European green light for support measures in favour of Bornholm airport

Europe
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On 27 November 2020, the European Commission authorised the extension until 2023 of the public service compensation of EUR 3.5 million per year for Bornholm Airport in Denmark following an official notification from Denmark. On 30 November 2020, the European Commission also approved a Danish aid scheme of approximately EUR 1.3 million to support the activities of air passengers to and from Bornholm and Sønderborg airports on the basis of the 2014 Aviation Guidelines.

Approval of the extension until 2023 of the public service compensation for Danish Bornholm Airport

Bornholm Airport is a Danish regional airport located on an island in the Baltic Sea between Denmark, Sweden, Germany and Poland.

Three airlines operate from the airport, namely Danish Air Transport, Spies and Alsie Express. These companies mainly serve other Danish airports. Danish Air Transport is the only airline with a regular flight schedule to Copenhagen and Billund.

Since 2014, a service of general economic interest (“SGEI”) has been entrusted to the airport operator by the Danish authorities. The public service tasks consist mainly, on the one hand, in keeping the airport open to all airlines wishing to fly to and from the airport and, on the other hand, in ensuring a high level of safety.

In February 2018, the Commission concluded that Denmark's plan to grant compensation for the discharge of public service obligations in connection with the operation of Bornholm regional airport was in line with EU State aid rules and in particular Article 106(2) TFEU applicable to SGEIs.

Alternatively, the Commission also assessed the measure under its 2014 guidelines on State aid to airports and airlines, which allow Member States to grant aid in the form of compensation for SGEI to airports that play an important role in regional connectivity in the European Union.

In this respect, the European Commission has recognised the possibility for States to grant public service compensation for the management of airports in isolated areas in order to guarantee the accessibility of these territories.

In this case, the Commission found that without the airport, the island of Bornholm would be at a significant disadvantage in terms of connectivity and economic development compared to other European regions, as the airport is the main hub for its population to reach the Danish mainland and for tourists from the rest of Europe to travel to Bornholm.

It also considered that, apart from the air links operated from Bornholm airport, the fastest way to reach the Danish mainland was by ferry, which was not an acceptable alternative.

In accordance with the guidelines, the Commission also ensured that the compensation could not be used to directly subsidise an airline serving the airport.

So far, several airports located in isolated regions of the EU have been financed under the regulation on services of general economic interest, including Sundsvall Timrå and Skellefteå airports in Sweden (see our article of 3 March 2016 on this subject).

According to the Commission, these airports are of particular importance in linking sparsely populated regions with the rest of the EU. Due to their geographical location, they generate only limited passenger traffic, which is not enough to cover their fixed costs. These airports therefore generally operate at a loss and have no margin of profitability. It should be noted, however, that the Commission has a much stricter interpretation of the concept of public service in the airport sector than that adopted by Member States and that only in exceptional cases to ensure the connectivity of isolated regions does the Commission authorise such public service compensation. However, other legal options are possible to ensure the public financing of small regional airports, such as the General Block Exemption Regulation ("GBER") or de minimis aid.

Social aid scheme for passengers on domestic flights to and from Bornholm and Sønderborg

A few days later, on 30 November 2020, the European Commission also approved a Danish aid scheme worth EUR 1.3 million to support the activities of air passengers to and from Bornholm and Sønderborg airports. The scheme will be in force until 31 December 2020.

The main objective of the Danish scheme is to increase the accessibility of the geographical areas where the two airports are located and to promote the social inclusion of the population in these areas, which have suffered from a drastic reduction of flights due to the coronavirus epidemic.

The aid scheme provides for reductions in domestic air fares for certain categories of passengers.

The Commission has also assessed this measure under its above-mentioned 2014 guidelines on State aid to airports and airlines, according to which aid of a social character in the air transport services sector will be considered compatible with the internal market in accordance with Article 107(2)(a) of the TFEU, provided that certain cumulative conditions are met. This category of aid is rarely used by States, although it allows indirect support to air transport to regional airports.

In the first place, the aid must actually benefit the final consumer;

Secondly, the aid must have a social character, i.e. it must in principle only cover certain categories of passengers travelling on a given route (e.g. passengers with special needs, such as children, disabled people, people on low incomes, students, elderly people, etc.). However, if the route concerned is between remote regions, such as outermost regions, islands and sparsely populated areas, the aid is likely to cover the entire population of the region concerned;

Finally, the aid must be granted without discrimination as to the origin of the services, i.e. irrespective of the airlines providing the services.

The Commission found that the proposed subsidies to airlines operating domestic routes to and from Bornholm and Sønderborg airports will benefit final consumers. Moreover, the aid has a social character as it only covers certain categories of passengers travelling on these routes and is granted without discrimination as to the origin of the services, which means that it does not depend on the airline operating the services. On this basis, the Commission has approved the measure under the Community rules on State aid.

This aid scheme complements the very varied arsenal of measures put in place by Denmark to support its economy and in particular its air transport and airports. Denmark is indeed the country that has been the most responsive and prolific in notifying aid schemes to the European Commission since the beginning of the pandemic.

Notwithstanding the Commission's flexibility with regard to State support measures for air transport, the air sector will take time to recover its former form. Indeed, it is expected that the capacity of the European air sector will be sharply reduced in the medium term at least until 2023.