(1)

By letter dated 27 November 2006, a complaint from a citizen was filed with the Commission alleging State aid in connection with NERES (‘New and Existing Routes Expansion Scheme’) and with a profit and loss transfer agreement between the Flughafen Dortmund GmbH (‘FD’) and the public utility company Dortmunder Stadtwerke AG (‘DSW21’).

(2)

By letter dated 10 July 2007, the Commission informed Germany that it had decided to initiate the procedure laid down in Article 108(2) of the Treaty in respect of NERES and the financing of FD (‘2007 opening decision’).

(3)

Germany transmitted its comments on the 2007 opening decision on 5 October 2007.

(4)

The Commission decision to initiate the procedure was published in the Official Journal of the European Union (3). The Commission invited interested parties to submit their comments on the measure.

(5)

The Commission received comments from 11 interested parties. It forwarded them to Germany on 11 January 2008, which was given the opportunity to react; its comments were received by letter dated 28 February 2008.

(6)

The Commission then requested further information on 10 November 2008 and 26 October 2009, which Germany provided on 19 December 2008 and 12 November 2009 respectively.

(7)

By fax of 14 September 2009, the Commission received a complaint from a private citizen alleging that the discount scheme NEO (‘Neue Entgeltordnung’ = ‘New schedule of airport charges’) constitutes unlawful and incompatible State aid in favour of airlines using FD. In addition, the complainant alleged that unlawful and incompatible State aid was also provided to the publicly owned airport operator FD. This complaint was registered under the State aid case number SA.29404 (CP 284/2009).

(8)

By letter of 13 July 2010 the Commission forwarded this complaint to Germany and requested information. Germany replied by letter of 14 October 2010.

(9)

On 14 December 2010 the Commission received a complaint from the District of Paderborn (‘Kreis Paderborn’). This complaint was registered under the State aid case number SA.32091.

(10)

The Commission forwarded this complaint to Germany and requested information by letter of 20 December 2011. The German authorities submitted their comments on 1 February 2012.

(11)

The Commission requested further information on 21 February 2012 and 4 March 2012. Germany replied on 12 April 2012 and 24 April 2012 respectively.

(12)

By letter dated 21 March 2012, the Commission informed Germany of its decision to initiate the procedure laid down in Article 108(2) of the Treaty (‘2012 opening decision’). Germany transmitted its comments on the 2012 opening decision on 23 April 2012.

(13)

The Commission decision to initiate the procedure was published in the Official Journal of the European Union (4). The Commission invited interested parties to submit their comments on the measures in question within one month of the publication date.

(14)

The Commission received comments from 7 interested parties. It forwarded them to Germany on 6 March 2013, which was given the opportunity to react. Germany transmitted its comments by letter dated 8 April 2013.

(15)

The Commission requested further information on 10 December 2013. Germany replied by letters dated 9 January 2014 and 17 February 2014.

(16)

By letter dated 22 February 2014 the Commission informed Germany of the adoption of the 2014 Aviation Guidelines (5) and of the fact that these guidelines would become applicable to the case at hand from the moment of their publication in the Official Journal of the European Union, and invited Germany to submit its comments.

(17)

The 2014 Aviation Guidelines were published in the Official Journal of the European Union on 4 April 2014 (6). They replaced the 2005 Aviation Guidelines (7) (8).

(18)

On 15 April 2014 a notice was published in the Official Journal of the European Union inviting Member States and interested parties to submit comments on the application of the 2014 Aviation Guidelines in this case within 20 working days from the date of publication of that notice (9).

(19)

The Commission received comments from six interested parties. It forwarded them to Germany on 28 May 2014, which was given the opportunity to react. Germany submitted its comments by letter dated 13 June 2014.

(20)

By letter dated 17 June 2014, due to the urgent need to adopt and notify a Decision, Germany agreed that this decision would be adopted in English.

(21)

Dortmund airport is located around 14 km from the City of Dortmund in North Rhine-Westphalia, with a population of approximately 17,6 million inhabitants. It serves the Ruhr area with 5,2 million inhabitants, in particular the city of Dortmund.

(22)

Table 1 gives an overview of airports with regular scheduled connections located in the proximity of Dortmund airport.

Table 1

Overview of airports located in the proximity of Dortmund airport

(23)

Dortmund airport is owned and operated by FD, which is 100 % publicly owned (10).

(24)

Already in 1969 the City Council of Dortmund decided on the General Development Plan for Dortmund airport (11). Against this background, several infrastructure development programmes (such as the construction of a new runway in 1983, and its extension in 1987) took place.

(25)

In 1992/1993, in the context of the structural and political changes in Germany (such as deindustrialisation of the Rhein-Ruhr area, reunification of Germany and opening of the borders in central and eastern Europe), FD commissioned surveys on the passenger growth potential in the region (12). These surveys showed that 90 % of passengers used Dortmund airport for business trips as opposed to private travel. Charter flights to tourist destinations have played a minor role. The forecasts expected an increase in the airport's passenger traffic from 196 000 in 1991 to at least 664 000 to 731 000 in 2000 and 1,1 million passengers per annum in 2010.

(26)

Against this background, in 1993 the public shareholders of FD decided to upgrade and extend the existing infrastructure. As a consequence, in 2000 the new terminal of Dortmund airport and the extension of the runway to 2 000 m were completed. Since then Dortmund airport had the capacity to handle approximately 2,5 million passengers per year. Only around 30 % of the maximum capacity of the airport was used from 2001 to 2003.

(27)

After the terrorist attacks of 11 September 2001, the airport lost many business passengers. Lufthansa and Eurowings significantly decreased the number of their frequencies and offered routes. Air Berlin temporarily replaced these two airlines, but in 2003 it decided to concentrate its activities on Düsseldorf airport.

(28)

Table 2 indicates the development of Dortmund airport in terms of passenger numbers from 1999 to 2013.

Table 2

Passenger development at Dortmund airport 1999-2013

(29)

In 2003, 1 338 people worked at Dortmund airport: 274 of them directly for the airport operator, 614 for airlines operating from the airport, 365 for enterprises active at the airport and the remaining 85 for public authorities (such as police, customs and fire brigade).

(30)

In 2004, in order to increase the degree of utilisation, the shareholders of FD decided for a strategy change and to attract low-cost airlines providing connections to tourist destinations, central and eastern Europe. On 1 July 2004 a scheme of lower airport charges (‘New and Existing Routes Expansion Scheme’) called NERES was introduced. On 1 July 2009 a new schedule of airport charges called NEO (‘Neue Entgeldordnung’, ‘NEO’), was put into place.

(31)

The Commission investigated the following four measures: a 100 % State guarantee for loans to FD, a profit and loss transfer agreement between FD and the public utility company DSW21, and two measures concerning the lowering of airport charges for certain airlines, NERES and NEO.

(32)

The infrastructure development programmes at Dortmund airport were financed directly by FD through loans collateralised by 100 % State guarantees issued in 1987 until 2000.

(33)

On 20 December 1991 the shareholders of FD (city of Dortmund and DSW21) decided to conclude a profit and loss transfer agreement (hereinafter: ‘1991 PLTA’ ) between the airport and DSW21 (13). Under this agreement DSW21 covers all losses of FD. The agreement entered into effect on 1 January 1992.

(34)

The 1991 PLTA includes the following provisions:

(35)

In order to comply with tax legislation an addendum was adopted in 1999. The 1991 PLTA was amended on 12 December 2008, with retroactive effect from 1 January 2008, in order to guarantee the fiscal effectiveness of the coverage of losses. For this reason, a reference to the version of the AktG (Aktiengesetz — Companies Act) currently in force regarding the coverage of losses was inserted and (in accordance with the original version) a minimum duration period of five years with automatic annual renewal was specified for reasons of legal certainty.

(36)

The following tables (Table 3, Table 4 and Table 5) show the investment and operating costs financed by the 1991 PLTA as well as the costs of public policy remit activities.

Table 3

Investment decided after the Aéroports de Paris judgment and financed by the PLTA

Table 4

Operating costs including public policy remit financed by the 1991 PLTA

Table 5

Costs of public policy remit financed by the 1991 PLTA

(37)

In its last submission Germany explained that it considered as public policy remit the costs for the following activities covered by the 1991 PLTA:

(38)

Further, Germany provided the costs related to activities falling within the public policy remit, which are covered by the Land North Rhine-Westphalia:

(39)

To increase its revenues (from airport charges and non-aeronautical activities) and to optimise the use of its infrastructure, FD introduced NERES on 1 July 2004. It t remained applicable until 30 June 2009. Airlines could apply for the lower airport charges for each new connection and for all existing connections. The application had to be received by the airport between 1 July 2004 and 30 June 2009 and had to be submitted 3 months in advance of the opening of a new connection.

(40)

For connections already existing on 1 July 2004, the discount applied only to all subsequent passengers. An airline was not supported by NERES when it opened a new connection, if the connection replaced a existing one for which a support measure had already been granted. The approval of support was limited only by the capacity of Dortmund airport.

(41)

If an airline met the scheme criteria, NERES granted a marketing contribution per passenger and a discount on the uniform airport-use charge per plane, depending on the total yearly passenger traffic flow of the airline.

(42)

According to the schedule of charges, airport charges were set in principle on the basis of all aircraft movements and not on the number of passengers. They included the following items: landing charge, parking charge, infrastructure service charges (check-in, baggage handling and aircraft parking charges) and ground handling service charges (passenger check-in, baggage reclaim, loading and unloading and ground handling).

(43)

The scheme was applied simultaneously with FD's schedule of charges at the time, which had been in force since 1 November 2000 (the ‘2000 scheme’), in accordance with the approval by the North Rhine-Westphalia Ministry of Transport. For connections benefiting from NERES, the NERES scheme replaced the 2000 scheme. Instead of the different charges set out in the 2000 scheme, the airlines concerned paid a uniform airport-use charge per passenger. This charge then included the charges for all airport services, with the exception of the flight security charge.

(44)

The level of the uniform airport-use charge depended on the number of seats of the individual aircraft. The following five categories were distinguished, based on the number of seats, as set out in Tables 6 and 7:

Table 6

The five seating categories

Table 7

Uniform airport-use charge by category

(45)

Apart from the discounts on the uniform airport-use charge, the airport also granted a marketing contribution per passenger for the opening of a new connection. This contribution depended on the frequency of the new connection and on the number of seats available for the connection.

Table 8

Marketing contribution

(46)

On 1 July 2005 an additional discount depending on the total amount of departing passengers per airline per year entered into force. The discount was given on top of the uniform airport-use charge which airlines had to pay. Taking into account also the discount through marketing distribution, user charges were, however, not supposed to be less than EUR 5.

Table 9

Discounts on the total of departing passengers

(47)

NEO was introduced on 1 July 2009, replacing both the previous discount scheme NERES (16) and the schedule of charges introduced on 1 November 2000. NEO was initially not limited in time and the decision to implement NEO was based on the business plan approved in 2008, which had provided forecasts until 2019. NEO was amended on 1 November 2011 when some of the charges were increased.

(48)

For scheduled flights, NEO provided for a uniform take-off and landing charge (17). The take-off charge (including landing charges) depended on the number of passengers on board, the total number of passengers carried per year, and the size of the aircraft. The minimum charge was set at EUR 100. The charges were subdivided into three categories according to the type of aircraft and of the number of seats available.

(49)

Table 10 provides an overview of the applicable take-off charges for scheduled flights introduced on 1 July 2009.

Table 10

NEO take-off charges (including landing charges) for scheduled flights at Dortmund airport in the period July 2009-November 2011

(50)

For non-scheduled flights, NEO distinguished between take-off charges and landing charges. The landing charge was EUR 2,23 per 1 000 kg MTOW (maximum take-off weight). The take-off charge depended on the MTOW of the aircraft and on noise protection level among other criteria.

(51)

Additionally, there was a parking charge for aircraft that stayed at the airport for longer than three hours. The amount of the parking charge depended on the aircraft's MTOW. Normally this charge did not apply to low-cost carriers as they kept their turnaround time as short as possible.

(52)

The security charge was EUR 0,30 per departing passenger; the PRM-levy (18) was EUR 0,36 per departing passenger.

(53)

Charges for ground handling services for scheduled flights were established in individual contracts between the airlines and the airport, based on the scope of the services supplied. A volume-based discount was granted depending on the number of passengers carried.

(54)

In 2010, individual contracts existed with Wizz Air, EasyJet, Air Berlin, Germanwings, Sky Airlines and Sun Express. On 1 November 2011, there were further contracts with Corendon, Tailwind, Germania, Pegasus, Freebird, Air Arabia, Bulgarian Air Charter and Air Via.

(55)

For non-scheduled flights, the charges for ground handling services depended on the size of the aircraft. Passenger services were calculated on the basis of individual contracts. De-icing was priced on the basis of MTOW.

(56)

Table 11 shows cost coverage level of ground handling charges at Dortmund airport between 2009 and 2019. The ground handling charges shown in Table 11 are the average charges for the main clients of Dortmund airport. The lowest handling charges of EUR […] (for […]) in 2009 covered the costs of the services which were around EUR […].

Table 11

Cost coverage of ground handling charges

(57)

Germany provided Table 12 to show the actual airport revenues per passenger stemming from take-off charges and from all other charges after deducting the amounts of marketing benefits in favour of the airlines as from 1 November 2011. The take-off charges have increased between the introduction of NEO in 2009 and 2011.

Table 12

Revenue per departing passenger as from 1 November 2011

(58)

In the 2007 and 2012 opening decisions the Commission initiated investigations into the 100 % State guarantees, the 1991 PLTA, the NERES scheme of charges, and the NEO scheme of charges including the related discounts.

(59)

With regard to the 100 % State guarantee, the Commission expressed doubts whether under normal market conditions a market economy operator (‘MEO’) would also have provided 100 % guarantees for the loans financing infrastructure programmes at Dortmund airport. If it should be concluded that this was not the case the Commission also doubted whether such aid could be considered compatible with the internal market.

(60)

In the 2012 opening decision the Commission had doubts in particular on whether the 1999 and 2008 modifications led to a substantial amendment of the 1991 PLTA. Thus the Commission raised the question whether the amended 1991 PLTA would need to be assessed as a new measure.

(61)

The Commission furthermore was in doubt whether certain losses relating to activities falling within public policy remit, such as customs, air traffic control, and fire brigade, were falling within the ambit of State aid control or not.

(62)

Furthermore, the Commission questioned whether DSW21 acted as a MEO by concluding and amending the 1991 PLTA with FD. Therefore, the Commission had doubts on whether the coverage of annual losses of FD constituted State aid, and whether such aid could be considered compatible with the internal market under Article 107(3)(c) of the Treaty. In particular the coverage of operating losses of FD seemed to involve operating aid, which was unlikely to meet the requirements of the exemptions provided for in Article 107(3)(c) of the Treaty.

(63)

With regard to NERES, the Commission had doubts whether a MEO would have introduced NERES and entered into similar agreements on this basis with airlines using Dortmund airport. If the schedule and the agreement were found to constitute State aid, then the Commission furthermore doubted whether these measures could be deemed compatible with the internal market.

(64)

With regard to NEO, the Commission had doubts whether a MEO would have introduced NEO and would have entered on this basis into similar agreements with airlines using Dortmund airport. If this would not be the case then the Commission again doubted whether the aid contained in the schedule and the agreements could be deemed compatible with the internal market.

(65)

According to Germany, the Commission did not take into account that the guarantees are part of the infrastructure development programme for Dortmund airport. In this respect, Germany stated that since 1991 Dortmund airport played an important role in the transport concept of North Rhine-Westphalia.

(66)

Germany clarified that the 100 % State guarantees were granted by the City of Dortmund and by DSW21 in order to collateralise loans for financing of the infrastructure development at Dortmund airport.

(67)

Germany provided a comprehensive overview of all (100 % State) guarantees granted in favour of FD from 1987 to 2000, as summarised in Table 13 (19).

Table 13

Overview of 100 % State guarantees for the collateralisation of loans of FD 1987-2000

(68)

Germany stated that these guarantees were irrevocably granted between 1987 and 2000, so before it was clarified that airports are subject to State aid rules. Germany argued further that the guarantees were thus irrevocably given prior the Aéroports de Paris judgment and were not amended since then. Germany moreover emphasised that these guarantees were neither extended nor otherwise changed.

(69)

Moreover, Germany argued that the airport operator paid a market based charge for these guarantees.

(70)

Germany argued on the interpretation and applicability of Article 107(1) of the Treaty to the 1991 PLTA that this agreement had been irrevocably concluded before the judgment of the General Court in Aéroports de Paris (20). Germany affirmed that the 1991 PLTA had already been irrevocably concluded in 1991 and entered into effect on 1 January 1992, and that the coverage of annual losses by DSW21 was based entirely on that agreement. Germany is thus of the opinion that the rules of State aid should therefore not be applied to the agreement.

(71)

Germany took the view that the 2005 Aviation Guidelines could not be applied in this case since the 1991 PLTA was signed as part of the infrastructure measures implemented in the early 1990s, before the Guidelines were adopted and published. Furthermore, Germany stated that the 1991 PLTA was necessary for to the extension of the airport. Accordingly, Germany clarified that the city council of Dortmund agreed on the agreement as an alternative to a direct grant for financing the airport extension. Germany submitted, that the new infrastructure would be accessible for every potential user without discrimination in any way. Dortmund airport was supposed to become a public airport which in Germany's view was of common interest.

(72)

Germany provided studies presenting the possibilities and perspectives of the development of the former airfield Dortmund-Wickede (21). The result was that a development of the airfield to an airport would have led to an increase of up to 196 000 passengers in 1991, up to 664 000-731 000 passengers in 2001 and even up to 1,1 million in 2010. Germany claimed that before the extension, the airport's capacity was only at around 750 000 passengers and therefore the extension was necessary. In this regard, Germany confirmed that the forecasts of the surveys had been correct. In the year 2000 already 719 365 passengers used Dortmund airport and the predicted numbers for 2010 were reached already in 2001 with 1 064 153 passengers.

(73)

Germany stated that the 1991 PLTA was neither extended nor otherwise changed, nor has it been terminated and it was also not limited in time. Germany pointed out that both the 1999 addendum and the 2008 amendment were concluded purely to comply with the requirements of German tax legislation and did not affect the principle of indefinite coverage of annual losses. Consequently, according to Germany the 2008 modification of the 1991 PLTA between FD and DSW21 was not a new measure, but still concerned the same agreement, investigated in the 2007 opening decision.

(74)

Moreover, Germany is of the opinion that the MEO principle can be applied only in the context of the situation at that time. Furthermore, Germany argued that since at that time the operation and construction of airports was not considered to be an economic activity, airports were not considered to be undertakings falling within the scope of Article 107(1) of the Treaty.

(75)

Germany clarified furthermore that certain operating and capital costs (depreciation and costs of financing) were falling within the public policy remit and would be outside the scope of State aid rules. In Germany's view these were costs such as police, customs, and air traffic control.

(76)

Germany pointed out that the 1991 PLTA met the requirements of the Altmark (22) judgment from 24 July 2003. In its submission, Germany stated that FD was officially entrusted by the city council of Dortmund to further develop the infrastructure at Dortmund airport, and that, it was not overcompensated. Although the operation of the airport was not tendered out, according to Germany FD was on average a well-managed undertaking.

(77)

Germany stated furthermore that losses of the airport included costs related to investments, which were decided prior to the 2000 Aéroports de Paris judgment and costs of public policy remit.

(78)

In this context, Germany provided at several occasions different lists of activities that were regarded as falling within the public policy remit. The overview from the most recent submission is summarised in Table 4 and Table 5.

(79)

In Germany's point of view, referring to the judgment Leipzig/Halle, these measures are outside of the scope of State aid control. According to Germany, if these costs were taken out of the cost-base, FD would have a positive EBITDA.

(80)

In any case, Germany pointed out that the measure must not be considered as operating aid, rather but as investment aid, which can be deemed compatible with the Treaty according to Article 107(3)(b) and (c) of the Treaty. However, Germany acknowledged that projects of common European interest within the meaning Article 107(3)(b) of the Treaty should be implemented by more than one Member State. Nevertheless, Germany argued that the overall structural transformation, of which the airport infrastructure construction was part, was in the common interest of the Union, and was therefore compatible with the internal market.

(81)

Germany argued that the measures of the NERES programme could not be considered as State aid within the meaning of Article 107(1) of the Treaty. Germany regarded NERES as a programme supporting the extension of Dortmund airport, for which every airline could apply, and therefore, it was not discriminatory. In any case, according to Germany, NERES was applied to at least three airlines and for that reason could not be considered as a de facto discrimination in favour of EasyJet. Also, Germany emphasised that the programme was limited in time and applied only to airlines setting up or expanding their operation at Dortmund airport within this period. In Germany's opinion the measures of NERES were not selective because they did not give an advantage only to certain airlines.

(82)

According to Germany, NERES is not imputable to the state because the management of FD established the programme of its own motion and responsibility. Germany affirmed that neither the supervisory board of FD, nor the shareholders of DSW21, nor the city of Dortmund were involved in developing NERES.

(83)

Germany presented alternative scenarios with and without NERES and came to the conclusion that a MEO would have behaved in the same manner. According to these scenarios, the profits with the NERES scheme were expected to be higher than without introducing it since it aimed at an increase of passengers. With the NERES scheme the airport was expected to become profitable as from 2008. Germany reminded the Commission that a closure of the airport would also have caused costs and pointed out that § 45 of Air Traffic Licensing Regulation (Luftverkehrs-Zulassungs-Ordnung, ‘LuftVZO’) requests a proper operation and maintenance of an airport rather than a closure.

(84)

Following the attacks on 11 September 2001, the number of passengers decreased and the market conditions changed according to Germany. Therefore, NERES needed to be introduced in order to increase the passenger numbers and utilisation of the infrastructure again. Germany argued that, due to NERES, FD was able to maintain its number of passengers, unlike other airports during those times.

(85)

Furthermore, according to Germany, the Europe-wide demand at the time concentrated on low-cost carriers. Germany argued that since Dortmund airport's main client, Air Berlin, increasingly relocated its flights to other airports, FD was forced to introduce incentives, such as NERES. However, Germany explained that NERES did not only target low-cost airlines; FD was also interested in establishing business airlines at Dortmund airport, but Lufthansa did not respond positively to a request of FD.

(86)

Germany stated that with NERES, FD did not take risks, but rather created a strategy to return to profitability. A MEO would also have behaved in that way, Germany argued, especially because the airport could already win EasyJet with the introduction of NERES incentives. Germany provided the business plan that was used for the introduction of NERES. The business plan compared the best-case scenario, the base-case scenario and the worst-case scenario of FD with and without the introduction of NERES. Every scenario expected an annual passenger growth of 4-7 %. This expectation was based on Europe-wide and global forecasts of the ‘Luftverkehrsinitiative’. The business plan expected in each scenario that FD would also be able to raise non-aviation revenues by 5 % per year. These expectation were based on the development during the years 1999 to 2003, when the amount of passengers increased on average by 14,39 % and at the same time the parking revenues increased on average by 27,64 % due to an average annual increase in parking charges by 13,25 %.

(87)

Furthermore, the scenarios relied on the assumption that FD would be able to save costs by outsourcing employees. All of the scenarios expected that, taking into consideration the incentives, Dortmund airport would be able to increase the parking charges by another 10 %, due to the increase of passengers. In the best-case scenario, the airport would be expected to become fully profitable by 2015. The worst-case scenario predicted that this increase would only be possible for the remaining time during which EasyJet stayed. Germany pointed out that even in the worst-case scenario with the introduction of the incentives, the result of FD would be better than without incentives. According to Germany, it was also expected that eventually so many airlines would settle at Dortmund airport that the passenger increase would even exceed the forecasts and expectations. Germany stated that by introducing the NERES incentives, the airport would be more profitable due to an increase in passenger numbers and the higher utilisation. Germany presented all scenarios in detail. Without the introduction of incentives, Dortmund airport would use 60 % of its capacity in the best-case scenario, which meant 1,7 million passengers. In the worst case it would use 44 % of its capacity. Even in the best-case scenario, FD would continue to make operating losses and a recovery could not be expected in the coming years. In the worst-case scenario, the operating losses would first increase and then slightly decrease towards 2014, but they would still be significantly higher than in 2003.

(88)

Germany stated that the introduction of NERES was the most profitable option for FD, even compared to the closure of Dortmund airport. In particular, it was more profitable than the alternative of applying the original scheme of airport charges introduced on 1 November 2000. Germany further clarified that the assessment carried out showed that with NERES FD would be able to maximise the number of passengers, its aviation and non-aviation revenues, and its earnings before interest, taxes, depreciation and amortisation (‘EBITDA’).

(89)

In this regard, Table 14 summarises the incremental profitability results of NERES. It shows the expected differences in terms of number of passengers, costs, revenues and results of FD as compared to alternative scenarios. These results are specifically due to the introduction of NERES.

Table 14

Incremental costs of NERES as compared to the 2000 scheme of charges

(90)

Germany stated that the overall aim of the measures was to generate the highest possible medium to long-term profits and that short-term losses would be balanced by the profits in the future as the introduction of NERES was expected to lead to a positive EBITDA (excluding costs falling within public policy remit) as from 2015 onwards.

(91)

Germany also provided forecasts based on the total cost and total revenue calculations, as summarised in Table 15.

Table 15

Forecast profit or loss in the NERES scenario

(92)

Germany furthermore argued that after the introduction of NERES, positive effects could be seen already in the second half of 2004. In 2005, losses of Dortmund airport had been already reduced by 8,5 % compared to 2004. Germany provided an updated business plan for FD which expected a positive development for the upcoming years and a return to profitability in terms of EBITDA level by 2011.

(93)

Germany declared that a closure of the airport would have caused costs of EUR 170 million. When considering a closure of the airport, according to Germany, the following had to be taken into account: the accelerated depreciation for assets (EUR 187 million), demolitions (8,5 million), and indemnities due to personnel reductions (EUR 14 million). The sale of the property, buildings and equipment would yield at most EUR 38,75 million. A closure would have also required a surveillance of the buildings (EUR 450 000 per year) and the takeover of the employees with a life-term contract (EUR 1,3 million). Comparing the closure of the airport with the scenarios above, a continuation of activities of FD was the better alternative, Germany concluded (23).

(94)

Germany declared that with the introduction of NERES, the number of destinations available from Dortmund airport increased from 37 before NERES to 53 destinations thereafter.

(95)

The submissions made clear that the profits from parking charges in fact increased as expected. Personnel costs were higher than expected, which was due, however, to the initial adjustment, according to Germany. According to the submissions, the overall results of the airport in 2004 were EUR — 20 995 000 and EUR — 24 111 000 in 2005. These results were better than the best expected scenario without the introduction of incentives, but also slightly below the base-case scenario with the introduction of NERES incentives.

(96)

Germany put forward that if the Commission would consider NERES as State aid, it would be compatible with the Treaty on the basis of Article 107(3)(c) of the Treaty, because the programme was in the common interest. Germany referred to the Commission's decision Charleroi, arguing that State aid for regional airports could help developing these and in that way help reducing congestion at international airports. Germany took the view that NERES also facilitated the development of certain economic activities, namely through establishing more routes from Dortmund airport, and therefore, strengthening Europe-wide competition and trade.

(97)

Furthermore, Germany pointed out that ground handling activities always covered their costs.

(98)

Germany underlined the necessity of the programme, pointing out that through the introduction of incentives, more low-cost airlines settled at Dortmund airport. Looking at the number of passengers in 2004 and 2006, the number almost doubled from 1,15 million to 2,02 million passengers. Germany stated also that the number of aircraft movements increased by 30 % and the number of scheduled flights increased by 36 %.

(99)

With regard to NEO, Germany submitted that FD acted as a MEO when deciding to introduce NEO.

(100)

Just as for NERES, Germany argued that also the NEO schedule was the most profitable option for FD, compared to the alternative scenarios such as no introduction of NEO or a mixture of NEO and the original 2000 scheme. Germany further clarified that the assessment carried out showed that under this option FD would be able to maximise the number of passengers, its aviation and non-aviation revenues, and its EBITDA. Germany stated again that even compared to the closure of the airport, the introduction of NEO would still remain the most profitable option for the way forward.

(101)

In this regard Table 16 and Table 17 summarise the incremental profitability results of NEO. They show the expected differences in terms of number of passengers, costs, revenues and results of FD as compared to alternative scenarios. These results are specifically due to the introduction of NEO.

Table 16

Incremental costs of NEO as compared to the 2000 scheme of charges

Table 17

Incremental costs of NEO as compared to the mixed scheme

(102)

Germany stated that the overall aim of the measures was to generate the highest possible medium to long-term profits. In this respect, Germany clarifies that short-term losses would be balanced by the profits in the future as the introduction of NEO was expected to lead to positive EBITDA (excluding costs falling within public policy remit) as from 2016 onwards.

(103)

Germany also provided the forecasts based on the total costs and total revenues calculations, as summarised in Tables 18 and 19.

Table 18

Forecast profit or loss in the NEO scenario

Table 19

Forecast adjusted profit or loss in the NEO scenario

(104)

Germany further presented that ex ante forecasts for NEO were confirmed by the actual results, as shown in Table 20.

Table 20

Actual results of NEO

(105)

Germany further presented the uniform take-off charge introduced with NEO depending on the number of passengers carried by the airline. In this regard, Germany argued that a higher number of passengers would lead to higher aviation and especially non-aviation revenues, and that this justified the higher discounts.

(106)

Germany asserted that all charges were based on NEO, even if FD concluded individual agreements with airlines. Therefore, Germany is of the opinion that NEO is transparent.

(107)

Germany clarified moreover that benchmarking of the charges paid a FD with charges paid at other airports in its proximity is not appropriate. Germany is of the opinion that the Commission did not verify how the charges at these airports were determined. Moreover, according to Germany, the charges need to take into account the different business models pursued by the airports (such as point-to-point versus hub-and-spoke or low-cost traffic), as well as regional differences.

(108)

Germany states further that the charges for ground handling services were negotiated individually in order to take account of the level of services required by the various airlines. According to Germany, the ground handling charges in any case covers the underlying costs (see Table 11).

(109)

FD emphasised the importance of Dortmund airport for the mobility of the population, for the economy in the eastern part of the Land North Rhine-Westphalia, and for the regions surrounding Dortmund. Consequently, according to FD, Dortmund airport is a substantial contribution to the economic development of the region which had stagnated due to the structural change initiated by the end of the 1980s. FD also pointed out the relevance of the airport referring to the enlargements to the east of the Union.

(110)

Furthermore, FD provided an analysis of Airport Council International which stated that airports on average provide 950 jobs per one million transported passengers. FD indicated that in the case of regional airports the amount of jobs offered is even higher. The analysis showed moreover that in addition to those jobs, airports also lead to an increase in regional and local employment levels.

(111)

According to FD the forecasts for FD's development were positive. FD stated that forecasts made in 1992 for 2000 had been accurate and that forecasts for the following years had not realised due to the events of 11 September 2001, which could not have been predicted. This meant that the amount of passengers was only increasing slowly and especially in the low–cost market segment. Therefore, FD used NERES to attract EasyJet and other airlines. In this context, it emphasised once again the effect of the incentive brought with low airport charges and marketing contributions.

(112)

FD stated that with the low charges under NERES it succeeded in creating new routes and therefore an increase of passenger volume in order to better use the infrastructure and to return to profitability at operating level.

(113)

According to FD the benefit was not provided from public resources, and therefore, could not be considered as unlawful State aid. FD indicated that it took the decisions without any consultation with the supervisory board of the airport, which could object to NERES, but could not impose an alternative. Therefore, NERES could not be imputed to public authorities, according to FD. It also claimed that a private investor would have introduced NERES as well. FD pointed out that it had taken up negotiations with Virgin Express and Ryanair, which failed because both requested even lower charges than NERES allowed. Moreover, FD noted that it had also negotiated with Germanwings and that in the end Germanwings signed contracts with Cologne/Bonn airport. So according to FD, Cologne/Bonn probably offered charges comparable to or lower than the Dortmund charges.

(114)

Referring to its ex ante business plan prepared for the introduction of NERES, FD is convinced that a private investor would have done the same since only the introduction of NERES and the favourable treatment of low-cost airlines could have led to the return to profitability at the operating level. FD furthermore stated that the charges pursuant to NERES were transparent and every airline could have applied for them, so NERES was not selective. Furthermore, FD claimed that the measure was limited to five years and that it did not qualify as State aid for the purposes of Article 107(1) of the Treaty, taking into account how the criteria were applied in the Commission decisions Manchester and Charleroi.

(115)

DSW21 declared that its task was to manage and operate the infrastructure of the city of Dortmund, therefore the operation of the airport is part of its tasks. The 1991 PLTA was concluded as a tax efficient alternative for financing the airport construction and operation compared to a direct grant. The aim of the expansion of the airport was to accompany the structural transition of the region from the coal and steel industry to a modern, service based economy.

(116)

DSW21 stated that it supported the decision of the airport to introduce NERES. According to DSW21, NERES was the best alternative to improve the profitability and growth of the airport. Other strategies, such as closure or a different positioning on the market were economically less advantageous. DSW21 stated that the success of NERES could be seen from the increased number of routes, the number of airlines and a better economic situation at the airport than it would have been without NERES.

(117)

The city of Dortmund stated that it was not involved directly or indirectly in the decision-making process that led to the introduction of NERES. The city of Dortmund explained also that since the signature of the 1991 PLTA, FD was integrated into the DSW21, whose management organs and supervisory board consist of representatives of the city of Dortmund (24), which are bound by the decision and instructions of the city council. Moreover, representatives of the city have to act in the interests of the city (25).

(118)

The city of Dortmund claimed that the airport is pursuing a task of general economic interest. According to a study prepared by the University of Münster/Osnabrück in 2006, 1 550 persons were employed at the airport by FD and by about 70 other companies. The indirect employment created by the investments of these companies amounted to 2 100 employees and the induced employment created by the consumption of these companies amounted to 630 employees. Moreover, the city of Dortmund stated that the airport is important for the tourism industry of the region as well as for the region's competitiveness, in particular for modern Europe-wide service providers.

(119)

EasyJet stated that the 2005 Aviation Guidelines were not applicable because NERES had been already set up in 2004 when the guidelines were not yet adopted and published. Therefore, in EasyJet's opinion, the Commission has to take a decision on the basis of its previous decisions, such as in the case Ryanair/Charleroi. EasyJet also noted that NERES met the requirements of Article 107(3)(c) of the Treaty and was therefore compatible with the common market.

(120)

Furthermore, EasyJet stated that it did not benefit from the lower charges, since it left the airport before reaching profitability. EasyJet pointed out that its business model did not rely on exploiting favourable deals, but that instead, it was willing to commit and share risks with the airport, which is supported by the fact that EasyJet never closed a base since 1995.

(121)

In EasyJet's opinion, NERES would also have been conceived and applied by a MEO. EasyJet stated that with NERES the number of flights increased again between 2002 and 2004. EasyJet pointed out that a MEO does not have to choose the most profitable investment in the short term, nor does he have to achieve profits in the short term. According to the airline, if an existing investment would pay off later, the investor would be more tempted to accept temporary lower returns, as was the case in Dortmund. EasyJet pointed out examples of airports, such as Liverpool, Glasgow Prestwick or London Stansted, where private capital and not State resources were involved, and incentives were used to increase the numbers of passengers and improve the profitability.

(122)

In its submission of 6 May 2014, EasyJet emphasised that the 2014 Aviation Guidelines clarified that only incremental costs have to be considered for the purpose of the MEO test. EasyJet claimed that this demanded an ex ante profitability analysis on the basis of sound medium-term prospects, which FD had carried out in the market studies concerning the two scenarios for future development, that is to say introducing NERES and keeping the pre-existing schedule of charges without NERES. According to these scenarios, non-aviation revenues would have been higher, if NERES were applied. According to EasyJet, FD took into account costs which go beyond the incremental costs in its initial business plan for NERES.

(123)

EasyJet pointed out that the airport charges together with the non-aeronautical revenues were capable of covering all costs stemming from the arrangements between airlines and the airport, with a reasonable profit margin on the basis of sound medium-term prospects. Therefore, according to EasyJet, NERES was likely to cause a substantial increase in passenger numbers, and hence, also in non-aviation revenues. EasyJet pointed out furthermore that the predicted increase of passengers by 2014 was realistic because experience showed that in the years between 2004 and 2007 the airport's passenger numbers increased significantly due to the introduction of NERES.

Table 21

Increase of passengers since the introduction of NERES (provided by EasyJet)

(124)

EasyJet argued that in 2004 the operator would have had no reason to be pessimistic regarding the potential of passenger number growth since the airport had an important catchment area, which is the Ruhr region with over 10 million inhabitants and EasyJet was determined to open a base at the airport. The series of circumstances that occurred since 2008, namely the raise of oil prices, the financial crisis and the local authorities refusing night flights, could not have been foreseen. EasyJet stated that these were the reasons why it had to reduce its operations despite the initial optimism. However, EasyJet argued that these circumstances could not have been predicted, and therefore, a MEO with the knowledge of 2004 would have had no reason to be less optimistic than the airport had been regarding the passenger traffic growth perspectives.

(125)

Considering the sensitivity of low-cost passengers to an increase of parking charges, EasyJet disagreed with the Commission's doubts. According to EasyJet there would be no reason to consider that a passenger who saves on the price of a plane ticket is so sensitive about moderate increases in parking charges that he will automatically start travelling only by public transportation means.

(126)

Finally, EasyJet stated that in light of the 2014 Aviation Guidelines, the focus should be on whether the airport charges and the related additional non-aviation revenues generated due to the application of NERES were sufficient to cover the incremental costs with a reasonable profit margin. Therefore, costs falling within the public policy remit should be excluded and the relevant time frame for the calculation should be 10 years. EasyJet concludes that the NERES incentives would satisfy the conditions of the MEO principle.

(127)

Together with Soest, which now is the district of Lippstadt, the district of Paderborn established the Paderborn/Lippstadt airport. In its comment the district of Paderborn mainly concentrated on the fact that Dortmund airport distorted competition by being only 95 km away from the Paderborn/Lippstadt airport. It is claimed that Paderborn/Lippstadt airport is the only German regional airport with a positive balance sheet and making profit, but is suffering from the fact that Dortmund airport and Kassel Calden airport are being financed mainly through State aid. The District of Paderborn furthermore claimed that the take-off airport charges and the charges for ground handling services covered only […] % of FD's costs.

(128)

Air France argued that NERES was discriminatory in favour of low-cost airlines and that the measures were not limited. Air France claimed that since NERES benefits routes which are similar and in competition to the neighbouring Düsseldorf Airport (such as Alicante, Barcelona, Budapest, London, Malaga, Nice, Palma, Prague, Rome, Thessalonica), it cannot be deemed compatible with the internal market as start-up aid for development of new routes.

(129)

According to the Association of European Airlines, it seemed that NERES favoured specific airlines and low-cost business models and that the scheme did not meet the conditions for granting start-up aid.

(130)

The IHK emphasised the necessity to introduce low-cost airlines at Dortmund airport since the region had to focus on aviation business after the structural change from steel to service industry. According to the IHK, difficulties arose only when Lufthansa became a shareholder of Eurowings AG and changed flight routes from Dortmund airport, which therefore lost its main customer.

(131)

The IHK claimed that Dortmund airport was the only airport specialised in low-cost traffic in the region surrounding the city of Dortmund and that its charges were not unusually low in this segment. So according to the IHK, in this region NERES did not affect competition. IHK also argued that the 1991 PLTA between FD and DSW21 was legitimate because during the structural change in the region, the development of the airport had positive effects on economy and population. Therefore, the 1991 PLTA served the general economic interest of the region.

(132)

According to VVW, a MEO would also have decided for the investments at Dortmund airport because the period of initial losses was expected and acceptable in the context of managing airport infrastructure. Furthermore, VVW argued that because at the time of the investment decision it was commonly accepted that financing of airport infrastructure does not constitute State aid, the possible aid could not be considered to be unlawful. VVW furthermore stated that FD was not competing with the surrounding airports Düsseldorf (which would not even have any more capacities for EasyJet), Münster/Osnabrück and Paderborn/Lippstadt (which both did not serve low-cost airlines). So according to VVW, the internal market was not affected by NERES.

(133)

Private parties also submitted comments in the State aid procedure concerning Dortmund airport and NERES. They claimed that no MEO would adopt the measures taken at Dortmund airport because in fact the economic situation did not improve. They further stated that the submitted MEO test was deficient because it erroneously considered Dortmund airport as an international airport and the airport was not located as far from the city as the test claimed. These private parties also estimated that the financing covered more than the costs of public policy remit activities, such as fire protection and rescue services.

(134)

Furthermore, the private parties argued that State aid was given through the city of Dortmund granting State guarantees for loans.

(135)

Furthermore, the private parties dismissed the argument that the board of directors did not take part in developing NERES. As proof of the opposite, they provided minutes of a meeting during which the management submitted NERES to the supervisory board.

(136)

The comments of DSW21 and FD were fully in line with the comments of Germany. In addition, DSW21 and FD stated that a MEO would also have concluded the 1991 PLTA, taking into consideration in particular the costs for closing down the airport.

(137)

EasyJet stated that NEO is in line with the MEO principle and thus does not constitute State aid. In EasyJet's opinion, from an economic perspective the introduction of NEO was the most feasible way forward for the operator of Dortmund airport.

(138)

EasyJet stated further that incentive schemes based on the growth of passenger volume as in the present case help airports in achieving economies of scale. EasyJet states that similar incentive schemes were introduced in Sweden, for example at Stockholm-Arlanda, Stockholm-Bromma and Göteborg Landvetter. EasyJet emphasised that according to the 2014 Aviation Guidelines, the investigation regarding NEO should exclusively concern the question whether the same conditions would have been offered by a profit-driven airport operator. EasyJet stated further that the ex ante profitability assessment on the basis of sound medium-term prospects of NEO is provided in the business plan and in the comparison of the different scenarios, and that therefore the MEO test would be satisfied. EasyJet stressed that the MEO test should only focus on incremental costs and revenues. EasyJet also pointed out that, when setting up an individual contract with an airline or an overall scheme of airport charges, it is possible to cover the incremental costs with a reasonable profit margin on the basis of sound medium-term prospects.

(139)

In this regard, EasyJet argued that in the NEO business plan FD took into account costs which go beyond the incremental costs. Accordingly, EasyJet concluded that if these costs would be excluded from the profitability assessment, the profitability of NEO would be even higher. EasyJet was further of the opinion that also costs related to tasks falling within the public policy remit and costs related to historical investments should not be taken into account when conducting the MEO test.

(140)

Moreover, EasyJet stated that the reduced rates pursuant to NEO were accessible to all airlines operating at the airport. Individual agreements between EasyJet and the airport did not go beyond the scope of NEO.

(141)

Germanwings clarified that its final charges including departing passenger charges and ground handling charges were on average between EUR […] and […] per departing passenger.

(142)

In addition, Germanwings declared that the relevant market to compare charges would be the charges paid at low-cost airports. Germanwings clarified further that the charges at Dortmund airport would not have differed from charges at Graz or Maastricht.

(143)

Germanwings stated furthermore that a MEO would also have to accept losses at least during the first few years of a new project.

(144)

Wizz Air stated that NEO is in line with the MEO principle and that it does not constitute State aid. Wizz Air agreed in particular that NEO was more economical than the closure of the airport. According to Wizz Air, in the framework of the closure of the airport, the Commission should take into account the high costs of closure that the city of Dortmund would have incurred.

(145)

Wizz Air asserted that the market conformity of airport charges needs to be compared with charges paid by low-cost airlines at different European regional airports, because a low-cost airline chooses its destinations not on a ‘one-catchment-area’ basis but across all of Europe.

(146)

Finally, Wizz Air expressed its view that its arrangement with FD were also market conform because they are incrementally profitable for the airport. Such an assessment should take into account network effects.

(147)

To support its argument of market conformity, Wizz Air provided the Oxera study.

(148)

Oxera first compared the charges Wizz Air paid at Dortmund airport to those paid at Doncaster, Liverpool, Memmingen, Prestwick and Stockholm-Skavsta airports. These airports are claimed to be similar to Dortmund airport in relation to traffic volume, type of airport traffic, and catchment area. According to Oxera, these airports are privately owned. They received public financing, which was, however, relatively small compared to their total asset base.

(149)

Oxera submitted that the charges paid by Wizz Air at Dortmund airport are on average significantly higher than those paid by Wizz Air at the airports used for the comparison, if the government security charge is taken into account. Oxera further submitted that the charges (net of the security charge) paid by Wizz Air are comparable to the levels of airport charges paid at the airports used for the comparison. Oxera concluded thereby that Wizz Air payed a market price at Dortmund airport and that the airport-airline arrangement is in line with the MEO principle.

(150)

Secondly, Oxera made an incremental profitability analysis of Wizz Air's contribution to the profitability of FD in the years 2009 to 2014. Oxera presented an approach to calculating incremental costs and revenues which is different from the one presented by Germany. Oxera included into this analysis incremental aeronautical and non-aeronautical revenues as well as incremental costs per passenger.

(151)

Oxera took into account the aeronautical revenues stemming from the airport charges net of the relevant discounts, based on the following agreements between Wizz Air and FD):

(152)

Oxera estimated the non-aeronautical revenues (for example relating to car parking, car rentals and other rentals relating to restoration) on the basis of the business plan provided by FD.

(153)

Based on FD's business plan, Oxera included into the analysis the incremental costs of marketing, incentive and cash support deriving from the agreements listed in recital 151, points (a) to (h). Moreover, it included an estimate of additional costs contained in the business plan of the airport, such as costs for personnel, material and other operating expenses that are not specific for Wizz Air.

(154)

According to Oxera, to assess the amount of general costs that is incremental to the agreement, a regression analysis has been carried out. On this basis, according to Oxera it would be possible to determine which fraction of the costs is fixed and which fraction varies depending on the passenger volume. Oxera estimated that the following costs vary with passenger numbers:

(155)

These costs are averages across the whole airport and all its airlines and Oxera subsequently attributed them to Wizz Air based on its share of passenger departures.

(156)

Oxera estimated further the incremental costs of investments based on a schedule of investments for the period 2009 to 2019 as well as on the actual investments from 2004 to 2008 when Wizz Air was also operating at Dortmund airport. Investments before the arrival of Wizz Air to the airport were considered as sunk costs, and thus not incremental to the deal. According to Oxera, the costs of the investment cannot be attributed to the customers in the year of the investments, but must be spread over the lifetime of the investment. Therefore, Oxera took into account the annual depreciation costs and costs of financing of the relevant investment. The total annual costs of new investments were allocated to Wizz Air's passenger share of the passenger capacity of the airport of 2,5 million passengers as indicated by FD. Oxera considered this as a very conservative estimate, as not all of the envisaged investments were incremental to Wizz Air's presence, for example the runway extension planned originally for 2014.

Table 22

Expected incremental revenues and costs from Wizz Air presence (EUR million)

(157)

Oxera calculated the incremental contribution of Wizz Air's presence as a difference between the incremental revenues and incremental costs. Finally, Oxera concluded that the agreements concluded between Wizz Air and FD, and NEO contributed to the profitability of the airport from an ex ante point of view.

(158)

According to Oxera, the agreements resulted in a positive estimated net present value of about EUR [300 000-400 000] over their duration (2009 to 2014), and therefore, a private investor would have been willing to conclude similar agreements with Wizz Air.

(159)

The District of Paderborn, the owner of Paderborn airport, stated that the possibility offered under the 2014 Aviation Guidelines for providing further operating aid to loss making airports for another 10 years gives these airports an unjustified advantage compared to profitable airports.

(160)

Several private individuals have sent their comments within the framework of the procedure, stating that the public financing granted to the airport constituted State aid and that NEO was not on market terms.

(161)

In its observations on the comments of third parties, Germany took the view that the statements in most instances supported its opinion, and therefore, Germany emphasised the fact that 1991 PLTA could not be qualified as State aid. It pointed out once again that the 1991 PLTA was comparable to a historical investment grant for the infrastructure and in any case was compatible with the common market. This was supported by FD, the Verkehrsverband Westfalen e.V., the IHK Dortmund, DSW21 and the city of Dortmund.

(162)

In agreement with FD, Germany stated that if the Commission reached the conclusion that the 1991 PLTA between DSW21 and FD has to be considered as unlawful State aid, it could only be assessed under the 2005 Aviation Guidelines as from their date of application. Furthermore, Germany emphasised that the financing provided by DSW21 has to be seen as financing of a service of general economic interest (‘SGEI’) for which the Commission usually granted Member States a wide margin of discretion. Germany brought forward the argument that it is cheaper for the city Dortmund to finance the investments at the airport through the 1991 PLTA than through direct grants, since overall losses between 1998 and 2008 were lower than the depreciation and interests would have been. Joining the Verkehrsverband Westfalen e.V. and DSW21, Germany stated that the closure would have been even less cost-efficient because FD was at least able to pay part of its own fixed costs and had positive forecasts for the future in terms of passenger increase. An MEO would have behaved as the city and DSW21 did and at least have invested for a limited period of time. Germany especially agreed with the third parties about the fact that airports have a long economic life and that a period of losses was acceptable.

(163)

Germany then argued that NERES was accessible for all airlines on the basis of objective criteria. As the third parties had confirmed, Wizz Air, Germanwings, Sterling, AirBerlin and EasyJet fulfilled these criteria. According to Germany and also according to EasyJet and FD, an increase of passengers as well as an increase of returns were to be expected as a consequence of NERES.

(164)

As regards comments of the IHK and Verkehrsverband Westfalen e.V., stating NERES did not affect competition and the internal market, Germany agreed and stated that the nearby airports Münster/Osnabrück, Paderborn, Cologne/Bonn and Düsseldorf did not serve low-cost carriers.

(165)

Germany made clear that NERES was introduced after the extension of Dortmund airport. It was a reaction to the decline in passengers after 11 September 2001 in order to increase the use of the airport's underused capacity.

(166)

Germany stated that it does not agree with the observations of Air France and the Association of European Airlines because they were obviously not proven or substantiated in any way.

(167)

Germany commented that the 2005 Aviation Guidelines could be applied only as from 1 June 2007. According to Germany, if the 2005 Aviation Guidelines had to be applied, NERES was compatible with the common market.

(168)

Generally Germany agreed with the comments provided by EasyJet, Germanwings, Wizz Air, DSW21 and FD. Germany asserted that NEO as well as any individual agreement concluded with the airlines using the airport was non-discriminatory, because it was applicable to every airline wishing to serve the airport.

(169)

Moreover, Germany agreed that NEO was in line with the MEO principle and that the different scenarios have shown that rising charges above the level of NEO would lead to a decrease of passengers, and due to the fixed costs of the airport it would result in higher losses. Germany submitted that a private investor would have accepted losses over a certain period. According to Germany, in this context an ex ante perspective is decisive since in an ex ante perspective NEO was the best economic alternative. Germany clearly pointed out that NEO was based on a business plan.

(170)

Germany furthermore agreed that the relevant market to determine whether there was an effect on competition is wider than point-to-point air connections and that comparable competing airports should not be located in the surrounding 100 km from Dortmund airport. Germany welcomed the conclusions of the comparative study on charges at other airports prepared by Oxera and submitted by Wizz Air.

(171)

Germany dismissed the observations of the private parties, who according to Germany partially relied on inaccurate facts. Germany clarified that the annual compensation of losses could not be automatically regarded as aid, because contrary to the assumptions of the private parties, operating results include also costs falling within the public policy remit and the marketing support was part of the charges.

(172)

By virtue of Article 107(1) of the Treaty ‘any aid granted by a Member State or through State resources in any form whatsoever which distorts or threatens to distort competition by favouring certain undertakings or the production of certain goods shall, in so far as it affects trade between Member States, be incompatible with the internal market’.

(173)

The qualification of a measure as State aid within the meaning of this provision requires the following cumulative conditions to be met:

(174)

The Commission recalls that an aid measure constitutes existing aid pursuant to Article 1(b)(v) of Council Regulation (EC) No 659/1999 (27) where it can be established that at the time the aid measure was put into effect, it did not constitute State aid, and subsequently became an aid due to the evolution of the common market and without having been altered by the Member State.

(175)

Germany submits that the 100 % State guarantees provided in favour of Dortmund airport constitute, if any, existing aid pursuant to Article 1(b)(v) Regulation (EC) No 659/1999, as they were put into place when the public funding of airports was not yet considered to constitute State aid and have not been altered since then.

(176)

Indeed, until recently, the development of airports was often determined by purely territorial considerations or, in some cases, military requirements. The operation of airports was organised as part of the administration rather than as a commercial undertaking. Competition between airports and airport operators was also limited and developed gradually. Taking into account those conditions, the financing of airports and airport infrastructure by the State had previously been considered by the Commission itself as a general measure of economic policy which could not be controlled under the Treaty rules for State aid.

(177)

However, the situation has changed. In the Aéroports de Paris judgment, the Court stated that the operation of an airport, including the provision of airport services to airlines and to the various service providers within airports, is an economic activity (28). Consequently, as of the adoption of that judgment (12 December 2000) it is not possible anymore to consider the operation and construction of airports as a task carried out within the public policy remit by an administration, which is outside the ambit of State aid control.

(178)

In its Leipzig/Halle airport judgment the Court confirmed that it is a priori not possible to exclude the application of State aid rules to airports as the operation of an airport and construction of airport infrastructure is an economic activity (29). Once an airport operator engages in economic activities, regardless of its legal status or the way in which it is financed, it constitutes an undertaking within the meaning of Article 107(1) of the Treaty, and the Treaty rules on State aid therefore apply (30).

(179)

In the light of the recitals 176 to 178 the Commission considers that prior to the Court judgment in Aéroports de Paris, public authorities could legitimately consider that financing measures definitively adopted before the judgment Aéroports de Paris did not constitute State aid and accordingly did not need to be notified to the Commission. It follows that the Commission can no longer put into question individual financing measures, which were not awarded on the basis of an aid scheme (31), definitively adopted before Aéroports de Paris under State aid rules.

(180)

Accordingly, the Commission has to assess first, whether the 100 % State guarantees were put into place before the judgment in Aéroports de Paris (12 December 2000) and second whether the measure was amended since then. Third, the Commission has also to assess whether the measures at stake qualify as ‘individual aid’ pursuant to Article 1(e) of Regulation (EC) No 659/1999 or as an ‘aid scheme’ pursuant to Article 1(d) of Regulation (EC) No 659/1999. Only as regards the latter, the Commission can propose appropriate measures pursuant to Article 108(1) of the Treaty and Article 17 of Regulation (EC) No 659/1999.

(181)

With regard to the 100 % State guarantees at stake issued in 1987 and until 2000 (see Table 13), the Commission observes that they were irrevocably granted before the Aéroports de Paris judgment.

(182)

As Germany clarified during the formal investigation, the 100 % State guarantees have not been amended since. However, they have expired by now. In addition, the 100 % State guarantees were limited in time and in amount. Also the purpose of these 100 % guarantees was to collateralise concrete loans financing specific airport infrastructure investments at Dortmund airport. Therefore, they are to be considered as individual measures.

(183)

Therefore, at the time when these guarantees, which were at the end of 2008 worth EUR 74,182 million, were irrevocably granted, the Commission did not consider the financing of airports to constitute State aid. Even if they were State aid, they would have been individual existing aid and cannot be put into question at this time. In this light, it is not necessary to investigate further whether the 100 % State guarantees amounted to aid.

(184)

According to settled case-law, the Commission must first establish whether FD is an undertaking within the meaning of Article 107(1) of the Treaty. The concept of an undertaking covers any entity engaged in an economic activity, regardless of its legal status and the way in which it is financed. Any activity consisting in offering goods or services on a given market is an economic activity.

(185)

In its Leipzig/Halle airport judgment the Court of Justice confirmed that the operation of an airport for commercial purpose and the construction of the airport infrastructure constitute an economic activity. Once an airport operator engages in economic activities by offering airport services against remuneration, regardless of its legal status or the way in which it is financed, it constitutes an undertaking within the meaning of Article 107(1) of the Treaty, and the Treaty rules on State aid are therefore capable of applying to advantages granted by the State or through State resources to that airport operator.

(186)

FD is engaged in constructing, maintaining and operating Dortmund airport. FD offers airport services and charge users for the use of the airport infrastructure, thereby commercially exploiting the infrastructure. In the light of the considerations in recitals 184 and 185 it must therefore be concluded that FD was engaged in an economic activity as from the date of the Aéroports de Paris judgment (12 December 2000) onward and constitutes an undertaking within the meaning of Article 107(1) of the Treaty.

(187)

It follows that the Commission will not put into question compensation of investment costs of infrastructure investment projects that were irrevocably decided before 12 December 2000.

(188)

With regard to the present case Germany provided data included in Table 23 on the costs of capital related to investments that were irrevocably decided before the Aéroports de Paris judgment and other costs of investments during the years 2000 to 2012.

Table 23

Capital costs of investment into infrastructure decided before Aéroports de Paris (in EUR thousands)

(189)

As a result, the Commission concludes that it is not entitled to examine and put into question loss transfers that covered the amounts mentioned in the column 7 of Table 23.

(190)

While FD must be considered to constitute an undertaking within the meaning of Article 107(1) of the Treaty, it must be recalled that not all the activities of an airport owner and operator are necessarily of an economic nature (32).

(191)

According to the 2014 Aviation Guidelines and the Court of Justice (33) jurisprudence, activities that normally fall under State responsibility in the exercise of its official powers as a public authority are not of an economic nature and do not fall within the scope of the rules on State aid. Such activities include for example security, air traffic control, police and customs. The financing has to be strictly limited to compensation of the costs to which they give rise and may not be used instead to fund other economic activities (34).

(192)

Therefore, the financing of activities falling within the public policy remit or of infrastructure directly related to those activities in general does not constitute State aid (35). At an airport, activities such as air traffic control, police, customs, firefighting, activities necessary to safeguard civil aviation against acts of unlawful interference and the investments relating to the infrastructure and equipment necessary to perform those activities are considered in general to be of a non-economic nature (36).

(193)

However, public financing of non-economic activities necessarily linked to the carrying out of an economic activity, must not lead to undue discrimination between airlines and airport managers. Indeed, it is established case law that there is an advantage when public authorities relieve undertakings of the costs inherent to their economic activities (37). Therefore, if in a given legal system it is normal that airlines or airport managers bear the costs of certain services, whereas some airlines or airport managers providing the same services on behalf of the same public authorities do not have to bear those costs, the latter may enjoy an advantage, even if those services are considered in themselves as non-economic. Therefore, an analysis of the legal framework applicable to the airport operator is necessary in order to assess whether under that legal framework airport managers or airlines are required to bear the cost of the provision of some activities that might be non-economic in themselves but are inherent to the deployment of their economic activities.

(194)

Germany's view on the extent of the public policy remit evolved throughout the procedure. At one point Germany included in the public policy remit also costs related to salaries of public service officials working for the airport. While the extra costs of public service officials employed in a newly liberalised sector may be considered as sunk cost of the liberalisation, there is no legal obligation on the airports in Germany to employ such officials. Therefore, this item does not constitute a cost falling within public policy remit.

(195)

Furthermore, Germany has submitted that the costs arising from the following activities, whether as investments or operating expenses, are to be considered as falling within the public policy remit: airport security measures pursuant to §8 Luftsicherheitsgesetz (Air Security Law), measures assuring operational safety, air control and air safety measures pursuant to §27c(2) Luftverkehrsgesetz (Air Traffic Law), meteorological services and the fire brigade.

(196)

The Commission is of the view that measures pursuant to §8 Luftsicherheitsgesetz, measures pursuant to §27c(2) Luftverkehrsgesetz (including also meteorological services) and the fire brigade service can, in principle and subject to the analysis below, be considered to constitute activities falling within the public policy remit.

(197)

With respect to measures relating purely to operational safety, however, the Commission considers that ensuring safe operations at the airport is a normal part of the economic activity of operating an airport (38). Subject to a more detailed review with respect to individual activities and costs, the Commission finds that measures designed to ensure the safety of operations at the airport do not constitute activities falling in the public policy remit. Any undertaking wishing to operate an airport has to ensure the safety of the installations, such as the runway and the aprons.

(198)

As regards the legal framework, Germany has submitted that for the fire brigade there are no legal rules strictly imposing these costs on the airport operator. Furthermore, the Commission observes that the remuneration of costs for fire brigade is subject to regional responsibilities and those costs are usually remunerated by the relevant regional authorities. The remuneration of those costs is limited to the extent necessary to cover these costs.

(199)

As regards air traffic control and meteorological services, the Commission notes that according to §27d and §27f Luftverkehrsgesetz regulates that the costs related to §27c Luftverkehrsgesetz are covered by the State for a number of specific airports. While the Commission does not, in the present case, need to decide whether the provision may grant an advantage to those airports that profit from State financing pursuant to §27d and §27f Luftverkehrsgesetz, it is clear that the law envisages that all other airports have to bear the relevant costs themselves. In this light, costs related to air traffic control and meteorological services must be considered to constitute normal operating expenses of at least those airports not addressed by §27d and §27f Luftverkehrsgesetz.

(200)

With respect to measures pursuant to §8 Luftsicherheitsgesetz, it appears that Germany considers that all costs related to the measures prescribed therein may be borne by the relevant public authorities. The Commission notes, however, that pursuant to §8(3) Luftsicherheitsgesetz only the costs related to the provision and maintenance of spaces and premises necessary for the performance of the measures listed therein may be reimbursed. All other costs must be borne by the airport operator. Hence, to the extent that public financing granted to FD relieved that undertaking of costs it had to bear pursuant to §8(3) Luftsicherheitsgesetz, that public financing is not exempted from scrutiny under Union State aid rules.

(201)

In the light of the above considerations, the Commission finds it appropriate to draw more specific conclusions regarding investment costs and operating costs allegedly falling with the public policy remit.

(202)

As regards investment and operating costs linked to the fire brigade, the Commission accepts that these costs qualify as public policy remit costs, in so far as the remuneration of these costs is strictly limited to what is necessary to pursue these activities.

(203)

As regards investment and operating costs linked to measures taken pursuant to §8 Luftsicherheitsgesetz, the Commission considers that only those costs for which the airport operator is entitled to reimbursement pursuant to §8(3) Luftsicherheitsgesetz qualify as public policy remit costs.

(204)

With respect to air traffic control and air safety measures pursuant to §27c(2) Luftverkehrsgesetz, and noting that Dortmund airport is not one of the airports for which a corresponding need has been recognised by the Federal government pursuant to §27d(1) and §27f(1) Luftverkehrsgesetz, the Commission finds that operating costs linked to air traffic control and air safety measures as well as meteorological services cannot qualify as public policy remit costs.

(205)