1. Revision of the Aviation Guidelines A. ALEXIS

2. Liberalisation of air transport market 1984 -liberalisation of scheduled inter-regional air services 1988 – the first liberalisation package 1990 – the second liberalisation package 1993 – the third liberalisation package 1997 – completion of the internal market From national air transport market to EU internal market for air transport 2 Increased competition between airlines and airports

3. New market players – Emergence of the Low Cost Carriers 0 1 2 3 4 5 6 7 199519961997 1998 1999 200020012002 2003 20042005 200620072008 20092010 Source: OAG summer schedules Weekly seats available (millions) Network carrier (incumbent) 44 % Regional airlines 16 % Low cost carrier 40 % 2005 Aviation Guidelines 1994 Aviation Guidelines Increased competition and low prices for customers 3

4. Increased number of regional airports ~460 airports are used for commercial aviation in the EU Member States 4 Increased number of regional airports facilitates local/regional development, but danger of creation of unused capacity

5. High number of publicly owned airports Source: ACI 77 % of EU airports are still publicly owned Publicly owned 77% Privately owned 9% Mixed ownership 14% 52% 720 M pax 34% 470 M pax 14% 200 M pax 0% 10% 20% 30% 40% 50% 60% PublicMixedPrivate Public airports are usually smaller than mixed/privately owned airports 5 Vast majority of airports is subsidised

6. High number of small airports 6 ~60 % of airports serve less than 1 million passengers in 2010 Source: ACI Europe, Data 2010. Small airports are not able to support all their costs ~462 airports are used for commercial aviation 200 000 pax 18197803371 1 M pax 1 – 3 M pax3 – 5 M pax 5 M pax Source: ACI, Year 2010. These airports usually cannot finance their operating costs from own revenue These airports usually cannot finance part of their capital costs Financing of operation of these airports is covered by the 2012 SGEI Decision These airports are usually self- financing

7. Where we are Increased competition between airlines and airports 7 Where do we want to go Enabled regional/local development and accessibility Duplication of unprofitable airports Vast majority of airports are subsidised level playing field. Interactions between aid to airports and aid to airlines Continue to enable regional development and accessibility Avoid duplication of unprofitable airports and creation/ maintenance of overcapacity Avoid waste of public money and reduce the need for public funding (State aid)

8. Operation of an airport and construction of airport infrastructure is an economic activity, except activities falling within public policy remit, e. g. police, customs, air traffic control (Judgement of 12 December 2000 in Aéroport de Paris case, confirmed by Leipzig-Halle airport judgement of 24 March 2011) State of play Public funding of airports is subject to State aid rules 8 Question: Would a profit oriented market economy investor finance the investment of the airport or cover operating losses of the airport? No aid to the airport Aid to the airport If yesIf no

9. State of play 2005 Aviation Guidelines 9 Compatibility criteria for investment aid to airports financing airport infrastructure No compatibility criteria for operating aid to airports to finance their losses Start-up aid to support launching of new routes from small regional airports No aid intensity thresholds (up to 100 % on a case by case assessment) and only rarely notified by MS Exception compensations for Service of General Economic interest only for small airports in remote areas Only financing of marketing support allowed and was only rarely used by airports and notified by MS

10. What have we done? Contact with stakeholders Public consultation e. g. ACI Europe, ERAC, IATA, AEA, ELFAA, ERA, individual airports and airlines, etc. 7 April 2011 – 7 June 2011: 89 replies providing feedback on the recent market developments: 21 Member States, Norway and 12 regional authorities 22 Airports, 9 Airlines, 14 Airline and airport associations 10

11. Main results of the public consultation Simplification and increased transparency More enforcement of State aid rules to airports and airlines Need for special rules for small airports and airports in remote areas More predictable rules for investment aid (clarifications on eligible costs and aid intensity thresholds) Rules to avoid distortion of competition between airports located in the same catchment Majority of the stakeholders supports the revision of the existing guidelines 11

12. Interactions between financing of airports and possible aid to airlines Publicly financed airports might reduce the price for the airport services rendered to the airlines Airlines using this airport could indirectly benefit from an aid 12 Aid granted by a Member State

13. Policy perspective Current situation Transitional period Steady state regime 13

14. Where we want to go in the long-term: A "steady state" regime Investment aid to airports Operating aid to airports Range of permissible maximum aid intensities depending on the size Necessity, proportionality and incentive effect to be demonstrated Additional capacity created meets medium-term demand in the catchment area and does not lead to duplication of unprofitable infrastructure Should not be necessary as airports should be able to cover their operating costs (exception small airports up to 200.000 which can be declared SGEI) 14

15. Growth potential 200 000 pax 18197803371 1 M pax 1 – 3 M pax3 – 5 M pax 5 M pax Small airports may have problems in financing their operating cost Financing of operation of these airports is covered by the 2012 SGEI Decision Growth potential? Source: ACI Europe. 15

16. A number of airports managed to grow into a more viable size Calculation based on a sample of 245 EU (total number of airports in EU = 462). Source: Data ACI Europe. 16

17. How can transitional period be designed? Investment aid to airports Operating aid to airports No phasing-in needed Operating aid to airports allowed under certain conditions [with a passenger volume of less than x mio passengers] 17

18. Under which conditions could operating aid to airports be allowed? due to unused capacity due to too low airport charges Why are airports not able to cover their operating costs? Aid to the airportAid to the airlines 18

19. How to exclude existence of aid to airlines by publicly funded airports? Market price Airlines pay charges corresponding to the costs in accordance with their use of the airport services Appropriate market benchmarks normally not available at this moment Assessment based on a "cost approach" In absence of an appropriate market benchmark 19

20. Airport charges and aid to airlines "Steady state" regime No aid to the airlines airport charges (including non-aeronautical revenues) cover airport's costs Transitional period Which operating aid to airlines? 20

21. Next step 21 Beginning 2013: consultation Member States, stakeholders and interested parties on a written document