Source: EURLEX
Language: en
Format: md

No C 63 / 4 | EN 1 Official Journal of the European Communities 14 . 3 . 95

( ECU / 100 kg )

Minimum

selling

price

Standing invitation

to tender

Tender

No

Date of

Commission

Decision

Processing

security

Commission Regulation ( EEC ) No 3398 / 91
of 20 November 1991 on the sale by invi ­
tation to tender of skimmed-milk powder
for the manufacture of compound feed ­
ingstuffs and amending Regulation ( EEC )
No 569 / 88

( OJ No L 320, 22 . 11 . 1990, p. 16 )

70 7 . 3 . 1995 209,53 45

STATE AID

C 45 / 94 ( NN 105 / 93 )

Spain

( 95 / C 63 / 05 )

( Text with EEA relevance )

( Articles 92 to 94 of the Treaty establishing the European Community )

Commission communication pursuant to Article 93 ( 2 ) of the EC Treaty to other Member
States and interested parties concerning a partial opening of the Article 93 ( 2 ) procedure with
regard to the aid for the development of the regional aircraft ( turbo-prop ) CASA-3000 by

Construcciones Aeronauticas SA ( CASA )

By the following letter the Commission has informed the
Spanish Government of its decision to open partially the
Article 93 ( 2 ) procedure :

' At its cabinet meeting of 20 December 1991 the Spanish
Government authorized the then Ministry of Industry,
Trade and Tourism to conclude an agreement with
Construcciones Aeronauticas SA on a feasibility, defi ­
nition and development programme for a civil transport
aircraft .

Subsequent to this authorization, a cooperation
agreement in respect of the CASA-3000 project put
forward by Construcciones Aeronâuticas SA was signed
on 27 December 1991 by the Ministry and Construc ­
ciones Aeronauticas SA .

The agreement provided for the granting of repayable
loans on a yearly basis for the feasibility, definition and
development stage of the CASA-3000 programme for a
total amount of Pta 32,897 billion ( about ECU 209
million ) at current prices for each year of the

programme .

The definition stage of the CASA-3000 programme set
out in the agreement was conducted during 1991, 1992
and the first quarter of 1993 and the relevant funds
corresponding to these financial years were disbursed
( Pta 2,591 billion ( ECU 16,4 million ) for 1991 and Pta

1,534 billion ( ECU 9,7 million ) for 1992 ).

The cooperation agreement was supplemented by an
agreement of 1 June 1993 .

By letter of 13 September 1993, recorded as received on

14 September 1993, the Office of the Spanish Permanent
Representative notified the granting of the loans for the
CASA-3000 programme .

Answers to a request for supplementary information
were provided by letter of 6 October 1993, recorded as
received on 4 November 1993 .

In 1991 and 1992 loans had already been provided for
the feasibility and definition phase . The cooperation
agreement, which proved to be the legal basis for the aid
for all the different activities including development,
entered into force prior to the date of notification . The
agreements do not contain the condition that aid can
only be paid after approval by the Commission .
Consequently, the aid had to be regarded as
non-notified .

CASA ( Construcciones Aeronauticas SA ) is the sole
aircraft manufacturer in Spain and one of the
participants in the Airbus consortium .

The company, Construcciones Aeronauticas SA, operates
in the aerospace sector and is involved in the design,
development, manufacture, assembly and certification of
civil and military aircraft . It also cooperates, on an
associate or subcontracting basis, with the world 's
principal manufacturers of aircraft in designing, manu ­
facturing and certifying aircraft components, in
particular large units made of non-metallic materials,
satellite components and structures for launch vehicles .
The company also carries out aircraft maintenance for
the Spanish and United States armed forces .

14 . 3 . 95 I EN I Official Journal of the European Communities No C 63 / 5

In the agreement of 27 December 1991 the Spanish
Government undertook to finance the feasibility phase,
the definition phase and the R&D work with a total
budget of Pta 32,897 billion ( about ECU 209 million ), to
be spent in the period 1991 to 1997 . It disbursed at the
same time Pta 2,591 billion ( ECU 16,4 million ) for the
definition .

In 1992 the Spanish Government paid out Pta 1,534
billion ( ECU 9,7 million ).

For the other years the breakdown of the R&D budget
is, according to the notification and the agreement of

1 June 1993, as follows :

( ECU 19,6 million )

( ECU 35,5 million )

( ECU 37,3 million )

( ECU 31,9 million )

( ECU 29,7 million )

( ECU 28,7 million )

1993

1994

1995

1996

1997

1998

Pta 3,085 billion

Pta 5,590 billion

Pta 5,880 billion

Pta 5,035 billion

Pta 4,660 billion

Pta 4,522 billion

Total Pta 28,772 billion ( ECU 182,7 million )

These figures differ slightly from the ones given in the
first agreement, but leave the total amount unchanged .

It is expressly stated that, once CASA has repaid the
sums received, it will be able to acquire the rights
concerned in exchange for a 3 % royalty on the selling
price of the next 100 aircraft after the one which extin ­
guishes the debt ( principal plus interest ) towards the
State .

It is the opinion of the Spanish authorities that part of
the knowledge acquired thanks to the project can be
made available to other firms and research centres and
universities on condition that this does not jeopardize the
project .

The market segment for 70-seater civilian aircraft is a
growing one, since the regional airlines which sprang up
in the United States as a result of deregulation — a
policy which is being followed throughout the world —
have been moving from 19-seater to 35-seater and
50-seater aircraft as they grow .

Regional airlines are currently considering using aircraft
with up to 70 seats as a result both of their natural
growth in terms of their networks of routes and of their
taking over routes from the flag-carriers, who are being
forced to give up the unprofitable routes they are
operating with out-of-date 100 to 120-seater jets .

1991

1992

Pta 2,591 billion The CASA-3000 belongs to a new generation of

high-speed turboprops : faster than other turboprops but

Pta 1,534 billion

not as fast as jets . There will be two versions : a 72-seater
and a 78-seater .
Total Pta 32,897 billion ECU 209 million )

The loans for the development of the CASA-3000
aircraft are repayable with interest at the Bank of Spain
base rate .

These repayments will sxart with the sale of the 76th
aircraft at a rate of Pta 104,4 million ( ECU 0,66 million )
per aircraft sold . CASA expects sales to begin in 1997
and that the 76th aircraft will be sold towards the year
2000 . It is also expected that by 2010 the total
outstanding sum plus the interest will have been repaid
( approximately 390 aircraft sold ).

Total project costs are put at Pta 74,263 billion ( ECU
471,2 million ).

In percentage terms the level of total project financing is :

# 32 897,, . . . 000, 000 x 100 .„ 0 % / = 44,3 . ., 0 % /

74 263 000 000

The Ministry of Industry and Energy retains the intel ­
lectual property rights in development by CASA . These
are estimated by the Spanish authorites to be worth at
least Pta 5 billion in 1992 currency .

CASA and the Spanish authorities estimate that there is a
potential market of 1 620 new regional transport aircraft
in the period 1992 to 2013 . Jets are expected to account
for approximately 40 % of this market and turboprops
60 ° / o of which the CASA-3000 hopes to capture 50 ° / o .
Thus it is expected that CASA will be able to sell 486

aircraft up to 2013 ( 30 ° / o of the total potential market
for these years ).

The Commission put forward the following figures in a
report of 1992 ( the European aircraft industry : first
assessment and possible Community actions —
COM(92 ) 164 final ):

Sales in the turbo-prop segment in the next 20 years are
expected to range between 3 500 to 4 300 units repre ­
senting however only 2 / 5 of the total sales value of
regional transport aircraft .

Cumulation with other aid is not envisaged .

The Spanish authorities refer to the Commission 's
communication on the " application of Articles 92 and 93

No C 63 / 6 I EN I Official Journal of the European Communities 14 . 3 . 95

of the EEC Treaty to public authorities ' holdings "
( Bulletin EC 9-1984 ) and more specifically to its point
3.2.VI .

That communication deals with the acquisition of a
holding in the capital of companies . However, the aid has
been notified to the Commission as a loan which has to
be repaid if the project is successful and not as an
acquisition of a holding in the capital of CASA .

In this respect, therefore, the Commission cannot accept
that no State aid is involved .

The State will ( partly ) own the intellectual and industrial
property rights resulting from the development of the
CASA-3000 aircraft and CASA will be entitled to
acquire these rights through the payment of royalties
after reimbursement of the advance and the interest . In
the meantime CASA is at liberty to use these results, free
of charge, in the production phase .

Such a situation does not, however, have any effect on
whether state aid is present, since CASA will be using the
results without having to pay for them .

The financial aid will strengthen the position of CASA,
which will lead to a change in the market conditions for
its competitors . Such a strengthening of the company 's
position compared with other enterprises competing on
the common market must be regarded as affecting trade .

As far as regional transport aircraft are concerned there
is competition on a world level and at a European level
between the main aircraft manufacturers . There is no
such thing as a national market . All aircraft manu ­
facturers try to sell their products over the border .

Article 91 ( 1 ) of the EC Treaty and Article 61 ( 1 ) of the

EEA Agreement are therefore applicable .

Article 92 ( 2 ) and Article 92 ( 3 ) ( a ), ( b ) and ( d ) do not

apply to this aid . Their equivalents in the EEA
Agreement are not applicable either .

Point 5.3 of the Community framework for State aids
for R&D ( OJ No C 83, 12 . 4 . 1986, p. 2 ) allows, as a
general rule, an aid intensity of 50 % for basic industrial
research . Furthermore, it is stated that the Commission
will look in principle for progressively lower levels of aid
for applied research and development .

In its day-to-day practice the Commission fixed the aid
intensity for the latter types of research at 25 % gross .

In financing R&D projects, some Member States are
using a system whereby they provide loans instead of

outright grants . These loans have to be repaid if the
successful outcome of the R&D is commercialized . An

aid intensity of 40 % in the case of a failure has been
regarded as acceptable by the Commission in various
cases for R&D schemes . The reasoning for these
decisions is that the effect on competition resulting from
a failed R&D project is not the same as when there is a
successful product on the market .

In cases of R&D aid to SMEs, aid for R&D projects in
Article 92 ( 3 ) ( a ) or ( c ) regions and aid to SMEs in such
regions, the aid intensity may be enhanced by 10
percentage points, 10 percentage points and 15
percentage points respectively with a view to mirroring
the specific circumstances of the receiver . These
enhancements are available in the case of basic industrial
research as well as applied research / development .

The Commission regards the method mentioned above

as an effective way of encouraging companies to embark
upon new projects and it takes in principle a favourable
view towards it when it is used in a scheme . For an indi ­
vidual project this method may also apply unless there

are valid reasons why this should not be the case .

The general rule, as pointed out above, is to allow a level
of funding of 40 % in the case of applied research and
development, provided the funding is made available in
the form of loans that have to be repaid if the results of
the R&D are commercialized .

The Spanish authorities are proposing to give R&D
financing covering 44,3 % of the total development
costs, i.e. 4,3 % ( about ECU 20 million ) above what is
usually allowed .

In defence of this position it is argued that 10 % of the
R&D consists of basic industrial research and that the

work is partially carried out in Article 92 ( 3 ) ( a ) regions .

However, arguments like this have to be balanced
against other factors such as the present overcapacity in
this sector of the market .

The market for regional transport aircraft is suffering
from overcapacity . In June 1993 nearly 700 turboprops
were in storage ( Commuter Regional Airline News, 14
June 1993, p. 8 ). Several of the companies active on this

market ( for example Fokker and SAAB ) had to cut
production .

Deliveries of turboprops fell from 325 in 1992 to 244 in

1993 and orders from 261 to 190 .

14 . 3 . 95 I EN | Official Journal of the European Communities No C 63 / 7

In accordance with point 5.1 of the Community
framework for State aids for R&D, the Commission
assesses aid projects on a case-by-case basis, taking into
consideration overall policy considerations related to the
competitiveness of European industry .

The Commission regards the aircraft industry as an
important industrial sector ( 1 ). In 1992 the European
aerospace industry produced goods valued at over ECU
40 billion, directly employing 450 000 people and
indirectly more than a million ( 2 ).

In 1990 20 % of the personnel employed by the
aerospace industry were qualified eingineers and
managers ( 2 ). These figures highlight the importance of
the sector and the share of technological activities within
it .

The importance of a strong, dynamic and competitive

aircraft industry for the economy as a whole and for the
strategic aspect of European technology was affirmed by
the Council on 17 June 1992 ( 3 ).

On the one hand the Commission acknowledges the
enormous importance of the aircraft sector, on the other
it has to maintain competition in the common market .
Competition comes mainly from other European aircraft
manufacturers, who are affected by overproduction
within the regional transport aircraft market .

The Commission is therefore of the opinion that an aid

intensity of 40 % in the event of failure of the project is
acceptable and it consequently raises no objections to an
initial financing of 40 % . However, overcapacity within
the European industry outbalances other arguments
which plead in favour of a higher aid intensity in the
case of a failure .

The Commission has accordingly decided to declare

compatible with the common market Spanish State aid
for the development of CASA-3000, in so far as the state
financing does not go beyond 40 % of the total costs of
the project .

In order to verify the compatibility of the remaining
4,3 % with the common market, the Commission is
initiating the procedure provided for in Article 93 ( 2 ) of
the EC Treaty .

Member States, EFTA Member States which are parties
to the EEA Agreement, the EFTA Surveillance Authority
and interested parties will be asked to submit their
comments by means of a notice published in the Official
Journal of the European Communities and in the EEA

supplement of the Official Journal .

It should be pointed out that, failing a reply from the
Spanish authorities or in the event of an inadequate
reply, the Commission is entitled, pursuant to the
judgment of the Court of Justice in Case C-301 / 87

( Boussac ), to take a final decision pursuant to Article 93
( 2 ) of the EC Treaty, assessing the compatibility of the
aid solely on the basis of the information available to it,
and where appropriate, to require the aid to be abolished
and any aid payments recovered with interest starting to
run from the date on which the illegal payments took
place .

The Commission reminds the Spanish Government that

according to the provisions of Article 93 ( 3 ) of the EC
Treaty no aid for which the procedure provided for in
Article 93 ( 2 ) of the EC Treaty has been initiated can be
put into effect before this procedure has resulted in a
final decision of the Commission .

The Commission draws the attention of your
Government to its letter of 3 November 1983 sent to all

Member States regarding their obligations as they arise
from the provisions of Article 93 ( 3 ) of the EC Treaty
and to the communications published in the Official
Journal of the European Communities No C 318 of 24

November 1983, page 3, on the basis of which any aid
provided illegally, that is without waiting for the
Commission 's final decision resulting from the Article 93
( 2 ) procedure, could be subject to a recovery order .

The Commission also hereby requests the Spanish auth ­
orities to inform the recipient firm, Construcciones Aero ­
nauticas SA ( CASA ) without delay of the initiation of
the procedure concerning the remaining 4,3 % of the
total amount of aid and of the fact that it might have to
repay any aid improperly received .'

The Commission hereby gives the other Member States

and interested parties notice to submit their comments on
the measures in question within one month from the date
of publication of this notice to :

(*) Commission communication on idustrial policy in an open Commission of the European Communities,

and competitive environment COM(90 ) 556 . Rue de la Loi 200,

( 2 ) Panorama of EC Industry 93, DG III . B-1049 Brussels .
( 5 ) Council conclusions of 17 June 1992 on the European civil

(*) Commission communication on idustrial policy in an open

and competitive environment COM(90 ) 556 .

aircraft industry ( OJ No C 178, 15 . 7 . 1992, p. 9 ). The comments will be communicated to Spain .