Revised EU state aid rules ‘could lead to closure of 100 small airports’

Saarbruecken airport.jpg

Regional stakeholders from all over Europe are pressing the European Commission to show more flexibility over new guidelines on state aid for airports and airlines, warning these could have “damaging consequences” for local economies.

The proposed revision of state aid rules to airports and airlines, unveiled by the European Commission in July this year, will allow start-up aid for launching a new route during a limited period of time and allow operating aid to airports under certain conditions for a 10-year transitional period.

The Commission launched a public consultation over the revised rules but EU regions, especially those that have seen their economic development boosted by local airports, find the new rules “worrying”.

10 year transition phase

Speaking at a panel discussion organised by the Assembly of European Regions on 2 December, Annabelle Lepièce, a lawyer representing the French region of Languedoc-Roussillon, warned that “if the guidelines are applied as the Commission intends to, it could lead to the closure of around 100 airports” around Europe.

Lepièce criticised the EU executive’s plan to decrease operating aid to airports until they become profitable.

“Some of them will never become profitable,” Lepièce claimed, although some of these small airports contribute “immensely” to the economic development of the regions.

The lawyer cited the example of a French village, Saint André de Roquelongue, near Carcassonne in South-West France, which was entirely revived over the past ten years following the construction of a nearby regional airport. Thanks to the connection, the village was repopulated by younger people, mainly Brits, even leading to the opening of a new school.

Similar concerns were raised by Swedish MEP Marita Ulvskog, a social democrat. Sweden is a sparsely populated country where regional airports are “a necessity”, she claimed. With 21 people per square kilometer, the country suffers important geographic handicaps, which local airports help alleviate.

Road and rail are no alternative for big trips, she explained, as driving from north to south can take 21 hours and high speed trains go only “as far north as Stockholm”. Hence, she said domestic flights are a “basic component” of the country's economy given the lack of alternatives.

“A 10-year transition phase for all airports with under 3 million passengers per year cannot work," said Catiuscia Marini, who drafted a report on the matter for the Committee of Regions. "It is not possible to adopt a one-size-fits-all approach in this field, the diversity within this category of airports is huge and there are completely different situations that must be taken into account.

The EU's regions request, therefore, the European Commission allows the possibility to support, beyond the transition period, at least airports with a yearly traffic rate of below one million passengers,” she told EURACTIV in an emailed statement.

In a letter to the Commission, sent in September, Swedish Social Democrats MEPs expressed their concern that “the vast majority of [Swedish] regional airports have no prospect of ever making a profit because of the small economies of scale outside of the major urban areas”.

While the Commission foresees specific conditions for so-called Services of General Economic Interest (SGEI), experts fear that most of the airports will fail to be considered as such, as the EU Executive’s definition is seen as “too restrictive” and “not sufficiently harmonised”.

Public mission

In its draft opinion, the Committee of Region calls on the European Commission to considers state aid to regional airports as a public mission.

“What is the Commission trying to do? Interfere in the economic policy of the member states?” asked Olga Simeon, an Italian representative from the Venice region who helped draft the report.

“In most cases, public investments in airports […] help better connect the region with other transport modes. They grant advantage to the whole economy, not to one enterprise. Intermodality investments should be considered a public mission,” she said.

For the Regions, it should also be made clear that micro-airports with less than 300,000 passengers per year should fall outside of the Commission’s scope as they “cannot affect competition between member states, as  defined in the article 107 of the [EU treaty]”, Simeon concluded.

Charleroi airport

However, not all regional airports are small.

In Belgium, the Brussels-South airport in Charleroi manages 6.5 million passengers per year, and has become a viable alternative to the Zaventem national airport, which complained to the European Commission over the generous state aid granted by the Wallonia region to welcome the Irish low-cost carrier Ryanair. The case is currently being investigated by the Commission.

The impressive growth of small airports such as Charleroi has also been denounced, albeit for different reasons, by environmental NGOs, such as Transport and Environment:

"It seems small airports are exploding rather than struggling. State aid is the primary reason that smaller airports have grown so much faster than larger airports. This serious and unfair distortion of competition must be addressed urgently", the NGO said, adding that "state aid for Charleroi should be out of the question as long as it offers rates so far below market rates".

The investigation is still ongoing, and it will not be clear before the summer of 2014 whether the alleged aid the airport received was legal or not. 

But it does prove the Committee of Regions' point that there should not be a "one-size-fits-all" approach for state aid rules when it comes to regional airports.

"We want a tailored approach and ask for a review of the rules based on the specific needs of each region," a spokesperson for the CoR said.

In a written statement to EURACTIV, the European Low Fares Airlines Association, ELFAA commented:

"ELFAA has long advocated that regional airports be free to compete with private airports and therefore welcomes the proposal contained in the proposal for revision of the Guidelines to apply the Market Economy Investor Principle (MEIP), when assessing cases of alleged state operating aid at regional airports. It is important that airports, partly or publicly-owned, not be artificially constrained from competing with privately-owned airports. The MEIP, which considers whether the decision, taken by the airport, is one that would be taken by a private investor, is the correct way to address this."

"While the concern at a small number of newly-created white elephant airports is understandable, ELFAA shares the concern of the Committee of the Regions at the proposed approach to investment aid. Regional airports represent latent capacity, which, at considerably lower cost, can ease the claimed capacity crunch at certain, not all, main airports. Barriers should not be placed in the way of creating genuinely-needed additional infrastructure."

"ELFAA is also concerned at the proposed timescale for phasing out of operating aid to airports, in particular the proposed rate of reduction. The proposed rate of reduction to close the gap with full operating costs is likely to lead to unsustainable annual increases in charges, beyond what the market can bear, with the risk of route closures"

In a letter to the EU Commissioner Joaquin Almunia, the NGO Transport and Environment (T&E) called on the Commission to "reconsider the guidelines". During the public consultations T&E stressed that "aviation is a mature sector. If sectoral rules are still required, they should be strictly limited to addressing the needs of deprived and remote regions".

Air transport contributes significantly to the European economy, with more than 15 million flights per year, and a network of over 460 airports, providing work for some 2.3 million people.

Overall, airlines and airports contribute more than €140 billion to the EU's Gross Domestic Product.

Member States' public funding of airports and airlines is currently regualted by the 1994 and 2005 Aviation Guidelines.

The 1994 guidelines were adopted in the context of the liberalisation of the market for air transport services and contain provisions for assessing social and restructuring aid to airlines in order to provide a level playing field for air carriers.

They were complemented in 2005 by guidelines on the public financing of airports and on the start-up of airline services from regional airports.

Neither of the guidelines has an expiry clause, but in view of the significant market changes that have taken place in the last decade, the European Commission has initiated a review, with a first public consultation in 2011 aiming in particular to determine whether a revision is necessary (see IP/11/445). 

  • January 2014: Adoption of the new guidelines on state aid to airports and airlines

Subscribe to our newsletters