Introduction
In July 2008, the Commission received complaints alleging that France granted State aid to the operator of La Rochelle airport and certain airlines. Almost four years later, in February 2012, the Commission decided to open the formal investigation procedure. It eventually adopted a decision in July 2022 [Commission decision 2023/1683] which found compatible State aid for the airport, incompatible on State aid for some of the airlines and no State aid for certain activities linked to tasks performed by public authorities.1
La Rochelle airport was classified as a small regional airport [category D]. The airport was owned by the local Chamber of Commerce and Industry which was also the operator. At the time the complaints were lodged with Commission, the airport had scheduled flights only to about ten destinations. The main airlines that operated at the airport were Ryanair, easyJet, and Flybe.
Because this decision is both very long [about 120 pages] and very rich [it examines several different measures], this article is divided into two parts. Part I reviews the assessment of the measures in favour of the airport operator. Part II reviews the assessment of the measures in favour of airlines.
Part I: Measures in favour of the airport
Subsidies for tasks falling under the remit of public authorities
France alleged that part of the subsidies were intended to cover the costs of tasks that fell within the remit of the state such as facilities and devices for screening hold baggage, control of access to restricted areas, screening of persons and cabin baggage and investments to increase fire safety.
The Commission recalled that “(224) according to the 2014 Guidelines, activities such as air traffic control, police, customs, aircraft firefighting, activities necessary to safeguard civil aviation against acts of unlawful interference and the investments relating to the
infrastructure and equipment necessary to perform those activities are considered in general to be of a non-economic nature.”
The Commission also added that “(225) in order not to be classed as State aid, the public funding of such non-economic activities should be strictly limited to compensating the costs to which they give rise and must not lead to undue discrimination between airports. The [2014] Guidelines specify with regard to this second condition that, when it is normal under a given legal order that civil airports have to bear certain costs inherent to their operation, whereas other civil airports do not, the latter might be granted an advantage, regardless of whether or not those costs relate to an activity which in general is considered to be of a non-economic nature.”
The Commission then confirmed in paragraphs 226-229 of the decision that the corresponding activities at La Rochelle airport were not economic in nature and that their public funding did not exceed the costs incurred by the airport operator. This is because under French law, those tasks were entrusted to airport operators but their financing remained the responsibility of the state. They were funded through airport taxes. For this reason, the Commission checked that the revenue from airport taxes allocated to non-economic activities did not exceed their costs.
Use of state resources
The measures in favour of the airport were funded by the local Chamber of Commerce and Industry [CCI]. In France, CCIs carry out tasks reserved for the state. They are also supervised by the state. For theses reasons, the Commission concluded that “(237) chambers of commerce and industry such as the CCI must be regarded as public authorities and all their decisions, just like those of the national government or local and regional authorities, must be regarded as ‘imputable to the State’, within the meaning of the case-law on State aid, with their resources constituting State resources.”
Does an airport provide a service of general economic interest?
France argued that the public funding of La Rochelle airport was compliant with the Altmark conditions and therefore it did not confer an advantage to the operator. The Commission examined first whether an airport could provide services of general economic interest [SGEI]. France claimed that the airport provided an SGEI because it contributed to local economic development.
“(248) The Commission does not share this view. To assess the extent to which the operation of an airport is an SGEI, the need in the general interest met by that activity must be analysed.” “(249) For an activity to be considered as an SGEI, it should exhibit special characteristics as compared with ordinary economic activities. According to the case-law of the Court, an SGEI is a service that exhibits special characteristics as compared with those of other economic activities and undertakings entrusted with SGEI tasks are undertakings entrusted with a ‘particular task’. Generally speaking, the entrustment of a ‘particular public service task’ implies the supply of services which, if it were considering its own commercial
interest, an undertaking would not assume or would not assume to the same extent or under the same conditions.”
“(250) It is not disputed that, by improving a region’s accessibility, particularly when it breaks its isolation, an airport can have positive effects on local economic development. However, the simple fact that the presence and activity of an airport generate direct and indirect jobs and stimulate the activity of local undertakings, in particular in the tourism sector, cannot be regarded as a relevant criterion for establishing the existence of a genuine SGEI.”
“(251) As a result, the contribution of La Rochelle airport to local economic development, [[…]], is not in itself a relevant factor as long as it is considered separately from the contribution of that airport to the region’s accessibility.”
“(252) Moreover, point 72 of the Guidelines provides, ‘As far as airports are concerned, the Commission considers that it is possible for the overall management of an airport, in well-justified cases, to be considered an SGEI. […] the Commission considers that this can only be the case if part of the area potentially served by the airport would, without the airport, be isolated from the rest of the Union to an extent that would prejudice its social and economic development. Such an assessment should take due account of other modes of transport, and in particular of highspeed rail services or maritime links served by ferries’.”
“(254) The Commission had stated that the management of La Rochelle airport ‘also includes activities not directly linked to the airport’s core activities such as the construction, financing, use and renting of land and buildings, both for offices and storage and for the hotels and industrial enterprises located within the airport, as well as shops, restaurants and car parks. Finally, while the French authorities consider that all the airport activities in question constitute public service obligations, there is no provision for separate accounts for the revenue from commercial activities.’ By considering that these activities not directly linked to the airport’s core activities are part of the public service obligations, France has ignored the fact that the activities do not exhibit special characteristics as compared with other economic activities, and that economic operators assume the same services to the same extent or under the same conditions outside the airport as within it. Consequently, by considering that all the activities of the airport constitute public service obligations, France has committed a manifest error of assessment in defining the SGEI.”
The Commission also considered that France had committed a manifest error because it did not impose a public service obligation through an act of entrustment with clearly delineated tasks, [paragraphs 260 & 261], it did not define the parameters of compensation in advance [paragraph 263], compensation was not calculated according to the net extra costs [paragraph 267] and the airport operator was not chosen through a competitive procedure, nor was it shown that it was efficient and adequately equipped [paragraph 271].
Existence of advantage with respect to interest-free loans
The airport had received public funding in the form of loans from the CCI. France argued that there was no risk for the CCI which owned the land and infrastructure because their value exceeded the amount of the loans.
The Commission rejected that argument on the grounds that that could be relevant “(276) only if, by granting these advances to allow the continued operation of La Rochelle airport, the CCI expected the airport to become profitable in the medium to long term, allowing the CCI not only to see these advances repaid, but also to receive a ‘return on its investment’ remunerating the capital committed, through any profits made by the airport.”
But at the time the loans were granted the airport was loss-making. In addition, there was no study indicating that the airport could become profitable. [paragraphs 279 & 280]
Compatibility
Since the Commission found the various measures in favour of the airport to constitute State aid, it proceeded to assess its compatibility with the internal market. The Commission examined both investment aid and operating aid which was allowed, under certain conditions, for small airports. In the end, it concluded that the aid was compliant with the provisions of the 2014 aviation guidelines and therefore it was compatible with the internal market.
