European state aid: European Commission approves three state aid schemes on the basis of the new Aviation Guidelines

On 7 April 2015 the Commission for the first time approved three state aid schemes for airports and airlines on the basis of the new Aviation Guidelines. The Commission pointed out that the adopted French schemes promote regional connectivity and development, more sustainable support to the European aviation sector and help to combat air traffic congestion. The aid schemes concerning investment aid, operating aid and start-up aid for new routes have been approved for a period of 10 years. In order to ensure that France complies fully the schemes also provide for monitoring arrangements put in place by the French authorities.

The new Guidelines were adopted within the context of the modernisation of the EU state aid policy and follow the significant changes and problems in the market environment of the aviation industry. On the one hand there is a big number of regional airports overlapping at local level while on the other hand there are congestion problems in large hubs. The new Aviation Guidelines therefore aim to ensure that airports located in regions with a genuine transport need get access to public funding while also maintaining a level playing field for airports and airlines irrespective of their business models.

Furthermore the new legislation introduced some more technical definitions. It envisages three types of aid: operating, investment and start-up aid. Operating aid as one of the most distortive types of aid is only allowed for the smaller airports and for a transitional period of 10 years. The beneficiary needs to present a viable business plan proving that it can fully cover the operating costs at the end of the transitional period. Investment aid is subject to greater restrictions. Unless there are exceptional circumstances, aid is allowed only for airports with fewer than 5 million passengers per year, subject to certain restrictions. The total amount of aid is restricted from 25% to 75% of eligible costs whereby the aid intensity declines with the size of the airport. As for the start-up aid, it is restricted to airlines connecting smaller airports but the proportion of the aid has increased and granting conditions for airport in remote regions have become more flexible.

The Guidelines also bring changes for the airport-airlines agreements by adopting a more economic/business approach. The market economy operator (MEO) test is introduced for ex-ante assessment of the measure. Furthermore, the Guidelines provide for clarification of the distinction between economic and non-economic activities in the light of the Leipzig Halle judgment (Mitteldeutsche Flughafen AG v European Commission (C-288/11 P) [2013] 2 C.M.L.R. 18.).

The clear and more transparent legal framework of the Guidelines will expedite state aid decisions and encourage Member States to set up national schemes for aid granted to small regional airports. However, some concerns still remain. The vagueness of the terms genuine transport need, exceptional circumstances and non-aeronautical activity, decisive for the interpretation of the operating aid and the notion of state aid, remains unclear. It is believed that the current decision on the three French state aid scheme and the ones to follow will provide some guidance and a useful tool for interpretation of the new Guidelines.