Regional airports and EU State aid – new twists in a difficult relationship

Few economic operators provide so many and diverse State aid cases as regional airports do. Some recent decisions add further aspects to this area of law.

Recently, the Court of Justice of the European Union partially annulled a decision of the European Commission, which approved State aid in favor of a regional airport in Romania. Only one day later, Advocate General Priit Pikamäe proposed to set aside a judgment against a Commission decision endorsing State aid for Hahn Airport.

The Commission thus faces repeated corrections of its decisions. Soon it will also have to deal with the extension of the Guidelines for Airports and Airlines beyond 2023. Many financial support measures subsidies will be allowed to continue at least in 2024.

General Court: Judgment of 9 March 2023, Case T-522/20 – Timișoara v Wizz Air

On March 9, 2023, the General Court partially annulled the Commission’s decision on the legality of the State aid granted at Timișoara International Airport in favor of Wizz Air. The Commission approved with its decision the subsidies granted by Romania to the third largest airport in the country from 2007 to 2009. The Commission also addressed airport charges from 2007, 2008 and 2010, including discounts granted, as well as certain agreements between the airport operator and Wizz Air from 2008.

The General Court ruled that the Commission made several errors in its assessment of the selectivity and advantageousness of the measures in question. In doing so, it appears that the General Court also challenges the case law of the Court of Justice on selectivity (Case C-524/14 P – Lübeck Airport), at least partially. At the time, the Commission argued that a measure was selective, if it only applied for certain economic sectors or to certain undertakings within an economic sector. Fee or charge schedules always applied to certain infrastructures and were therefore selective. The General Court did not follow this approach and determined the selectivity by considering the effect and not the nature of the measure in question. Accordingly, agreements regarding airport charges are not selective if they are transparent and non-discriminatory. By contrast, the General Court now argues that – even though the criteria of the weight of the aircraft and the number of passengers are objective – de facto selectivity can also be established if the formal criteria for the application of the measure are formulated in general and objective terms, i.e. could be fulfilled by other airlines, but are individually designed in such a way that they significantly benefit a certain group of companies.

In addition, the General Court ruled that the Commission did not properly justify its decision regarding an economic advantage. While the market economy investor principle test had to be based, according to established case law, on the elements known at the time of the conclusion of the contract, the Commission chose an alternative method to assess this issue. This method was based on the subsequent reconstruction of business plans, which incorporate parameters determined on the basis of probable forecasts made prior to the date of conclusion of the contract. However, the Commission’s assessment – that a market economy private operator would also have concluded the contracts between Timişoara Airport and Wizz Air in 2008 – was solely based on ex post evidence. This approach was considered unlawful by the General Court. The General Court decided that the Commission’s conclusion according to which the public funding did not provide Wizz Air with an economic advantage, which it would not have received under normal market conditions and therefore did not constitute State aid was not based on any documents dating before the conclusion of the agreement in 2008. In this respect, the Commission’s decision was not sufficiently reasoned.

The parties are free to appeal the judgment of the General Court before the Court of Justice within two months and ten days after the notification of the judgment. It is therefore to be expected that this procedure will also engage the Court of Justice.

European Court of Justice: Advocate General recommends reversal of the GC judgment on Hahn Airport (C-466/21 P)

Meanwhile, the Court of Justice has not been idle either. Last year, the General Court ruled in favor of subsidies in connection to regional airports in Sardinia in the amount of about EUR 45 million (ECJ, judgment of 17.11.2022 – C-331/20 P, C-343/20 P – Volotea / EasyJet). The Advocate General at the European Court of Justice Priit Pikamäe addressed the State aid of Hahn Airport and issued his Opinion in case C-466/21 P recommending the setting aside of the the judgment of the General Court only one day after the judgment was rendered.

In 2017, the Commission had allowed the German federal state of Rhineland-Palatinate to cover operation losses of Hahn Airport amounting to EUR 25.3 million. The State aid was approved by the Commission without a formal investigation procedure. This was justified on the one hand by the fact that there were no other airports in the catchment area, and on the other hand, by the low negative impact on competition and trade in the Member States. Lufthansa however considered the compensation payments to be distorting competition and therefore brought an action before the General Court. The General Court annulled the Commission’s decision in favor of Hahn Airport (Judgment of May 19, 2021, Case T-218/18) by arguing that the Commission’s examination had been insufficient and incomplete. The Commission should have examined all the criteria specified in the Commission’s Guidelines on State Aid for Airports and Airlines (Aviation Guidelines) for the assessment of the catchment area. This, however, had not been done. The Commission’s decision was therefore not suitable to eliminate all concerns regarding the compatibility of the State aid with the internal market.

According to the Advocate General, the 2021 Judgment of the General Court cannot be upheld. The Advocate General argues that the General Court committed errors of law when rendering its judgment. In particular, the General Court would had failed to observe the obligation to state reasons as well as the rule that the parties should be heard.

In particular, the General Court did not sufficiently substantiate the existence of a competitive relationship between Ryanair flights from Hahn airport and Lufthansa flights from Frankfurt airport. No distinction was made between the use of Frankfurt Airport as a “hub” by Lufthansa and the “point-to-point” traffic by Ryanair at Hahn. In addition, Lufthansa did not plead on the possible competitive relationship, in particular between Frankfurt and Hahn airports.

Commission: Extension of State aid Guidelines for Airports and Airlines beyond 2024

The Commission will also not be able to avoid addressing these issues in the upcoming weeks.

According to media reports, the Commission’s decision not to allow any more State aid for regional airports from 2024 is at a tipping point. Although there has not yet been made a decision on the matter, there are increasing signs that the ban on State aid for regional airports starting from 2024 in the Aviation Guidelines is to remain suspended for the time being. The Commission had adopted the Aviation Guidelines in order to put a stop to the continuous subsidization of regional airports, which taking place in many places in Europe at the time. Its compatibility with the rules of the EU single market is not unlimited.

The ban on State aid in the Aviation Guidelines would mean that, starting 2024, no more State aid would be permitted for airports with fewer than 3 million passengers per year. In Germany, this would affect 14 of 24 main airports. However, the Commission apparently feels compelled to act, considering the now sharply reduced passenger numbers due to the Covid-19 pandemic. The Commission’s decision is therefore eagerly awaited. This is, however, not expected before the second half of 2023.

Authors: Prof. Dr. Moritz Lorenz and Lars Hettstedt