The European Commission (EC) published its working paper on the issue of state aid provided by regional airports to airlines in mid-February.

This was a response to a ruling by Brussels in February 2004 that had forced low-cost operator Ryanair to pay back some of the aid it had received from the Wallonian regional government in Belgium for its operation at Charleroi airport. Airlines operating from the main Brussels National airport had complained that this constituted unfair competition. The EC admits that it was caught on the hop by the sudden trend for regional airports to compete against neighbouring major hubs as well as other regional airports as the low-cost sector mushroomed.

In the working paper, which is to form the basis for legally binding rules to be set out late this year, Brussels accepts that it can be necessary for airports to offer financial support to attract carriers. The EC makes it clear that it sees the development of regional airport links as a vital part of the battle to alleviate congestion in the most crowded airports. "To some extent, European regional airports are suffering as a result of years of airport and air traffic policies that concentrated traffic at major international cities," the EC says, adding that major airports have benefited from years of infrastructure investment.

However, noting the problem of competitive distortions, the EC says that the aid should only be targeted at airports with fewer than 5 million passenger a year, and only for new routes that do not have a high-speed rail alternative. The aid must be for a fixed time period – the EC suggests a maximum of 50% of costs for five years for remote or disadvantaged regions, or else 30% to 50% for three years. "In any event, the period during which start-up aid is granted must be less than the period during which the airline undertakes to operate from the airport in question," the working paper says. The aid must also be transparent, with rules and principles drawn up by airports and available equally to all airlines.

The EC also insists that aid must be gradually phased out. This "allows a carrier to be helped when a route is started up and then to be encouraged to rely fully on its own strengths later".

Brussels says that aid must be calculated on a per passenger basis. "In this way, an airline that cannot provide an airport with the volume of passengers necessary for its development will not be unduly favoured." In addition, support would only be allowed for costs "that the air operator would not have to bear once cruising speed is reached." This would include the initial marketing and advertising needs, as well as start-up costs. "Aid cannot be granted for recurring operating costs such as aircraft rental or depreciation, fuel, crew salaries or catering service costs."

The European Low Fare Airlines Association has already indicated it will challenge the proposals.


Source: Airline Business