Commission orders the recovery of aid to airlines in Sardinia

In a decision of 29 July 2016, the European Commission concluded that the public support granted by Italy’s Sardinia region to selected airlines gave them an unfair advantage and must be repaid. It found the measures involved no aid in favour of the airports as they only acted as an intermediary and passed on the public funding in full to the airlines.

The case concerns a compensation scheme to support the development and de-seasonality of air transport services between Sardinia and the mainland (European and Italian cities), which the Italian authorities notified to the Commission in November 2011.

Under the scheme, airport operators were compensated for selecting airlines that were able to meet certain annual targets, i.e. frequencies and passenger volumes on given “strategic” routes. In return, selected airlines were granted financial contributions from the respective airports for delivering these services and to carry out related marketing.

Italy argued that the compensation payments were intended to remunerate airports for the discharge of a public service obligation in relation to air transport from and to the island. According to the Italian authorities, the justification for services of general economic interest (“SGEI”) was primarily based on the need to increase traffic flows, with associated social and economic benefits for the territory of Sardinia.

The Commission, however, expressed its doubts about meeting the EU criteria on SGEI and opened a formal investigation into the scheme in January 2013.

The decision of January 2013 focused mainly on the airports, as the Italian authorities did not at that time provide the Commission with much information about the passing on of funding to the airlines.

In its recent decision, however, the Commission found that, although the measures involved no aid to the airports, the financial compensation granted by the airports of Cagliari and Olbia to certain airlines for the opening of new routes or the extension of existing routes was illegal aid which breached the 2005 guidelines on state aid for developing regional airports.

As stated by the Commission in its press release, “the measures were not designed to make routes profitable without public funding in the future and were not restricted to the extra costs of opening new routes. Sardinia also failed to organize tender procedures to select the airlines to provide the activities financed”.

The precise amounts to be repaid must be determined by the Italian authorities.