Industry at odds over state aid to regional airports

Saarbruecken airport_0.jpg

Europe’s regions and smaller airlines are urging the European Commission to allow more flexible rules for government support of non-hub airports, which they contend are a vital economic lifeline for communities and islands.

The EU executive this year is revising its guidelines on the financing of airlines and airport operations. In response to allegations of lax enforcement, it has also recently launched probes of state aid provided to airfields in at least five countries.

Commission figures show there are more than 460 airports in the EU and 77% are publicly owned. More than half lose money and small airports in particular struggle because of limited revenue from landing rights and retail concessions.

“Regional airports have major difficulties in reaching profitability and this is particularly the case with airports with less than one million passengers,” said Christoph Köppchen, economics manager for the Airports Council International’s European office.

Nearly half of EU airports handle fewer than 1 million passengers annually.

Köppchen said 2005 EU guidelines on state support that are now under review are “burdensome” for regional airports. These include a requirement to notify the Commission of pending public investments, a vetting process that he says limits flexibility in a highly competitive market.

Köppchen spoke yesterday (12 April) at a European Economic and Social Committee hearing on how EU policies affect regional airports and air services. In the 20 years since the European airline industry was liberalised, rules enacted in 1994 and 2005 set out guidelines saying that state support must not distort competition between airports and airlines.

Representatives of regional carriers and airports speaking at the hearing also said smaller airfields will offer important alternatives to Europe’s biggest hubs – such as London, Paris, Frankfurt and Amsterdam – that are expected to exhaust their expansion capacity in under two decades.

Flying into the sunset?

But some air industry officials question whether the guidelines are being enforced rigorously enough, and whether subsidies are necessary at all.

“We find it very difficult to swallow that some airports are granted aid for indefinite periods of time,” said Athar Husain Khan, deputy secretary-general of the Association of European Airlines. “There has to be some kind of sunset mechanism.”

He said the AEA supports “sustainable regional development” that does not create unfair competition for hub airports and the main network carriers.

Khan cited as an example the close proximity of five regional and community airports – Luxembourg, Strasbourg and the German airfields of Saarbrüken, Zweibrücken and Frankfurt Hahn.

“Is this indeed a wise use of national and regional funds?” he said. “I would say probably not.”

The EU executive’s probe involves regional airports in Austria, Belgium, France, Germany and Sweden as well as government support of national airlines in Hungary and Malta. Saarbrüken and Zweibrücken, which are 39 km apart and together handle fewer than 1 million passengers per year, are among those under investigation.

Officials at Belgium’s privately held Brussels Airlines have complained that government subsidies for the regional Charleroi airfield, a major hub for Ryanair, give the low-cost Irish carrier an unfair competitive advantage.

The Commission announced last month it was reopening its investigation of public support given to Ryanair to launch operations at Charleroi. A 2008 EU court ruling annulled the EU executive’s demands that Ryanair reimburse some of the money.

 

EU rules identify three airport categories: - international connecting points (with an annual passenger volume of no less than 5 million), community connecting points (1 million to 4.9 million) and regional connecting points and accessibility points (under 1 million).

Under the EU’s 2005 guidelines on airport financing, subsidies for infrastructure investment are permissible when they “are necessary, proportionate, pursue an objective of general interest, ensure non-discriminatory access for all users and do not unduly affect trade in the internal market.”

Operating support, one the other hand, is considered incompatible with the EU’s internal market rules.

2012: European Commission is expected to revise its guidelines on state aid to airports

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