On 27 July 20151 France was referred to the European Court of Justice for failing to recover State aid granted to Ryanair and Transavia for the three airports of Pau, Nîmes e Angoulême, after the European Commission found the aid to be incompatible with the Single Market rules.

The amount to be recovered was estimated at around €10 million, based on contractual arrangements between the airlines concerned and the managers of local airports resulting in undue economic advantage for the carriers. In the Commission’s view, the amount should be recovered in order to correct a distortion of competition.

Today’s order for deferral originates from certain decisions previously adopted by the European Commission in 2014 on State aid to airports and airlines as part of its State Aid Modernisation (SAM) strategy (Communication from the Commission 2014/C 99/03 – Guidelines on State aids to airports and airlines). In those decisions, the Commission recognised the importance of regional airports for both local accessibility and economic development as well as the need to preserve a level playing field in the sector.

However, in the cases of Pau, Nîmes e Angoulême, the Commission concluded that Ryanair, and, in the case of Pau, Transavia, received State aid that was deemed incompatible with the EU rules.

The EC's analysis has demonstrated that these airlines paid less than the additional costs linked to their presence in the airport. These airlines therefore benefited from an undue economic advantage, distorting competition in the Single Market.

Consequently, France was directed by Brussels to recover the aid received by the companies in order to restore the level playing field, namely, €0.87 million for the airport of Angoulême (from Ryanair and AMS jointly), € 2.8 million for the airport of Pau (€ 0.42 million from Ryanair, € 1.97 million from Ryanair and AMS jointly and €0.43 million from Transavia) and €6.3 million for the airport of Nîmes (from Ryanair and AMS jointly).

Despite submitting recovery orders, Paris has however been unable to recover the relevant sums, since the orders in question were challenged by the beneficiaries and, under French law, recovery orders are automatically suspended in case of appeal.

French law appears to go against established European case law on the implementation of recovery decisions by Member States, which prevents national courts from suspending the relevant decisions when deciding on appeals against recovery orders.

Referral to the ECJ has therefore proved to be necessary, since the distortion of competition created by State aid is in conflict with Article 141 of Regulation (EC) No. 659/99, which requires Member States to recover illegal or incompatible aid by efficiently and promptly taking action against the beneficiary concerned.

The infringement of EU State aid rules has therefore entitled the Commission to directly refer the case the Court of Justice, in accordance with Article 108 (2) of the Treaty on the Functioning of the European Union (TFEU).

That of France’s referral, however, is not the only case of this sort: the Commission has indeed recently extended the scope of its investigation concerning state aid to the Klagenfurt airport (Austria).

As is clear, the matter of State aid to regional airports is particularly significant in Italy too (see, for example, the investigation carried out by the Commission concerning the Alghero airport).

The position of Italian local bodies, formalised in the context of the Conferenza delle Regioni e delle Province Autonome (lastly, on 7 May 2015) is that public aid to small and micro airports with an average annual traffic up to 200,000 passengers cannot be classified as a State aid, since it has no impact on competition between Member States.

Such position had already been endorsed by the Commission, which, for example, in July 2010 considered the aid granted to Stretto (Reggio Calabria) airport to be legal, finding it being clearly aimed at improving the airport accessibility, while having a limited distortive effect due to being over 100 km from next airports.

The impression we are left with is, however, that, by issuing the new Guidelines, the Commission is enacting a stricter approach, giving priority to the need to avoid duplications of unprofitable airports, waste of public resources and undue distortion of competition over the need to promote regional economic development.