Tuesday, 25 February 2014

European Commission issues new guidelines on State aid to airports and airlines

The European Commission issued new guidelines on State aid to airports and airlines on 20 February 2014, to facilitate the application of Art. 107 Treaty on the Functioning of the EU (TFEU) in aviation. The aim of the new rules is to ensure the efficiency of State support, while preventing the distortion of competition through overcapacity and duplication of infrastructure. There are four main points in the guidelines.

First, transitional periods are laid down depending on the airport size. Such periods extend from five to ten years, during which State aid is permitted to a percentage ranging from 50% to 80% of the initial funding gap of the airports, i.e. the additional amounts necessary to cover the airports’ operating costs. Within these periods airports should improve their finances, to be able to cover unaided their costs. After these periods State aid will be permitted, only if it regards the costs of Services of General Economic Interest (SGEI), i.e for airports playing an important role in regional connectivity of isolated regions in the EU. The conditions for such aid are established in the 2012 SGEI Decision and the 2012 SGEI Framework.

Second, investment aid is permitted only concerning airport projects that would not have been undertaken, either at all or to the same extent, without State aid. Depending on the size of the airport, there is a cap to the maximum aid permitted, which ranges from 25% to 75%. The cap may be increased by an additional 20% for airports located in remote regions.

 Third, start-up support to new airlines operating from regional airports will be allowed for up to 50% of the airport charges for new destinations during a three-year period.

Fourth, the new guidelines clarify the application of State aid rules to agreements between airports and airlines, including rebates and other financial incentives offered by airports and States to airlines. Such agreements will only be allowed, if a private investor, operating under normal market conditions, would have accepted the same terms, i.e. if the revenue generated by the airport operation suffices to cover all costs arising out of the agreement with the airline.

The text of the Guidelines can be found here. For the relevant policy brief click here. You can find the Commission’s press release here.

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