Response by C.A.J. Vlek (NL) to questions about:

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1 Response by C.A.J. Vlek (NL) to questions about: REVIEW OF THE COMMUNITY GUIDELINES ON FINANCING OF AIRPORTS AND START- UP AID TO AIRLINES DEPARTING FROM REGIONAL AIRPORTS Name Organisation represented Location (Country) address C. A. J. (Charles) Vlek Prof. em. of environmental psychology and decision research at University of Groningen The Netherlands Note: Below, only net responses to the Commission s many questions are provided insofar as possible and relevant from the point of view of a private citizen and research psychologist living in the wide vicinity of one problematic regional airport: Groningen Airport Eelde (GAE). I have professionally followed and participated in the long debate (started in 1984 and stepped up in 1992) about the need for and promises of GAE s further development (incl. runway extension). In addition, in the early 1990s, as a member of the national Commission for Environmental Impacts Assessment, I have assisted in formal reviews of Schiphol Amsterdam Airport s plans for constructing their fifth runway. When desired I would be willing to further explicate and/or explain my views and suggestions as expressed below. My responses are given in the order of your questionnaire, as follows. A.1 and A.2: No. B.1.1: (a) Growth in European goods transport, in holiday and leisure travel, and in high-speed rail transport. (b) Developing climate policies, and expanding environmental pressure from air and corresponding ground transport infrastructure as well as from passenger accommodation (e.g. hotel) facilities. (c) General liberalisation of European air transport with continuaton, however, of largely tax-free aircraft fuelling and passenger ticketing, which implies a significant competitive advantage compared to other (surface) modes of transport. (d) The shock therapy (since Aéroports de Paris, Dec. 2000) of treating regional airports as selfsupporting commercial enterprises, whereas many airports could and can not exist without some kind of government support. B.1.2: Increasing reliance on holiday charter transport and strong low-cost airline competition. For the smaller regional airports, freight transport seems to suffer from insufficient volumes. B.1.3: Yes. The distinction between larger and smaller airports as well as between infrastructural and operational aid is useful, and the proposed criteria for market-compatibility judgments are reasonably clear. Specifically about the Guidelines-2005: Point 13: Apparently, there were/are altogether 159 airports in the EU-15 (..?), of which only 35% take care of 80% of all air European transport. This means that 124 airports are sharing about 20% of European air transport amongst themselves, which amounts to an average of only 0.25% for each. The 67 smallest airports together account for 4% of all air transport, i.e. for 0.06% each. Conclusion: For an autonomous, commercially sustainable development, there are (far) too many airports in the EU, and thus the need for State aid always has been and actually is great. Question: What are the relevant figures for EU-27 in 2011 and would the above conclusion also be valid for the meanwhile-enlarged EU at the present time? Point 20: Given that there are too many regional airports, the Commission s 2005 statement that such airports help reduce congestion, increase citizens mobility (why should this be a goal in itself?),

2 and contribute to regional development may not be applicable to many airports. A case-by-case evaluation seems indispensable. Point 61: One problem here is the provision to the Commission of basic information about particular cases: what, by whom, and how is a valid and balanced picture eventually obtained? See further my response to question D.1.1 below. B.1.4: Given the (too) many small airports in the EU, their competitive power must be rather limited. Thus, many regional airport managers increasingly depend on the dynamic market strategies of fairly aggressive low-cost airline companies such as Ryan Air and Easyjet. So far, many airports operating losses can only be paid out of government contributions. B.1.5: Regional airports and relevant airline companies could become more important: (a) if they play a supplemental, international role next to public surface transport (trains, buses), (b) if they could take over a substantial share of long-distance car travel (> 200 kms, say). For such a strategy to succeed, the price, accessibility and regular use of air transport should be made more attractive, whilst long-distance motorized road transport should be effectively discouraged at the same time. It may nevertheless turn out inevitable that quite a few regional airports close down before not too long. Locally, this might significantly contribute to the quality of living environments and natural landscapes, as well as to regional governments financial situation. B.1.6: In view of my response to B.1.5 it would be desirable to consider State aid for airports (mainly: infrastructure) and for start-up of airline operations in certain cases permissible under the condition and/or to the extent that competing forms of surface (notably car) transport are discouraged. B.1.7: To me, a substantial revision does not seem necessary, but several points (as mentioned particularly under B.1.3 above and D.1.1 below) need significant reformulation. B.1.8: Horizontal State-aid rules seem most appropriate for fully commercial, flexible and regularly competing production and service companies. But distinctively, the aviation sector is a hybrid one since it comprises air transport companies operated by themselves, as well as airports aimed at locally serving a greater or smaller number of air transport businesses. Thus airports, like railway stations and sea-ports, may serve important public interests such as regional accessibility and economic development, for which air transport companies cannot and will not take responsibility. In fact, and thus far, without some form of State aid many airports would be forced to close down. However, for regional airports, small generally means low in competitive power and high in need of government support. Thus, keeping them open does no seem to be an international problem of market distortion (on the short term, at least) as much as it is a national problem of uneconomical, fruitless government investments. B.2 [B.2.1 through B.2.11]: Not applicable. B.3.1: It is perhaps more difficult, but it would be more appropriate to evaluate airports in terms of multiple criteria covering their annual number of passengers, tons of freight, training flights (if any), and overall airport revenues (benefits minus costs). B.3.2: Small airports might be exempted from the Commission s scrutinizing about State aid (see also under B.1.8 above), unless some other involved party complains about State aid that would significantly distort airport competition. B.3.3: Not applicable. B.3.4: In line with my response to B.3.1 one might say that to 1 million passengers annually is a suitable lower boundary, but a still lower annual number of passenger movements could be compensated by a greater number of tons of freight and/or training flights. 2

3 C.1.1: On this point the Guidelines-2005 seem quite appropriate and generous towards airport operators. See further under C.1.4 below. C.1.2: Not applicable. C.1.3: Not applicable. C.1.4: In line with my response to B.1.8 one might argue that the various non-economic activities are part and parcel of any airport whose main function is the provision of air transport facilities. To the extent that airports are considered to be normal commercial enterprises in a free European market, governments should not need to feel obliged to provide for airport security and fire-brigade and not even for local air traffic control. In contrast, basic infrastructure, police and customs services typically fall under government responsibility. Otherwise we would have government-subsidized air transport, which actually is already the case, partly, via the absence of fuel excise tax and VAT on airline tickets. C.2.1: Not as far as I know. In case of (nearby) Groningen Airport Eelde the Dutch government has proposed that keeping the airport in operation should be seen as an historic public service (since 1959) for which State aid was and is justified. However, GAE has always predominantly been a heavily subsidized national pilot training centre (for KLM, mostly), under the auspices of the government s own State Aviation Service ( Rijksluchtvaartdienst, RLD). C.2.2: The Guidelines-2005 are clear enough. C.2.3: The practical obstacle is to find airport services that may be deemed of such general economic (and social) interest that a public service obligation is warranted for which compensatory State aid may be provided. In the case of Groningen Airport Eelde or any other Dutch airport, our government has as far as I know not (yet) publicly announced any attempt to formulate one or more specific public service obligations. C.2.4: No. C.3.2, a-f: Not Applicable. C.3.1, a-e: Not applicable. (f): It is imaginable that basic airport infrastructure should be promising enough to attract private investors for the development of additional infrastructure, so that the airport as a whole may become an appropriate basis for various commercial activities (especially air transport, of course). For the State to finance such basic infrastructure, however, there should be plausible scenarios and promising results of valid market studies for justifying major investments decisions. D.1.1. The five criteria in point 61 of the Guidelines-2005 seem rather appropriate. Among these, criterion 5 is less transparent and seems the most difficult to apply, since by definition effective State aid for airport development must sooner or later have an impact on airport competition. One might consider adding a criterion 6, about the justification of the environmental (especially landscape) impact of State-aided airport investments. Another criterion (7) one might add is the compatibility of airport expansion, and thus of increased air transport, with the EU s goals and strategies as regards sustainable mobility and CO 2 emissions reduction in view of climate change. Indeed, such a criterion would be more generally applicable to the Commission s premises and goals for European aviation, as exposed in point 20 of the Guidelines. Of crucial importance is the question not addressed in point 61 who is to provide the Commission with the relevant information, including basic premises, component judgments and overall conclusions, to be used for the Commission s own analysis and evaluation. When intended or already granted State aid must be formally announced to the Commission, it is important that involved parties 3

4 other than the State itself should a priori be given the opportunity to take notice of the State s representation of the case under consideration and to submit their own information and considerations about the case. This prevents the Commission from having to rely on incomplete and biased information from State officials reflecting their often traditional role of airport supporter and perhaps shareholder, too. D.1.2: Major investment aid to an airport will distort free-market competition to the extent that, thanks to the investment, the airport is able to attract more passengers and/or freight and/or flight training activities and/or air transport-related business companies than before. Obviously, the airport s relative attractiveness also depends on its vicinity to other, similar airports, the size and population density of its catchment area and its own marketing strategy. Competition may be distorted as a consequence of greater or smaller shifts in market shares with respect to other, obviously competing airports (e.g., for Groningen Airport Eelde these are Bremen, Münster-Osnabrück and Düsseldorf- Weeze in Germany, as well as Schiphol-Amsterdam, Eindhoven and Rotterdam in The Netherlands). D.1.3: The conclusions of the Cranfield University study may of course be updated, but they still seem reasonably valid today. D.1.4: Please see under D.1.3. In addition, newer empirical data might be collected. D.1.5: As said under D.1.1, point 61 of the Guidelines-2005 seems clear enough, except for criterion 5, while two additional criteria may be useful. It would be quite necessary, I believe, that the Commission conduct a careful, balanced and valid investigation into the rationale given for State aid. As far as States may have a prior commitment or an interest of their own (e.g. as the major long-term airport shareholder), it seems important that other involved parties also get to present their views. See further under D.1.1. above. D.1.6: Not applicable. D.1.7: Perhaps yes. Any prudent government would first explore the possibilities for attracting private investors. Traditionally, however, private parties have often perceived regional airports as notoriously non-profitable and they have well noted the self-evidence of continual government support (which they prefer to see as a typical government task ). Much of regional airport investment so far seems to be a risky venture, and it will take some time and effort to convince private parties that they stand a good chance of positive returns on investment. D.1.8: This question invites a full business case for airport development, including an environmental and social impacts assessment: What good and bad would this bring and would the overall result be better than what we have now? The question cannot be answered without an explicit methodology (including quantitative as well as qualitative components) and a focus on one or more particular cases. Around Groningen Airport Eelde, for example, it has taken numerous policy documents, many critical analyses and years of debate to get a reasonably broad (and still contested) picture of what airport expansion would mean and whether the State-aided investment of nearly Є 40 million (and much more, if we look further into the past) would be sufficiently effective, or whether it would only worsen GAE s financial position for many years to come. D.1.9: Lack of time prevents me from elaborating a detailed response here, but see my comments on the 2005-Guidelines point 13 under B.1.3 above. The Commission may want to realize that many (regional) governments cherish their regional airport(s) as a potential (albeit proven-weak) basis for economic development and as a regional status symbol. Thus there often are strong policy tendencies towards favouring our own airport and to perceive its future prospects as far more promising than a rational, evidence-based and balanced analysis would allow one to conclude. D.1.10 and D.1.11: Not applicable. 4

5 D.2.1: The 2005-approach is thoughtful and seems still valid. D.2.2: A service of general economic interest should be clearly described in terms of necessary airside accessibility, support for regional economic and social development including employment, indispensable facilities for emergency transports and/or nationally important flight training facilities. D.2.3: Not applicable. D.2.4: Yes, in principle. However, the answer significantly depends on the relevant package of airport services. To the extent that this covers activities as mentioned under D.2.2 above, the airport may justifiably receive government support. There is a paradox here, however. If the airport would demonstrably be of such general economic interest, then why should it not be able to make major investments from its own (built-up) financial resoures? For other activities, such as touristic air transport and private leisure or sports aviation, no government support seems justifiable. D.2.5-D.2.7: Not applicable (see under D.2.2 and D.2.4 above). D.3.1 and D.3.2: Yes. The 2005-Guidelines are clear enough and seem to suffice. D.3.3 and D.3.4: State aid for airport services does not seem justifiable. See also under C.1.4 above. E.1.1: Start-up aid for new airlines from peripheral regional airports may give one mixed feelings. On the one hand, one might understand that airline companies shy away from starting an operation from an airport whose passenger and/or goods market they don t know yet and which they might help open up. On the other hand, shouldn t the start-up of such a new operation be considered to be the airline company s own venture risk, similar to any other commercial business trying to launch a new product? In my view, only if the Commission considers it of general economic interest that new airlines are started up from remote, and often weak airports would it be justifiable that governments provide some aid to help them get started. Otherwise one would just be stimulating commercial (airline) business and take over the start-up risk from the relevant company. E.1.2-E.2.14: Not applicable (too detailed for me; see general answer under E.1.1 above). F.1.1-F.1.7: Not applicable. G.1.1: Returning to nearby Groningen Airport Eelde we may clearly note that without many years of substantial government support since 1954 (when a grassy airfield was turned into a professional airport having two concrete runways), this regional airport would long ago have had to close down. At the present time, and particularly after the national government s official withdrawal in 2001 as the airport s main shareholder, this means that GAE s financial future is bleak and uncertain, while its current five regional government-shareholders (two provinces and three municipalities) have not yet developed a clear vision of the airport s sustainable future. It is my conjecture that such a situation also pertains to quite a few other regional airports (see under B.1.3 above), and that it should not be a European policy axiom that these should all be government-stimulated to develop into commercial successes. Groningen (NL), 21 June 2011 C.A.J. Vlek 5