Competition law

Specific regulation

Do sector-specific or general competition rules apply to aviation?

The general EU competition rules have applied in full to the aviation sector since 2004, when the previous sector-specific regime of Regulation (EEC) No. 3975/87 was abolished. Accordingly, articles 101 Treaty on the Functioning of the European Union (TFEU) (prohibiting and making void anticompetitive agreements and concerted practices) and 102 TFEU (prohibiting the abuse of a dominant position) apply fully to all agreements and behaviour concerning air transport services that may affect trade between member states, including those relating to routes between the EU and third countries. The European Commission (the Commission) has full enforcement powers under Regulation (EC) No. 1/2003 when applying EU competition rules in cases concerning the air transport sector. Likewise, the EU merger control rules under Regulation (EC) No. 139/2004 (the EC Merger Regulation) (EUMR), and the EU state aid rules under articles 107 to 109 TFEU apply fully to the aviation sector.

Previous block exemptions from the application of article 101 TFEU (covering, for instance, International Air Transport Association (IATA) passenger tariff consultations and slot allocation conferences) implementing the (now defunct) Regulation (EEC) No. 3976/87 on the application of article 101(3) TFEU to certain categories of agreements and concerted practices in the air transport sector have been abolished. With respect to the IATA airport slot allocation conferences, the Commission has expressly stated that they do not restrict competition and thus a block exemption is unnecessary. Finally, while the Commission retains the power to adopt block exemptions under Regulation (EC) No. 487/2009 currently in force, it has so far expressed no intention to exercise this power.


Is there a sector-specific regulator, or are competition rules applied by the general competition authority?

There is no EU-level sector-specific regulator concerning the application of competition law in the air transport sector. Within the Commission, DG Comp enforces the EU competition rules, including (since 2010) EU state aid rules. Member states’ authorities and courts have concurrent but subsidiary powers to apply articles 101 and 102 TFEU (but not the EUMR). 

Market definition

How is the relevant market for the purposes of a competition assessment in the aviation sector defined by the competition authorities?

When defining the relevant product and geographic market in the context of a competition assessment in the aviation sector, the general market definition principles under EU competition law apply.

The starting point when defining the relevant product market is to assess whether two products can be considered as substitutes from a demand-side perspective. In mergers and alliance agreements between airlines, the well-established approach to relevant market definition in passenger services is the origin and destination (O&D) city-pair. Accordingly, the relevant product market includes all relevant services on the O&D city-pair in question. The relevant market may, where appropriate, be further segmented between the market for premium (mainly business) passengers, and the market for non-premium (mainly leisure) passengers.

Only in exceptional circumstances will the possibility of indirect services be seen as exercising a significant competitive restraint on nonstop short-haul services (eg, when a one-day round trip is not possible on nonstop services or indirect services account for a significant share of passengers). On long-haul services, the Commission traditionally included only indirect services that are seen as credible alternatives taking into account connection and overall journey time. More recently, however, the Commission has suggested a more flexible approach at least as concerns long-haul routes, including all one-stop bookings in the market definition, stating that if one-stop services are not a credible alternative then they will only account for a very small share of passengers anyway.

The city-pair approach means that the relevant market may include competing flights from neighbouring airports if there are significant overlaps between the catchment areas of the relevant airports. Likewise, services by other modes of transport such as high-speed trains may also form part of the same relevant market. These are fact-specific questions that the Commission will assess on a case-by-case basis. These broader market definitions are generally more likely to be valid options for non-premium rather than for premium passengers.

Code-sharing and joint ventures

How have the competition authorities regulated code-sharing and air-carrier joint ventures?

The Commission reviews code-sharing and other forms of airline alliances in the context of article 101 TFEU (prohibiting and making void anticompetitive agreements and concerted practices).

The EU merger control rules under the EUMR apply only to ‘full-function’ joint ventures (ie, those that perform, on a lasting basis, all the functions of an autonomous economic entity), which means that most forms of airline alliances are not caught. There has only been one case (KLM/Alitalia) in which an airline alliance met the full-function condition and was, therefore, examined under the EUMR.

Assessing competitive effect

What are the main standards for assessing the competitive effect of a transaction?

To assess the competitive impact of a transaction in the air transport sector (eg, an airline merger or an alliance), the Commission examines whether the transaction raises concerns on those O&D city-pairs where the parties’ services overlap, or could potentially overlap (ie, where, in the absence of the agreement, the parties would be actual or potential competitors). The Commission pays particular attention to overlaps on hub-to-hub routes.

The Commission assesses whether a sufficient number of actual competitors would remain active in the relevant market post-transaction so as to prevent the parties from obtaining incremental market power as a result of the transaction. The Commission also takes into account competitive constraints exercised by potential entrants in the relevant market and, where appropriate, alternative possibilities (such as indirect flights or other modes of transport) on the city-pair.

With regard to potential competition, a carrier will only be considered as a potential competitor on a specific O&D city-pair if that city-pair’s traffic size is such (taking into account both local and connecting flights) as to allow for and justify the offering of a competing service.

Furthermore, entry of a specific carrier must be reasonably expected in the sense that it must be in line with that carrier’s operational and strategic business plans. In assessing the likelihood of potential entry, the Commission uses as a benchmark whether the following applies to the carrier in question:

  • operates services on other O&D city-pairs of similar size and characteristics;
  • already has a local market presence, in particular through the operation of a hub or a base at either end of the O&D city-pair; and
  • has appropriate aircraft that could be deployed on the relevant O&D city-pairs.


The Commission recognises verifiable efficiencies created by airline alliances and mergers that are found to have some anticompetitive effects on the relevant market, provided that such efficiencies are passed on to the consumer, and the consumer benefits outweigh, or at least equal, the identified competition concerns. The Commission conducts a separate assessment of the efficiencies for each of the affected O&D city-pairs. In more recent alliance cases, the Commission has (subject to important restrictions) also indicated a willingness to accept ‘out-of-market’ efficiencies (ie, efficiencies created not on the overlap routes in question, but on other routes in the network where the alliance leads to consumer benefits (eg, better or more frequent services and connections)).

Finally, where the parties’ arguments concerning the existence of efficiencies sufficient to offset potential competition concerns are not (fully) confirmed by the investigation, remedies will be required to enable entry by competitors on ‘problem’ city-pairs.


What types of remedies have been imposed to remedy concerns identified by the competition authorities?

Remedies typically offered by parties in airline mergers or alliances to remove competition concerns include the following:

  • slot divestitures at congested (hub) airports at one or both ends of the ‘problem’ city-pairs, primarily designed to encourage entry by new competitors (this is by far the most important element of the Commission’s remedy policy in aviation cases);
  • code-share, interlining obligations, special pro rata agreements and arrangements for combining fares; and
  • remedies relating to access to joint frequent-flyer programmes and computerised reservation system displays.


In some early cases, the Commission imposed pricing constraints and frequency freezes. However, such measures have not been included in more recent cases, and they can be considered as no longer forming part of the Commission’s remedy policy. The Commission has also requested member states to relax the fifth and sixth freedom rights restrictions on ‘problem’ city-pairs to further encourage entry in such O&D city-pairs.

Moreover, following an inquiry in 2008 into the effectiveness of remedies in the airline sector, the Commission has also required measures designed to enhance the likelihood that slot commitments are taken up by new entrants and in particular carriers envisaging to operate services on several of the routes where slot remedies are required. These include, for instance, measures facilitating the more flexible use of slots acquired as a result of the remedies, provided the slots have been used for a certain period of time to provide services on one or more of the ‘problem’ routes (referred to in the remedies as grandfathering), preference given to carriers able to start new services on several problem routes, and (where the concerns relate to short-haul routes) measures designed to facilitate the establishment of a base operation by the new entrant at one or more of the airports concerned. Finally, the Commission has also sought to facilitate the new entrant’s access to behind and beyond routes through the conclusion of special prorate agreements and fare combinability arrangements with the parties.

Financial support and state aid

Rules and principles

Are there sector-specific rules regulating direct or indirect financial support to companies by the government or government-controlled agencies or companies (state aid) in the aviation sector? Is state aid regulated generally?

Both general and aviation-specific state aid rules apply to the provision of direct or indirect financial support to companies active in the air transport sector.

The general state aid rules applicable to the aviation sector are as follows:

  • article 107 Treaty on the Functioning of the European Union (TFEU) containing the general prohibition of the unlawful grant of state aid, specifying generally what constitutes state aid, and granting exemptions;
  • article 108 TFEU creating a standstill obligation;
  • article 106(2) TFEU on undertakings entrusted with services of general economic interest (SGEI);
  • Regulation (EU) No. 2015/1589 (Procedural Regulation), laying down detailed rules for the application of article 108 TFEU;
  • Regulation (EC) No. 794/2004 (as amended), setting out detailed provisions on notifications and annual reports referred to in the Procedural Regulation;
  • Directive 2006/111/EC laying down rules on the transparency of financial relations between member states and public undertakings, where an air carrier is a state-controlled undertaking;
  • Regulation (EU) No. 651/2014 (General Block Exemption Regulation), as amended by Regulation (EU) No. 1084/2017, Regulation (EU) No. 972/2020 and Regulation (EU) No. 1237/2020 declaring certain categories of aid compatible with the internal market in application of articles 107 and 108 TFEU;
  • 2014 guidelines on state aid for rescuing and restructuring non-financial undertakings in difficulty;
  • 2008 notice on the application of articles 107 and 108 TFEU to state aid in the form of guarantees;
  • the European Commission’s (the Commission) SGEI package comprising:
    • 2012 Communication on the application of state aid rules to compensation granted for the provision of SGEIs;
    • Decision No. 21/2012 on the application of article 106(2) TFEU to state aid in the form of public service compensation granted to certain undertakings entrusted with the operation of SGEIs (the SGEI Decision);
    • 2011 Communication on the EU framework for state aid in the form of public service compensation; and
    • Regulation (EU) No. 360/2012 (as amended) on the application of articles 107 and 108 TFEU to de minimis aid granted to undertakings providing SGEIs; and
  • Regulation (EU) No. 1407/2013 on the application of articles 107 and 108 TFEU to de minimis aid (the De Minimis Regulation).


In addition, in February 2014 the Commission issued the 2014 aviation state aid guidelines (the Aviation Guidelines). The guidelines consolidate and replace the 1994 guidelines on state aid to the aviation sector and the 2005 guidelines on the financing of airports and start up aid to airlines departing from regional airports and have been in force since April 2014.

Under the Aviation Guidelines the following applies:

  • smaller airports (ie, airports with fewer than 3 million passengers per year) may be permitted to receive a limited amount of aid for operating purposes for a transitional period of 10 years (starting from 4 April 2014). Airports receiving operating aid must demonstrate that they will be capable of fully covering their operating costs by the end of the 10-year transitional period;
  • unless there are ‘very exceptional circumstances’, aid to finance infrastructure investments is allowed only for airports with fewer than 5 million passengers per year. Below that threshold, there are different bands of permissible aid intensity (ie, the maximum permissible amount of state aid as a percentage of infrastructure costs) depending on the number of passengers per year (the smaller the airport, the higher the permissible intensity). According to the guidelines, state aid for investment purposes must have satisfactory medium-term prospects; and
  • airlines launching a new route with the aim of increasing connectivity of a region may be permitted to receive ‘start-up’ state aid. To qualify for the aid airlines must either present a business plan showing that the route in respect of which aid is being received has prospects of becoming profitable without public funding after three years or give an irrevocable commitment to the relevant airports to operate the route for a period at least equal to the period of state aid funding.

In January 2019, the Commission launched a comprehensive state aid policy evaluation. As part of this evaluation, it carried out a targeted consultation on the Aviation Guidelines and the General Block Exemption Regulation as regards its provisions on aid for airport infrastructure. The Commission’s evaluation revealed the need for an update and further clarification of the rules under the Aviation Guidelines and the relevant General Block Exemption Regulation provisions, in particular to (1) prolong the transitional period allowing operating aid under the Aviation Guidelines beyond 2024; (2) simplify rules for aid to regional airports below 500,000 passengers per year; (3) align rules governing investment and operating aid to airports; and (4) amend the guidelines to specifically address measures to mitigate the airports’ impact on the environment and the climate. As future revisions of the Aviation Guidelines will need to take account of the impact of the ongoing covid-19 pandemic on the aviation sector, the Commission proposed amendments to the Aviation Guidelines 'in the medium term', and no proposals have been published to date.

The SGEI Decision also contains specific provisions on airports providing SGEIs. In April 2012, the Commission adopted, as the final pillar of the package, the De Minimis Regulation for the field of SGEI.

In response to the covid-19 outbreak, the Commission published a Communication setting out the Temporary Framework relating to the application of article 107(3)(b) TFEU for state aid measures to support the economy by specifically providing for more flexibility of the state aid framework. The Temporary Framework applies across sectors, including aviation. On 12 May 2022, the Commission announced that the Temporary Framework will not be extended beyond its current expiry date (30 June 2022). In addition, in light of the fact that the covid-19 pandemic hit the aviation industry particularly hard, the Commission accepted that, insofar as the sector is concerned, the covid-19 crisis qualified as an exceptional occurrence according to article 107(2)(b) TFEU.

What are the main principles of the state aid rules applicable to the aviation sector?

The general EU principles relating to state aid, namely, the ‘market economy operator principle’, the ‘proportionality principle’, the ‘one time, last time principle’, and the ‘principle of neutrality of property ownership’ also apply to the aviation sector.

In particular, the ‘market economy operator principle’ is used to assess whether a public investment in an undertaking is made under conditions that would be acceptable to a long-term private investor operating under normal market conditions. If this is the case, a member state’s intervention is regarded as economically rational and therefore does not constitute state aid within the meaning of article 107 TFEU. Depending on the type of the relevant transaction, variations of this principle such as the ‘market economy lender principle’, the ‘market economy creditor principle’, and the ‘market economy guarantor principle’ apply on the same basis.

The ‘proportionality principle’ must also be observed by member states when granting aid under the exemptions of article 107(3) TFEU, meaning that only aid that is proportionate to its objective (eg, the restructuring programme under consideration) may be exempt under article 107(3)(c) TFEU.

Under the ‘one time, last time principle’, member states may contribute to the rescue or restructuring of one and the same undertaking under the exemption of article 107(3)(c) TFEU only once every 10 years. This principle is explained in the Commission guidelines for rescue and restructuring of non-financial undertakings in difficulty.

The ‘principle of neutrality of property ownership’ also applies in this sector, allowing member states to set up public undertakings, to acquire shareholdings, and to nationalise existing undertakings that operate in all sectors of the economy, provided, however, that the conditions set by the market economy investor principle are met.

Consistent with the Commission’s communication on state aid modernisation, the 2014 aviation state aid guidelines state that to be considered compatible with the internal market, the following must apply:

  • a state aid measure in the aviation sector must contribute to a well-defined common interest objective;
  • state intervention must be necessary (eg, addressing a market failure or an equity or cohesion concern);
  • state aid must be an appropriate policy instrument;
  • the aid must have an appropriate ‘incentive effect’ on the undertaking concerned;
  • the aid must be proportionate (ie, limited to a minimum);
  • the aid must not have undue negative effects on competition and trade between member states; and
  • transparency of the aid, such that all relevant stakeholders can have access to all pertinent information and documents concerning the aid.



Are there exemptions from the state aid rules or situations in which they do not apply?

The general exemptions to the prohibition of article 107(1) TFEU contained in article 107(2) and (3) TFEU, and the General Block Exemption Regulation are fully applicable to the aviation sector. The 2014 aviation state aid guidelines provide a sector-specific framework for a state aid analysis. In principle, the generally applicable rules do not exempt operating aid. However, the 2014 aviation state aid guidelines do contain a limited exemption for certain categories of operating aid.

Aid granted to allow for the restructuring and privatisation of a state-owned company is usually assessed under article 107(3)(c) TFEU. Such a restructuring will be tested against the conditions described in the Commission’s rescue and restructuring guidelines. With regard to the privatisation process as such, aid is generally excluded, and therefore notification is generally not required under article 108(3) TFEU, if, upon privatisation, the following conditions are fulfilled:

  • the participation of the private entity is made by way of an unconditional public tender process on the basis of transparent and non-discriminatory terms;
  • the participation is granted to the highest bidder; and
  • the interested parties are given sufficient time to prepare their offer and receive all the necessary information to undertake a proper evaluation.


In addition, privatisations by flotation or competitive tender on the above conditions generally need not be notified to the Commission in advance for examination of aid implications, but member states may notify, if they desire greater legal certainty.

Regulation (EU) No. 1407/2013 on De Minimis Aid, which also applies to the air transport sector, provides for an exemption to article 107(1) TFEU, when the aid does not exceed €200,000 over any three-year period. Loans may also be covered by the exemption if they are secured by collateral covering at least 50 per cent of the loan and the loan does not exceed either €1 million and a duration of five years or €500,000 and a duration of 10 years. Loan guarantees may be covered by the exemption to the extent that the guarantee does not exceed 80 per cent of the underlying loan and either the guaranteed part of the loan does not exceed €1.5 million and the duration of the guarantee does not exceed five years or the guaranteed part of the loan does not exceed €750,000 and the duration of the guarantee does not exceed 10 years. To avoid abuses, forms of aid the inherent aid amount of which cannot be calculated precisely in advance (ie, non-transparent aid), and aid to firms in difficulty are excluded from the de minimis exemption. Rules on cumulation of aid apply.

In accordance with Commission Decision 21/2012 on the application of article 106(2) TFEU to state aid in the form of public service compensation granted to certain undertakings entrusted with the operation of SGEIs, member states are exempt from the obligation to notify compensation for the provision of SGEIs by airports with 200,000 or fewer passengers per year.

Finally, the Temporary Framework adopted in March 2020 in response to the covid-19 outbreak lifted a number of restrictions in view of enabling member states to use the full flexibility foreseen under state aid rules to support the economy in those unprecedented circumstances. The Temporary Framework applies across sectors, including aviation, and certain airline state aid packages were based on the Temporary Framework that will expire on 30 June 2022. Other packages had article 107(2)(b) TFEU as their legal basis, taking advantage of the fact that, in so far as the aviation sector is concerned, the Commission recognised that the covid-19 crisis qualifies as an exceptional occurrence within the meaning of that article.

Clearance of state aid

Must clearance from the competition authorities be obtained before state aid may be granted? What are the main procedural steps for doing so?

Yes, unless the block exemption de minimis rule or SGEI exception applies.

As set out in article 108(3) TFEU, the Commission’s supervision of state aid is based on a system of ex ante authorisation (see also the Procedural Regulation). Member states are thus required to inform the Commission upfront of any plan to grant or alter state aid (which is not covered by the General Block Exemption Regulation), and they may not grant such aid prior to Commission approval (‘standstill obligation’ – see article 108(3) TFEU and article 3 Procedural Regulation). State aid granted without such formal approval is automatically ‘unlawful’, and the member state involved may be required by the Commission to recover it from the recipient.

Member states may, and are in fact generally encouraged to, notify (national) aid schemes, rather than individual measures (eg, 2014 guidelines on state aid to airports and airlines).


Procedural steps

The main procedural steps to obtain clearance of state aid are provided by the Procedural Regulation, and can be distinguished in two distinct phases:


Phase I

The member state concerned must notify planned aid measures to the Commission. The Commission’s preliminary (Phase I) examination can result in any of the following types of decision:

  • a clearance decision, on the basis that the notified measure does not qualify as aid within the meaning of article 107(1) TFEU;
  • a clearance decision, on the basis that, although the notified measure qualifies as aid, it is compatible with the internal market. In this case, the Commission shall specify which exemption provision it has applied (the Commission cannot attach conditions to a positive decision in Phase I); or
  • the opening of formal (Phase II) investigation, on the basis that the notified measure qualifies as aid that raises serious concerns with regard to its compatibility with the internal market.


The Commission must adopt a Phase I decision within two months following the receipt of a complete notification.


Phase II

Where the Commission has serious concerns, it adopts a decision declaring the commencement of a formal investigation (article 6(1) Procedural Regulation). The decision contains a summary of the relevant issues of fact and law, and a preliminary assessment of the proposed aid, identifying the Commission’s serious doubts as to the compatibility of the aid with the internal market. The member state concerned must submit its comments within one month from the day on which the decision was communicated to it. The Commission also invites member states and interested parties to submit comments. Other member states and interested parties may submit their comments within one month from the day the decision is published in the Official Journal. If the notifying member state wishes to make oral submissions to the Commission, meetings for this purpose must be held within three months, at the latest, upon receipt of the letter stating that the procedure has been initiated.

The formal investigation procedure is concluded by a Commission decision, which should normally be adopted within 18 months of the opening of the Phase II procedure and may be either a positive decision allowing the implementation of the aid, possibly subject to conditions, or a negative decision prohibiting the implementation of the aid.

Recovery of unlawful state aid

If no clearance is obtained, what procedures apply to recover unlawfully granted state aid?

Where the Commission finds that the notified aid is incompatible with the internal market, the aid cannot be put into effect (article 9(5) Procedural Regulation).

Where the Commission finds that granted aid is incompatible with the internal market, the aid must be recovered from the beneficiary by means of a recovery decision (article 16 Procedural Regulation). Member states must take all necessary measures to recover the aid, except if such recovery is contrary to a general principle of EU law. Recovery takes place in accordance with the national procedural rules of the member state concerned. In addition, the aid to be recovered must include interest at market rate, to be calculated from the date on which the unlawful aid was at the disposal of the beneficiary until the date of its recovery. The interest rate is to be applied on a compound basis. The Commission updates the interest rates applicable in recovery cases regularly.

A negative Commission decision is final and fully binding upon the member state concerned, which has the right to seek its annulment by the EU courts. In principle, appealing a Commission decision does not suspend the challenged decision’s enforcement, unless the EU court orders the grant of interim measures following an application by the member state concerned. The only occasion where a member state is justified not to recover the aid is where it is absolutely impossible to do so, as provided for in the relevant case law.