Europe Set To Stifle State Aid for Airports and Airlines

 - July 15, 2013, 11:30 AM
After handling 3.3 million passengers in 2012, Scotland’s Aberdeen Airport would be restricted to 25 percent of eligible investments under new proposals from the European Commission. (Photo: Eastern Airways)

The European Commission (EC) wants to impose tighter guidelines restricting state aid for airports and airlines in the European Union (EU). In a consultation document launched on July 3, the EC proposed that all publicly funded aid for airports must end after a 10-year transitional period and that it restrict funding in the meantime to only smaller, regional airports. The same guidelines subject to industry consultation through September 25 would also limit start-up aid for airlines.

Initiated by the EC’s directorate general for competition out of concern about a lack of transparency and consistency in the way the 27 EU states currently regulate state aid in the sector, the proposed new rules would replace previous guidelines issued in 2005. They would prohibit all “investment aid” by airports handling more than five million passengers per year. For airports with three to five million passengers, the rule would limit aid to up to 25 percent of “eligible investments.” The limits would increase to 50 percent for airports with one to three million passengers and up to 75 percent for airports with fewer than one million passengers. Eligible costs relate to initial investments in airport infrastructure, including planning costs, ground handling infrastructure and airport equipment.

The revised guidelines would also restrict publicly funded aid to start-up airline services connecting a regional airport with fewer than three million passengers to another airport within the Common European Economic Area (the EU plus several other European countries). The restrictions would not apply to routes departing in the “outermost” regions of Europe serving destinations in neighboring third countries such as Turkey.

The EC would permit aid for routes between airports with more than three million passengers per year only in exceptional cases, such as where a single airport serves a remote or sparsely populated region without high-speed rail service.

The European Regions Airline Association (ERA) criticized the proposals as “a missed opportunity.” It argued that the planned restrictions on state aid conflict with the EC’s objectives to support regional economic development and access to Europe’s remote areas. “The launch of some new routes could be impacted by this announcement, as will the future viability of some existing routes to, from and between the regions of Europe,” said ERA director general Simon McNamara.

The Association of European Airlines, which represents the continent’s major carriers, has yet to take a position on the new guidelines.