Europe Plans New Limits on Aid to Money-Losing Regional Airports

By Nicola Clark,

The European Commission announced new limits Thursday on the amount of financial aid that member states can provide to money-losing regional airports, a move that could eventually lead to higher fares for passengers traveling to some out-of-the way terminals served by low-cost carriers.

Under the new rules, which are expected to take effect next month, airports serving more than 5 million passengers a year will be barred from receiving any state support unless there is evidence of a “clear market failure.” And aid for most smaller airports, with fewer than 3 million passengers, will have to be phased out by 2024.

In a statement, Joaquín Almunia, the Union’s competition commissioner, called the new restrictions “a key ingredient for a successful and competitive European aviation sector,” which he said would “ensure the mobility of our citizens while preserving a level playing field between airports and airlines.”

The overhaul follows more than a decade of breakneck expansion in European air traffic, led by budget airlines like Ryanair and EasyJet. Small airports have grown especially rapidly. Between 2004 and 2012, airports serving fewer than 5 million passengers have seen traffic jump by 79 percent; traffic at those serving more than 5 million has risen by just 29 percent over the period, according to Transport and Environment, a lobbying group based in Brussels.

The Commission, the executive arm of the 28-member Union, said on Thursday that it was still reviewing more than two dozen cases of past subsidies granted to airports and to airlines, including the Dublin-based low-cost carrier Ryanair. The Commission said it would judge those cases — which involve regional airports in Germany, France, Austria, Italy, Sweden, Romania and Spain — based on their compliance with the new aid guidelines.

Legacy carriers like Air France-KLM and Lufthansa have long complained that public support for small airports puts them at a competitive disadvantage and serves as an indirect subsidy to low-cost rivals..

The availability of subsidies has also led to a decade-long boom in new, taxpayer-funded airport construction that has often pitted municipalities against one another in hopes of luring air travelers and new jobs.

But many of those airports have yet to turn a profit and are dependent on taxpayer support, which violates European competition rules. Some also are significantly underutilized by airlines, draining public coffers for their upkeep and failing to deliver much economic benefit.

Under the new rules, member states will continue to be allowed to cover the operating losses of small airports and to finance 25 percent to 75 percent of investments in new infrastructure for a maximum 10 years, beginning in 2014. Airports will need to present a business plan to qualify for aid and will be expected to increase the fees they charge to airlines, potentially leading to higher ticket prices.

The Commission set looser restrictions for Europe’s smallest airports, however, allowing those that serve fewer than 700,000 passengers per year to receive subsidies of up to 80 percent of operating losses. Member states will be required to review such support after five years, but they will not be required to phase it out entirely.

Airport groups applauded what they saw as a measured approach by the Commission that recognized the role that air connectivity plays in economic development. But they also expressed concern that the restrictions could hamper future investment in airport infrastructure as demand for air travel rises across the region.

“In order for Europe to stay globally relevant, we should be able to address airport investment as flexibly as our peers in other world regions,” ACI Europe, a trade group representing 450 of the region’s airports, said in a statement.

Environmental groups expressed frustration that the Commission did not take a tougher stance against the air transport sector. They said the industry already receives generous breaks on fuel and value-added taxes while being responsible for about 5 percent of global greenhouse gas emissions.

The new guidelines “open the floodgates to increased operating aid for airports,” for at least the next decade, Bill Hemmings of the Transport and Environment lobbying group said in a statement. “Why must everybody pay so that the better off can fly more often and for cheaper?”

Sourced by New York Times

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