By means of the letter dated 4 July 2018, the Commission notified France of its decision to start the procedure under Article 108, paragraph 2, of the Treaty on the Functioning of the European Union (TFEU), concerning certain measures that may constitute a State aid in favour of the airline Ryanair’s activities at Montpellier airport. The procedure laid down in Article 108, paragraph 2, TFEU will be initiated within one month of the publication, on 9 November 2018, of the invitation to submit comments on the contested measures.

On 23 March 2017, the Commission received a complaint according to which between 2010 and 2015 public regional and local entities in the area surrounding the city of Montpellier granted unlawful State aid to Ryanair through marketing agreements concluded by the Association for the Promotion of Touristic and Economic Flows (APFTE) with the airline, aimed at supporting the airline’s air transport operations from the Montpellier airport.

The APFTE is an association composed of representatives of various public regional and local entities, as well as private entities operating in the tourism sector. It is mainly financed by public regional and local entities through voluntary contributions. Since 2010, the APFTE has been signing agreements with Ryanair and its subsidiary Airport Marketing Services (AMS),purchasing marketing services intended to promote the Montpellier area on Ryanair‘s website. Other agreements involve obligations for Ryanair to provide air transport services to Montpellier from various European airports with specific flight frequencies. In exchange for the supply of marketing services, Ryanair and its subsidiaryAMS have received payments from the APFTE.

The Commission has noted that the agreements at issue are financed through State resources, since the public entities financed the APFTE through voluntary contributions on the basis of specific plans through which the association ensures that the funds are used effectively for the indicated purposes.

The Commission has considered that the marketing agreements between the parties confer an unfair economic advantage to Ryanair, by lowering the costs that the airline would normally sustain to operate at Montpellier airport. According to the Commission, the real objective and effect of the agreements at issue is the financial support of Ryanair’s air transport services from/to Montpellier airport with the aim to incentivise Ryanair to expand or at least not to downsize its operations at that airport. Therefore, the Commission doubts that such agreements are compatible with the behaviour of market economy operator led by considerations of profitability. If such principle is not applicable, the payments made by the APFTE to Ryanair and AMS should be seen as subsidies conferring them an economic advantage.

Moreover, even if the market economy operator principle could be applied, the Commission does not believe that it is complied with. The APFTE does not manage Montpellier airport, and the airport charges and other revenues accruing to the airport as a result of Ryanair’s activities could not be considered as profits for the APFTE. Therefore, the APFTE appears to support Ryanair’s air transport operations from/to Montpellier airport without any return that a prudent market economy operator guided by profitability prospects would take into consideration.

The Commission has also considered the economic advantage in favour of Ryanair as selective. The Commission has found that the marketing contracts signed directly with Ryanair/AMS without any tender are per se selective. With regards to the agreements concluded following a public tender, the Commission has noted that such tender has been designed to enable the selection of Ryanair as the service provider.

The Commission has concluded that the agreements at issue may constitute unlawful State aid within the meaning of Article 107, paragraph 1, TFEU. According to the Commission, the only possible compatibility basis for those measures would be Article 107, paragraph 3, letter c), TFEU as interpreted by the provisions of the Commission’s 2014 and 2005 Guidelines on State aid to airports and airlines as well as the general principles underpinning the compatibility of start-up aid to airlines.

Sara Capruzzi