EUROPEAN COMMISSION

PUBLIC VERSION

This document is made available for information purposes only.

Brussels, 10.11.2015 C(2015) 7700 final

Subject: State aid SA.39315 (2015/N) – Investment in airside infrastructure at Sir,

1 PROCEDURE

(1) On 26 June 2015, the Estonian authorities notified a measure concerning the modernisation of the 's infrastructure (hereinafter “the measure”). The measure was registered under State aid case number SA.39315.

(2) On 5 August 2015, the Commission requested complementary information from the Estonian authorities. The reply of the Estonian authorities was received on 28 August 2015.

2 DESCRIPTION OF THE MEASURE

2.1 Tallinn airport

(3) Tallinn Airport Ltd (AS Tallinna Lennujaam, hereafter "Tallinn Airport") operates and develops in Estonia, including the main , known as Tallinn Airport,) and the small regional airports of , Pärnu, Kuressaare and Kärdla, as well as small airfields in the islands of Kihnu and Ruhnu1.

1 Airports managed by the same company as Tallinn Airport - AS Tallinna Lennujaam

Lp pr Marina Kaljurand Välisminister (4) The shares of the company are owned by the Republic of Estonia. The company comes under the administrative control of the Ministry of Economic Affairs and Communications.

(5) The company's busiest international airport is Tallinn Airport, which in 2013 served 1,958,801 passengers, and then 2,017,371 passengers in 2014. The number in passengers has grown considerably since Estonia regained its independence (in 1992 the airport served only 206,000 passengers).

(6) According to the airport's business plan, the passenger numbers are expected to grow at Tallinn Airport in the period 2015 – 2040:

2015 2016 2017 2018 2019 2020 2025 2030 2040 2 175 656 2 340 926 2 457 972 2 580 870 2 709 914 2 845 410 3 298 610 3 823 993 5 000 000

(7) These figures are mostly in line with Eurocontrol's latest forecast2, showing that the airport operator does not expect any extraordinary growth rates or significant change in the competitive position of Tallinn Airport when compared to the main competitors.

(8) As to the rest of Tallinn Airport Ltd's airports, they only served 44,288 passengers in total in 2013, and 41,927 passengers in 2014.

(9) Tallinn Airport is situated at 4 km from the Tallinn city centre, and is the only airport in Estonia with regular international passenger air traffic. Tallinn Airport is located in the vicinity of town's drinking water reservoir Lake Ülemiste.

(10) Tallinn airport is part of the North Sea-Baltic Corridor of the Trans-European Transport Network (TEN-T).3

(11) Currently the airport provides services to both full service and low cost airlines. Altogether 20 international destinations by 15 airlines were served during 2014.

(12) The share of transfer passengers at Tallinn airport is 2%. The most important transfer origins/destinations are St. Petersburg and Amsterdam

Islandi väljak 1 15049 Tallinn ESTONIA

Commission européenne, B-1049 Bruxelles – Belgique Europese Commissie, B-1049 Brussel – België Telefon: 00 32 (0) 2 299 11 11.

2 E.g. the Base Case scenario proposed for 2030 by Eurocontrol for flight operations foresees a 64% growth of flight operations for Estonia (when compared to 2012). The conservative forecast of Tallinn Airport that has been used in the Business Plan sees for the same period only a 41% increase for both the number of flight operations and the number of passengers. 3 http://ec.europa.eu/transport/themes/infrastructure/ten-t-guidelines/doc/ten-t-country-fiches/et_en.pdf; http://ec.europa.eu/transport/infrastructure/tentec/tentec- portal/site/brochures_images/CorridorsProgrReport_version1_2014.pdf 2

(13) As to cargo activities, these have a minor impact on the business performance of the airport which is explained by the fact that the airlines operating from Tallinn airport have a fleet which is currently mostly composed of CRJ900, Embraer 170 and ATR- 75 aircraft and these types of aircraft have small cargo holds.

2.2 The investment project and its financing

(14) According to Estonia, what is needed for Estonia's connectivity and sustainable economic development is airport infrastructure which can cater for passenger numbers up to 5 million per annum and would simultaneously meet high safety and environmental standards.

(15) According to Estonia, such infrastructure would require massive investment in airside infrastructure (airside includes all areas accessible to aircraft, including runways, taxiways and ramps) and in terminal infrastructure. The total cost of the investments would amount to EUR 88.5 million.

(16) In the absence of state aid, the airport operator would, however, be driven by profit maximisation considerations and would only proceed with minor investments in the coming years. These would include the basic renovation of and lighting system and minor modifications to the passenger terminal (Base Case scenario). The passenger flows would continue to grow until the maximum airport capacity of 3 million passengers per year is reached. Expansion of the airport that would need to be accompanied by very costly additional investments in safety and environmental measures would thus not be in the commercial interests of the airport operator.

(17) The proposed support is planned only for the airside investment part of the project. This support is set out in Estonia's Partnership Agreement4 and the Operational Programme for Cohesion Policy Funds 2014-20205. Regulation (EU) No 1300/2013 of the European Parliament and of the Council of 17 December 2013 on the Cohesion Fund6 allows EU support for investments in TEN-T infrastructure, including investment in airport infrastructure related to environmental protection or accompanied by investment necessary to mitigate or reduce its negative environmental impact (Articles 1 and 2).

(18) The proposed airside investments would enhance the connectivity of the region while having a direct impact on the sustainability of airport operations in terms of environmental and safety considerations, as described below.

(19) Investments into runway, taxiways, apron system, airfield lighting, navigation category upgrading and de-icing facilities will raise the peak hour capacity up to 20 flight operations per hour from the current level of 12 flight operations per hour. For instance, upgrading of taxiway system will shorten the backtracking time on the runway, and time of occupying the runway for manoeuvring and take-offs will shorten. Investments into the navigation system (upgrade to CATII), in turn, will allow Tallinn Airport to provide service for all aircraft types in unstable weather conditions,

4 http://ec.europa.eu/contracts_grants/pa/partnership-agreement-estonia-summary_en.pdf 5 http://ec.europa.eu/regional_policy/en/atlas/programmes/2014-2020/estonia/2014ee16m3op001 6 OJ L 347 of 12 December 2013, p. 287. 3

including bigger – E- type - aircraft (e.g. B747)7. Investment in the runway will equally be important for the airport's ability to receive the bigger aircraft involved in long-haul flights.

(20) At the same time, the proposed investments will be important in terms of promotion of sustainable development. This in particular concerns reconstruction of storm water systems; building dedicated snow collection areas with a system to dispose melting snow water; construction of a new de-icing pad and engine run-up area, which are required for reducing air, soil, and noise pollution; extension of runway which will make it possible to conduct flight operations farther from sensitive area of the Lake Ülemiste8 and to reduce the noise level in Tallinn as planes will be able to fly at a higher altitude; replacement of airfield lighting system with a more energy-efficient LED technology.

(21) Similarly, the extension of the airport will respect the need for ensuring high safety of operations. The later will be achieved through rehabilitation of the runway and apron pavement; improving airport infrastructure to meet safety requirements according to ICAO Category II standards9; construction of a manoeuvring and stand-by area for airfield maintenance equipment; building patrol roads and perimeter fence systems to meet the security requirements; acquiring maintenance equipment and machinery for runway and airport territory; building apron stands to increase flight safety and aircraft parking capacity; upgrading taxiway system to increase safety on runway and taxiway operations.

(22) The table below provides break-down of the envisaged investments in airside infrastructure:

Estimated cost Investments Million EUR Construction of a new de-icing pad […] (*)

Construction of dedicated removed snow collection areas and construction of […] special water collection and removal systems Construction of the storm and drainage water and de-icing fluids system network […] at eastern and southern direction of the airport

Construction of an engine run-up area […] Replacement of runway and taxiway lighting system with energy efficient and sustainable navigation system and installation of higher category navigation […] systems (CAT II) Extension of runway for displacement of runway threshold for directing flight operations farther from Tallinn city and Lake Ülemiste. Rehabilitation of […] runway pavement, upgrading taxiway system.

7 Current CAT I navigation system restricts heavily type E aircraft operations in low visibility conditions and existing runway/taxiway system sets constraints to aircraft weight on take-off and landing. In addition there is a shortage of aircraft stands for E-type aircraft. (*) Confidential information. 8 Drinking water reservoir of the Tallinn City with approximately 431,000 inhabitants as of June 1, 2014. 9 Tallinn Airport is currently operating as Category I airport. Installation of higher category navigation systems will allow aircraft to land and take off in bad weather and emergency situations. 4

Construction of additional and reconstruction of existing apron area, manoeuvring and stand-by area for airfield maintenance equipment, building […] patrol roads and perimeter fence systems, maintenance equipment and machinery for runway and airport territory.

Total amount of supported expenditure 70,0

(23) As can be seen from the above, the aid will not go to classical expansionary investments such as terminal expansion investments (which will be financed by the airport itself) or building new runways. At the same time the proposed investments will have a positive effect on peak-hour capacity of the airport and will ensure that higher traffic levels expected in the future will be possible without detrimental effects on environment and safety.

(24) 50% of the cost of the investment in airside infrastructure will be covered from the resources of the Cohesion Fund (2014 - 2020 Cohesion Fund financing10). The Estonian authorities have presented financial calculations which demonstrate that the proposed support will not exceed the estimated funding gap of the project. The latter is analysed in the assessment part of the present decision.

(25) The remaining 50% of the investment in airside infrastructure will be covered by Tallinn Airport's own operating revenues and by commercial loans.

(26) The planned construction works will be carried out in two phases - during 2016-2017 and 2019-2020. The Airport will be operational during the construction works.

(27) All works of the infrastructure project will be tendered out in an open and non- discriminatory procedure.

(28) The airport will self-finance the extension of the passenger terminal as well as other works not eligible for Cohesion Fund financing, at a total cost of at least EUR 18.5 million.

2.3 Legal basis

(29) The legal basis for the financing of the investment project at the Tallinn airport is Regulation No 85 of 03.10.2014 of the Minister of Economic Affairs and Infrastructure on Development of Transport Infrastructure for the period 2014-2020 2020 as well as Regulation (EU) No 1300/2013 of 17 December 2013 on the Cohesion Fund.

10 Council Regulation (EU) No 1300/2013 of 17 December 2013 on the Cohesion Fund (OJ L 347 of 20.12.2013, p.281). 5

3 ASSESSMENT OF THE MEASURE

3.1 Existence of aid

(30) By virtue of Article 107(1) of the TFEU "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."

(31) The criteria laid down in Article 107(1) of the TFEU are cumulative. Therefore, in order to determine whether the notified measures constitute State aid within the meaning of Article 107(1) of the TFEU all of the following conditions need to be fulfilled. The financial support must:

- be granted by the State or through State resources, - favour certain undertakings or the production of certain goods, - distort or threaten to distort competition, and - affect trade between Member States.

Notion of undertaking and economic activity

(32) According to settled case law, the Commission must first establish whether the operator of the Tallinn airport is an undertaking within the meaning of Article 107 (1) of the TFEU. 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 financed11. Any activity consisting in offering goods and services on a given market is an economic activity.12

(33) In its "Leipzig-Halle airport" judgment the Court of Justice confirmed that the operation of an airport for commercial purpose and the construction of airport infrastructure constitute an economic activity13. 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 TFEU, and the Treaty rules on State aid therefore apply14.

(34) The Commission notes that the infrastructures, which are the subject of the present decision, will be operated on a commercial basis by the airport manager of Tallinn airport. Since the airport operator will charge users for the use of these infrastructures, they are commercially exploitable. As regards investments to improve environmental

11 Case C-35/96 Commission v , ECLI:EU:C:1998:303, para 36; C-41/90 Höfner and Elser, ECLI ECLI:EU:C:1991:161, para 21; Case C-244/94 Fédération Française des Sociétés d'Assurances v Ministère de l'Agriculture et de la Pêche, ECLI:EU:C:1995:392, para 14; Case C-55/96 Job Centre, ECLI:EU:C:1997:603, para 21. 12 Case 118/85 Commission v Italy ECLI:EU:C:1987:283, para 7; Case 35/96 Commission v Italy ECLI:EU:C:1998:303, para 36. 13 Case C-288/11 Mitteldeutsche Flughafen and Flughafen Leipzig-Halle v Commission, ECLI:EU:C:2012:821; see also Case C-82/01Aéroports de v Commission, ECLI:EU:C:2002:617, and Case T-196/04 v Commission, ECLI:EU:T:2008:585. 14 Cases C-159/91 and C-160/91, Poucet v AGV and Pistre v Cancave, ECLI:EU:C:1993:63 . 6

protection and safety, the Commission observes that reduction and mitigation of environmental effects of the airport's activity and the improvement of the safety of the airport operation are costs normally borne by the budget from an undertaking and cannot be considered as falling within the public policy remit.15

(35) It follows that the operator of Tallinn Airport is an undertaking for the purposes of Article 107 (1) of the TFEU.

Use of state resources and imputability to the State

(36) The funding for the proposed investments at Tallinn Airport will come from the Cohesion Fund. Funding from this source is considered as state resources based on well-establish decisional practice given that they transit through national budget and the discretion the national authorities have in selecting supported projects16.

Economic advantage

(37) The above-mentioned public funding reduces the investment costs that the airport operator of Tallinn airport would normally have to bear, if they wanted to expand or improve its efficiency, and therefore it confers an economic advantage on the airport operator.

Selectivity

(38) Article 107 (1) TFEU requires that a measure, in order to be defined as State aid, favours "certain undertakings or the production of certain goods". The Commission notes that the advantages in question would be granted to the operator of Tallinn Airport only. Thus it is a selective measure within the meaning of Article 107 (1) of the TFEU.

Distortion of competition and effect on trade

(39) When aid granted by a Member State strengthens the position of an undertaking compared with other undertakings competing in the internal market, the latter must be regarded as affected by that aid. Indeed, the recipient of the aid competes with other undertakings on markets open to competition. Some competition clearly exists with the Airport of at least with respect to residents of Southern Estonia. Even if the share of transfer passengers is not high (2%) there are transfer passengers at the Tallinn airport.

(40) The forecast in terms of traffic of Tallinn Airport shows an increase in traffic over the coming years. In addition, the measures at stake will allow Tallinn Airport to accept bigger airplanes.

15 See e.g. Commission decision of 20 February 2014 in State aid case SA.35847 – 2013/N – – Ostrava Airport, OJ C153 of 08.05.2015. 16 The resources of the CF which are transferred to the relevant national authority or body designated for that purpose by the Member State before being paid to the beneficiary are considered to be at the disposal of the national authorities and therefore amount to state resources, see e.g. point 19 of decision of the Commission of 27.04.2010 in case SA.30358 (2010/N) Riga airport, OJ C147 of 02.06.2010, p.22; point 48, decision of the Commission of 22 February 2012 in case SA.30742 (2010/N) Klaipeda port, OJ C 121, 26.4.2012, p.1; point 38, decision of the Commission of 9.11.2011 in case SA.32632 (2011/N) ETGE, OJ C 82, 21.3.2012, p.2. 7

(41) Thus, the measure affects trade between Member States and distorts or threatens to distort competition.

Conclusion

(42) For the reasons set out above, the Commission concludes that the public funding of the investments in airside infrastructure measures at Tallinn Airport constitutes State aid within the meaning of Article 107 (1) of the TFEU.

3.2 Compatibility of the aid

(43) The Commission has assessed if the aid is compatible with the internal market.

The 2014 Aviation Guidelines17

(44) The proposed measure at Tallinn Airport should be assessed on the basis of Article 107(3)(c) TFEU, which stipulates that: "aid to facilitate the development of certain economic activities or of certain economic areas, where such aid does not adversely affect trading conditions to an extent contrary to the common interest", may be considered to be compatible with the internal market. In this regard, the 2014 Aviation Guidelines provide a framework for assessing whether aid for the financing of airport infrastructures may be declared compatible pursuant to Article 107(3)(c) TFEU. They set out a number of criteria which the Commission takes into account when assessing the measure at stake.

(45) According to point 79 of the 2014 Aviation Guidelines, the Commission has to examine whether following cumulative conditions are met:

(a) contribution to a well-defined objective of common interest: a State aid measure must have an objective of common interest in accordance with Article 107(3) TFEU; (b) need for State intervention: a State aid measure must be targeted towards a situation where aid can bring about a material improvement that the market cannot deliver itself, for example by remedying a market failure or addressing an equity or cohesion concern; (c) appropriateness of the aid measure: the aid measure must be an appropriate policy instrument to address the objective of common interest; (d) incentive effect: the aid must change the behaviour of the undertakings concerned in such a way that they engage in additional activity which they would not carry out without the aid or they would carry out in a restricted or different manner or location; (e) proportionality of the aid (aid limited to the minimum): the aid amount must be limited to the minimum needed to induce the additional investment or activity in the area concerned;

17 Communication from the Commission, Guidelines on State aid to airports and airlines (OJ C 99, 4.4.2014, p. 3). 8

(f) avoidance of undue negative effects on competition and trade between Member States: the negative effects of the aid must be sufficiently limited, so that the overall balance of the measure is positive; (g) transparency of aid: Member States, the Commission, economic operators, and the public, must have easy access to all relevant acts and to pertinent information about the aid awarded thereunder as outlined in section 8.2.

(a) Contribution to a well-defined objective of common interest: a State aid measure must have an objective of common interest in accordance with Article 107(3) TFEU

(46) The financing of the infrastructure project will maintain and improve the accessibility of the region in a sustainable way.

(47) Tallinn Airport plays an important role in Estonian transportation system and in Estonian economy as a whole, as it is the main (essentially only) international airport in Estonia. As Estonia is situated at the remote outskirts of Europe, it is essential to maintain the air connections, especially when taking into account that there is no high- speed rail.

(48) Moreover, the Estonian authorities have demonstrated on the basis of sound passenger forecasts that the infrastructure project meets medium-term demand from airlines and passengers. The Commission can therefore conclude that the construction and operation of the infrastructure meets a clearly defined objective of common interest.

(b) Need for State intervention: a State aid measure must be targeted towards a situation where aid can bring about a material improvement that the market cannot deliver itself, for example by remedying a market failure or addressing an equity or cohesion concern

(49) Tallinn airport is of a size (with roughly 2 million passengers per annum) that is still difficult for an airport to ensure the full financing of investment projects without public funding.18

(50) The results of the financial analysis show that the project's revenues will not be sufficient to cover its costs of capital (for more details see point e below).

(51) Even though the airport is a financially sound undertaking, it would not be able to carry out the aforementioned investments on its own and the company would not be able to obtain private financing to cover the entire cost of the project given the high funding gap (see point e).

(52) The Commission concludes that the aid will bring a material improvement for the investment project that the market itself does not deliver and that there is a need for state intervention.

(c) Appropriateness of the aid measure: the aid measure must be an appropriate policy instrument to address the objective of common interest

18 See point 89 (a) of the 2014 Aviation guidelines. 9

(53) Given the type of the investments in airside infrastructure and the high funding gap of the project the only support instrument which can ensure implementation of the project is direct grant from public resources.

(54) Indeed, subsidised interest rates or credit guarantees would not be sufficient to ensure implementation of the project as the revenue generated by the project will not be sufficient even for covering principal loan amount.

(55) The Commission concludes that the aid measure at stake is an appropriate policy instrument.

(d) Incentive effect: the aid must change the behaviour of the undertakings concerned in such a way that they engage in additional activity which they would not carry out without the aid or they would carry out in a restricted or different manner or location

(56) The Commission must establish, whether the State aid granted to Tallinn airport has changed the behaviour of the beneficiary in such a way that it engages in activity that contributes to the achievement of a public-interest objective that (i) it would not carry out without the aid, or (ii) it would carry out in a restricted or different manner.

(57) The operator of the Tallinn airport could not undertake the investment project without aid.

(58) According to the counterfactual scenario which would allow the airport to maximise its profitability, only investments indispensable for continued operation of the airport would be made amounting to EUR […] million. The passenger flows would continue to grow until the current maximum capacity of the airport is reached, i.e. 3 million passengers per year. Indeed, the Commission recognises that given the limited revenue generation potential of most of the supported investments, a profit-driven airport operator would not finance EUR 70 million investment in airside infrastructure without aid.

(59) The application to the granting authority was submitted on 18 September 2015 and an open tender for the construction works will be launched in fall 2015. The estimated start of construction works is first half of 2016, after State aid has been granted.

(60) For all these reasons the Commission concludes that the aid has an incentive effect.

(e) Proportionality of the aid amount (aid limited to the minimum): the aid amount must be limited to the minimum needed to induce the additional investment or activity in the area concerned

(61) First, eligible costs are limited to the costs relating to the investments in airport infrastructure and airport equipment. Investment costs relating to non-aeronautical activities (including car parks, hotels, restaurants and offices) are ineligible as required by point 97 of the Aviation guidelines. As environment and safety-related investments are taking place in the context of considerable increase of the existing capacity of the airport, they are eligible in the specific framework of the Aviation guidelines.

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(62) Second, state aid to airports, as any other State aid measure, should be proportional in relation to the aimed legitimate objective in order to be cleared as compatible aid19. The aid is considered to be proportionate, only if the same result could not be reached with less aid. This means that the amount and intensity of the aid must be limited to the minimum needed for the aided activity to take place.

(63) The eligible costs are the costs relating to the investments in airport infrastructure and airport equipment. The Commission notes that the notified aid will finance exclusively investment costs that are eligible under the 2014 Guidelines.

(64) According to point 101 of the 2014 Aviation guidelines the maximum permissible aid intensity for airports with less than 3 million passengers per annum is 50%. Since the notified aid intensity for the airside investments is 50%, the notified measure is in line with the maximum permissible aid intensity.

(65) In addition, the Estonian authorities proved that the proposed investment aid will not exceed the funding gap of the investment project in question.

(66) The calculation of the funding gap submitted by the Estonian authorities identifies the various revenues, investment costs and operating costs expected to arise because of the aided project, as compared with a counterfactual scenario described above whereby the aided project would not be undertaken. The Commission considers that the degree of detail provided by the Estonian authorities is satisfactory given the scale, types of supported investment and the competition situation in the region.

(67) The calculation covers the period of 25 years which appears to be a reasonable assumption as regards economic life-time of supported investments.

(68) The funding gap of the project corresponds to the difference between costs and revenues expected to arise because of the project, calculated using an appropriate discount rate (i.e. weighted average cost of capital). The Commission notes that the discount rate was rightly adjusted downwards given that the projections were made in constant prices. The calculation thus obtained shows that the proposed aid amount would be lower than the funding gap of the aided project amounting to EUR […] million.

(69) This calculation of the funding gap takes into consideration all revenues and costs related to the project, including costs and revenues linked to net additional non- aeronautical revenue related to the planned expansion of catering and shopping facilities. The latter will take place in the context of expansion of the terminal and will be financed by the airport itself.

(70) The fact that the aid amount does not exceed the general funding gap of the total investments in airport infrastructure shows that it is limited to the minimum necessary to make the overall project economically viable.

19 It is constant case law that the Commission can declare an aid compatible only if it is necessary for achieving a legitimate objective (cf. case 730/79, Philipp Morris, ECLI:EU:C:1980:209, paragraph 17; case C-390/06, Nuova Agricast, ECLI:EU:C:2008:224, paragraph 68; case T-162/06, Kronoply, ECLI:EU:T:2009:2, paragraph 65). 11

(71) Consequently, the aid which will enable the beneficiary to realise the investment is proportional.

(f) Avoidance of undue negative effects on competition and trade between Member States: the negative effects of the aid must be sufficiently limited, so that the overall balance of the measure is positive;

(72) The investment project will not lead to the duplication of unprofitable airports or create additional unused capacity.

(73) According to 2014 Aviation guidelines ‘catchment area of an airport’ means a geographic market boundary that is normally set at around 100 kilometres or around 60 minutes travelling time by car, bus, train or high-speed train.

(74) When considering the radius of 100 km around the airport, then Tallinn Airport's natural catchment area is overlapping with the Vantaa airport. The air- distance between Helsinki and Tallinn is around 84 km, however the "separates" both countries from each other and the actual travel time by ferry-line is 4 hours. Therefore, the competition is limited, especially when considering the time needed to reach the airport.

(75) The other nearest international airports are Riga and St. Petersburg airports. In both of these airports the offered destinations and passenger numbers exceed considerably Tallinn Airport.

(76) The distance between Tallinn and St. Petersburg is around 360 km (around 5h by car). The EU border "separates" both countries from each other due to extensive customs procedures. Therefore, Tallinn Airport's and 's (St. Petersburg's main airport) catchment areas in practice do not significantly reach beyond their respective borders.

(77) At the moment the main competitor of Tallinn Airport is Riga Airport. Although it is 350 km from Tallinn (5 hours by car), it is an attractive alternative to passengers from South Estonia, because for them the distance to Riga is similar to Tallinn. At the same time, it is important to note that the number of people living at the Estonian-Latvian border area is rather small and for most inhabitants of Estonia, Tallinn airport is closer than Riga. The same goes for Latvian people and Riga airport. Consequently, investments in Tallinn Airport do not have a significant impact on the competitiveness of Riga Airport.

(78) When compared to the competitors, Tallinn Airport is relatively small (approximately 2 million passengers annually), with a catchment area of only 1,3 million persons (the inhabitants of Estonia). Hence the support for investment in the airport's airside infrastructure cannot pose a significant competitive threat to other airports. At the same time Tallinn Airport is an important gateway to the country for international tourists and business travelers. Based on Tallinn Airport annual passenger survey (2014 May) 53% of passengers are incoming travellers, of which more than half (52%) travel on business purposes.

(79) On the basis of the above, the Commission can therefore conclude that the development of trade is not affected to an extent contrary to the common interest. 12

(80) The Estonian authorities confirm that the airport will be continue to be open to all potential users, and is not dedicated to one specific user.

(81) The Commission considers that the public support in financing the enhancement of Tallinn airport in accordance with the conditions described previously, is not prejudicial to the common interest and that the criteria set out in point 79 of the 2014 Aviation Guidelines20 have been satisfied in the present case.

(g) Transparency of aid: Member States, the Commission, economic operators, and the public, must have easy access to all relevant acts and to pertinent information about the aid awarded.

(82) The Estonian authorities provided a commitment to respect the transparency obligations with regard to publication of details of aid granted, as outlined in section 8.2 of the 2014 Aviation guidelines. Namely, transparency obligations with regard to publication of details of aid granted will be fulfilled through the publication of relevant information on the website of the Ministry of Finance. The State aid register is currently being upgraded and additional data fields will be added during 2016. Until then the information will be published under the State aid section of the website of the Ministry of Finance.

Conclusion

(83) In view of the above assessment the Commission concludes that the measure is compatible with the internal market on the basis of Article 107(3)(c) of the TFEU.

4 CONCLUSION

The Commission has accordingly decided not to raise objections to the aid to finance the modernisation of infrastructure at Tallinn airport as notified by the Estonian authorities on the grounds that it is compatible with the internal market pursuant to Article 107(3)(c) of the Treaty on the Functioning of the European Union.

20 Notably aid meets common principles applicable to the assessment of compatibility of aid measures carried out by the Commission. 13

If this letter contains confidential information which should not be disclosed to third parties, please inform the Commission within fifteen working days of the date of receipt. If the Commission does not receive a reasoned request by that deadline, you will be deemed to agree to the disclosure to third parties and to the publication of the full text of the letter in the authentic language on the Internet site: http://ec.europa.eu/competition/elojade/isef/index.cfm

Your request should be sent by registered letter or fax to:

European Commission Directorate-General for Competition B-1049 Brussels Belgium Fax n°: +32 (0) 2 2961242

Yours faithfully, For the Commission

Margrethe Vestager

Member of the Commission

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