the required
investments as well as the long amortisation periods
makes these investments only possible under public
support. Thus, Cargolux welcomes the public initiatives
and investments in regional airports as generators of
employment and as supporters of the European industry,
the customers and the public order.

5. COMMENTS FROM GERMANY ON THIRD PARTY

COMMENTS

4.16. BDF

(Bundesverband

der
Fluggesellschaften)

Deutschen

4.16.1. Aid to the airport

(158) The BDF represents German scheduled flights, charter
and low cost carriers and in doing so advocates need-

(162)

they underlined that all of

In commenting on the third party comments
the
German authorities reiterated the arguments previously
the third party
made,
the airport and its
comments had been in favour of
development. They also pointed out that none of the
third parties
to the DHL
raised any objections
arrangement.

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6. ASSESMENT OF THE AID

6.1. Existence of Aid

market is an economic activity (26). As regards the exis-
tence or otherwise of State aid, it is necessary to deter-
mine whether the beneficiary is engaged in an economic
activity (27).

(163) By virtue of Article 87(1) of

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

(164) The criteria laid down in Article 87(1) EC are cumulative.
Therefore,
in order to determine whether the notified
measures constitute State aid within the meaning of
Article 87(1) EC all of the following conditions need to
be fulfilled. Namely, the financial support:

(a) is granted by the State or through State resources;

(b) favours certain undertakings or the production of

certain goods;

(c) distorts or threatens to distort competition; and

(d) affects trade between Member States.

6.1.1. Existence of State aid to the airport — capital

contribution

(165) As previously set out above in order

to determine
whether the notified measures constitute State aid within
the meaning of Article 87(1) four conditions need to be
fulfilled

6.1.1.1. Economic

activity

and

notion

of

under taking

(166) The Commission has

to establish whether Leipzig
Airport is an undertaking subject to EC competition law.

(167)

It must first be noted that, according to settled case-law,
the concept of an undertaking covers any entity engaged
in an economic activity, regardless of its legal status and
the way in which it is financed (25) and that any activity
consisting in offering goods and services on a given

(25) Case C-35/96 Commission v Italy [1998] ECR I-3851, paragraph 36;
C-41/90 Höfner and Elser [1991] ECR I-1979, paragraph 21; Case
C-244/94 Fédération Française des Sociétés d'Assurances v Ministère de
l'Agriculture et de la Pêche [1995] ECR I-4013, paragraph 14; Case
C-55/96 Job Centre [1997] ECR I-7119, paragraph 21.

(168) Until recently, the development of airports was often
in
determined by purely territorial considerations or,
some cases, military requirements. The operation of
airports was organised as part of
the administration
rather than like a commercial undertaking. Competition
between airports and airport operators was also limited.
The liberalisation of the market for air transport services
has also meant that there are more airlines flying to
more airports thereby increasing competition between
airports. Taking into account these conditions, the finan-
cing of airports and airport infrastructure had previously
been considered as falling within the public policy remit
and, in principle did not raise State aid issues.

(169) This situation has however changed in recent years.
Although these land-use planning considerations and
administrative structures may still persist in some cases,
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
a progressive
opening-up of capital.
In recent years, private equity
firms and investment and pension funds have shown a
great interest in acquiring airports.

form of privatisation or

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

(171) These recent changes have also led to a change in the
commercial relationships between airports. Whereas in
the past airports were mostly managed as infrastructures
with a view to ensuring accessibility and territorial devel-
opment, in the last few years, more and more airports
also have commercial objectives and are competing with
each other in order to attract air traffic.

(172) The changing nature of airports has therefore to be
reflected in the legal assessment of airport activities
under State aid law. It is no longer possible to consider
the operation and construction of airports as a task
carried out by an administration, which in principle is
outside the ambit of State aid control.

(26) Case 118/85 Commission v Italy [1987] ECR 2599, paragraph 7; Case

35/96 Commission v Italy [1998] ECR I-3851, paragraph 36.

(27) According to the European 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 184/98 Pavlov [2000] ECR I-6451.

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L 346/21

(173) The European Court, in the ‘Aéroports de Paris’ case has
also sought to clarify matters, stating that the operation
of a big international airport consisting in the provision
of airport services to airlines and to the various service
providers within airports is an economic activity because
it consists ‘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 when the latter is public, does not
its official powers as a public
fall within the exercise of
authority and is separable from its activities in the exercise of
such powers’ (28). Thus, the airport operator, in principle, is
engaged in an economic activity within the meaning of
Article 87(1) EC Treaty, to which the rules of State aid
apply.

(174) Given the ongoing developments of

the sector,

this
approach has since been extended by the Commission to
all kind of airports, including smaller ones (such as the
one considered in the present decision) in its guidelines
adopted in 2005. In the light of this recent transforma-
tion,
is no longer
possible a priori to exclude the application of State aid
rules to airports as of 2000.

the Commission considers that

it

(175) Pursuant

to the ‘Aéroports de Paris’ decision once an
airport engages in economic activities, regardless of its
legal status or the way in which it is financed, it consti-
tutes an undertaking within the meaning of Article 87(1)
of the EC Treaty, and the Treaty rules on State aid there-
fore apply (29).

(176) The judgement of the Court of Justice in this case clari-
fying that the management and operation of an airport
constitutes an economic activity has lead the Commission
to conclude that from the date of this judgment the State
aid rules apply in this sector. Accordingly, there is there-
fore no retroactive application of the 2005 guidelines as
the German authorities have argued,
the Court has
simply clarified (a clarification which applies ad vitam
aeternam) on the fundamental concept of aid (30).

(177)

In this regard the Commission notes that the infrastruc-
ture which is the subject of the present decision will be
operated on a commercial basis by the airport manager;
it
is therefore commercially exploitable infrastructure.
The airport operator will charge users rates for the use of
this infrastructure rather than infrastructure being made
available without charge to users in the common interest.

(28) ECJ, Aéroports de Paris case, loc. cit., paragraph 121 with further references.
(29) Cases C-159/91 and C-160/91, Poucet v AGV and Pistre v Cancave

[1993] ECR I-637.

(30) In this context see the ruling of CFI of 12 February 2008 in Case

T-289/03 BUPA v Commission (points 157 to 160).

(178) However,

independently of

its legal status 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 (31).

(179) The European 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 security, air
traffic control, police, customs, etc. (32). The financing has
to be strictly limited to compensation of the costs to
which they give rise and may not be used instead to fund
other economic activities (33).

(180) Therefore the practice of the Commission (32) is that in
relation to functions falling within the public policy
remit, the financing of these functions or of infrastruc-
ture directly related to these functions does not constitute
State aid. This means that the financing of infrastructure
for instance necessary for security reasons or essential for
the control and supervision of the air navigation and
airspace may fall within the public policy remit (34).

(181)

In the case at hand the continuous losses of the airport
and the infrastructural investments have been financed by
the public shareholders' equity and long-term debts. The
extension and the realignment of the second, southern
runway were planned to boost the airport's position at
the freight traffic market. However, this being said certain
the investments may fall within the public policy
of
remit. The investments Germany considers falling within
the public policy remit have been set out previously.

(182) Having carried out an evaluation of the nature and the
figures supplied by Germany in relation to investment
relating to the new southern
and operational costs
runway,
in the
the Commission can conclude that
present case certain costs fall within the public policy
remit. These costs relate to security and police functions,
fire and public safety measures, operational
safety,
and German Air Traffic
German Weather Service
Control. It is also the case that the users of the airport
may also be charged for certain of these public policy
measures.

(31) Case C-364/92 SAT Fluggesellschaft v Eurocontrol [1994] ECR I-43.
(32) Commission Decision N 309/02 of 19 March 2003 Aviation security
incurred following the attacks of

— compensation for costs
11 September 2001.

(33) Case C-343/95 Cali & Figli v Servizi ecologici porto di Genova [1997]
ECR I-1547; Commission Decision N 309/02 of 19 March 2003;
Commission Decision N 438/02 of 16 October 2002, Aid in support
of the public authority functions in the Belgian port sector.

(34) See Commission Decision N 620/06 of 7 March 2007 Einrichtung des

Regionalflughafens Memmingen.

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amount

(183) Therefore, to the extent that they fall within the public
policy remit as set out above the costs in question may
not
to State aid within the meaning of
Article 87(1) EC. However in the present case indepen-
dently whether
the
the Commission was
approach advanced by the German authorities that none
of the costs should be considered as State aid, the final
assessment of the measure would not change. Even if
these costs were to amount to state aid, such aid would
be compatible aid (see below). Therefore the Commission
does not have to reach a definitive conclusion on this
question.

to accept

6.1.1.2. State resources and imputability to the

State

(184) As has been stated by the Court (35) for the measures to
be qualified as State aid in the sense of Article 87(1) EC,
(a) they have to derive from the State's resources, either
indirectly or directly and (b) they have to be imputable to
the State.

(185)

In the case under discussion, at all material times the
State exercised direct or indirect control on the resources
under consideration. Leipzig Airport has financed the
enlargement by equity contributions of the public share-
holders and has received long-term loans from its parent
company Mitteldeutsche
Flughafen AG (hereinafter
MFAG), which has only public shareholders.

(186) The decision to grant these State resources is imputable
to public authorities: The supervisory board of MFAG, a
publicly owned company, declared that sufficient equity
will be raised to finance the expansion of the airport. The
majority of the MFAG's Supervisory Board members are
representatives of public authorities (e.g. Land Ministers,
Mayors etc.).

6.1.1.3. Economic advantage

(187) The

capital

contributions

loans
previously mentioned reduce the investment costs that
the airport operator would normally have to bear and
therefore confer an advantage on the airport.

shareholder's

and

(190) The Commission must

then analyse whether Leipzig
Airport's shareholders have acted as private investors in
financing the expansion of
It has to be
in similar circumstances a private
assessed whether
investor operating under normal conditions of
the
market economy would have entered into the same or
similar commercial arrangements as MFAG for
the
realignment of the southern runway.

the airport.

(191)

In doing so the Commission has to bear in mind, that
‘[…] the conduct of a private investor with which the interven-
tion of the public investor pursuing economic policy aims must
be compared need not be the conduct of an ordinary investor
laying out capital with a view to realising a profit in the rela-
tively short term, it must at least be the conduct of a private
holding company or a private group of undertakings pursuing a
structural policy — whether general or sectorial — and guided
by prospects of profitability in the longer term’ (37).

(192)

In this particular case in relation to the investments
relating to the new southern runway the German
authorities appear to call into question the applicability
of the market economy investor test. They argue that the
test is not applicable to transport infrastructure because
there are no comparable private investors. According to
the German authorities, private investors have no interest
in airports, especially where large renewal
investments
are necessary.

(193) The Commission cannot agree with this view. The private
investor market
test cannot be excluded because the
private sector would not be involved in financing airport
infrastructure (38). An economically difficult
situation
does not absolve the public investor from acting as
reasonably as a private investor in the same situation
would have done.

(188) However, it could be argued that the capital contributions
granted to Leipzig Airport do not constitute State aid
within the meaning of Article 87(1) EC if the market
economy investor test can be shown to be applicable in
this case.

(189)

In this regard the European Court in the Stardust Marine
Judgment declared ‘capital placed directly or indirectly at the
disposal of an undertaking by the State in circumstances which
correspond to normal market conditions cannot be regarded as
State aid’ (36).

to examine whether or not

(194) The Court declared in the Stardust Marine Judgment that,
the State has
‘[…] in order
adopted the conduct of a prudent
investor operating in a
market economy, it is necessary to place oneself in the context
of the period during which the financial support measures were
taken in order to assess the economic rationality of the State's
conduct, and thus to refrain from any assessment based on a
later situation’ (39).

(35) See Case C-482/99 France v Commission (Stardust Marine) [2002]

ECR I-4397.

(36) Stardust Marine Judgement, paragraph 69.

(37) Case C-305/89 Alfa Romea [1991] ECR I-1603, paragraph 20.
(38) Which in any case is not true, see for example the construction of the

privately owned airport of Ciudad Real, Spain.

(39) Stardust Marine Judgement, paragraph 71.

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(195) The decisive point of time is the date when the decision
for investment was taken. The applicability of the private
market investor test does not arise from the 2005 Guide-
lines but from the development of EC case-law and the
decisions of the European Commission (40).

(196) Therefore, notwithstanding the assertions of the German
authorities,
in order to be able to apply the private
investor test the Commission has to substitute itself for
the public authority in question at the time the decision
to make the investment was taken.

(197)

In November 2004 when Leipzig Airport decided to start
the construction works for the southern runway DHL
had not yet entered into a legally binding commitment to
move to Leipzig Airport. To have a conservative profit-
ability assessment, the following analysis will make a
comparison between ‘Status quo’ and ‘Expansion without
DHL’ and will disregard ‘Expansion with DHL’.

(198) The German authorities argue that Leipzig Airport acted
like a private market investor. The German authorities
submit that the realignment of the southern runway has
helped to reduce the losses of Leipzig Airport and in the
medium to long term, the financed investments allow to
reach the break-even point.

(199) The German authorities need to be able to prove that the
public authorities acted in a way that would be acceptable
to a private investor. However, according to the informa-
tion provided to the Commission, it is not ascertainable
that the realignment of the southern runway was the
most favourable solution for economic purposes.

(200) The conduct of an investor in a market economy is
guided by prospects of profitability (41). The market
investor test will normally be satisfied where the struc-
ture and future prospects for the company are such that
a normal return, by way of dividend payments or capital
appreciation by reference to a comparable private under-
taking, can be expected within a reasonable period.

(201) The assessment should leave aside any positive repercus-
sions on the economy of the region in which the airport
is located, since the Commission assesses whether the
given measure constitutes aid by considering whether ‘in
similar circumstances a private shareholder, having regard to the
foresee ability of obtaining a return and leaving aside all social,
regional-policy
have
and
subscribed the capital in question’ (42).

considerations, would

sectoral

(40) See recitals 166 to 180 above.
(41) Case T-296/97 Alitalia v Commission [2000] ECR II-3871, para-
graph 84; C-305/89 Italy v Commission [1991] ECR I-1603, para-
graph 20.

(42) See 2005 Guidelines, paragraph 46.

(202) As the Commission already in the ‘Charleroi’ decision
pointed out, ‘one cannot consider as consistent with the prin-
ciple of private investor in a market economy any commit-
ments made by an airport operator for which it cannot be
proven that the airport activity as such will produce reasonable
profits within a reasonable time. It goes without saying that
any positive effects on the economy of the Region surrounding
the airport cannot in any case be included in this evaluation,
which is aimed at determining whether or not the intervention
conceals elements of aid’ (43).

(203) As the Court held in its judgments,

‘a private shareholder
may reasonably subscribe the capital necessary to secure the
survival of an undertaking which is experiencing temporary
difficulties but is capable of becoming profitable again, possibly
after a reorganisation’ (44). However, as to the Court, ‘when
injections of capital by a public investor disregard any prospect
of profitability, even in the long term, such provision of capital
must be regarded as aid …’ (45).

(204) As previously mentioned Germany has submitted a busi-
ness plan for the realignment of the southern runway.
the included income data and cost
On the basis of
figures the Commission can review whether Leipzig
Airport acted like a private investor with regard to finan-
cing, building and operating of the southern runway.

(205) Germany presented the business plans

for

three

scenarios,

(a) ‘Expansion with DHL’: Rebuilding of
runway, DHL comes to Leipzig Airport;

the southern

(b) ‘Status quo’: No rebuilding or realignment of

the

southern runway;

(c) ‘Expansion without DHL’: Rebuilding of the southern
runway, DHL does not come to Leipzig Airport.

(206) The business plans are based on the following assump-
tions, cost figures and income data as provided by the
German authorities for the period from 2006 until 2042,
no terminal value for the time after 2042 is specified.

(207) As previously stated the Commission cannot take into
consideration the ‘Expansion with DHL’ scenario in deter-
the investments with the
mining the conformity of
MEIP (46).

(43) Commission Decision Charleroi C 516/04 of 12 February 2004, para-

graph 169.

(44) Case 234/84 Belgium v Commission [1986] ECR 2263, paragraph 15,
Case 303/88 Italy v Commission [1991] ECR I-1433, paragraph 21.
(45) Case 303/88 Italy v Commission [1991] ECR I-1433, paragraph 22.
(46) See above, paragraph 197.

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(208) The forecast development of

for

sales

the scenario
‘Expansion without DHL’ is based on two main assump-
tions: The investor expects a displacement effect of night-
flight restrictions at Frankfurt/Main Airport in 2012, and
capacity bottlenecks at other airports will lead to further
growth between 2013 and 2018. The provisions of the
enlargement were deemed necessary in order to ensure
sufficient capacity to meet the expected growth of air
freight. However, while the increasing demand for air
freight traffic from Leipzig airport is mentioned as the
reason for investment,
justified by in the
present case by a specific cost-benefit-analysis.

this is not

(209) The risk of overcapacity existed when the decision to
rebuild the southern runway was taken. Vacancy costs
resulting from possible overcapacity (e.g. without DHL)
would not be compensated. However,
the presented
calculations do not seem to take this risk into considera-
tion.

(210) The following table (47) summarises the cash-flow calcula-
tions in relation to the two different scenarios ‘Status
quo’ and ‘Expansion without DHL’. These calculations are
based on the business scenarios submitted by Germany
which assume inter alia a growth rate of at least three
percent for the air cargo business.

Table 8

Cash-flow calculations

(A)
Airport
Status Quo

(B)
Airport
Expansion
without
DHL

(EUR million)

(C) =
(B) — (A)
Southern
runway
without
DHL

[…]

[…]

[…]

[…]

[…]

[…]

Cash-flow calculations (*)

(1) EBITDA

(2006-2042)

(2) EBITDA Safety
Measures

(3) EBITDA

[…]

[…]

[…]

(2006-2042)
corrected (1) + (2)

(4) Investments costs
(2006-2042)

[…]

[…]

[…]

(5) Investments

costs

[…]

[…]

[…]

Safety measures
(2006-2042)

(6) Investments costs

[…]

[…]

[…]

2005

(47) There are a number of differences between the cash flow calculations
in the current decision and in the decision to open the investigation.
These differences can be explained as follows. While the opening deci-
sion discounted revenues and costs to 2006, the current calculations
take 2005 as reference year because the decision to build the southern
runway was taken in November 2004, and construction started in
early 2005. The Commission learnt from the German submission to
the opening that additional
investment costs of EUR […] were
incurred in 2005, which further increase the cash-flow losses. These
investment costs were included.

Cash-flow calculations (*)

(A)
Airport
Status Quo

(B)
Airport
Expansion
without
DHL

23.12.2008

(EUR million)

(C) =
(B) — (A)
Southern
runway
without
DHL

(7) Cash flow

[…]

[…]

[…]

2005-2042 (3) + (4)
+ (5) + (6)

(*) All values discounted to 2005; discounting rate = 6,5 %.

(211) The Commission firstly notes that

it has taken into
account the total amount of the investment and opera-
tional costs for security and safety measures for the
purposes of
the Cash-flow calculations. However, as
previously explained (see recitals 180 to 183) part of
these expenses (operations and also investment costs)
may represent measures which fall within the public
policy remit

the period 2005-2042 totals

(212) This fact notwithstanding, the cash-flow of the airport
for
to approximately
[negative cashflow] euro. The Commission cannot there-
fore accept that a market economy investor would have
decided to make the investment in the construction of
the southern runway.

show that Scenario B generates a
(213) The calculations
about
Scenario A by
cash-flow lower
EUR [100-200] million. Building the southern runway
reduces the cash flow in real terms, which is at disposal
for the financing of the pre-existing facilities.

than

(214) As the airport has still to finance the existing capital
assets amounting to EUR 642 million (book value 2005),
it will not
reach the required EBITDA to refinance
completely the existing capital assets in Scenario B. On
the presented cash flow calculations it
the basis of
cannot be assumed that
the business operations of
Leipzig Airport will reach break-even in the future. It
cannot therefore be assumed that the Southern runway
would have been built by a private investor on the basis
of Scenario B.

(215) On this basis the Commission can conclude that the
public authorities do not have a well founded expectation
of a financial return on the investment in question and
although it is their intention to make the airport more
attractive to users and therefore more profitable, they are
not guided by prospects of profitability in the longer
term (48). Rather the aim of the public financing is, as
explicitly indicated by the German authorities, regional
development, and an increase in the accessibility of the
region, the creation of jobs and environmental purposes
(i.e. noise reduction).

(48) Case C-305/89 Italy v Commission (‘Alfa Romeo’) [1991] ECR I-1603,

paragraph 20.

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(216) The Commission concludes that a private investor, even
the scale of a group in a broader
one operating at
economic context, could not,
in the normal circum-
stances of a market economy and even in the longer
term, have expected an acceptable return on the capital
invested in the case at hand.

(217)

In these circumstances the Commission is entitled to
consider that a private investor, even one pursuing a
comprehensive
regard to
immediate returns, would not,
in the normal circum-
stances of a market economy, have made the injections
of capital in question.

long-term policy without

(218) Furthermore, and without prejudice to the arguments set
out and the conclusions reached above the Commission
is obliged to observe that the discount rate applied by the
German authorities in their calculations of 6.5 % (see
point 117) implies that the calculations assume a very
low risk investment premium of approximately 3.25 %
based on a beta factor of 0.65. A beta of 0.65 means
that if the value of the overall market decreases by 1 %,
the value of the investment decreases by 0.65 %, which
implies a lower volatility of
than the
overall capital market and therefore results in a lower
risk.

the investment

(219)

In this regard, the Commission notes that some expert
sources provide beta for aerospace and airport develop-
in Europe based on statistical data of between
ment
0,81 and 1,26 (49). These beta factors are calculated for
international airports (mainly hub-airports) with good
access to capital markets because of their listing on the
stock exchange. The Commission considers that invest-
ments into smaller airports such as in the present case
would give rise to a higher level of risk because of their
size. Furthermore,
is
publicly owned and its access to capital markets is
is dependent on the support
limited, moreover,
provided by its public shareholders. Therefore,
the
Commission notes that in addition to a higher beta factor
a so-called ‘illiquidity premium’ should have been taken
into account by the German authorities in their calcula-
tion but was not. If it had been taken into consideration
the interest rates would have been higher and the net
present value of the cash flow would have been at a
lower level.

in the present case the airport

it

6.1.1.5. Distor tion of competition and affecta-

tion of trade

(221) When aid granted by a Member State strengthens the
position of an undertaking compared with other under-
takings competing in intra-Community trade, the latter
must be regarded as affected by that aid. In accordance
with settled case law (50), for a measure to distort compe-
tition it is sufficient that the recipient of the aid competes
with
to
other
competition.

on markets

undertakings

open

(222) As previously explained, the operation of an airport is an
economic activity (51). Competition takes place not only
between air carriers but also between airports. In the case
at hand, these are inter alia undertakings possibly offering
the requested premises to become a hub for air freight
traffic.

(223) Any economic advantage which the airport Leipzig/Halle
receives from the financing of
the southern runway
would strengthen its position vis-à-vis its competitors on
the European market of providers of airport services.
Therefore, the public funding under examination distorts
or
threatens to distort competition and affects trade
between the Member States

6.1.1.6. Conclusion

(224) For the reasons set out above the Commission concludes
that
the
southern runway at Leipzig-Halle airport involves State
aid within the meaning of Article 87(1) EC Treaty.

the public financing of

the development of

6.1.2. Existence

of State
Agreement and Comfort Letter

aid to DHL — Framework

6.1.1.4. Specif icity

(220) Article 87(1) EC requires that a measure, in order to be
defined as State aid, favours ‘certain undertakings or the
production of certain goods’. In the case at issue, the
Commission notes that the advantages in question were
granted to Leipzig airport only. The public funding is
directed at a single undertaking. The capital contributions
granted by public authorities have not been made avail-
able to any competing airports Airport. Thus it is a selec-
tive within the meaning of Article 87(1) EC.

(225) As already explained in the opening decision (see reci-
tals 42 to 46),
the
measures under assessment are granted by State resources
and are liable to distort competition.

the Commission considers that

6.1.2.1. Transfer of State resources

(226) The concept of State aid applies to any advantage,
granted directly or
financed out of State
resources, granted by the State itself or by any inter-
mediary body acting by virtue of powers conferred on it.

indirectly,

(49) See Damodaran Online,

http://pages.stern.nyu.edu/~adamodar/.

(50) Case T-214/95 Het Vlaamse Gewest v Commission [1998] ECR II-717.
(51) See above, paragraph 166ff.

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(227)

conclusion of

It is evident that the Framework Agreement and letter of
comfort are financed by State resources and the decisions
to grant
them are imputable to public authorities:
MFAG's supervisory board authorised on 3 June 2004
the
Framework agreement. The
majority of MFAG's supervisory board members are
representatives of public authorities (e.g. finance ministers
of Sachsen and Sachsen-Anhalt, mayors of Leipzig,
Dresden, and Halle). The letter of comfort was signed by
the finance minister of Land Sachsen on 21 December
2005.

the

6.1.2.2. Distor tion of competition and affecta-

tion of trade

(228) To the extent that the measures grant a selective advan-
tage to DHL and Leipzig Airport,
the Commission
considers that they are liable to distort competition and
affect trade between Member States.

(229)

It is also evident that the express parcel business is a
market in which companies from different Member States
compete. Any economic advantage which DHL receives
from the listed public measures will strengthen its posi-
tion vis-à-vis its competitors on the European express
parcel market.

(230) As this assessment remained undisputed by Germany and
third parties, the following discussion will focus on the
extent
to which the Framework agreement and the
comfort letter favour DHL.

6.1.2.3. Economic advantages for DHL through

Framework Agreement

(231) The Commission will analyse for each of

the offered
services — warranties,
lease, and airport services —
whether the Framework Agreement offers an appropriate
remuneration which a private investor would have
accepted.

(i) Warranties

(232) The Framework Agreement does not offer any explicit
premium payments for the provided warranties. The only
possible source of remuneration will be the incremental
cash-flow which the airport may earn from the construc-
tion and operation of the southern runway. The Commis-
sion will therefore, firstly, calculate the incremental cash-
flow for the southern runway. Secondly, the Commission
will check whether this incremental cash-flow provides a
sufficient remuneration for the warranties provided.

(233) A private investor would have decided whether to enter
into the Framework Agreement along with whether to
build the southern runway, thus the reference date for
the private investor test must be November 2004, before
the date construction works started. As explained above

(see recital 215 and following), the Commission holds
that a private investor would not have wilfully damaged
his negotiating position by sinking investment costs into
to the conclusion of a
the southern runway prior
contract for its use. The cash-flow calculations clearly
show that
the southern runway without having DHL
coming to Leipzig Airport would not have been a viable
business alternative because an incremental cash-flow
loss of about EUR […] would have resulted (see column 5
in Annex 1). Therefore by first constructing the southern
runway, and then signing the Framework Agreement, the
airport did not act as a private investor would have. The
scenario ‘expansion without DHL’ was only feasible due
the granting of substantial aid. Therefore the scenario
cannot be used as a point of reference for the private
market investor test.

(234) The Commission will therefore retain its approach devel-
oped in the opening decision to calculate the incremental
cash-flow for the construction of the southern runway
by taking the difference of the cash-flows resulting from
the expansion scenario with DHL and the status-quo
scenario (operation of
the existing northern runway
only).

(235) The calculation starts in 2005 when the airport incurred
the first investment costs of about EUR […] for the
southern runway of which the Commission only became
aware after the opening decision.

earlier

according

submission

(236) The cash-flow calculation will not go beyond 2042 and
not include the terminal values proposed by Germany,
by
an
to
because,
Germany (52), the useful
life of a runway amounts to
about 30 years. Furthermore, a private investor would
not be willing to finance the southern runway if it did
not yield a satisfactory return in its prime — the first
37 years of operation from 2005 until 2042. Therefore
the cash-flow analysis will only cover this time period for
the purpose of assessing the effect of the investment on
the airport's profitability.

(237) The proposed terminal values are also disregarded
because they lack credibility. The terminal values are
based on an infinite rent which grows annually by
3 percent. Such a calculation is not realistic because a
runway has a limited capacity and revenues cannot grow
infinitely. This leads e.g.
in
Germany's calculation for the expansion scenario with
DHL that the discounted terminal value is five times as
high as the airport's discounted cash-flow for 2005
to 2042 (53).

to the paradoxical result

(238) As explained in more detail in Annex 1, the calculations
of the discounted incremental cash-flow of the southern
runway show in 2005 that the revenues fall short of the
investment costs by about EUR […] for the period 2005
to 2042 (see column 4 in Annex 1).

(52) Submission from Germany, 21 July 2006, p. 12.
(53) See the calculations provided by Germany (recital 88 above).

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(239) The airport will therefore not be able to finance any risk
costs out of the cash-flow of the southern runway. Risk
insurance could only be said to be accepted business
the project was profitable and the airport
practice if
could refinance the risk, as it is not the case.

(240)

to the

start of

takes over

subsequent

the airport

In offering unlimited warranties for the operation of the
the DHL hub
airport
(according to sections 8 and 9 of the Framework Agree-
ment),
risks which it cannot
control. As explained in more detail in recitals 17 to 19
of the opening decision, the airport is neither able to
control the preferential access of DHL to the southern
runway (which falls under the responsibility of the public
flight control) nor the introduction of night flight restric-
tion (which is the responsibility of public authorities).

(241) Germany itself calculates that the risk of a night flight
ban puts a financial cost of about EUR […] on the
airport. This leads consequently to an increase of the
cash-flow loss to EUR […] (see column 4 of annex 1).
Even though it is clear that the airport cannot finance
the risk costs out of its own revenues, the Commission
would nevertheless like to point out that these EUR […]
can only be seen as a lowest end of the scale. Among
other flaws in the calculation, Germany neglects that the
airport would go into bankruptcy if it had to pay an
amount of EUR […] or EUR […] to compensate DHL for
the costs of moving to another airport due to a night
flight ban. Additionally, the calculations by Germany do
not take account of the other warranted risks (e.g. access
to southern runway which is controlled by public flight
control).

(242) Finally,

the Commission wants to emphasise that

the
calculations would still show a negative cash-flow even if
the Commission followed Germany's argument
that
security and safety costs of EUR […] fell within the
public policy remit and had therefore to be excluded
from the airport's costs (54). As shown in column 4 of
loss of EUR […] would also
annex 1, a substantial
remain in this scenario.

(243) Although the above calculations are sufficient to prove
that a private investor would not have granted such an
unlimited warranty, the Commission would nevertheless
like to add that closer scrutiny would establish even
higher losses. As Germany pointed out, the UK regulator
used a cost of capital
terms and pre-tax) of
(in real
6,2 percent for Heathrow Airport and 6,7 percent for
Gatwick Airport in his calculations to set airport fees for
the period 2008 to 2013. While both Heathrow and
Gatwick Airport can rely on a substantial demand for
flights into and from London, Leipzig Airport
faces
excess capacity and has to compete with other airports
for attract
low-cost passenger and cargo airlines. As
Leipzig Airport is therefore exposed to higher market
risks than Heathrow or Gatwick Airport, a cost of capital
(in real terms and pre-tax) higher than 6,5 percent would
seem appropriate.

(54) The amount of EUR […] is the discounted sum of the operating and
investment costs for safety and security measures which the airport
plans to undertake for the southern runway. Annex 1 also lists the net
present values of the safety and security and security costs for the
other business scenarios.

(244) Additionally, the fact that — according to Germany (55)
— private financial institutions were not ready to hedge
the risks which result from the warranty for the opera-
tion of the airport subsequent to the start of the DHL
hub confirms
that no private operator would have
offered such an unlimited warranty to cover risks which
he cannot control.

(245) Arguments advanced by Germany and DHL that

the
mutual provision of warranties between contracting
parties is usual business practice are not more than a
general statement and are therefore irrelevant because the
above calculations show clearly that in the particular case
Leipzig Airport is just not able to finance the offered
warranties out of its own resources. A private investor
would only enter a contract which yields a profit and
does not deteriorate its financial position.

(246) To conclude, the Commission would like to return to
Germany's argument that — given the southern runway
was already constructed — a private investor would have
signed the framework agreement because the cash-flow
was higher with than without DHL. Germany's argument
misses the essential point that — as shown above — the
risk costs cannot be financed out of own revenues. To be
able to offer the warranties to DHL, Leipzig Airport must
resort to the capital which has been contributed for the
construction of the southern runway. However, as the
foregoing section has established, these capital contribu-
tions themselves constitute aid. Therefore, whatever the
timing of the analysis, it comes down to the result that
the warranties have necessarily been financed by aid.

(ii) Lease contracts

(247) Taking note of the comments by DHL and Germany, the
Commission considers that the lease contracts do not
the
provide financial advantages to DHL because of
following reasons:

(a) The lease contracts for the apron and the further
ground handling areas are based on market interest
rates and Leipzig Airport is not limited in its choice
of financing.

(b) The reservation of certain land plots to DHL seems
to constitute a customary provision in German rental
law and does not — in any case — prevent the loca-
tion of competitors at Leipzig Airport because a large
number of land plots are still available to them.

(iii) Airport fee arrangement

(248) Taking note of the comments by DHL and Germany, the
Commission considers that the airport fee arrangements
do not provide financial advantages to DHL because of
the following reasons:

(a) DHL pays the same fees as other users of Leipzig

Airport.

(55) Submission from Germany, 21 July 2006, p. 7.

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(b) As it can be seen from the comparison of airport fees
which DHL has submitted, the airport fees charged
by Leipzig Airport are […] to […] percent higher
than at other competing cargo airports in Europe.
The Commission has therefore no basis to conclude
that
is not market
fee arrangement
conform.

the airport

6.1.2.4. Economic advantages for DHL through

comfor t letter

(249) The Guarantee Notice sets out criteria which ensure that
a guarantee does not constitute State aid. Two essential
cumulative conditions are:

6.1.2.5. Conclusions on existence and lawful-

ness of State aid to DHL

(252) The Commission finds that the (i) unlimited warranties
granted by the Framework Agreement
(according to
sections 8 and 9); and (ii) the comfort letter constitute
aid in the meaning of Article 87(1) EC Treaty because the
Land Sachsen, MFAG, and Leipzig Airport hedge business
risks for DHL at terms which a private investor would
not have accepted. Without public support Leipzig
Airport would have neither been able to finance the
southern runway nor to enter into the Framework Agree-
ment with DHL.

(253) As the Framework agreement had been signed and put it
the unlimited
into effect before Germany notified it,
warranties granted by the Framework Agreement consti-
tute unlawful aid in contravention of Article 88(3)
EC Treaty.

(a) The guarantee could in principle be obtained on

market conditions from the financial markets.

6.2. Compatibility of aid

(b) The market premium for the guarantee is paid.

6.2.1. Compatibility of aid to the airport

(250) The comfort letter — by which Land Sachsen assumes
(i) to provide sufficient capital to Leipzig Airport and
MFAG to fulfil the commitments given in the Framework
Agreement and (ii)
to be directly liable for DHL's
compensation claims up to EUR […] m — fulfils neither
of these two criteria:

(a) According to Germany (56), Leipzig Airport sought,
but was unable
eventually
to cover
addressed by the comfort letter through private finan-
cial institutions.

risks

the

(b) As neither DHL nor MFAG nor Leipzig Airport is
obliged to pay any premium for the comfort letter,
the risk exposure of Land Sachsen is not directly
remunerated.

(251) Furthermore, it can also not be said that Land Sachsen is
indirectly remunerated as shareholder of Leipzig Airport
because the airport's share value will effectively decrease
due to the cash-flow losses of the expansion with DHL.
By the same token, any arguments about proportionality
between the comfort letters granted by Land Sachsen and
Deutsche Post AG are irrelevant because the incremental
cash-flow for the southern runway is just not sufficient
the airport and its
to finance the risk exposure of
owners.

(56) Submission from Germany, 21 July 2006, p. 7.

(254) As set out above the total amount of the investments will
be financed from public resources which (although some
of the public financing may be destined for public policy
expenditure)
the present decision
involves State aid (57).

for the purposes of

(255) The Commission must establish if the aid can be found
compatible with the common market. Article 87(3) of
the Treaty provides for certain exemptions to the general
rule of incompatibility set out in Article 87(1) of the
Treaty.

(256)

In this regard, the ‘2005 Guidelines’ provide a framework
for assessing whether aid to airports may be declared
compatible pursuant to Article 87(3)(c). They mention a
number of criteria which the Commission takes into
account in this regard.

(257) The Commission must examine in particular, according
to paragraph 61 of the 2005 guidelines, whether:

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

(b) the infrastructure is necessary and proportional to

the objective which has been set;

(57) The aid intensity cannot be precisely calculated as the Commission
cannot exclude that the notional private investor would have reduced
its exposure by investing a lower amount.

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Official Journal of the European Union

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(c) the

infrastructure has

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

(d) all potential users of the infrastructure have access to

it in an equal and non-discriminatory manner;

(e) the development of trade is not affected to an extent

contrary to the Community interest.

(i) construction and operation of

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

(258) The project aims at the creation of a new air-freight hub
and multimodal cargo centre based on the airport. The
air freight sector, in particular express freight, is showing
considerable growth rates. Air
are
expanding their operational capacities. However, the three
main air-freight hubs in Germany — Frankfurt Main,
Munich and Köln/Bonn are facing night flight capacity
constraints.
that Frankfurt Main Airport
should have to discontinue its night flight operations or
decrease the number of the night flights, Germany would
face a serious air-freight capacity crunch.

In the event

carriers

freight

(259)

the investment

for airports and concludes that

In this context,
is in line with the
Commission's 2007 Action Plan for Airport Capacity (58),
which notes that ‘given the expected traffic evolution, Europe
face an ever growing gap between capacity and
will
demand’
this ‘capacity
crunch at airports poses a threat to the safety, efficiency and
competitiveness of all actors involved in the air transport supply
chain’ (59). In the same Action Plan, the Commission high-
lights the need not only for more efficient use of existing
runways, but also for ‘support for new infrastructure’ and
underlines the importance of regional airports in order
to address this capacity crunch.

forms part of
airport
the

the strategy for
(260) The envisaged project
the development of
contained in the
Trans-European Transport Network Outline Plan (2020
horizon) from 2004 as a ‘Community connecting point’.
The airport is located in the region of Middle Germany
(close to five major Trans-European transport axes and
Pan-European corridors) between the axes from North to
South Europe (i.e. Federal motorway A 9) and from the
West to Eastern Europe (i.e. Federal motorway A 14)
with an access to excellent rail and road network. The
access to rail and road network facilitates intermodality
of
freight transport and results in more efficient and
environmentally friendly transport, and furthermore,
contributes to sustainable development. Therefore the
project is in line with the ‘development of an integrated
European air transport network’ as set out in Point 12 of the
abovementioned Action Plan which notes that ‘it would be
desirable to unlock existing latent capacity at regional airports
provided that Member States respect Community legal instru-
ments relating to state aids’.

(58) Communication from the Commission to the Council, the European
Parliament, the European Economic and Social Committee and the
Committee of the Regions An action plan for airport capacity, effi-
ciency and safety in Europe, 24 January 2007, COM(2006) 819 final.

(59) Action Plan, point 7 and box in page 3.

(261)

It is foreseen that the implementation of the project will
have a positive impact on the entire region and will
significantly influence its economic and social develop-
ment. It will in particular improve access to the Region
and increase its attractiveness for investors and visitors.
This should have a positive on employment bearing in
mind that unemployment is significantly higher in the
Leipzig-Halle region than the national average.

(262) The investment work at stake will facilitate a better, safer,
more environmentally friendly and more rational use of
the existing infrastructure and will
therefore improve
airport safety, security and efficiency. The new alignment
of the southern runway avoids that in the future densely
populated areas in the north of Leipzig and in the south
of Halle are over-flown. In particular, an area of Leipzig,
which is located close to the airport grounds at the head
of
the original southern runway, was affected by the
noise because of the location of take-off and approach
paths.
In addition, the old southern runway was not
facing in a direction with favourable meteorological
conditions for take-off and landing. The most common
prevailing wind direction, taken over the year and for
individual months, is south-west. This can be disadvanta-
geous with regard to disruptive crosswind components.
The new alignment satisfies meteorological requirements
enabling ILS CAT III
flight
operations. Furthermore, the distance between the two
runways allows independent operation of air
traffic,
which was not the case previously for safety reasons
because of risk of collision.

(all weather)

instrument

(263) The Commission can therefore

that

conclude

the
construction and operation of the infrastructure meets a
clearly defined objective of general
interest, being the
development of an airport with a large air freight compo-
nent in line with EU policy in this respect due account
being taken of regional and environmental aspects and
that
this criterion of compatibility is fulfilled in the
present case.

(ii) the infrastructure is necessary and proportional to

the objective which has been set

(264) The figures provided by the German authorities clearly
show that the airport as currently laid out cannot meet
expected growth foreseen in either passenger or freight
traffic. As previously mentioned, it is expected that the
airport will experience a gradual but significant increase
in passenger and freight traffic over the lifetime of the
new southern runway.
In 2006 the airport handled
2.3 million passengers and according to estimates it will
serve about 6-7 million passengers in 2010. Further
increase is expected in the future in the freight traffic
operations in particular with regard to further night
flights restrictions at other German airports (i.e. Frankfurt
Main, Köln/Bonn etc.).

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(265) For various reasons the old southern runway was consid-
ered as deficient infrastructure not suitable for purpose.
First, it has to be recalled that in the present case the old
southern runway was built between 1957 and 1960. The
alignment of the old southern runway was decided on
the basis of the military airspace structure of the former
German Democratic Republic and not the meteorological
requirements
defects
(i.e. cracks in the pavement slabs, spalling and washout
of the runway bed) had already started to appear.
In
order to rectify these defects, a new concrete surface was
built on top of
the damaged runway in 1983/84.
However, the new concrete surface was not connected to
the original surface and the renewal of the runway was
only superficial and proved to be inadequate.

aviation. Around 1980,

for

(266) This inadequacy became particularly apparent from 1990
on, when the runway was used much more often. For
example, cracks in the lower surface created cracks in the
new upper surface causing extensive spalling and major
the runway
longitudinal distortions at both ends of
which resulted in pavement buckling. Buckling of the
pavement poses a serious danger to aviation safety when
pavement blowups occur in summer as a result of higher
an
temperatures. The
increasing level of damage and expensive and dispropor-
tional maintenance.

consequences of

this were

(267)

(268)

In addition, the original southern runway was 2 500 m
long and as such could only be used for short-haul
flights.
It could not be used for fully loaded aircraft
weighing more than 30 t. Consequently, the efficiency of
Leipzig Airport was seriously impaired (aircraft of the
types Boeing B 747, B 767 and McDonnell Douglas MD
11 when fully fuelled and loaded require runways of
between 2 925 m und 3 320 m for take-off). This defi-
ciency also significantly increases the likelihood of inter-
ruptions in operations (e.g. in the event of the northern
runway being closed). Also from the aviation safety
perspective it was necessary to adapt the alignment of
the old southern runway. Even with aircraft landing in
the two runways could not
the westerly direction,
operate in parallel because there was always a possibility
that approaching planes would have to abort the landing
and take off again in order to avoid a collision. Therefore,
the German Air Traffic Control Service (Deutsche Flugsi-
cherung GmbH, DFS) had to treat the two runways as if
they were a single runway for flight operations.

the

the forecast

conditions mentioned above,

the
In view of
maximum number of take-offs and landings which could
occur on the original runway was calculated and a simu-
lation conducted on the basis of
flight
schedule for a freight hub at Leipzig Airport. The results
of the simulation of the forecast flight schedule showed
there would be significant time delays for planes taking
off and landing during peak hours. Planes landing could,
on average, expect to wait around 21 minutes (in both
directions of operation) and planes departing around six
minutes.
there were even delays of
between 30 minutes and one hour for landings, and up
to 18 minutes for take-offs.

In specific cases,

(269) As noted previously, the capacity of the airport to obtain
finance other than from or through the intercession of
its public shareholders is very limited and therefore an
aid intensity of 100 % was necessary. The German
authorities have been able to show that all of the infra-
structure that they will undertake and finance are neces-
sary to attain the goals that they have set and the project
is not disproportionately large or elaborate.

(270) Thus, taking all of the above considerations into account
the Commission can reach the conclusion that the infra-
structure in question is necessary and proportional to the
objectives which have been set.

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

(271) Due to its location in the centre of Europe and its
surrounding market of approximately 7 million persons
within 100 km of the airport and its location next to
excellent road and rail infrastructure the airport has large
the air freight
growth potential. As previously stated,
sector is showing considerable growth rates (i.e. average
growth rate in international passenger transport between
2002 and 2006 of approximately 7.4 % and on the
freight side 6.2 %) (60). However, the current airport capa-
cities are facing night flight constraints.

(272) With regard to the freight growth at Leipzig airport the
German authorities expect high growth rates in the first
years and as from 2013 an average growth rate of 3 %.
In comparison, IATA expects an average annual growth
rate for 2007-2011 for passengers of about 5.1 % and
freight of 4.8. The German authorities
forecasted
(in 1999) about 4 million passengers in 2004 and
6-7 million passengers
in 2010. According to the
German authorities a more recent study expects an
increase from 2.1 million passengers in 2005 to 4.8
million passengers per year.

(273) Thus, in the medium term, the new infrastructure offers
good perspectives
for use, especially in relation to
existing infrastructure, which the planned works will
optimise.

(iv) all potential users of the infrastructure have access
to it in an equal and non-discriminatory manner

(274) As indicated by the German authorities, all potential
users (airlines) will have access to the new infrastructure
on an equal and non-discriminatory basis. DHL will use
the new southern runway only 19 % of
the time
amounting to only 9.4 % of the overall capacity of the
airport as a whole. With regard to the use of the runway
capacity by DHL the Commission notes, that in most

(60) IATA, Passenger and freight forecasts 2007 to 2011, October 2007.

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(hub) airports it is not unusual that the incumbent airline
utilise approximately 60 — 80 % of the overall runway
capacity, effectively functioning as anchor tenants. This
phenomenon is also becoming more prevalent in the low
cost sector in their use of regional or secondary airports.

(275) The reservation of certain time frames (in effect slots) to
DHL reflects the commercial reality of the express cargo
business. Moreover, in the present case, Leipzig Airport is
not a congested airport (‘slot-constrained’ airport) and
therefore, there are no capacity restrictions. This means
that the reservation of certain time frames does not have
a negative impact on DHL's competitors. This has been
largely confirmed by the observations received from
cargo operators and passenger air carriers (i.e. Panalpina,
Jade Cargo International, Ruslan-Salis, Lufthansa Cargo,
CARGOLUX Condor etc.).

(276) With regard to the allocation of time frames (or slots) in
Leipzig/Halle airport as with most (uncongested) airports
the available slots are allocated on a ‘first come first
served’ basis. Intrinsic to the operation of all airports is
the concept that the air carriers retain the slots that they
have received. This is referred to as ‘grand-father rights’.
The allocation of slots to DHL at
this uncongested
airport and the possibility for DHL to retain these slots is
therefore not an advantage to DHL in State aid terms

(277)

It should however be recalled that such ‘rights’ cannot
derogate from Community or national law. In this regard,
the Commission takes this opportunity to remind the
German authorities that in the case of congestion of
Leipzig/Halle airport
they must carry out a capacity
analysis in accordance with the provisions of Council
Regulation No 95/93 (as amended) on common rules for
the allocation of slots at Community airports (61).

(278)

In the view of the above the Commission can conclude
that all potential users of the infrastructure have access to
it in an equal and non-discriminatory manner.

(v) the development of trade is not affected to an extent

contrary to the Community interest

(279) The airport falls in category C, as defined by paragraph
15 of the 2005 Guidelines. Although there will be an
impact on competition and trade at Community level,
the Commission has to determine if this is to an extent
contrary to the Common interest.

(280) The Commission firstly notes that

the new southern
runway while it optimises capacity at the airport is no

(61) OJ L 14, 22.1.1993, p. 1.

more than a replacement for a pre-existing runway which
was not optimally positioned.

(281) As previously referred to, the main cargo airports in
Germany with which Leipzig-Halle competes are facing
capacity or night flight restrictions and therefore future
competition is unlikely. There is therefore little or no risk
of distortion of competition with these airports.

(282) As previously indicated, when DHL was canvassing for
possible European hubs it settled on a short-list of
Leipzig/Halle, Vatry and Brussels.
In this regard the
Commission notes that neither Brussels nor Vatry has
commented during the opening of procedure. The
Commission also notes that no other European airport
has indicated during the opening of procedure that the
development of Leipzig/Halle airport as set out above
gives them cause for concern. Nor has the Commission
identified specific competition concerns vis-à-vis any
other EU airport.

(283) On the basis of the above, the Commission can therefore
conclude that the development of trade is not affected to
an extent contrary to the common interest.

6.2.2. Incompatibility of the unlimited warranties under the

Framework agreement and the comfort letter

(284) As

has

DHL

already

benefited

from the
maximum amount of investment aid permissible under
Article 87(3)(a) EC Treaty, the aid which DHL receives by
the Framework Agreement and the comfort letter consti-
tutes operating aid.

(285) According to the regional aid guidelines (62), operating
aid is normally prohibited. Exceptionally, such aid may be
granted in regions eligible under
the derogation in
Article 87(3)(a) EC Treaty provided that certain strict
conditions are fulfilled (63). As Germany has not provided
any evidence that these conditions are met, the Commis-
sion finds that the operating aid to DHL is not compa-
tible under Article 87(3)(a) EC Treaty.

(286)

information proving the opposite,

In absence of
the
Commission finds also that the aid to DHL does not fulfil
any other objective of common interest. Therefore, as
none of the exceptions provided by Article 87(2) and
the unlimited
Article 87(3) EC Treaty are applicable,
warranties granted by the Framework Agreement and the
comfort
letter have to be considered as incompatible
with the common market.

(62) Guidelines on national regional aid 2007-2013, OJ C 54, 4.3.2006.
(63) In particular, operating aid has to target bottlenecks in regional devel-
opment, to be proportional to the specific handicaps it seeks to alle-
viate, to be digressive, and to be limited in time.

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6.2.3. Elimination of incompatible aid granted to DHL

(287) According to the Court of Justice's established case-law,
the Commission is competent to decide that the state
concerned must abolish or alter aid (64) when it has
found that it is incompatible with the common market.
The Court has also consistently held that the obligation
on a state to abolish aid regarded by the Commission as
being incompatible with the common market is designed
to re-establish the previously existing situation (65). In this
context, the Court has established that that objective is
attained once the recipient has repaid the amounts
granted by way of unlawful aid, thus forfeiting the advan-
tage which it had enjoyed over its competitors on the
market, and the situation prior to the payment of the aid
is restored (66).

(288) Following that case-law, Article 14(1) of Regulation (EC)
No 659/99 (67) laid down that: ‘where negative decisions
are taken in respect of unlawful aid, the Commission
shall decide that the Member State concerned shall take
all necessary measures to recover the aid from the benefi-
ciary (…). The Commission shall not require recovery of
the aid if this would be contrary to a general principle of
Community law’.

(289) To ensure that DHL does not enjoy any economic advan-
tages out of the incompatible aid measures, the Commis-
sion considers three actions as necessary:

(a) The comfort letter must not be implemented.

(b) The unlimited warranties must be abolished.

(c) As the unlimited warranties have covered the period
from 1 October 2007 (which is the operations start
date of the DHL hub) onwards, the aid which has
already been put at the disposal of DHL must be
recovered.

(290) For the calculation of the aid element which has already
been put at the disposal of DHL, the Commission would
firstly like to note that, according to the case-law of the
Court of Justice, no provision of Community law requires
the Commission, when ordering the recovery of aid
declared incompatible with the common market, to fix
the exact amount of the aid to be recovered. It is suffi-
cient for the Commission's decision to include informa-
tion enabling the recipient to work out himself, without
overmuch difficulty, that amount (68).

(291) To quantify the aid element, the warranty fee needs to be
calculated for the first months of the DHL hub opera-

(64) Case C-70/72, Commission v Germany, [1973] ECR 00813, point 13.
(65) Joined Cases C-278/92, C-279/92 and C-280/92 Spain v Commission,

[1994] ECR I-4103, point 75.

(66) Case C-75/97, Belgium v Commission,

points 64-65.

[1999] ECR I-030671

(67) OJ L 83, 27.3.1999, p. 1.
(68) See,

in particular, Case C-480/98 Spain v Commission [2000]
ECR I-8717, point 25, and Case C-415/03, Commission v Greece,
[2005] ECR 0000, point 39.

a

private

insurance

tions starting on 1 October 2007 until the abolition of
It has to be asked which fee
the unlimited warranty.
would
on
21 September 2005, when the framework agreement was
signed, for the period from 1 October 2007 until the
abolition of
In a competitive
insurance market, the warranty fee will be equal to the
expected risk costs which the warranty has to cover.

the unlimited warranty.

demanded

have

(292) Germany has already provided an estimate of

the
the complete
expected risk costs of EUR […]
[…] years duration of
the framework agreement. As
already explained before, these risk costs result from the
following calculation:

for

(a) Germany assumes that the compensation claims will
linearly decrease over time as a result of the amortisa-
investments. Starting from the
tion of DHL's
maximum of EUR […] in year […],
this implies
e.g. EUR […] in year […] and EUR […] in year […].

(b) To simplify the analysis, Germany does not use a
continuous probability distribution for the risk of a
night flight ban but assumes that after half of the
contract period — in year […] — a night flight
restriction will be introduced with a probability of
[…] percent. Multiplying
the nominal damage
claims of EUR […] in year […] by the probability of
[…] percent gives expected nominal risk of EUR […]
in year […] and a discounted value to EUR […] for
the expected risk costs.

(293) The Commission considers that for having a correct esti-
the risk costs, Germany has to change the

mate of
following elements in its calculation:

(a) Contrary to Germany's assumption, certain parts of
DHL's compensation claims will remain stable over
time (e.g. costs for removal of equipment, damage
claims by DHL clients for late delivery, etc.). The
the nominal damage claims over
development of
time must accordingly be adjusted.

risks (e.g. preferred use of

(b) Germany's calculation only focuses on the risk of a
night flight ban. However, the warranty also covers
daily operational
the
southern runway). These risks must
therefore be
included in the calculation. The damage claims due to
operational risks and their probability of entry must
be estimated and the resulting net present value of
these risk costs must be calculated.

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L 346/33

(c) While the Commission could accept the simplified
analysis proposed by Germany as regards the prob-
ability for the risk of a night flight ban, as regards
the daily operational risks, the Commission considers
that the probability must be estimated on an annual
basis. The time-series of the expected yearly damage
claims must be discounted to arrive at
the net
present value for the daily operational risk.

(294) Based on the re-estimated risk costs for the complete
period of the framework agreement, Germany will have
to accordingly apportion the risk costs to arrive at the
warranty fee for the period from 1 October 2007 until
the abolition of the unlimited warranty.

7. CONCLUSION

7.1. In relation to the aid to the airport

(295) The Commission considers that the measure in question,
which allows Leipzig-Halle airport to realise the invest-
ment project in accordance with the conditions described
previously, is not prejudicial to the common interest and
that the five criteria set out in the Guidelines have been
satisfied in the present case.

7.2. In relation to the aid to DHL

(296) The Commission finds that

the unlimited warranties
granted by the Framework Agreement and (the comfort
letter constitute aid in the meaning of Article 87(1)
EC Treaty because the Land Sachsen, MFAG, and Leipzig
Airport hedge business risks for DHL at terms which a
private investor would not have accepted.

of

investment

(297) As DHL has already benefited from the maximum
amount
under
Article 87(3)(a) EC Treaty, the Commission considers that
the unlimited warranties granted by the Framework
Agreement and the comfort letter have to be considered
as incompatible with the common market,

permissible

aid

HAS ADOPTED THIS DECISION:

Article 1

The State aid which Germany is planning to implement
amounting to EUR 350 million in relation to the construction
of a new runway and related airport infrastructure at Leipzig
Halle Airport is compatible with the common market under
Article 87(3)(c) of the EC Treaty.

Article 2

The State aid which Germany is planning to implement by
granting the comfort letter in favour of DHL is incompatible
with the common market. The aid may accordingly not be
implemented.

Article 3

The State aid which Germany granted to DHL in the form of
unlimited warranties (according to sections 8 and 9 of
the
Framework Agreement)
incompatible with the common
market. These unlimited warranties granted by the Framework
Agreement must accordingly be abolished.

is

Article 4

1.
Germany shall recover the part of the aid referred to in
Article 3 which has already been put at the disposal of DHL
(i.e. the warranty fee for the period from 1 October 2007 until
the abolition of the unlimited warranties).

2.
The sums to be recovered shall bear interest from the date
on which they were put at the disposal of the beneficiary until
their actual recovery.

3.
The interest shall be calculated on a compound basis in
accordance with Chapter V of Regulation (EC) No 794/2004
and to Regulation (EC) No 271/2008 amending Regulation (EC)
No 794/2004.

Article 5

1.
Recovery of the aid referred to in Article 3 which has
already been put at the disposal of DHL shall be immediate and
effective.

2.
Germany shall ensure that this decision is implemented
within four months following the date of notification of this
Decision.

Article 6

1. Within two months following notification of this Deci-
sion, Germany shall submit the following information to the
Commission:

(a) the total amount (principal and recovery interests) to be

recovered from the beneficiary;

(b) a detailed description of the measures already taken and

planned to comply with this Decision;

(c) documents demonstrating that

the beneficiary has been

ordered to repay the aid.

the
Germany shall keep the Commission informed of
2.
progress of the national measures taken to implement this Deci-
sion until recovery of the aid referred to in Article 3 which has
already been put at the disposal of DHL has been completed. It
shall immediately submit, on simple request by the Commission,
information on the measures already taken and planned to
comply with this Decision. It shall also provide detailed informa-
tion concerning the amounts of aid and recovery interest
already recovered from the beneficiary

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This Decision is addressed to the Federal Republic of Germany.

Article 7

Done at Brussels, 23 July 2008.

For the Commission

Antonio TAJANI

Vice President

Neelie KROES

Member of the Commission

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L 346/35

ANNEX

Cash-flow calculations for aid to DHL

Table 1

Cash-flow calculations

Cash-flow calculations (*)

(1)

(2)

(3)

Airport

Airport

Airport

Status Quo

Expansion
with DHL

Expansion
without DHL

(EUR million)

(4)=(2)-(1)
Southern
runway
with DHL

(5)=(3)-(1)
Southern
runway
without DHL

EBITDA (1) (2006-2042)

Investment costs (2006-2042)

Investment costs 2005

Cash-flow 2005

Risk costs (**)

a

b

c

d=a+b+c

e

Risk-adjusted cash-flow 2005

f=d+e

Correction for security and safety costs

[…]

[…]

[…]

[…]

[…]

[…]

Security and safety cost
ating + investment costs) (**)

(oper-

g

[…]

Corrected cash-flow 2005

h=f+g

[…]

(1) Earnings before interest, taxes, depreciation and amortisation.
(*) All values discounted to 2005.
(**) Calculated by Germany.

Calculation of the cash-flow for the southern runway

[…]

[…]

[…]

[…]

[…]

[…]

[…]

[…]

[…]

[…]

[…]

[…]

[…]

[…]

[…]

[…]

[…]

[…]

[…]

[…]

[…]

[…]

[…]

[…]

[…]

[…]

[…]

[…]

[…]

[…]

[…]

[…]

Germany submitted 3 different scenarios for the development of the 2006-2042 cash-flows of Leipzig Airport:

— Airport — Status quo: The southern runway is not built. The airport operations continue on the existing northern

runway.

— Airport — Expansion with DHL: The southern runway is built and DHL begins operating its European hub in 2008.

— Airport — Expansion without DHL: The southern runway is built but DHL does not move to Leipzig and another

operator will be attracted to the airport after 2010.

Based on the differences in cash-flows, the expected profitability of the southern runway is calculated thus:

— Southern runway with DHL: This column shows the cash-flow difference between the expansion with DHL and the

status quo.

— Southern runway without DHL: This column shows the cash-flow difference between the expansion without DHL and

the status quo.

Difference between cash-flow calculations of the opening and the current calculations

— While the opening decision discounted revenues and costs to 2006, the current calculations take 2005 as reference
year because the decision to build the southern runway was taken in November 2004, and construction started in
early 2005.

— The Commission learnt from the German submission to the opening that additional investment costs of EUR […] were

incurred in 2005, which further increase the cash-flow losses. These investment costs were included.

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Cash-flow calculations show substantial losses for southern runway

— The construction and operation of the southern runway with DHL yields a discounted cash-flow loss of about

EUR […] in 2005. The discounted cash-flow loss for the expansion without DHL amounts to EUR […].

— Finally, the risk costs of EUR […] (as calculated by Germany) increase the cash-flow losses to EUR […] for the southern
runway with DHL. It is thereby important to note that the estimated risk costs of EUR […] m merely represent lowest
end of the scale since the Germany does not quantify all risks assumed by the airport and builds its calculations on
very questionable assumptions.

— Even if the Commission followed Germany's argument that security and safety costs of EUR […] fell within the public
policy remit and had therefore to be excluded from the calculation for the southern runway, a substantial cash-flow loss
of EUR […] would remain.