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State subsidies for airports set to soar

February 26, 2014

State subsidies for regional airports and airlines serving them – mainly the low-cost airlines – will be allowed to continue for at least another 10 years, according to the Commission’s finalised guidelines on state aid for airports. The revised guidelines, which cannot now be challenged by MEPs, are ostensibly aimed at streamlining and tightening state aid for airports.

For the larger airports the guidelines generally do tighten state aid, but concessions for Europe’s 400-plus regional airports mean current subsidies of €2-3 billion a year are likely to snowball, especially as an amnesty for past illegal practices of granting operating subsidies has been included. T&E says it is wrong that all European taxpayers have to pay so that the better off can fly cheaply.

Rules governing the EU internal market prohibit the use of government money in situations that will distort competition. Guidelines on when member states can give taxpayer money to airports, and how much they can give, were first drawn up in 1994; they were revised in 2005, so these new guidelines are the third version. They apply to more than 460 airports in the 28 EU member states. Previous rules governing assistance to airports in remote regions (public service obligations) and restructuring aid for failing carriers (more honoured in the breach) remain in place.

The Commission has presented its guidelines as a toughening of limits on the state funding airports and airlines can receive. Airports that serve more than 5 million passengers a year will be excluded from receiving investment aid in the future except in cases of ‘clear market failure’ – an expression which could cover many eventualities. Meanwhile, operating aid for airports with fewer than 3 million passengers will be allowed until 2024, and airports that serve fewer than 700,000 passengers can have operating losses subsidised up to 80%. State aid for operating costs was illegal, but the Commission says it will be legalised retroactively.

T&E’s aviation manager, Bill Hemmings, said: ‘The Commission openly acknowledges that operating aid is the most distortive form of aid. Yet with its new state aid guidelines, it not only legalises past subsidies, but also gives a new blank cheque to airports and airlines that fail to boost local economies. And while its phrasing says most subsidies must be phased out by 2024, we know from past experience that there is a good chance the deadline will be put back. All this so that the Commission and member states can avoid the hard political decisions required to rationalise the sector and so that the better off can fly more often and more cheaply.’

A lot of past aid has been used as part of agreements to entice low-cost airlines like Ryanair, EasyJet and Air Berlin to expand services to regional airports. This is the main cause of smaller airports growing much faster than bigger airports over the past 10 years – airports with over 5 million passengers have grown by 29%, while those with under 3 million have grown by 79% and those under with 1 million by 135%.

The Commission’s own guidelines say fewer subsidies for air transport are unlikely to make air tickets much more expensive. It estimates phasing out subsidies will mean only €3 per ticket more on most trips, and if airports become more efficient, even this increase will be wiped out by other savings.

Aviation is the most carbon-intensive mode of transport, responsible for about 5% of global warming.

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