LCCs and Europe’s illegal state aid

EU regulators have ordered a number of budget airlines and European airports to pay back millions of euros in illegal subsidies, it was made public yesterday (October 1).

The ruling could significantly affect Europe’s low-cost model and the availability of cheap flights to secondary airports.

The European Commission found that, wishing to attract budget carriers to secondary airports, regional authorities had offered airlines, including Ryanair and Lufthansa's Germanwings, deals that stood against a single market.

Zweibruecken Airport in Germany must now retrieve €1.2m from Germanwings, €500,000 from Ryanair and €200,000 from TUIFly.

The commission also found that Charleroi Airport received state aid that was “incompatible with EU rules and must now be recovered”.

A further three airports were penalised, meaning a total of six European airports were found guilty of providing illegal state aid.

The commission also opened an in-depth investigation into state financial support granted to certain airlines flying from Brussels Airport in Zaventem.

The decisions are based on the commission’s new guidelines on state aid to airports and airlines adopted in February 2014 as part of its state aid modernisation strategy.

Commission vice-president, Joaquín Almunia, in charge of competition policy, explains: “EU state aid rules allow public authorities to grant support to airports where it is justified, in particular where it improves the accessibility of a region and provides a significant contribution to its economic development.

“However, duplicating unprofitable airport infrastructure or unduly favouring certain airlines wastes taxpayers’ money and distorts competition in the single market.”

In the case of Germanwings at Zweibruecken Airport, it seems the airport favoured its regional carrier, which one can agree distorts competition. However, is anyone really surprised that Ryanair gets good deals flying to secondary airports? It has publicly boasted as much on numerous occasions.

The question is, if we don’t support budget carriers flying to secondary airports, can the low-cost model as we know it survive?

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