PREFACE... 9 LIST OF ABBREVIATIONS... 11 1. INTRODUCTION... 13 1.1 Presentation of the topic... 13 1.2 Methodology... 14 2. A SINGLE SKY AIRLINE REGULATION IN THE EU... 18 2.1 Introduction... 18 2.2 The era of regulated air transport (1944 1984)... 19 2.2.1 The Chicago system... 19 2.2.2 Bilateral Air Service Agreements... 21 2.2.3 Inter-airline Pooling Agreements... 23 2.2.4 The IATA and the tariff-fixing regime... 24 2.3 Deregulation in the United States Inspiration and role model... 25 2.4 Liberalization of the airline industry in Europe (1984 1997)... 27 2.4.1 Introduction... 27 2.4.2 Air transport in EU law... 29 2.4.3 The first liberalization package and other developments (1984 1990)... 34 2.4.4 The second liberalization package and other developments (1990 1993)... 36 2.4.5 The third liberalization package and developments after 1993... 39 2.5 The Low-Cost Revolution in Europe... 45 2.6 Other developments after liberalization the 1996 and 1999 Communications from the Commission... 50 2.7 External relations International aspects of the airline industry... 53 2.7.1 The Commission on the move: Bilateral air service agreements between the EU and third states... 53 2.7.2 Subsidies to airlines in the USA... 56 2.7.3 EU protection against subsidization of foreign airlines... 59 2.8 How do airlines make money?... 61 2.9 Conclusions... 62 3. STATE AID CONTROL IN THE EUROPEAN UNION... 64 3.1 State aid policy and State aid control... 64 3.1.1 EU Law and the Role of the ECJ... 64 3.1.2 EEA Law and the Role of the EFTA Court... 66 3
4 3.2 The interdisciplinary context of State aid law: economics and policy analysis... 67 3.2.1 Economics... 67 3.2.2 Policy Analysis... 74 3.3 Finding the balance: economic efficiency vs. equity... 78 3.4 The State Aid Action Plan... 79 3.5 Commission Guidelines and their application... 84 3.6 Article 107(1) TFEU The definition of State aid... 86 3.7 The resources must be attributable to the state... 87 3.8 Advantage... 95 3.8.1 The aid must confer an advantage on the undertaking... 95 3.8.2 The Market Economy Investor Principle... 97 3.8.3 Services of General (Economic) Interest... 107 3.9 The notion of an undertaking and the selectivity criteria... 112 3.9.1 The notion of an undertaking... 112 3.9.2 Selectivity... 115 3.10 The effect on trade and distortion of competition... 121 3.10.1 Introduction... 121 3.10.2 The development of Competition analysis under Article 107(1) TFEU... 124 3.10.3 The relationship between Articles 101 and 107 TFEU... 129 3.10.4 The applicability of Articles 107 and 101 TFEU... 132 3.10.5 Market definitions in Air transport... 134 3.10.6 Effect on trade between Member States... 138 3.11 State aid that is compatible with the Internal market... 140 3.11.1 Article 107(2) TFEU... 140 3.12 State aid that may be compatible with the Internal market... 149 3.12.1 Introduction... 149 3.12.2 Article 107(3)(a) and (c) TFEU Aid to promote regional economic development... 152 3.12.3 Article 107(3)(b) TFEU Aid to important projects and to remedy a serious disturbance in the economy... 163 3.12.4 Article 107(3)(c) TFEU Development of certain economic activities or of certain economic areas... 170 3.12.5 Article 107(3)(d) TFEU State aid that promotes culture and heritage conservation... 175 3.12.6 Article 107(3)(e) TFEU State aid specified by decision of the Council... 175
3.13 The more economic approach Applying the State Aid Action Plan... 176 3.13.1 The State Aid Action Plan and State aid Control... 176 3.13.2 The Balancing Test... 178 3.13.3 What is the Common interest?... 186 3.14 Conclusions... 191 4. STATE AID PROCEDURE AND REGULATION 659/1999... 192 4.1 Introduction... 192 4.2 Basic definitions in the Procedural Regulation... 193 4.2.1 New and existing aid temporal aspects... 193 4.2.2 Aid schemes and individual aid measures... 197 4.2.3 Other definitions in the Procedural Regulation... 198 4.3 Procedure for assessment of the aid... 199 4.3.1 The procedure regarding notified State aid... 199 4.3.2 Authorization by the Council... 215 4.3.3 Procedure regarding unlawful aid... 216 4.3.4 Decisions of the Commission... 219 4.3.5 Recovery of aid... 222 4.4 Misused aid... 230 4.5 The procedure regarding existing aid... 231 4.6 Third Parties and Interested Parties... 233 4.7 Monitoring... 237 4.8 Common provisions... 238 4.9 Locus standi: Access to justice... 239 4.9.1 Locus Standi in State aid Law General principles... 239 4.9.2 Locus standi for airlines a case study... 244 4.10 The simplification package... 249 4.10.1 The Notice on the Enforcement of State aid law by National Courts... 249 4.10.2 The Notice on a Simplified Procedure... 251 4.10.3 Code of best Practice in State aid Procedures... 252 4.11 Conclusions... 254 5. STATE AID LAW, AIR TRANSPORT AND THE AIRLINE INDUSTRY... 257 5.1 The rules in the Treaty of the Functioning of the European Union concerning air transport... 257 5.2 State intervention and air transport... 260 5
6 5.3 The 1994 Guidelines... 263 5.3.1 Scope of the Guidelines... 263 5.3.2 Operating aid to airlines... 264 5.3.3 Application of the Market Economy Investor Principle... 274 5.3.4 Capital injections... 275 5.3.5 Loans and guarantees... 277 5.3.6 Privatizations of airlines... 285 5.3.7 Concessions of exclusive rights for activities accessory to air transport... 285 5.3.8 Transparency of financial transactions... 286 5.3.9 Accelerated procedure... 287 5.4 The 2005 Guidelines... 288 5.4.1 Origins: The Charleroi Decision and the Ryanair case... 288 5.4.2 Scope... 293 5.4.3 Start-up aid... 296 5.5 Conclusions... 302 6. RECENT COMMISSION DECISIONS ON STATE AID TO AIRLINES... 305 6.1 Introduction... 305 6.2 Aid schemes designed by airports and the Commission s invitation to submit comments... 307 6.2.1 Dortmund airport (favourable tariffs for new routes)... 307 6.2.2 Pau-Béarn airport (reduced airport service fees and marketing services via Ryanair s website)... 309 6.2.3 Tampere airport (preferential tariff for the sole user of a terminal and exemption from security charges)... 312 6.2.4 Lübeck Airport (privatization and reduced airport charges)... 315 6.2.5 Alghero airport (ground-handling charges and marketing support)... 318 6.2.6 Aarhus airport (preferential agreement concluded with low-cost airline)... 318 6.2.7 Bratislava airport (reduced airport charges)... 321 6.2.8 Frankfurt/Hahn airport (preferential tariffs and consultant reports claiming the scheme to be compatible with the MEIP)... 322 6.2.9 Berlin/Schönefeld airport (cross-subsidization from other airports, exclusive rent agreements, reduced charges and marketing support)... 325
6.3 Final decisions on State aid to airlines... 329 6.3.1 Toulon airport (Start-up aid to low-cost airline compatible with the Internal market)... 329 6.3.2 Torino and Cuneo airports (Start-up aid declared compatible with the Internal market)... 333 6.3.3 State aid to the airline Intermediación Aérea SL (State aid compatible with the internal market)... 335 6.3.4 Leipzig airport and DHL (State aid to cargo operator)... 339 6.3.5 Alitalia (State guarantees to failing airline)... 343 6.3.6 Conclusion... 347 6.4 Enforcement of the State aid rules before national courts Airline-related cases... 347 6.5 Conclusion... 348 7. CONCLUSIONS... 350 7.1 The airline industry... 350 7.2 State aid control... 351 7.3 State aid procedure... 353 7.4 Guidelines on State aid to airlines... 354 7.5 Commission decisions... 355 7.6 Final remarks... 355 ANNEX THE FREEDOMS OF THE AIR... 359 BIBLIOGRAPHY... 360 Books and journals... 360 Newspapers and magazines... 373 SUMMARY... 375 ZUSAMMENFASSUNG... 376 CURRICULUM VITAE OF THE AUTHOR... 378 7
Preface This thesis was written during my time in Luxemburg as a lawyer at the Court of Justice of the European Union and visiting researcher at the EFTA Court. It has always been a dream of mine to write one, and I am highly indebted to Professors Carl Baudenbacher and Peter Nobel, for giving me this opportunity to fulfil it. Thank you! I particularly wish to thank the EFTA Court for letting me borrow one of their offices during the years 2006-2008 and former judge Pernilla Lindh, with whom I had the honor of working at the Court of Justice of the European Union during the years 2008-2011. I also wish to thank Cath Howdle for the excellent and I guess often tedious work of editing my Euro-English and make it readable. There are countless others who deserve mention, but according to the old Swedish proverb, ingen nämnd, ingen glömd. The thesis is dedicated to my grandfather, Hans-Erik Mattsson, without whom this thesis would never have been possible but who unfortunately never got to see this book become reality. Luxemburg, May 2012 9