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16 July 2008
On June 17 2008 the European Commission opened investigations into state subsidies allegedly paid to Flughafen Frankfurt-Hahn GmbH and into agreements with the low-cost carrier Ryanair. The investigations focus on capital increases from 2002 and 2004 and a profit and loss transfer agreement between the airport and its parent company Fraport AG. The airport has received, and continues to receive, public funding from regional authorities of the states of Hesse and Rhineland-Palatinate. In addition, the commission will look into the fees charged at Frankfurt-Hahn.
Hahn airport, which is located around 120 kilometres southwest of Frankfurt in the Hunsrück region, is owned by Fraport AG (65%) and the two states (17.5% each).
In 1999 the airport entered into a first individual agreement with Ryanair, which has one of its largest hubs at Hahn. In 2002 and 2005 Hahn and Ryanair concluded subsequent agreements. In the past Lufthansa has complained that Ryanair benefits from reduced landing and take-off fees at Hahn airport which could amount to illegal state aid pursuant to Article 87 of the EC Treaty.
Article 87(1) of the EC Treaty states that:
“any aid granted by a member state or through state resources in any form whatsoever which distorts or threatens to distort competition by favouring certain undertakings or the production of certain goods shall, insofar as it affects trade between the member states, be incompatible with the common market.”
Articles 87(2) and (3) of the EC Treaty provide two lists of state aid measures that are considered to be compatible with the common market under observance of certain criteria.
The commission initially assessed the presented evidence and concluded that although the airport might have acted like a private market investor, there were insufficient grounds to establish this beyond reasonable doubt for the time being. Therefore, the commission has given the parties involved the chance to present their positions and views before a final decision can be taken on whether state subsidies have been granted to the airport or airlines contrary to EU law.
Ryanair seems to be condemned to repeating history. In 2004 the commission issued a decision on the legality of financial advantages granted to Ryanair in relation to the Belgium airport Charleroi.(1) The carrier has asked the European Court of First Instance to annul the commission’s decision to reimburse illegal state aid.(2) The matter is ongoing.
That development led to publication of the EU guidelines on financing airports and start-up aid to airlines departing from regional airports.(3)
Since granting advantages to carriers that intend to establish bases at regional airports is still of great interest to the regional authorities that own those airports, this will probably not be the last commission investigation into this area.
For further information on this topic please contact Ulrich Steppler at Arnecke Siebold by telephone (+49 69 97 98 85 0) or by fax (+49 69 97 98 85 85) or by email (email@example.com).
(1) Commission decision of February 12 2004 concerning advantages granted by the Walloon Region and Brussels South Charleroi Airport to the airline Ryanair in connection with its establishment in Charleroi, (2004/393/EC) OJ 2004 L 137/1.
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