Commission Decision (EU) 2017/1149 of 27 September 2016 on State aid SA.30931 (11/C) (ex N 185/10) implemented by Romania for Romanian regional airports (notified under document C(2016) 6031)Text with EEA relevance.

(114) The measures at hand thus constitute unlawful State aid.

7.4.

COMPATIBILITY OF THE AID

(115) For the reasons explained above, the aid cannot be declared compatible with the internal market in accordance with the 2005 SGEI Decision and the 2011 SGEI Decision. Consequently, the Commission will assess the compatibility of the measures at issue on the basis of the criteria laid down respectively in the 2011 SGEI Framework and the 2014 Aviation Guidelines, which seem to be the only possible legal bases under which those measures might potentially be found compatible with the internal market.

7.4.1.

Compatibility under the 2011 SGEI Framework

(116) Article 106(2) of the Treaty sets out that undertakings entrusted with the operation of an SGEI or having the character of a revenue-producing monopoly shall be subject to the rules contained in this Treaty, in particular to the rules on competition, in so far as the application of such rules does not obstruct the performance, in law or in fact, of the particular tasks assigned to them. The development of trade must not be affected to such an extent as would be contrary to EU interest.

(117) That Article provides for a derogation from the prohibition of State aid contained in Article 107 of the Treaty to the extent that the aid is necessary and proportional to ensure the performance of the SGEI under acceptable economic conditions. Under Article 106(3) of the Treaty it is for the Commission to ensure application of this Article, including, inter alia, by specifying under which conditions it considers the criteria of necessity and proportionality to be fulfilled.

(118) Prior to 31 January 2012, the Community framework for State aid in the form of public service compensation (hereinafter the 2005 SGEI Framework)

OJ C 297, 29.11.2005, p. 4.

and the 2005 SGEI Decision represented the Commission's policy of applying the derogation of Article 106(2) of the Treaty.

(119) On 31 January 2012 the new SGEI package, including the European Union framework for State aid in the form of public service compensation (2011) (hereinafter the 2011 SGEI Framework)

OJ C 8, 11.1.2012, p. 15.

and the 2011 SGEI Decision entered into force.

(120) According to paragraph 69 of the 2011 SGEI Framework, the Commission will apply the principles set out in this Communication to unlawful aid on which it takes a decision after 31 January 2012 even if the aid was granted before this date.

(121) Paragraph 16 of the 2011 SGEI Framework sets out the requirements for an SGEI to be considered validly entrusted. Notably paragraph 16(a) thereafter lays down that the entrustment act must spell out the content and duration of PSOs. Therefore, for the same reasons already mentioned in Sections 7.1.4.1 and 7.3 above, in this case the aid cannot be considered compatible under the 2011 SGEI Framework.

(122) The Commission therefore considers that the aid measure in question cannot be declared compatible with the internal market pursuant to Article 106(2) of the Treaty.

7.4.2.

Compatibility under the 2014 Aviation Guidelines

(123) The 2014 Aviation Guidelines apply to operating aid granted to airports before 4 April 2014

Point 172 of the 2014 Aviation Guidelines.

. The compatibility conditions laid down in the 2014 Aviation Guidelines for operating aid to airports differ depending on whether the aid was granted before or after 4 April 2014, the date of entry into force of the guidelines

Point 137 of the 2014 Aviation Guidelines.

.

(124) Operating aid granted before the entry into force of the 2014 Aviation Guidelines, that is before 4 April 2014, may be declared compatible provided that the following conditions are met:

(a) Contribution to a well-defined objective of common interest: this condition is fulfilled, inter alia, if the aid increases the mobility of Union citizens and connectivity of the regions or facilitates regional development

Points 137 and 113 of the 2014 Aviation Guidelines.

;

(b) Appropriateness of State aid as a policy instrument: the Member States must demonstrate that the aid is appropriate to achieve the intended objective or resolve the problems intended to be addressed by the aid

Points 137 and 120 of the 2014 Aviation Guidelines.

;

(c) Need for State intervention: the aid should be targeted towards situations where such aid can bring about a material improvement that the market itself cannot deliver

Points 137 and 116 of the 2014 Aviation Guidelines.

;

(d) Existence of incentive effect: this condition is fulfilled if it is likely that, in the absence of operating aid, and taking into account the possible presence of investment aid and the level of traffic, the level of economic activity of the airport concerned would be significantly reduced

Points 137 and 124 of the 2014 Aviation Guidelines.

;

(e) Proportionality of the aid amount (aid limited to the minimum necessary): in order to be proportionate, operating aid to airports must be limited to the minimum necessary for the aided activity to take place

Points 137 and 125 of the 2014 Aviation Guidelines.

;

(f) Avoidance of undue negative effects on competition and trade

Points 137 and 131 of the 2014 Aviation Guidelines.

.

7.4.2.1.

Contribution to a well-defined objective of common interest

(125) The operating support measures granted to Romanian regional airports were aimed to allow the airports to have enough capital to continue operating viably. According to Romania, regional airports have an instrumental role to play in promoting accessibility to catchment areas and the financing at issue improve airport safety, security and efficiency, whilst contributing towards the achievement of wider regional development objectives. In addition, the most convenient mode of transport to/from those regions is air travel, apart from road/rail services, which however in Romania, given the poor condition of the infrastructure, involve considerably higher travelling times.

(126) Nevertheless, the Commission notes that in view of the close proximity between some of the airports in the investigation, a possible duplication of airport infrastructure could militate against finding financing for those airports meets a clearly defined objective of common interest. Therefore the Commission must assess that the financing of those airports does not lead to the duplication of airport infrastructure within the same catchment area.

(127) The 2014 Aviation Guidelines define the catchment area of an airport as the geographic market boundary that is normally set at around 100 kilometres or around 60 minutes travelling time by car, bus, train or high-speed train. The definition of the catchment area of a given airport needs to take into account the specificities of each particular airport. The size and shape of the catchment area depends on various characteristics of the airport, including its business model, location and the destinations it serves.

(128) As set out in recital 24 above, the only airports subject to the present assessment for which another airport is present within the catchment area of 100 km or 60 minutes travelling time by road, train or high-speed train, as set out in point 25 (12) of the 2014 Aviation guidelines are Arad, Baia Mare, Satu Mare, Constanța and Oradea.

For all the other airports, the Commission considers that the aid contributed to maintaining in operation infrastructure necessary to the mobility of citizens and accessibility of the regions where those airports are located, given in particular the poor quality of the road and rail infrastructure. Therefore, for those airports, the aid contributed to the furtherance of an objective of common interest for the Union. As to the remaining airports, the Commission notes the following.

Arad airport

(129) Arad airport is located only 50 km from Timișoara, which amounts to a travelling time by road of 40 minutes.

(130) Timișoara and Arad airports had different business models during the period 2007-2009. Timișoara was a well-established airport pursuing a business model that is significantly different from that of Arad airport. Timișoara airport offered mainly scheduled flights of regional and international full service carriers connecting Timișoara with a number of Romanian and European cities

Low cost carrier Wizz Air Wizz Air started its operations from Timisoara airport only at the end of 2008.

whilst, as mentioned in recitals 28 and 31 above, the business model of Arad was based on low-cost traffic. The two airports continued to operate under different models from 2009 onwards with low-cost traffic drastically reduced and subsequently disappearing at Arad airport (the airport served only 8632 passengers in 2015 and according to publicly available information, it had no commercial passenger traffic in 2016) and Timișoara airport gearing towards low cost traffic. The fact that the business models of the airports at Timișoara and Arad were different during the period under assessment and subsequently is an indication that the two airports are imperfect substitutes for one another.

(131) According to point 85 of the Aviation Guidelines, the duplication of unprofitable airports or the creation of additional unused capacity does not contribute to an objective of common interest. In this respect, the Commission notes that Timișoara was profitable during the period under assessment. In addition, Timișoara airport made investments in various terminals over 2007-2010 to expand its capacity and cater for increased air traffic (e.g. extension and modernisation of the international flights terminal in 2007, extension of the domestic departure terminal over 2008-2010). Timișoara airport therefore, already far bigger, had to invest to grow, so it is unlikely that absent the aid to Arad, Timișoara could have absorbed Arad's traffic without further investments. This is a further indication of the imperfect degree of substitutability between the two airports.

(132) In the light of the arguments put forward in recitals 130 and 131 above, the Commission finds that while Arad airport is situated in the same catchment area as Timișoara airport, there is no duplication between the two airports.

(133) On the basis of the above, the Commission can conclude that the aid to Arad airport contributed to the mobility of citizens and accessibility of the region where it is located and therefore served a well-defined objective of common interest.

Baia Mare and Satu Mare airports

(134) As regards Baia Mare and Satu Mare airports, they are located 76 km from each other and both airports served mostly scheduled flights to Bucharest operated by the Romanian flag carrier, TAROM. Based on publicly available information, at Baia Mare airport, during the period 2007-2009, TAROM operated several weekly flights to Bucharest, while Austrian Airlines operated one destination (Vienna) during the period April 2008-February 2009 and Blueair served three European destinations for just a few months (October to December 2009). TAROM also operated several weekly flights from Satu Mare airport to Bucharest. However, given the poor condition of the road infrastructure in that area, the travelling time between the two airports is 1h10 minutes by road, which exceeds the 60 minutes travelling time criterion used to delineate the catchment area of an airport according to the 2014 Aviation Guidelines.

(135) In addition, as mentioned in recitals 34 and 35 above there was a difference in the size of the aircrafts which could be regularly operated at the two airports given the difference in infrastructure.

(136) Therefore, in the light of the arguments set in recitals 134 and 135 above, while the two airports are situated within 100 kilometres distance criterion used to delineate the catchment area of an airport according to the 2014 Aviation Guidelines, the Commission finds that there is no duplication between them.

(137) Based on the above, the Commission concludes that the aid received by each of the two airports contributed to a well-defined objective of common interest by increasing mobility and accessibility in the areas where those airports are located.

Constanța airport

(138) Constanța airport is situated at 45 km and 0h30 travelling time from Tuzla airport. In 2007-2009, Constanța offered scheduled flights to several European destinations and therefore had a different business model compared to Tuzla which did not offer any airport services for commercial aviation and focused on specialised flights (e.g. for agricultural purposes, for advertising purposes as well as leisure, training and emergency flights). Consequently, although Tuzla airport is situated in the same catchment area as Constanța airport, it cannot be considered an airport within the meaning of point 25(6) of the 2014 Aviation Guidelines and therefore cannot be regarded as the duplication of the airport infrastructure at Constanța airport.

(139) On this basis, the Commission concludes that the aid to Constanța airport contributed to a well-defined objective of common interest by increasing mobility and accessibility in the area where the airport is located.

Oradea airport

(140) Oradea is 80 km away from Debrecen (Hungary), but traveling time is at least 1h30 (due to the need to pass a non-Schengen border).

(141) In addition, over 2007-2009 the airports had a different business model with Oradea operating domestic flights by regional and national full service carriers and Debrecen airport focusing at that time on charter flights (with low cost traffic developing only in recent years). This is an indication that the two airports in the period under assessment have been imperfect substitutes for one another. Therefore, while the two airports are situated within 100 kilometres distance criterion used to delineate the catchment area of an airport according to the 2014 Aviation Guidelines, the Commission concludes that there is no duplication between them.

(142) Based on the above, the Commission finds that the aid to Oradea airport contributed to a well-defined objective of common interest by increasing mobility and accessibility in the area where the airport is located.

7.4.2.2.

Need for State intervention, appropriateness of State aid as a policy instrument, existence of an incentive effect, proportionality of the aid amount

(143) As regards necessity of the aid, point 116 of the 2014 Aviation Guidelines requires that the operating aid brings about a material improvement that the market itself cannot deliver. According to point 120 of the 2014 Aviation Guidelines, Member States must demonstrate that the aid is appropriate to achieve the intended objective or resolve the problems intended to be addressed by the aid. This is the case if, absent the aid in question, the Romanian airports in question would likely have been forced to exit the market, depriving Romania's regions of a transport infrastructure which plays a significant role in its accessibility and development, or reduce their activity to a significant extent. According to the 2014 Aviation Guidelines, smaller airports may have difficulties in ensuring the financing of their operation without public funding. According to point 118 of the 2014 Aviation Guidelines, airports with annual passenger traffic below 200000 passengers per annum may not be able to cover their operating costs to a large extent. In this sense, the Commission notes that traffic at the eleven airports subject to this assessment was below 200000 passengers in the period 2007-2009.

(144) According to point 124 of the 2014 Aviation Guidelines, operating aid has an incentive effect if it is likely that, in the absence of the operating aid, and taking into account the possible presence of investment aid and the level

of traffic, the level of economic activity of the airport concerned would be significantly reduced. In the present case, absent the aid the activity of the beneficiaries would have been significantly reduced if not terminated altogether due to uncovered losses. According to point 125 of the 2014 Aviation Guidelines, in order to be proportionate, operating aid to airports must be limited to the minimum necessary for the aided activity to take place. The measures under investigation were limited to the minimum necessary to offset losses and allow the airports to continue to operate viably.

(145) Therefore, the Commission concludes that all operating aid was necessary and limited to the minimum necessary for the aided activity to take place.

7.4.2.3.

Avoidance of undue negative effects on competition and trade

(146) As set out in recital 24 above, the only airports subject to the present assessment for which another airport is present within 100 km or 60 minutes travelling time by road, train or high-speed train are Arad, Baia Mare, Satu Mare, Constanța and Oradea. As explained in recital 128 above, for all the other airports, the Commission considers that the aid contributed to maintaining in operation infrastructure necessary to the mobility of citizens and accessibility of the regions where those airports are located, given in particular the poor quality of the road and rail infrastructure. Therefore, for those airports, the aid contributed to the furtherance of an objective of common interest for the Union and did not give rise to undue distortions of competition. As to the remaining airports, the Commission notes the following.

Arad airport

(147) The Commission notes that in the period under assessment, Arad airport had very limited traffic, both in absolute terms and compared with Timișoara airport (situated at 50 km and 40 minutes travelling time). The number of passengers per year at Arad airport varied between 67183 and 128835 in the period under assessment, whereas traffic at Timișoara airport varied between 859329 to 991758 passengers per year. Traffic at Arad airport represented only 7,8 % of the traffic at Timișoara airport in 2007, 14,5 % in 2008 and 8,8 % in 2009. The competitive impact of the aid received by Arad airport on Timișoara airport has been very limited in view of the difference in traffic level between the two airports

In case SA 33961 (2012/C) (ex 2012/NN) implemented by France in favour of Nîmes-Uzès-Le Vigan Chamber of Commerce and Industry, Veolia Transport Aéroport de Nîmes, Ryanair Limited and Airport Marketing Services Limited (OJ L 113, 27.4.2016, p. 32), the Commission found that the competitive impact of the aid to Nîmes airport on the nearby Montpellier airport was also, inter alia, found limited due to the difference in traffic between the two airports as the traffic at Nîmes was six times lower that the one of Montpellier.

. More generally, the overall competitive effects of the aid have been necessarily modest in view of the small traffic at the airport. In addition, the traffic evolution at the two airports does not seem correlated. Traffic at Arad airport increased from 67183 passengers in 2007 to 128835 in 2008 and decreased to some 88147 passengers in 2009 while Timișoara airport increased steadily its traffic (from 859329 passengers in 2007 to 886083 passengers in 2008 and 991758 passengers in 2009)

The non-correlation of the traffic evolution of the neighbouring airports was also one criteria used in case SA.22614 (C 53/07) implemented by France in favour of the Chamber of Commerce and Industry of Pau-Béarn, Ryanair, Airport Marketing Services and Transavia (OJ L 201, 30.7.2015, p. 109), for arguing compatibility of the aid to Pau airport.

. This absence of correlation suggests that the two airports served different needs and market segments and were not simply duplicating each other.

(148) Furthermore, given that Timișoara airport was profitable between 2007 and 2009 and made investment to increase its capacity, it is unlikely that the effect of the aid to Arad airport have had a material impact on the operations of Timișoara airport.

(149) In view of the above, the Commission considers that the distortions of competition brought about by the aid were limited and did not outweigh the contribution of the aid to mobility and accessibility.

Baia Mare and Satu Mare airports

(150) Given the extremely low level of traffic of the two airports in the period under assessment (from 15334 passengers in 2007 to 24983 passengers in 2009 for Baia Mare and from 5883 passengers to 11101 passengers in 2009 for Satu Mara) and the difference in size of the type of aircrafts operated as indicated in recitals 34 and 35 above, the Commission concludes that the distortions of competitions caused by the aid were very limited and did not outweigh the positive contribution of the aid to mobility and accessibility.

Constanța airport

(151) As explained in recital 138 above, Constanța which operated commercial traffic had a different business model than the nearby Tuzla airport, which did not offer any airport services for commercial aviation. Tuzla airport is not even an airport within the meaning of point 25(6) of the 2014 Aviation Guidelines. Moreover, Constanța had a very low traffic in the period under assessment, which limits the distortions of competition brought about by the aid that it received. Therefore the Commission finds that the contribution of the aid received by Constanța airport in 2007-2009 to mobility and accessibility outweighed any distortion of competition brought about by that aid.

Oradea airport

(152) As explained in recitals 37 and 140 above, Oradea is 80 km away from Debrecen (Hungary), but traveling time is at least 1h30 (due to the need to pass a non-Schengen border). In addition, over 2007-2009 Oradea had very low traffic (less than 40000 passengers) and had a different business model compared to Debrecen airport (see recital 141).

(153) On this basis, the Commission considers that contribution of aid received by Oradea airport to mobility and accessibility outweighed any distortion of competition brought about by that aid.

7.4.3.

Conclusion on the compatibility of the aid

(154) On the basis of the above assessment, the Commission concludes that the aid granted in 2007-2009 to Romanian airports at Arad, Bacău, Baia Mare, Craiova, Iași, Oradea, Satu-Mare, Sibiu, Suceava, Tulcea and Constanța in the period 2007-2009 is compatible with the internal market pursuant to Article 107(3)(c) of the Treaty.

(155) This assessment is entirely without prejudice to any potential future assessment by the Commission of any potential aid granted to those airports after 4 April 2014, since any such aid would have to be assessed against criteria that differ from those applicable to the measures at hand

In particular for aid granted after April 2014 point 115 of the 2014 Aviation Guidelines foresee that there is a need to prove the capacity of an unprofitable airport to achieve full operating cost coverage at the end of the transitional period (see paragraphs 128 to 130 of the 2014 Aviation Guidelines) and point 132 of the Aviation Guidelines sets out the need for Member States to prove that all airports in the catchment area will be able to achieve full operating cost coverage at the end of the transitional period.

.

1. CONCLUSION

(156) The funding granted by Romanian public authorities between 2007-2009 to airports located in Arad, Bacău, Baia Mare, Craiova, Iași, Oradea, Satu-Mare, Sibiu, Suceava, Tulcea and Constanța constitutes unlawful State aid which is compatible with the internal market pursuant to Article 107(3)(c) TFEU.

(157) For the reasons explained in recital 69, the investigation for the public funding granted to Cluj-Napoca airport and Târgu Mureș airport between 2007-2009 remains open,

HAS ADOPTED THIS DECISION:

Article 1

1. The public funding which Romania has provided in the period 2007-2009 for Romanian airports at Arad, Bacău, Baia Mare, Craiova, Iași, Oradea, Satu Mare, Sibiu, Suceava, Tulcea and Constanța, amounting to 490401,3 thousand RON, constitute State aid within the meaning of Article 107(1) of the Treaty on the Functioning of the European Union, implemented in breach of Article 108(3) of the Treaty on the Functioning of the European Union.

1. The State aid referred to in paragraph 1 is compatible with the internal market within the meaning of Article 107(3)(c) of the Treaty on the Functioning of the European Union.

Article 2

This Decision is addressed to Romania.

Done at Brussels, 27 September 2016.

For the Commission

Margrethe Vestager

Member of the Commission