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Revision of the Aviation Guidelines

Revision of the Aviation Guidelines. A. ALEXIS. Liberalisation of air transport market. From national air transport market to EU internal market for air transport. Increased competition between airlines and airports. New market players – Emergence of the Low Cost Carriers.

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Revision of the Aviation Guidelines

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  1. Revision of the Aviation Guidelines A. ALEXIS

  2. Liberalisation of air transport market From national air transport market to EU internal market for air transport Increased competition between airlines and airports

  3. New market players – Emergence of the Low Cost Carriers 1994 Aviation Guidelines 2005 Aviation Guidelines 7 Network carrier (incumbent) 44 % 6 5 Low cost carrier 40 % 4 Weekly seats available (millions) 3 2 Regional airlines 16 % 1 0 1999 2003 2000 2001 2002 2004 2005 2006 2007 2008 1998 2009 2010 1995 1996 1997 Increased competition and low prices for customers Source: OAG summer schedules

  4. Increased number of regional airports ~460 airports are used for commercial aviation in the EU Member States Increased number of regional airports facilitates local/regional development, but danger of creation of unused capacity

  5. High number of publicly owned airports 77 % of EU airports are still publicly owned Public airports are usually smaller than mixed/privately owned airports Privately owned 9% 52% Mixed ownership 60% 720 M pax 50% 14% 34% 40% 470 M pax 30% 14% 20% 200 M pax 10% Publicly owned 0% Public Mixed Private Vast majority of airports is subsidised 77% Source: ACI

  6. High number of small airports ~60 % of airports serve less than 1 million passengers in 2010 ~462 airports are used for commercial aviation Financing of operation of these airports is covered by the 2012 SGEI Decision These airports usually cannot finance their operating costs from own revenue These airports usually cannot finance part of their capital costs These airports are usually self-financing 181 97 80 33 71 1 – 3 M pax 3 – 5 M pax ≥ 5 M pax ≤ 200 000 pax ≤ 1 M pax Small airports are not able to support all their costs Source: ACI, Year 2010. Source: ACI Europe, Data 2010.

  7. Where we are Where do we want to go Increased competition between airlines and airports level playing field. Interactions between aid to airports and aid to airlines Continue to enable regional development and accessibility Enabled regional/local development and accessibility Avoid duplication of unprofitable airports and creation/ maintenance of overcapacity Duplication of unprofitable airports Avoid waste of public money and reduce the need for public funding (State aid) Vast majority of airports are subsidised

  8. State of playPublic funding of airports is subject to State aid rules 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) Question: Would a profit oriented market economy investor finance the investment of the airport or cover operating losses of the airport? If yes If no Aid to the airport No aid to the airport

  9. State of play 2005 Aviation Guidelines Compatibility criteria for investment aid to airports financing airport infrastructure No aid intensity thresholds (up to 100 % on a case by case assessment) and only rarely notified by MS No compatibility criteria for operating aid to airports to finance their losses Exception compensations for Service of General Economic interest  only for small airports in remote areas Start-up aid to support launching of new routes from small regional airports Only financing of marketing support allowed and was only rarely used by airports and notified by MS

  10. What have we done? Contact with stakeholders e. g. ACI Europe, ERAC, IATA, AEA, ELFAA, ERA, individual airports and airlines, etc. Public consultation • 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

  11. Main results of the public consultation Majority of the stakeholders supports the revision of the existing guidelines • 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

  12. Interactions between financing of airports and possible aid to airlines Aid granted by a Member State 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

  13. Policy perspective

  14. Where we want to go in the long-term: A "steady state" regime Investment 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 Operating aid to airports 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)

  15. Growth potential Growth potential? Financing of operation of these airports is covered by the 2012 SGEI Decision Small airports may have problems in financing their operating cost 181 97 80 33 71 1 – 3 M pax 3 – 5 M pax ≥ 5 M pax ≤ 200 000 pax ≤ 1 M pax Source: ACI Europe.

  16. 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.

  17. How can transitional period be designed? Investment aid to airports No phasing-in needed Operating aid to airports Operating aid to airports allowed under certain conditions [with a passenger volume of less than x mio passengers]

  18. Under which conditions could operating aid to airports be allowed? Why are airports not able to cover their operating costs? due to too low airport charges due to unused capacity Aid to the airport Aid to the airlines

  19. How to exclude existence of aid to airlines by publicly funded airports? Market price Appropriatemarketbenchmarksnormally not availableatthismoment In absence of an appropriate market benchmark Assessment based on a "cost approach" Airlines pay charges corresponding to the costs in accordance with their use of the airport services

  20. 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?

  21. Next step Beginning 2013: consultation Member States, stakeholders and interested parties on a written document

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