The Commission has approved €11.7 million in State aid granted to the manager of Carcassonne airport between 2001 and 2011. The European Commission has also concluded that certain agreements signed over the same period between the Carcassonne airport and airlines operating at that airport (in this case Ryanair) amounted to around €1.8 million in incompatible State aid. France will now have to recover this amount.
The Commissions investigation
On 4 April 2012, following a complaint, the Commission opened an in-depth investigation to assess whether agreements between Ryanair and the Chamber of Commerce and Industry of Carcassonne-Limoux-Castelnaudary (‘CCI), a public entity and manager of Carcassonne airport until 2011, as well as government funding to CCI, were in line with EU State aid rules.
The Commission found that, between 2001 and 2011, CCI received subsidies, mainly from local and regional authorities, including €9 million to support investments to finance Carcassonne airports infrastructure, as well as €2.7 million to support CCIs operations. The Commission concluded that these €11.7 million in subsidies granted to CCI are allowed under the Aviation Guidelines, the sectoral rules applicable to operating or investment aid to airports. The aid was necessary and proportionate to the objectives pursued, since it contributed to the necessary modernisation of the airport and the financing of its operating costs without generating excessive profits. The Commission also concluded that the aid would not unduly distort competition with nearby airports such as Castres-Mazamet, Perpignan, Béziers and Toulouse-Blagnac. The Commission further found that €1.1 million in subsidies was used to finance activities outside the market, such as firefighting and customs control, and is therefore outside the scope of EU State aid rules.
In the same period, CCI signed a number of agreements with Ryanair and its subsidiary AMS, which dealt specifically with marketing. The contracts concerned both marketing services and airport services agreements. CCI paid out a total of €8.9 million to Ryanair and AMS for marketing services. The services agreements set out airport charges applied to Ryanair, as well as a commitment from the airline to operate certain routes to Carcassonne and reaching certain passenger targets.
The Commission today concluded that 11 marketing and airport services agreements signed between CCI and Ryanair/AMS constituted incompatible State aid. The Commission assessed the profitability of 16 of these agreements to the airport, to determine whether a private operator would have signed similar contracts (the so-called market economy operator or ‘MEOP‘ test). The test consists of calculating the net present value (‘NPV‘) of the agreements for CCI, based on the expected revenues and costs associated with them. A positive NPV means that the agreement is profitable and fulfils the MEOP test, while a negative NPV means that it does not and provides an advantage to Ryanair equivalent to the value of the NPV, as a market operator would not have concluded such an agreement.
The Commission found that 11 of the 16 contracts conferred an advantage on Ryanair. The profitability of the contracts evolved to the benefit of Ryanair because CCI started paying higher marketing fees to Ryanair, for similar services, while reducing its passenger charges.
The total advantage conferred on Ryanair amounts to €1.8 million. France must now recover the incompatible aid, plus interest. As a matter of principle, EU rules require that incompatible State aid is recovered without delay in order to remove the distortion of competition created by the aid. The purpose of recovery is to restore the situation which existed in the internal market before the aid was paid, and hence does not constitute a fine. By paying back the unlawful aid, the beneficiary forfeits the advantage which it has enjoyed over its competitors.
Background
Under EU State aid rules, public interventions involving companies can be considered free of State aid when they are made on terms that a private operator, placed in the same conditions as the State, would accept under market conditions. If this principle is not complied with, public interventions typically involve State aid within the meaning of Article 107 of the Treaty on the Functioning of the European Union, as they confer an economic advantage on beneficiaries with respect to their competitors.
The non-confidential version of the decision will be made available under the case number SA.33962 in the State aid register on the Commissions competition website once any confidentiality issues have been resolved. New publications of State aid decisions on the internet and in the Official Journal are listed in the Competition Weekly e-News.
