Air traffic: incompatible State aid to airlines in Sardinia

On 29 July 2016, the Commission found that public support granted by Sardinia region to some airlines, working at Cagliari and Olbia airports, gave them an unfair advantage, in breach of EU rules on State aid. This financing will have to be repaid, and its precise amount will be determined by the Italian authorities during the recovery process.

In 2010, Sardinia had adopted a scheme, aimed at the development of air transport and ensuring air connections to and from the region all year round, which provided financing to the airports of Cagliari and Olbia, which in turn used it to provide financial compensation to selected airlines. This compensations was intended to ensure that the selected airlines would increase air traffic to Sardinian airports and carry out related marketing activities. The conditions for the transfer of the funding from the airports to the airlines were monitored by the Sardinian authorities.

According to EU state aid rules, public interventions in favor of companies do not fall within the meaning of State aid when they are granted under conditions that a private investor, operating at market conditions, would have accepted. The Commission’s investigation, which started in 2013, found that no private investor would have agreed to finance such an increase of air traffic, nor the related marketing activities. Therefore, the public financing granted by the Sardinia region constitutes State aid within the meaning of European legislation.

The Commission added that Sardinian airports have not received any State aid as they served only as intermediaries to transfer the funding to the selected airlines. With regard to the airlines, however, the Commission found that the compensation they received provided a financial incentive for them to increase air traffic to Sardinia. Consequently, the Commission found that the agreements entered into between them involve State aid in favor of the select airlines flying to and from the island.

Moreover, according to the Commission, the measures do not meet the criteria set by the 2005 guidelines on state aid for developing regional airports (now replaced by the new 2014 guidelines on State aid to airports and airlines) and, in particular, they were not designed to make routes profitable without public funding in the future and were not limited to the extra costs of opening new routes. In addition, Sardinia failed to organize tender procedures to select the airlines to provide the activities funded. Consequently, the public financing does not meet common transport objectives, such as regional development or accessibility, and cannot therefore be justified.