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European Low Fares Airline Association State Aid and Low Fares Airlines John Hanlon - Secretary General, ELFAA Association of European Regions (AER) Conference Brussels, 8 September 2009. About ELFAA 150 million passengers in 2008 35% of intra-Europe scheduled air travel

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European Low Fares Airline Association State Aid and Low Fares Airlines

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European low fares airline association state aid and low fares airlines

European Low Fares Airline Association

State Aid and Low Fares Airlines

John Hanlon - Secretary General, ELFAA

Association of European Regions (AER) Conference

Brussels, 8 September 2009


European low fares airline association state aid and low fares airlines

  • About ELFAA

  • 150 million passengers in 2008

  • 35% of intra-Europe scheduled air travel

  • over 600 state-of-the-art, environmentally- efficient aircraft with an average fleet age of 5.2 years


Elfaa strongly pro competition

ELFAA strongly pro-competition

  • primacy of competition over regulation

  • market forces should be the determinant

  • regulation, only where necessary to control monopolies and curb abusive, dominant behaviour.


State aid

State Aid

state aid distorts competition, therefore there is no place for it in the liberalised air transport market

legitimate commercial arrangements not to be equated with state aid


Ec guidelines on state aid for regional airports

EC guidelines on state aid for regional airports

guidelines date from 2005

little was known at that time of evolution of regional airports and LFAs

understandably therefore, generative capacity of LFAs to revitalise failing airports severely underestimated


Objectives of guidelines

Objectives of Guidelines

Extract from EU guidelines – point 2. (20):

“increased use of regional airports is an asset in combating air traffic congestion at the major European hubs

more access points for intra-European flights increase the mobility of European citizens

developing these airports also helps develop the regional economies concerned”


Low fares airlines and regional airports

Low Fares Airlines and regional airports

The low fares business model a poster boy for the objectives of the guidelines by:

serving primarily regional and secondary airports

linking those airports and regions by direct services, bypassing hubs

of 426 new city pairs created within Europe between 2005 and 2007, 413 were by low fares airlines – 96% of total*

* York Aviation study on social benefits of Low Fares Airlines in Europe – November 2008


Background to guidelines

Background to guidelines

2005 guidelines were based on Charleroi decision

however, Commission’s decision on Charleroi overturned by CFI – December 2008

guidelines due anyway for review by end 2009

that review should be informed by factors which led to CFI decision


What constitutes state aid in context of regional airports

What constitutes State Aid in context of regional airports?

Commission’s Charleroi decision been overtaken by developments in the successful partnership between regional airports and LFAs

overriding criterion Market Economy Investor Principle - MEIP

Commission took too narrow a view of what a private investor would offer, and in particular

failed to take into account private investor’s likely attraction to loss-reducing charging


Flawed application of meip

Flawed application of MEIP

Commission failed to use relevant comparator data from competing airports

fell back on principle of cost-related charging

should have ignored sunk cost of infrastructure

underestimated pulling power of pilot agreements with launch customers


Where should we go from here

Where should we go from here?

the regional airport market has evolved considerably since guidelines issued in 2005

regional airports have generated considerable employment and economic benefits to regions they serve

there is now more competition between airports


Conclusion

Conclusion

ELFAA believes the Commission should consult airlines and regional airports to develop an understanding of the evolution of the airport market and the successful partnership between regional airports and LFAs.

the findings of that analysis should inform the Commission’s planned review of the guidelines and provide a comparator for the MEIP analysis


Thank you

Thank you!

Please visit:

www.elfaa.com

and subscribe to our mailing list


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