July 15, 2013
The vast majority of airports in Europe and the airlines that operate from these facilities are facing fundamental changes due to stricter regulation on state aid. The European Commission (EC) laid out plans to overhaul current guidelines on how public—national, regional or local—authorities subsidize airports and streamline rules on the support for airlines adding routes or services.
The EC argues that the revised rules are necessary to limit distortions of competition within the European Union (EU), and avoid airport overcapacity. But these new rules are “disconnected from reality” Airports Council International Europe claims while the European Regions Airline Association (ERA) describes them as “detrimental” to its members.
Introducing limitations on public financing of airport developments “flies in the face of the airport capacity crunch brewing here in Europe—a move that would probably be considered foolhardy in the rest of the world,” says ACI Europe Director General Olivier Jankovec. The new economic powerhouses in Asia and the Persian Gulf area are funding and using airport infrastructure projects as instruments of economic strategy, and “Europe is cutting its wings. We feel the commission is more guided by fiscal austerity than competition concerns,” he adds.
Furthermore, the new policy will introduce discrimination in favor of the competing rail sector, making air transport the only transportation mode in Europe having to pay for its infrastructure. “The rail sector in Europe has always been hugely subsidized and yet this seems to be accepted as the norm. Where is the level playing field?,” ERA Director General Simon McNamara pointedly notes. Rail receives €32 billion ($41 bililon) in public aid every year.
The EC deems a revision of the 1994 and 2005 community guidelines on airport financing and start-up aid to airlines departing from regional airports is necessary because the aviation industry has changed considerably in the past two decades, with low-cost carriers (LCCs) now accounting for a larger share of intra-European traffic than incumbent legacy airlines. The airport sector has also transformed, with regional and local authorities investing in terminals and runways to attract the likes of Ryanair, Norwegian, Wizz Air, Volotea and Jet2.com.
The mushrooming of subsidized regional airports across the EU and the often generous handouts and ingenious support packages to—primarily—LCCs bedevil Europe's once-dominant flag carriers.
The most prominent dispute is Brussels Airlines' irritation over regional government subsidies for Brussels South Charleroi Airport and its agreement with Ryanair, but there are many similar complaints in other EU member states. There are 61 cases pending with the EU's antitrust services regarding alleged illegal public support for or by regional airports; 30 of these are under formal investigation. The EU is also investigating alleged illegal state aid to nine airlines.