Revision of the Aviation Guidelines

A. ALEXIS

Liberalisation of air transport market

From national air transport market to EU internal market for air transport

2

Increased competition between airlines and airports

New market players – Emergence of the Low Cost Carriers

0

1

2

3

4

5

6

7

19

95

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96

19

97

19

98

19

99

20

00

20

01

20

02

20

03

20

04

20

05

20

06

20

07

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09

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Source: OAG summer schedules

Weekl

y s

eats

availa

ble

(m

illio

ns)

Network carrier (incumbent) 44 %

Regional airlines 16 %

Low cost carrier 40 %

2005 Aviation Guidelines1994 Aviation Guidelines

Increased competition and low prices for customers

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Increased number of regional airports

~460 airports are used for commercial aviation in the EU Member States

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Increased number of regional airports facilitates local/regional development, but danger of creation of unused capacity

High number of publicly owned airports

Source: ACI

77 % of EU airports are still publicly owned

Publicly owned

77%

Privately owned9%

Mixed ownership

14%

52%720 M pax

34%470 M pax

14%

200 M pax

0%

10%

20%

30%

40%

50%

60%

Public Mixed Private

Public airports are usually smaller than mixed/privately owned airports

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Vast majority of airports is subsidised

High number of small airports

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~60 % of airports serve less than 1 million passengers in 2010

Source: ACI Europe, Data 2010.

Small airports are not able to support all their costs

~462 airports are used for commercial aviation

≤ 200 000 pax

181 97 80 33 71

≤ 1 M pax 1 – 3 M pax 3 – 5 M pax ≥ 5 M pax

Source: ACI, Year 2010.

These airports usually cannot finance their operating costs from own revenue These airports usually cannot

finance part of their capital costs

Financing of operation of these airports is covered by the 2012 SGEI Decision

These airports are usually self-financing

Where we are

Increased competition between airlines and airports

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Where do we want to go

Enabled regional/local development and accessibility

Duplication of unprofitable airports

Vast majority of airports are subsidised

level playing field. Interactions between aid to airports and aid to airlines

Continue to enable regional development and accessibility

Avoid duplication of unprofitable airports and creation/ maintenance of overcapacity Avoid waste of public money and reduce the need for public funding (State aid)

Operation of an airport and construction of airport infrastructure is an economic activity, except activities falling within public policy remit, e. g. police, customs, air traffic control (Judgement of 12 December 2000 in Aéroport de Paris case,

confirmed by Leipzig-Halle airport judgement of 24 March 2011)

State of playPublic funding of airports is subject to State aid rules

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Question: Would a profit oriented market economy investor finance the investment of the airport or cover operating losses of the

airport?

No aid to the airport Aid to the airport

If yes If no

State of play 2005 Aviation Guidelines

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Compatibility criteria for investment aid to airports financing airport infrastructure

No compatibility criteria for operating aid to airports to finance their losses

Start-up aid to support launching of new routes from small regional airports

No aid intensity thresholds (up to 100 % on a case by case assessment) and only rarely notified by MS

Exception compensations for Service of General Economic interest only for small airports in remote areas

Only financing of marketing support allowed and was only rarely used by airports and notified by MS

What have we done?

Contact with stakeholders

Public consultation

e. g. ACI Europe, ERAC, IATA, AEA, ELFAA, ERA, individual airports and airlines, etc.

7 April 2011 – 7 June 2011: 89 replies providing feedback on the recent market developments:

• 21 Member States, Norway and 12 regional authorities

• 22 Airports, 9 Airlines, 14 Airline and airport associations

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Main results of the public consultation

• Simplification and increased transparency

• More enforcement of State aid rules to airports and airlines

• Need for special rules for small airports and airports in remote areas

• More predictable rules for investment aid (clarifications on eligible costs and aid intensity thresholds)

• Rules to avoid distortion of competition between airports located in the same catchment

Majority of the stakeholders supports the revision of the existing guidelines

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Interactions between financing of airports and possible aid to airlines

Publicly financed airports might reduce the price for the airport services rendered to the airlines

Airlines using this airport could indirectly benefit from an aid

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Aid granted by a Member State

Policy perspective

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Where we want to go in the long-term: A "steady state" regime

Investment aid to airports

Operating aid to airports

Range of permissible maximum aid intensities depending on the size

Necessity , proportionality and incentive effect to be demonstrated

Additional capacity created meets medium-term demand in the catchment area and does not lead to duplication of unprofitable infrastructure

Should not be necessary as airports should be able to cover their operating costs (exception small airports up to 200.000 which can be declared SGEI)

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Growth potential

≤ 200 000 pax

181 97 80 33 71

≤ 1 M pax 1 – 3 M pax 3 – 5 M pax ≥ 5 M pax

Small airports may have problems in financing their operating cost

Financing of operation of these airports is covered by the 2012 SGEI Decision

Growth potential?

Source: ACI Europe. 15

A number of airports managed to grow into a more viable size

Calculation based on a sample of 245 EU (total number of airports in EU = 462).

Source: Data ACI Europe. 16

How can transitional period be designed?

Investment aid to airports

Operating aid to airports

No phasing-in needed

Operating aid to airports allowed under certain conditions [with a passenger volume of less than x mio passengers]

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Under which conditions could operating aid to airports be allowed?

due to unused capacity due to too low airport charges

Why are airports not able to cover their operating costs?

Aid to the airport Aid to the airlines

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How to exclude existence of aid to airlines by publicly funded airports? Market price

Airlines pay charges corresponding to the costs in accordance with their use of the airport services

Appropriate market benchmarks normally not available at this moment

Assessment based on a "cost approach"

In absence of an appropriate market

benchmark

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Airport charges and aid to airlines

"Steady state" regime

No aid to the airlines airport charges (including non-aeronautical revenues) cover airport's costs

Transitional period

Which operating aid to airlines?

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Next step

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Beginning 2013: consultation Member States, stakeholders and interested parties on a written document