Antitrust Law Daily Wrap Up, ANTITRUST NEWS: EC proposes new guidelines on state aid in aviation sector, (Jul 10, 2013)

By John W. Arden, J.D., LL.M.

The European Commission (EC) is proposing new guidelines for state aid to airports and airlines throughout the European Union and is seeking comment by member states and stakeholders, according to a July 3 announcement by EC competition chief Joaquin Almunia.

“These guidelines are a further component of the State aid modernization agenda,” he said. “Its philosophy is simple: the state aid control carried out by the Commission should encourage aid that boosts economic growth and furthers other objectives of common European interest, while it should discourage harmful aid that does not bring real value added and introduces distortions to competition in the Single Market.”

The new rules should continue to allow state aid for investment in infrastructure where there is a genuine transport need and public money is necessary to ensure access to a region, according to Almunia. State aid should only be used to create additional transport capacity where demand for it exists. If an area is already well connected by other modes of transport—such as high-speed rail—investment of additional public money would be wasted, he said. Moreover, the possibilities for investment aid should be higher for smaller airports than for larger ones.

While the practice of subsidizing the operating cost of airports with public money has become widespread in recent years, operating costs “should normally not be subsidized by the taxpayer.” Like any other economic activities, “airports should recover their operating costs from those that use them: airlines and air passengers.”

While this is the goal, it would be unrealistic to believe that it can be done today. “So what I propose to do is to accompany regional airports in the transition towards a steady state where they will no longer need operating subsidies.” During a ten-year transitional period, small regional airports will be given time to adjust to the new market situation.

There will always be an exception where a genuine public need is identified. If a region would be isolated without the operation of the airport, state aid could be granted to cover operating cost, provided that the airport complies with the rules on services and general economic interest, the competition chief observed.

The draft guidelines will also address the issue of state aid to airlines through their arrangements with airports. If those arrangements are profitable for the airport, then they comply with the rules, in Almunia’s view.

The process of a public consultation is intended to result in adoption of the new guidelines at the beginning of 2014, according to the EC competition chief.

News: Antitrust