Proposal on reducing aid to aviation leaves distortions

The Commission has published proposals aimed at reducing the amount of taxpayers’ money that goes to airports and airlines. However, the fine print of what is initially a consultation means small airports will continue to receive massive subsidies that often make their way to low-fares airlines, even when such subsidies distort competition between airlines. The consultation is important, because when it is complete the Commission can implement its preferred solution without consulting MEPs.

Launching the consultation earlier this month, the EU competition commissioner Joaquin Almunia said the Commission’s proposals would ensure fair competition among airlines and airports, whether airlines are low-fare or national carriers, and whether airports are small regional airfields or international hubs. But T&E says the guidelines leave too many distortions, and set no environmental conditions for whether an airport is eligible for EU funds. Despite the proposals,Europe’s airlines will continue to receive around €3 billion a year in subsidies, even though aviation is the source of 5% of global warming.
 
The Commission is planning to divide Europe’s airports into three categories: those handling less than 3 million passengers a year, those with 3-5m, and those with more than 5m. The first category is by far the biggest with over 300 airports, while there are only 33 in the 3-5 category and 71 airports handling more than 5m. Airports under 3m will still be allowed to receive money for new routes, plus state aid to pay for operating costs for another  10 years, while those under 5m will be allowed to receive state aid for expanding airport infrastructure indefinitely. This means member states will continue to disproportionally subsidise smaller regional airports whose airlines are almost exclusively low-fares carriers.
 
T&E’s aviation officer Aoife O’Leary said: ‘Aviation needs to pay its own, fair way. Some low-fares airlines have disproportionately and unjustifiably benefited from subsidies paid to regional airports while the promises of wider benefits to the local economy – from tourists, visitors and buyers of second homes brought in by cheap flights – have often not materialised. Yet this won’t change under the Commission’s guidelines as presently drafted. They don’t stipulate any economic underpinning that would need to prove that subsidising airports promotes the common good rather than harming it, nor is there any weighing up of the benefits of the subsidies against the environmental damage that aviation causes.
 
‘We urgently need robust provisions to stop these on-going abuses and to base any EU state aid on the principles of cost-effectiveness and environmentally sustainable development, and thus put scarce taxpayer money to better use. Air transport already benefits from a concession not available to any other mode of transport – it does not pay a cent in fuel tax or value-added tax, which results in an effective subsidy to the aviation industry of €30-42 billion every year on top of the EU and state aid.’
 
The growth of low-fares airlines flying to big-city destinations by using small airports just outside urban areas has been hailed by many of Europe’s smaller airlines as a success for the low-fares business model. But in many cases, such flights only exist because of subsidies from EU and local funds to help the regional airports, and some of these subsidies have been used as payments to attract airlines to fly to regional airports. T&E says this distorts competition between budget airlines and national carriers and subsidises an environmentally harmful industry.
 
The consultation is open until 25 September. Anyone wishing to make comments on the Commission’s proposals can contact T&E or click here to see full details of the proposals and the process for commenting.