State Aid: The Decision Issued By Commission Regarding Public Support To Airports And Airlines In Italy

By Maurizio Corain

Posted: 8th October 2014 08:50

Further to the guidelines on how Member States can support airports and airlines with regards to EU state aid rules issued by Commission on 20 February 2014, EU is focused on ensuring good connections between regions and the mobility of European citizens, while minimising distortions of competition in the Single Market. 
 
In order to reach this goal, EU affirms that State aid to airports and airlines will promote the use of public resources for growth-oriented initiatives only.  At the same time, EU obliges to limit distortions of competition that would undermine a level playing field in the Single Market, in particular by avoiding overcapacity and the duplication of unprofitable airports.  Therefore, State aid for investment in airport infrastructure is allowed if there is a genuine transport need and the public support is necessary to ensure the accessibility of a region.  The guidelines define maximum permissible aid intensities depending on the size of an airport, in order to ensure the right mix between public and private investment.  The possibilities to grant aid are therefore higher for smaller airports than for larger ones.
 
Furthermore, EU ensures start-up aid to airlines to launch a new air route provided it remains limited in time.  The compatibility conditions for start-up aid to airlines have been streamlined and adapted to recent market developments.
 
On this basis, delimiting the analysis to Italian Market, it shall be underlined that European Commission has adopted decisions under which the State aid granted to the airport of Alghero is approved.  Besides this, the Commission states that certain agreements concluded by the managers of Alghero Airport procured the beneficiary airlines an undue economic advantage which they need to pay back.  The airlines concerned are Meridiana and Germanwings (a subsidiary of Deutsche Lufthansa).  The Commission's analysis has demonstrated that these airlines paid less than the additional costs linked to their presence in the airport. 
 
Particularly, the Commission has investigated the agreements concluded by So.Ge.A.AL (airport manager) with airlines operating at Alghero in the period 2000–2010.  The Commission found that agreements concluded between So.Ge.A.AL and Ryanair/AMS, Alitalia, Volare, Air Italy and Air Vallée could have been reasonably expected to improve the financial situation of the airport when they were entered into and therefore did not give the carriers any undue economic advantage over their competitors.  However, the Commission found that the agreement concluded by So.Ge.A.AL with Germanwings in 2007 and the agreement concluded with Meridiana in 2010 involved small amounts of State aid to those airlines.  The Commission found that this aid constituted operating aid to the airlines which could not be declared compatible with EU rules.  The beneficiaries need to pay it back.
 
This EU scenario shall be linked with the Italian situation where manager of Rimini Airport is under bankruptcy procedure, some Italian Carrier live an economic crisis period and the Government is working on the so called “Linate decree” under which new flights to European not capital cities will allow, even if it remains constraints on movements per hour, point to point and type of aircraft.
 
In fact, even if some “small” airports are not “ghost” airports, they could be submitted to bankruptcy procedure and so they lose the chance to operate under the concession given by the Public Authority.
 
Furthermore, several small airports could relaunch their activities taking advantage of the opportunity now given by EU about the State aid issue.  Also the Linate decree could be read in this perspective: the Government would relaunch that airport allowing new flights which connect certain EU “regions” even if this relaunch could be detrimental to Malpensa Airport (the nearby airport) due to the necessity to avoid duplication of unprofitable airports.
 
The reorganisation of the airport’s plan will have an after-effect on a brand positioning of airlines due to the allotment of slots.  Focusing on airlines point of view, it shall be noted that airlines plays the lead.  In fact, while the airport manager has to essentially face up the airlines only, the latter has to face up: passengers, tour operator and travel agencies, the airport managers and its competitors (low cost too).
 
The passengers are now over protected.  The interpretation given by the Italian jurisprudence about the Italian aviation law (pursuant to art. 941 Italian Shipping Code, EU and international rules are applied) in practice oblige the airlines to safeguard their client even when the carrier cannot do anything (imagine the case when the airport manager provides for a closing of the airport itself and the carrier has to assist the passenger, or the case when the handling goes on strike and the carrier has to compensate the passenger due to the unavailability of the baggage).
 
From the reorganisation of the airport’s plan, passenger can only have a lot to gain.
Tour operator and travel agencies are the less problem from airlines point of views: even if sometimes tour operator and travel agencies “speak up”, they depend on airlines (that could always use as distribution channel their own website).
 
The airport managers now shall pay attention to the relationship with the airlines: they cannot overcharge and they have to sign agreement that do not procure the beneficiary airlines an undue economic advantage.
 
The carriers, from this scenario, have to metabolise that even if they have to face up several entities, they could earn from new routes.  They have to metabolise that, even if it is a heavy task, they have to pay attention to the information they render to passengers. 
 
Especially the carriers which operate in Italy have to consider the EU area as a unique regional area from which they can offer international connection.  This in order to avoid that a Carrier could consider a single Member State as its own post guard.  Such policy would be deeply unprofitable.
 
Maurizio Corain has extensive experience in drafting contracts and advising on disputes in the air and maritime navigation, and land transport sectors.  He protects the interests of airlines in all aspects related to “aviation world” and “aviation entities” .  He provides for consultancy on the subject of airplane sale and leasing and on ship building.  He attends specialist conferences, frequently as a speaker and he is intended for specialist scientific training assignments.  He is a member of ISDIT - Institute for the Study of the Law of Transport as well as of AIDIM - Italian Association of Maritime Law.
 
Office: Rome, Via Emilia 86/90, 00187
Email: maurizio.corain@replegal.it
Phone: +39 06 97745105 
Fax: +39 06 8078804

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