COVID-19: European Commission’s overview of State rules and public service obligations in the air transport sector

On 14 May 2020, the European Commission published a working paper on the interpretation of State aid and public service obligations in the aviation sector in the context of the COVID-19 crisis

This document does not modify the existing legal framework but extends its interpretation and lists the legal options available for the public financing of airports and air routes.

The European Commission has indeed recognized that the COVID-19 outbreak has deeply impacted European transport and mobility. State aid may be used by Member States to safeguard and restore connectivity, but public support should not create undue discrimination of competition during and after the crisis. The General Court will assess this issue following Ryanair’s appeals against several national emergency aid measures in favour of airlines during the pandemic.

As regards public service missions of a non-economic nature, which fall outside the scope of State aid rules, the Commission specifies that the costs of keeping the airport open for repatriation or medical flights may be included in those missions. The public funding granted by a public authority (without the obligation to notify the Commission) may cover the difference between the costs actually incurred as a result of the airport remaining open and the costs that would have been incurred by the airport in the event of closure. Moreover, there can be no discrimination between airports within the territory of the same subsidising entity.

Furthermore, in certain cases, some services in specific airports may qualify as services of general economic interest (“SGEI”) for the duration of the pandemic to enable those airports to remain open. SGEI will have to be limited in time and scope and not include the full management of the airport.

Regarding the passenger air transport sector, Regulation 1008/2008 allows Member States to select airlines by tender to provide PSOs. If there is a sudden interruption to a service provided by the selected air carrier, Member States can by mutual agreement select another airline to operate that PSO route for up to seven months.

However, PSOs under Regulation 1008/2008 may not apply to routes operated commercially prior to the COVID-19 outbreak. However, the Commission allow public authorities and airports to organize emergency PSOs for air routes that were commercially operated before the crisis and may not be considered as PSOs under Regulation 1008/2008.

The Commission allows the introduction of these emergency PSOs for a period of three to six months, until 31 December 2020, in accordance with public procurement procedures that have been made more flexible because of the crisis, on the basis of the Commission guidelines.

On this basis, it is therefore possible to set up such an emergency PSO under a negotiated procedure without publication. The relevant State aid rules must be complied with.

The aim of this measure is to ensure the connectivity of a region for a limited period of time. However, this document does not offer a solution to ensure the relaunch of air routes in the longer term.

The document also lists other State aid that can be granted without notification:

• social aid for transportation for inhabitants in peripheral regions in accordance with the General Exemption Regulation;
• de minimis aid: public funding in various forms up to EUR 200,000 per company per country over three fiscal years;
• aid according to the Temporary Framework; or
• aid to compensate for the damages caused by the crisis (Article 107.2 (b) TFEU).

In summary, the document has the merit of extending the limits of the current legal framework, but it will not solve the crisis in the long term. Indeed, it does not deal with the exit plans and the post-crisis return to normal activities. Those measures are yet to be proposed by the Commission.

It follows intense discussions with the air transport associations, including ACI.

The use of emergency PSOs will depend on airlines’ financial demands, the essential nature of certain routes and the available budget. Please note that emergency PSOs can be financed by public authorities.

Currently, airlines' financial demands to relaunch routes vary greatly from one airline to another but, in general, capacity will be greatly reduced in the medium term.