State Aid: the European Commission has concluded its in-depth investigation on Klagenfurt airport, Austria

The European Commission, upon the conclusion of its in-depth investigation opened in 2014, has ruled that financing granted from 2000 to 2011 by the Austrian government to the Klagenfurt city airport public operator (Kärntner Flughafen Betriebsgesellschaft – KFBG), owned by the State of Carinthia and the City of Klagenfurt, can be considered State Aid within the meaning of the EU rules but, according to the 2014 Guidelines on State aid to airports and airlines, they shall be considered compatible with the single market. Indeed, these measures are aimed at the development and accessibility of the Carinthia region, a mountainous area located in the South of Austria with long travel times to other airports, especially during winter (the closest airport in Ljubljana is around 80 km away).

The Commission also assessed a scheme set up by KFBG in 2005 to incentivise airlines to increase traffic to Klagenfurt airport. Under this scheme, discounts to airport charges were granted under certain conditions, for instance when a new route was opened or frequency was increased on an existing route. The Commission’s has found that any profit-driven airport manager would have been prepared to put in place such a scheme. The reduced airport charges therefore involved no State aid within the meaning of EU rules.

Finally, the Commission assessed bilateral arrangements between KFBG and various airlines. Those arrangements typically set the level of airport charges to be paid in respect of specific routes for a given period, and set out marketing collaborations. The Commission found that the agreement concluded between KFBG and Austrian Airlines and Air Berlin, respectively, does not constitute State aid, while the agreements concluded with Ryanair, Tuifly and HLX (which was merged with Hapagfly in 2007 into the new brand Tuifly) could not, when they were concluded, have been expected to generate more revenues than additional costs. These agreements, therefore, distort competition in the Single Market in breach of EU state aid rules and must be paid back. In particular, Ryanair shall pay back around 2 million euros, Tuifly 1.1 million euros and HLX 9.6 million euros.

The non-confidential version of this decision will be made available under the case number SA.24221 at this LINK.

Pietro Michea