Public Service Compensation in the Aviation Sector: The Swedish Airports State Aid Cases

Abstract

For those EU airports whose catchment area is sparsely populated, it may be difficult to achieve the necessary air traffic volume that generates sufficient revenues to cover operating losses. Public financial support is often crucial to keep these airports operating, though it may be considered incompatible State aid under Article 107(1) TFEU. To have such public aid cleared by the European Commission, two options are open to national authorities. Either they invoke the compatibility conditions for operating aid to airports recently introduced by the Commission’s 2014 Aviation Guidelines on state aid to airports and airliners or they claim that the aided airports constitute SGEI and that compensation granted to airports for the provision of such services meet the compatibility conditions, laid down by the 2011 SGEI Decision or the SGEI Framework adopted by the Commission. The article deals with the second option based on the State aid rules for SGEI. It delves into how the Commission has applied these rules in the aviation sector, looking in particular at the cases of Kalmar Airport, Sundsvall Timra Airport, Skelleftea Airport. These three Swedish State aid airport cases are noteworthy because they illustrate what the Commission expects from national authorities to demonstrate that airport aid complies with the SGEI rules. Arguably, on applying the criteria laid down by the 2014 Aviation Guidelines, the Commission has crafted a two-limb test for the qualification of airports as SGEI, revolving around the isolation condition and the market failure condition. After reviewing the Commission’s decisional practice on the administration of this test, it can be submitted that small airports located in scarcely inhabited areas struggling to make profits are more likely to be considered by the Commission as SGEI. National authorities should bear this point in mind either when drafting public service compensation arrangements for airports or when defending the Commission’s objection that such arrangements constitute incompatible state aid in the context of Article 107 TFEU enquiries. National authorities should also make sure that the entrustment acts satisfy the formal and substantive requirements included in the compatibility conditions laid down by the Commission’s 2011 SGEI Decision and SGEI Framework. A shoddy compliance is likely to result in the Commission finding that the national measures under scrutiny are outside the safe harbours provided by the 2011 SGEI Decision and SGEI Framework with the ensuing risk that the compensation may be viewed by the Commission as incompatible State aid.