His Excellency Sir Didier Reynders Ministry of Foreign and European Affairs Rue Des Petits Carmes, 15 B-1000 Brussels

EUROPEAN COMMISSION

Brussels, 12.11.2019 C(2019) 8028 final

In the published version of this decision, PUBLIC VERSION some information has been omitted, pursuant to articles 30 and 31 of Council This document is made available for Regulation (EU) 2015/1589 of 13 July 2015 information purposes only. laying down detailed rules for the

application of Article 108 of the Treaty on the Functioning of the European Union, concerning non-disclosure of information covered by professional secrecy. The omissions are shown thus […]

Subject: State aid SA.45139 (2017/NN) and SA.45140 (2017/NN) – Belgium – Antwerp and Ostend-Bruges Airports

Sir,

1. PROCEDURE

(1) On 13 April 2016, the Belgian authorities pre-notified to the Commission investment aid and operating aid for the airports of Antwerp and Ostend-Bruges (“Ostend airport”). The pre-notifications were registered under the number SA.45139 for Ostend airport and SA.45140 for Antwerp airport. (2) On 23 March 2017, the cases were transferred to the registry of non-notified aid, as the operating and investment aid to both airports had been granted before any Commission authorisation. (3) Between March 2017 and September 2019, the Belgian authorities provided additional information.

His excellency Sir Didier Reynders Ministry of Foreign and European Affairs Rue des Petits Carmes, 15 B-1000 Brussels

Commission européenne/Europese Commissie, 1049 Bruxelles/Brussel, BELGIQUE/BELGIË - Tel. +32 22991111

(4) By letter of 26 October 2018, the Belgian authorities informed the Commission that, following amendment of the General Block Exemption Regulation (“GBER”)1 in June 2017, the planned investment aid to Ostend airport fell within the scope of the GBER. Since this has reduced the scope of the notification, this decision relates only to the investment aid to Antwerp airport and the operating aid to Antwerp and Ostend airports.

2. DETAILED DESCRIPTION OF THE MEASURES

2.1. The LOM-LEM structure (5) Following the institutional reform law of 8 August 1980, the Belgian regions were given powers to equip and operate public airports and aerodromes situated within their territory2. Since 1988, the ownership and management of the three regional airports located on its territory (Antwerp, Ostend and Kortijk-Wevelgem) is in the hands of the Flemish Region (Department of Mobility and Public Works of the Government of Flanders, as a Department with Separate Management.

(6) To end the declining trend in passenger numbers and to make the Flemish airports more market-oriented, the Decree of 10 July 2008 on the management and operation of the regional airports of Ostend-Bruges, Kortrijk-Wevelgem and Antwerp introduced a new structure for the airport management, the so-called LOM-LEM structure:

- The “LOM” (LuchthavenOntwikkelingsMaatschappij or Airport Development Company) is a public entity and the lessee of the airport infrastructure. The LOM is responsible for the provision and (extraordinary) maintenance of the basic infrastructure (i.e. infrastructure necessary to accommodate aircraft movements, to keep the ICAO certificates and environmental and other permits) put at the disposal of the LEM;

- The “LEM” (LuchthavenExploitatieMaatschappij or Airport Operating Company) is the airport operator, a private partner responsible for the commercial exploitation of the airport. The LEM is responsible for the basic maintenance of the airport and for all investments necessary to economically and commercially develop the airport.

(7) The Flemish Region considered that a private operator would be better placed to further develop the regional airports in Flanders, to better develop commercial opportunities and to estimate and manage operating risks. Therefore, since October 2014, Antwerp and Ostend airports have been operated by a French private company, EGIS Projects S.A. (“Egis”), through its subsidiaries LEM Antwerp and LEM Ostend-Bruges (hereafter, “LEM Antwerp” and “LEM Ostend”, and together “the LEMs”). Egis was awarded a 25 year concession

1 Commission Regulation (EU) 2017/1084 of 14 June 2017 amending Regulation (EU) No 651/2014 as regards aid for port and airport infrastructure, notification thresholds for aid for culture and heritage conservation and for aid for sport and multifunctional recreational infrastructures, and regional operating aid schemes for outermost regions and amending Regulation (EU) No 702/2014 as regards the calculation of eligible costs, OJ L 156, 20.6.2017, p. 1-18.

2 Except Brussels National Airport ("Brussels airport") which falls under the responsibility of the Belgian Federal State.

following a competitive public tender procedure which took place between December 2009 and February 2013.

(8) The infrastructure of Antwerp and Ostend airports is owned by the Flemish Region and managed through the independent public agencies , LOM Antwerp and LOM Ostend-Bruges (hereafter, “LOM Antwerp” and “LOM Ostend”, and together “the LOMs”). The LOMs were established on 6 June 2014 and on 27 October 2014 the LOM-LEM structure formally entered into force at both airports.

(9) While the LOM-LEM structure was only put in place by October 2014, on 19 July 2013, the Flemish Region, on behalf of the LOM Antwerp and the LOM Ostend, already concluded with the LEM Antwerp and LEM Ostend respectively the concession agreements (the “Concession Agreements”). Under the terms of the Concession Agreements, the LOMs put the infrastructure of the two airports at the disposal of the LEMs in a state that is suitable for use by airlines. The LOMs ensure that the ICAO certificate, environmental and other permits necessary for the safe operation of the airports are maintained. The LOMs are also authorised to collect concession fees from the LEMs.

(10) The Concession Agreements provide that the investments in basic infrastructure are to be carried out by the LOMs. Upon payment of a yearly concession fee, the LEMs are entitled to operate and manage the airports and are responsible for all other investments and maintenance of the airport. (11) The concession fees paid by the LEMs include two components, one fixed and one variable. The fixed concession fee is to be increased if the LOMs make additional investments which are not related to the basic infrastructure. The variable concession fee is calculated based on the airport’s turnover. (12) In addition, on 19 July 2013, two subsidy agreements (“the Subsidy Agreements”) were signed between the Flemish Region and the LEMs. These Subsidy Agreements only took effect at the start of the LOM-LEM structure in October 2014 and were concluded for a period of 5 years (i.e. October 2014- October 2019). The Subsidy Agreements grant public funding to the LEMs for: (i) fire protection and security functions at the airports (activities of non- economic nature), and (ii) certain services associated with the airports’ activities that are economic in nature.

2.2. Overview of the airports

2.2.1. Ostend airport

(13) Ostend airport is a regional airport owned by the Flemish Region, which is situated 5 km from the Belgian North Sea coast, an important destination for tourism in West Flanders. The airport focuses on freight and passenger traffic. While in the past Jetairfly and Thomas Cook were active at the airport, today TUI fly (previously Jetairfly) is the main tour operator operating charter flights to several holiday destinations on the Mediteranean coast and the Canary Islands. Regarding commercial passenger flights, the airport has a base capacity of […]. The total passenger numbers over the period from 2013 to 2018 are provided in Table 1.

Table 1: Passenger traffic development at Ostend airport 2013-2018 2013 2014 2015 2016 2017 2018

Total 247 669 253 044 276 027 434 9703 365 345 419 865 passengers

Source: https://www.luchthaven-oostendebrugge.com/statistieken/

(14) Ostend airport is located in a densely populated area and has a catchment area of 3 million people within 45 minutes’ drive4.

(15) The business plan submitted by Egis foresees an average annual growth rate of […] % at Ostend airport and a growth to approximately […] (departing) passengers or […] (total) passengers by 2039 (end of the concession agreement).

(16) Based on the report “Economic importance of air transport and airport activities in Belgium” published by the National Bank of Belgium, direct and indirect value added at Ostend airport in 2015 was EUR 37.1 million. The airport employed a total of 633 direct and indirect full-time equivalents in 20155.

(17) Ostend airport is located 69 km or 50 minutes by car from the small regional airport of Kortrijk-Wevelgem. The airport serves approximately 100 000 passengers per year. This airport does not operate scheduled flights, but is mainly used for private flights and, occasionally, medical flights and pilot training.

2.2.2. Antwerp airport

(18) Antwerp airport is a regional airport owned by the Flemish Region and situated near the city of Antwerp, the second most populous city of Belgium. Antwerp airport has a base capacity of approximately […]6. The airport is mainly used by passengers from the Province of Antwerp. Based on a market study conducted by Antwerp airport in 2016, 75.8 % of the outbound passengers at Antwerp airport were from the Province of Antwerp and 10 % from the province of East-Flanders.

(19) The airport has a runway of 1510 metres7 which makes it unsuitable for medium- sized jet aircraft, including, for example, those operated by Ryanair8. The

3 In March and April 2016, the airport accommodated 100 000 additional passengers due to the closure and temporary reduced capacity at Brussels airport in the aftermath of terrorist attacks. After Brussels airport resumed its activities, traffic at Ostend airport dropped to its normal level. 4 http://www.egis-airports-network.com/project/resources/apps/ost-airport-greatest-assets.pdf, accessed on 6 August 2019.

5 https://www.nbb.be/en/articles/economic-importance-air-transport-and-airport-activities-belgium- report-2015, accessed on 5 July 2019. 6 This base capacity is calculated based on the environmental permit. According to the Belgian authorities, the maximum number of passengers permitted at the airport is 384 739, due to the number of residents that would be affected by noise pollution. 7 In 2006, the Flemish Region agreed with the neighbouring municipality of Borsbeek not to lengthen the runway. 8 E.g. Boeing 737-800 aircraft, which has 189 seats in a two-class configuration.

geographic location of the airport precludes it from expanding, due to its environmental permit that contains strict noise restrictions.

(20) Currently, TUI fly and Flybe operate scheduled flights for leisure and business from Antwerp airport. According to the Belgian authorities, 26.6 % of commercial passengers in 2017 were business passengers. The total passenger numbers over the period from 2013 to 2018 are provided in Table 2.

Table 2: Passenger traffic development at Antwerp airport 2013-2018 2013 2014 2015 2016 2017 2018 Total 137 015 121 357 221 155 276 3119 273 130 298 403 passengers Source: https://www.antwerp-airport.com/statistics/

(21) Antwerp airport serves as a training centre for commercial pilots, aviation technicians and air traffic controllers. In addition, the airport serves as a general aviation and NATO airport, potentially to be called in to be used in times of need. (22) The business plan submitted by Egis foresees an average annual growth rate of […] % at Antwerp airport and a growth to about […] departing or […] total passengers by 2039 (end of the concession agreement).

(23) According to the report published by the National Bank of Belgium, direct and indirect value added at Antwerp airport was EUR 85.2 million in 2015. The airport employed a total of 1 090 direct and indirect full-time equivalents in 201510.

(24) The closest airports to Antwerp airport are Brussels airport located 42 km or 40 minutes by car from Antwerp airport and Eindhoven airport located 88 km or 58 minutes by car from Antwerp airport. There are no other airports within a radius of 100 km or 60 minutes of travel time by car.

Brussels airport

(25) Brussels airport is owned by a consortium of private investors (75 % of shares) and the Belgian State (25 % of shares). The airport serves as a hub for various airlines. In 2018, the airport served 25.7 million passengers and offered 248 destinations worldwide11. The number of passengers at Brussels airport is steadily growing.

(26) Based on publicly available information, the maximum capacity of the airport is estimated at 28 million passengers per year12.

9 In March and April 2016, the airport served 20 000 additional passengers due to the closure and temporary reduced capacity at Brussels airport in the aftermath of terrorist attacks. 10 https://www.nbb.be/en/articles/economic-importance-air-transport-and-airport-activities-belgium- report-2015, accessed on 5 July 2019. 11 https://www.brusselsairport.be/pressroom/at-60-brussels-airport-turned-in-an-excellent- performance-in-2018-with-257-million-passengers-and-732000-tonnes-of-cargo/, accessed on 10 July 2019. In 2018, 18.4 % of departing passengers at Brussels airport were transfer passengers. 12 https://www.sita.aero/globalassets/microsites/atis-2017/sponsor-brochures/brussels-airport- brochure.pdf, accessed on 10 July 2019.

(27) The financial statements show that Brussels airport has been profitable over the past years. In 2016, 2017 and 2018 Brussels airport reached a positive EBITDA of respectively EUR 287.4 million, EUR 407 million and EUR 324.9 million13.

(28) As regards routes served, Brussels and Antwerp airports had 6 overlapping routes in 2016: Alicante, Barcelona, Malaga, Mallorca, London14 and Nador. The information submitted by the Belgian authorities showed that the number of passengers on the overlapping routes had grown at both airports.

Eindhoven airport

(29) Eindhoven airport is owned by Schiphol Nederland BV, the North Brabant Provincial Authority and the Eindhoven Municipal Authority. The airport is located 7.6 km west of Eindhoven in the Netherlands. (30) Passenger traffic at Eindhoven airport has grown significantly in recent years, from 0.3 million passengers in 2003 to 6.2 million passengers in 2018. The source of this growth has principally been from three of Europe’s largest low-cost carriers, notably Ryanair, transavia.com and Wizz Air. Until 2018, the airport was a base for Ryanair.

(31) In terms of the number of passengers served, it is the second largest airport in the Netherlands and currently serves 75 destinations. The ceiling for the number of permitted aircraft movements is currently 43 000 movements per year (the airport had 38 642 movements in 2018)15.

(32) The annual reports show that Eindhoven airport has been profitable over the past years. In 2016, 2017 and 2018 Eindhoven airport reached a positive EBITDA of respectively EUR 19.6 million, EUR 22.1 million and EUR 25.8 million16.

(33) As regards routes served, Eindhoven and Antwerp airports had 8 overlapping routes in 2016: Alicante, Barcelona, Ibiza, Malaga, Mallorca, Murcia, London17 and Nador.

(34) TUI fly operates scheduled flights from all these three airports (Brussels, Antwerp and Eindhoven).

13 Consolidated financial statements of Brussels Airport Company for the financial years 2016, 2017 and 2018, registered at the National Bank of Belgium. Available at: https://cri.nbb.be/bc9/web/catalog;jsessionid=4FEDFF2B9C159147C249BCA2966B242F?executio n=e1s2#. 14 Antwerp airport served London City and Brussels airport served London Heathrow. Until August 2018, the Antwerp – London City route was served by VLM. Between August 2018 and August 2019, Flybe operated flights to London Stansted from Antwerp airport. Air Antwerp restored the Antwerp – London City route as of September 2019. London City airport serves mainly business traffic given its proximity to the financial district in London. See https://www.businesstraveller.com/business-travel/2019/08/09/london-city-to-regain-antwerp-link- next-month/ 15 https://www.annualreportschiphol.com/our-results/our-regional-airports, accessed on 10 July 2019. 16 Annual Reports of Eindhoven airport for several years, available at: https://www.eindhovenairport.nl/nl/jaarverslagen. 17 Antwerp airport served London City and Eindhoven airport London Stansted.

2.3. Investment aid

(35) The first measure consists of investment aid to the LOM Antwerp.

(36) The total investment project at Antwerp airport amounts to EUR […] (discounted value of EUR […], discounted to 2015 values at a discount rate of 6.5 %)18.

(37) The total investment project will be carried out by both the LOM Antwerp and the LEM Antwerp. Investments carried out by the LOM Antwerp, which are all eligible, amount to EUR [10 000 000 – 20 000 000] (discounted value of EUR [10 000 000 – 20 000 000] to 2015). The investments carried out by the LEM Antwerp amount to EUR […] in eligible infrastructure (discounted value of EUR […] to 2015) and EUR […] in non-eligible infrastructure (discounted value of EUR […] to 2015). (38) The notified investments in basic infrastructure to be carried out by the LOM Antwerp and the corresponding costs are detailed in Table 3 below. Table 3: Notified investments by the LOM Antwerp Measure Cost (in euro) Year Removal of southern access gate […] […] Removal equipment sign B and pulling high voltage sign A […] […] to sign B CCTV-system in the General Aviation Terminal […] […] Renewal and moving of the high-voltage cabine […] […] Remedying local sagging in the runway […] […] Construction of turn-pad side Borsbeek […] […] Removal of taxiway B, extension of taxiway K and removal […] […] glidepath antenna Removal of Perimeter-road North […] […] Overlay, expansion apron and sewerage […] […] Overlay runway (incl. renewing of cabling and lighting) […] […] Cabling and monitoring approach lights runway 11 […] […] Obstacle survey […] […] Friction tester […] […] Safety vehicles […] […] Overlay taxiway A and F […] […] [10 000 000 – Total 20 000 000]

18 Throughout the decision the same discount rate of 6.5 % applies for all discounted values.

(39) The Belgian authorities submitted that some of the investment works have already started, as they were necessary for safety reasons to keep the airport operational. As further explained below, the aid was granted before the start of the project. (40) The Belgian authorities provided calculations of the capital cost funding gap of the investments to be carried out by the LOM Antwerp, calculated as the difference between the discounted value of the expected net operating profits of the investment (EUR [1 000 000 – 5 000 000] discounted value to 2015) and the discounted value of the investments carried out over the period from 2016 to 2020 (EUR [10 000 000 – 20 000 000] discounted value to 2015). The analysis shows that over a reference period of 25 years (2015-2039) the investment has a negative net present value (NPV) of EUR 8 956 436 (discounted value to 2015). The negative NPV indicates that the investment is not financially sustainable without public support.

(41) For the calculation of the capital cost funding gap based on the discounted values, the applicable discount rate used corresponds to the weighted average cost of capital (“WACC”) and amounts to 6.5 %19. (42) The investments carried out by the LOM Antwerp will be financed through a direct grant by the Flemish Region, which has been capped to the maximum amount of EUR 8 956 436 (discounted value to 2015), as determined by the capital cost funding gap. The remaining part of the investment cost to be borne by the LOM Antwerp, amounting to EUR [1 000 000 – 5 000 000] (discounted value to 2015), will be financed through a private loan. This private loan will be contracted by the LOM Antwerp to a bank at market terms, and will be repaid thanks to the concession fees collected by the LOM Antwerp.

(43) In this way, the aid amount is limited to 60 % of the total eligible investment cost of EUR […] (in 2015 values). (44) According to the Belgian authorities, the planned investment project at Antwerp airport is not primarily aimed at creating new capacity but rather at securing and maintaining the existing capacity and allowing the airport to serve passengers with adequate standards and comfort. Moreover, the environmental permit precludes the airport from operating at its maximum theoretical capacity, as it restricts the airport from serving more than […]. (45) According to the Belgian authorities, the notified investment project aims to guarantee a greater flow of business travellers and supports economic development in the Province of Antwerp, while having a direct impact on the sustainability of airport operations in terms of environmental and safety requirements. The investment to be undertaken by the LOM Antwerp will ensure that the airport meets mandatory security and safety requirements required to maintain its ICAO certification and environmental permit. The Belgian authorities claim that without the necessary investments in basic infrastructure the airport would have to close.

19 To justify the WACC of 6.5 %, the the Belgian authorities refered to the Commission's decision- making practice, see e.g. the Commission Decision of 12 December 2014 in State aid case SA.37582 (2014/NN) – France – Projet de développement de l'aéroport de La Réunion – Roland Garros, recital 38.

(46) The Belgian authorities brought to the Commission's attention that the public financing will also be allocated to non-economic investments at Antwerp and Ostend airports. The LOM Ostend intends to invest in a new fire station. The LEMs will also invest in new equipment related to security and firefighting activities, e.g. a crash tenders, luggage and cargo scanners. The Belgian authorities consider that those investments are part of security and fire protection falling within the public remit and therefore do not constitute State aid. 2.4. Operating aid

(47) The second measure consists of past operating aid to the operators of Antwerp and Ostend airports, the LEMs, granted in 2013 and paid out during the period 2014-2019 pursuant to the Subsidy Agreements.

(48) During this period, the LEMs received regular payments from the Flemish Region to cover their operating losses. These payments are summarised in Table 4 and Table 5.

Table 4: Operating aid to the LEM Antwerp (in EUR)

2014 2015 2016 2017 2018 2019 (*)

Subsidies for 62 086 359 718 364 608 336 669 398 016 232 176 economic activities

(*) The amount of operating aid for 2019 is an estimate and covers the period January-July 2019

Table 5: Operating aid to the LEM Ostend (in EUR)

2014 2015 2016 2017 2018 2019 (*)

Subsidies for 86 602 449 378 532 652 495 336 488 959 285 226 economic activities

(*) The amount of operating aid for 2019 is an estimate and covers the period January-July 2019

(49) The Belgian authorities also brought to the Commission's attention public funding for personnel performing non-economic activities at both Antwerp and Ostend airports. The Belgian authorities consider that public funding for the operating expenses linked to the airport security, bird control and firefighting services to fall within the public policy remit and therefore do not constitute state aid.

(50) According to the Subsidy Agreements, public funding may only be granted for costs actually incurred that do not exceed the maximum amounts defined in the annexes to the Agreements. The LEMs must on each occasion submit accounts to the Flemish Region and separate costs for non-economic activities from costs related to economic activities.

2.5. Legal basis (51) The legal basis for the financing of the investment project is the Decree of 10 July 2008 on the management and operation of the regional airports of Ostend-Bruges, Kortrijk-Wevelgem and Antwerp, as well as the Concession Agreement of 19 July 2013 concluded for a period of 25 years between the Flemish Region, acting as legal representative of the LOM Antwerp, and the LEM Antwerp.

(52) The legal basis for the operating aid are the two Subsidy Agreements of 19 July 2013 concluded for a period of 5 years between the Flemish Region and the LEM Antwerp, and between the Flemish Region and the LEM Ostend.

3. ASSESSMENT OF THE MEASURES

3.1. Existence of aid (53) By virtue of Article 107(1) of the Treaty on the Functioning of the European Union20 ("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." (54) The criteria laid down in Article 107(1) TFEU are cumulative. Therefore, for a measure to constitute State aid within the meaning of Article 107(1) 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. (55) In the following sections, the Commission will assess whether the notified measures meet these cumulative criteria and thus constitute aid within the meaning of Article 107(1) TFEU. 3.1.1. Notion of undertaking and economic activity (56) For both the assessment of the investment aid to LOM Antwerp and the operating aid to LEM Antwerp and LEM Ostend, it is necessary to establish that the beneficiaries of the measures, the LOMs and LEMs (in particular, the LOM Antwerp in the case of investment aid and the LEM Antwerp and LEM Ostend in the case of operating aid), are undertakings within the meaning of Article 107(1) 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 financed21. Any activity consisting in offering goods and services on a given market is an economic activity22. This was confirmed by the Court of Justice in its "Leipzig- Halle airport" judgment, where it found that the operation of an airport for

20 OJ C 326, 26.10.2012, p. 47. 21 Judgment of the Court of Justice of 18 June 1998, Commission v Italy, Case C-35/96, EU:C:1998:303, paragraph 36; judgment of the Court of Justice of 23 April 1991, Höfner and Elser, Case C-41/90, EU:C:1991:161, paragraph 21; judgment of the Court of Justice of 16 November 1995, Fédération Française des Sociétés d'Assurances v Ministère de l'Agriculture et de la Pêche, Case C-244/94, EU:C:1995:392, paragraph 14; judgment of the Court of Justice of 11 December 1997, Job Centre, Case C-55/96, EU:C:1997:603, paragraph 21. 22 Judgment of the Court of Justice of 16 June 1987, Commission v Italy, Case C-118/85, EU:C:1987:283, paragraph 7; judgment of the Court of Justice of 18 June 1998, Commission v Italy, Case C-35/96, EU:C:1998:303, paragraph 36.

commercial purposes and the construction of airport infrastructure constitute economic activities23. (57) The Commission notes that the LEMs charge users for the use of the airport infrastructure and operate the airports on a commercial basis. (58) At the same time, the LOMs place the infrastructure at the LEMs disposal, including new infrastructure implemented in accordance with the investment programme, and provide certain services, i.e. extraordinary maintenance, in return for a concession fee. (59) It follows that the LEMs and the LOMs are undertakings for the purposes of Article 107(1) TFEU. 3.1.2. Economic vs. non-economic infrastructures and activities (60) According to well-established case law, activities that normally fall under the responsibility of the State in the exercise of its powers as a public authority are not of an economic nature and do not fall within the scope of the State aid rules24. This may concern expenses, in particular, for performing tasks of ensuring security, safety, customs, police services and air traffic control at airports. The financing of such activities has to be limited to the costs to which they give rise and may not be used to fund other activities.

(61) Thus, even if an entity that is engaged in an economic activity and is therefore regarded as an undertaking for the purposes of State aid law receives public funding, it is possible that some of its activities, due to their nature, fall under responsibility of the State in the exercise of its powers as a public authority. It follows that any funding received by the entity in respect of such activities is not considered to be linked to economic activities and, as such, does not constitute State aid.

Public funding for non-economic infrastructure and equipment

(62) In this regard, the Belgian authorities argue that the investment in the airports’ equipment and infrastructure related to fire protection and security, i.e. a fire station, crash tenders, luggage and cargo scanners, is not of an economic nature but falls under the State's powers as a public authority.

(63) The Commission considers that the investments relating to the infrastructure and equipment necessary to perform fire protection, safety and security services are considered in general to be of a non-economic nature25. However, the Commission must still check whether the funding of non-economic activities does not lead to undue discrimination between airports.

23 Judgment of the Court of Justice of 19 December 2012, Mitteldeutsche Flughafen and Flughafen Leipzig-Halle v Commission, Case C-288/11, EU:C:2012:821; see also judgment of the Court of Justice of 24 October 2002, Aéroports de Paris v Commission, Case C-82/01, EU:C:2002:617 and judgment of the General Court of 17 December 2008, Ryanair v Commission, Case T-196/04, EU:T:2008:585. 24 Judgment of the Court of Justice of 19 January 1994, SAT Fluggesellschaft v Eurocontrol, Case C-364/92, EU:C:1994:7. Communication from the Commission – Guidelines on State aid to airports and airlines, OJ C 99, 4.4.2014, points 35-37.

(64) As stated in recital (5), the Belgian regions have been given the necessary powers to equip and operate public airports situated within their territory, except for Brussels airport. Given this legal framework, the Commission takes the view that the relevant level for assessing the existence of discrimination arising from the financing of the investments related to non-economic activities is the region, and not the Federal State26. As the Flemish Region finances these investments without discriminating between the three Flemish airports (Antwerp, Ostend and Kortijk- Wevelgem), the Commission concludes that there is no undue discrimination between these airports.

(65) The Commission must then check that the funding of the investments relating to infrastructure and equipment necessary to perform non-economic activities is strictly limited to compensating the costs to which such non-economic actvities give rise and may not be used for economic activities27.

(66) In this regard, the Commission notes that the remuneration of the investment costs related to equipment incurred by the LEMs is limited to the amount necessary to cover these costs and it is paid after submission to the Flemish Region of all relevant invoices and proof of payments. In addition, public funding awarded to the LOM Ostend for the construction of a new fire station is limited to the costs of the investment.

(67) The Commission therefore concludes that the funding of the investments relating to infrastructure and equipment necessary to perform non-economic activities is strictly limited to compensating the costs to which such activities give rise and thus falls outside the scope of State aid control. Consequently, these investments will not be included in the subsequent analysis in this decision.

Public funding for non-economic activities

(68) Concerning operating costs, based on similar findings in the Commission case practice the Commission takes the view that, in the present case, activities associated with fire protection, security28 and bird control29 do not constitute economic activities. It must however be noted that public funding non-economic activities necessarily linked to the carrying out of an economic activity must not

26 Decision of the Commission of 1 October 2014 in State aid case SA.14093 (C76/2002), Measures implemented by Belgium in favour of Brussels South Charleroi Airport and Ryanair, OJ L 325 30.11.2016, p. 63, recitals 372 and 373. 27 Judgment of the Court of Justice of 18 March 1997 Diego Calì & Figli Srl v Servizi ecologici porto di Genova SpA (SEPG), C-343/95, EU:C:1997:160; decision of the Commission of 19 March 2003 in State aid case N309/2002 – France – Compensation of cost following the September 11 2001 attacks and decision of the Commission Decision of 16 October 2002 in State aid case N438/2002 – Belgium – Aid in support of the public authority functions in the Belgian port sector. 28 Decision of the Commission of 1 October 2014 in State aid case SA.14093 (C76/2002), Measures implemented by Belgium in favour of Brussels South Charleroi Airport and Ryanair, OJ L 325 30.11.2016, p. 63, recital 389. 29 See decision of the Commission of 23 July 2014 in State aid case SA. 22614 (C53/2007) – France – Aéroport Pau Pyrénées, OJ L 201, 30.07.2015, p. 109, recitals 101 and 495 and decision of the Commission of 23 July 2014 in State aid case SA.33961 (2012/C) (ex 2012/NN) – France – Aéroport de Nîmes, OJ L 113, 27.04 2016, p. 32, recital 567.

lead to undue discrimination between airport operators. The Belgian authorities confirmed that these costs are reimbursed in a non-discriminatory manner for all three airports in the Flemish Region. (69) Moreover, under the Subsidy Agreements (see recital (50)), the LEMs have to demonstrate the actual costs they have incurred providing security, bird control and fire protection services at Antwerp and Ostend airports. These costs are subject to the celling defined in the annexes to the Subsidy Agreements. The LEMs are also obliged to clearly separate the costs relating to economic and non- economic activities.

(70) The Commission takes the view that these provisions are sufficient to conclude that the public funding granted to the LEMs for fire protection, security and bird control have been limited to the minimum necessary and have not been used to subsidise the LEMs’ economic activities. This funding will, therefore, not be further dealt with in the present decision. 3.1.3. Use of state resources and imputability to the State (71) The grant in favour of the LOM Antwerp and the operating aid to both LEMs are financed through the budget of the Flemish Region. The resources available to the Flemish Region as a local authority30 constitute State resources. Hence, the measures involve State resources.

(72) The notified measures were directly awarded by the Flemish Region, through its administrative acts and signed contracts; they are thus imputable to the State.

3.1.4. Economic advantage (73) As regards the investment aid, the above-mentioned public funding reduces the investment cost that the LOM Antwerp would normally have to bear in order to adapt the airport to the applicable safety and security standards. The public funding of the investments in the basic infrastructure of Antwerp airport therefore confers an economic advantage to the LOM Antwerp. (74) As regards the past operating aid, the public funding for operating losses relieved the LEM Antwerp and the LEM Ostend from the burden of covering their own operating losses and thus confered an economic advantage to both LEMs. 3.1.5. Selectivity (75) Article 107(1) TFEU requires that, to be qualified as State aid, a measure must favour "certain undertakings or the production of certain goods". The Commission notes that the measures will be granted to the LOM Antwerp and both LEMs. Hence, the measures are selective within the meaning of Article 107(1) TFEU. 3.1.6. Distortion of competition and effect on trade (76) The Commission notes that 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. In accordance

30 Judgment of the General Court of 12 May 2011, Région Nord-Pas-de-Calais and Communauté d’agglomération du Douaisis v Commission, joined cases T-267/08 and T-279/08, EU:T:2011:209, paragraph 108.

with settled case law31, for a measure to distort competition it is sufficient that the recipient of the aid competes with other undertakings on markets open to competition. (77) Competition takes place between airports and between airport operators. Airports, also relatively small ones, compete to attract airlines; airport operators compete to be entrusted with the management of a given airport. (78) The Commission notes in this respect that the main carrier operating at Antwerp and Ostend airports is TUI fly, an airline company operating at different aiports across the Union. The investment aid granted to the LOM Antwerp and the operating aid granted to the LEM Antwerp and LEM Ostend strengthen the position of those undertakings and enable them to continue operating and to seek to attract airlines such as TUI fly to the detriment of other Union airports that could otherwise attract this airline’s capacity currently allocated to Antwerp and Ostend airports. Hence, the notified measures distort or are liable to distort competition and affect trade between Member States. 3.1.7. Conclusion on the existence of State aid and the lawfulness of the aid (79) For the reasons set out above, the Commission concludes that the notified measures involve State aid within the meaning of Article 107(1) TFEU, in so far as they relate to the economic activities of LOM Antwerp and the two LEMS. (80) The Commission notes that Belgium has not respected the standstill obligation laid down in Article 108(3) TFEU and has granted the investment and operating aid prior to the Commission’s approval.

4. COMPATIBILITY OF THE AID

4.1. Applicability of the 2005 and 2014 Aviation Guidelines

(81) Article 107(3)(c) TFEU 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 compatible with the internal market.

(82) In this regard, the Community guidelines on financing of airports and start-up aid to airlines departing from regional airports32 (“the 2005 Aviation Guidelines”) and Guidelines on State aid to airports and airlines of 4 April 201433 (“the 2014 Aviation Guidelines”) provide frameworks for assessing whether aid to airports may be declared compatible pursuant to Article 107(3)(c) TFEU. 4.1.1. Investment aid to the LOM Antwerp (83) According to point 173 of the 2014 Aviation Guidelines, in accordance with the Commission notice on the determination of the applicable rules for the assessment of unlawful State aid34 the Commission will apply to unlawful

31 Judgment of the General Court of 30 April 1998, Het Vlaamse Gewest v Commission, Case T- 214/95, EU:T:1998:77. 32 OJ C 312, 9.12.2005, p.1. 33 OJ C 99, 4.4.2014, p. 3. 34 OJ C 119, 22.5.2002, p. 22.

investment aid to airports the compatibility rules in force at the time when the unlawful investment aid was granted.

(84) In this regard, the Commission observes that Article 66/25 of the Decree of 10 July 2008 already specified that the LOM Antwerp will receive investment aid, previously granted to the DAB, to finalise or realise investment projects. In the selection file for the concession to operate the airport, published in December 2009, the Flemish Region committed to grant the LOM Antwerp a capital injection to finance the investments in basic infrastructure. The indicative amount was EUR 9.95 million. The Commission concludes that the investment aid to the LOM Antwerp was granted in July 2008 or December 2009 at the latest, thus before 4 April 2014. (85) Consequently, the Commission will apply the principles set out in the 2005 Aviation Guidelines to the unlawful investment aid granted before the entry into force of the 2014 Aviation Guidelines. 4.1.2. Operating aid to the LEM Antwerp and LEM Ostend (86) According to point 172 of the 2014 Aviation Guidelines, the provisions of the notice on the determination of the applicable rules for the assessment of unlawful State aid should not apply to pending cases of unlawful operating aid to airports granted prior to 4 April 2014. Instead, the Commission will apply the principles set out in the 2014 Aviation Guidelines to all cases concerning operating aid (pending notifications and unlawful non-notified aid) to airports, even if the aid was granted before 4 April 2014.

(87) In this regard, the Commission observes that the operating aid to the LEMs was granted on 19 July 2013, that is, at the time of the conclusion of the Subsidy Agreements which gave rise to the right to receive operating aid from the Flemish Region.

(88) Accordingly, the Commission will apply the principles set out in the 2014 Aviation Guidelines to the non-notified operating aid, even though the aid was granted before 4 April 2014.

4.2. Investment aid – compliance with the 2005 Aviation Guidelines

(89) State aid for financing airport infrastructure is compatible with Article 107(3)(c) TFEU if it complies with the conditions laid down in paragraph 61 of the 2005 Aviation Guidelines:

(a) the construction and operation of the infrastructure meets a clearly defined objective of common interest (regional development, accessibility, etc.);

(b) the infrastructure is necessary and proportional to the objective which has been set;

(c) the infrastructure has satisfactory medium-term prospects for use, in particular as regards the use of existing infrastructure;

(d) all potential users of the infrastructure have access to it in an equal and non-discriminatory manner;

(e) the development of trade is not affected to an extent contrary to the Union interest.

(90) In addition, to be compatible with the internal market, State aid to airports, like any other State aid measure, should have an incentive effect and be necessary and proportional to the legitimate objective pursued. 4.2.1. Construction and operation of the infrastructure meets a clearly defined objective of common interest (regional development, accessibility, etc.) (91) In the present case, the main aim of the financing of the investment project is to maintain and improve the accessibility and connectivity of the Flemish Region in general, and the connectivity between Antwerp and London in particular, and thus to stimulate the development and the economic strength of the Flemish Region and its biggest city (see recital (45)).

(92) The Commission notes that Antwerp airport is located in a densely populated area where there is a high demand for air transport. Because of its proximity to the centre of Antwerp, easy access, small size, fast check-in and security screening, the airport is frequently used by time sensitive passengers, in particular on the route Antwerp – London City (until August 2018, VLM operated flights to London City; the route has been restored by Air Antwerp in September 2019 (see recitals (22) and (28)). Three daily flights (early morning, early afternoon and evening) to London are currently operated from Antwerp airport35.

(93) In this regard the Commission observes that it would take at least 3 hours and 30 minutes to travel from Antwerp to London by train, which means that the train link between Brussels and London might not be a viable alternative for time sensitive passengers traveling from or to Antwerp, in particular for those taking one day round trip36.

(94) The investment aid to the LOM Antwerp therefore contributes to the accessibility of the Flemish Region.

(95) The Commission also notes that the airport plays an important role as an employer. According to the information provided by the Belgian authorities, the airport has created more than 1000 direct and indirect jobs at the airport itself or in other related sectors, e.g. hotels, restaurants, cargo handling, in 2015 (see recital (23)).

(96) In addition, the airport had direct and indirect added value of EUR 85.2 million to the Flemish Region in 2015. Thus, the Commission concludes that Antwerp airport facilitates the regional development of the Flemish Region.

(97) The Commission also notes that the investment project at Antwerp airport is not primarily aimed at creating new airport capacity but rather at securing and maintaining the existing capacity. Based on the information submitted by the

35 This time schedule and direct line to London are particularly interesting for business travellers who are generally time sensitive.

36 The journey also involves changing trains in Brussels.

Belgian authorities, the environmental permit restricts the airport from serving more than […] (see recital (44)). In addition, the geographic location precludes the airport from expanding (see recital (19)). Therefore, the investment project at Antwerp airport will not create additional unused capacity. (98) The Commission also observes that the new investment will not constitute a duplication of existing unprofitable infrastructure. Both Brussels airport and Eindhoven airport are profitable (see recitals (26) and (32)), and located in populous areas37, where there is a high demand for air transport. Therefore, there is no duplication of unprofitable airports within the catchment area of Antwerp airport.

(99) The Commission can therefore conclude that the investment aid granted to the LOM Antwerp meets a clearly defined objective of common interest. 4.2.2. The infrastructure is necessary and proportional to the objective which has been set (100) The airport has experienced a steady upward trend in the total number of passengers since the LEM Antwerp assumed the operation of Antwerp airport (see recital (19)). Moreover, as stated in recital (22), the airport expects a gradual increase in passenger traffic over the years to come ([…] passengers forecast by 2039).

(101) The objective of the investment that the LOM Antwerp will undertake is to ensure that mandatory security and safety requirements enabling the airport to maintain its ICAO certification environmental permit are satisfied (see recital (45)).

(102) The investments in basic intrastructure are clearly necessary, as they provide for considerable improvement in terms of safety and environment protection, and are proportionate, on the basis of information provided by the Belgian authorities. Indeed, the main investments are related to improving the runway, taxiways and apron, as well as other necessary infrastructure works such as renewing the high- voltage cabine.

(103) Commission also notes that the project is not disproportionately large or elaborate. As mentioned in recital (102) the project just covers the necessary basic infrastructure improvements to keep the airport open.

(104) The Commission can therefore conclude that the infrastructure in question is necessary and proportional to the objectives which have been set. 4.2.3. The infrastructure has satisfactory medium-term prospects for use, in particular as regards the use of existing infrastructure

(105) The Commission notes that the investment programme is not primarily aimed at the creation of additional capacity but is designed to secure existing capacity and to ensure that mandatory security and safety requirements are satisfied (see recital (44)).

37 The high population density of Belgium was acknowledged by the Commission in the Charleroi airport case, see decision of the Commission of 1 October 2014 in State aid case SA.14093 (C76/2002), Measures implemented by Belgium in favour of Brussels South Charleroi Airport and Ryanair, OJ L 325 30.11.2016, p. 63, recital 607.

(106) The Commission also notes that the ex-ante business plan of Egis is based on sound passenger forecasts. An average annual growth rate of […] % at Antwerp airport and a growth to […] passengers by 2039 is consistent with historic data for the airport and also in line with industry projections38 (see recital (22)).

(107) The condition of positive medium-term prospects for the use of Antwerp airport infrastructure is therefore met. 4.2.4. All potential users of the infrastructure have access to it in an equal and non-discriminatory manner (108) The infrastructure will be operated by the LEM Antwerp and will be open to all potential users on an equal and non-discriminatory basis. 4.2.5. The development of trade is not affected to an extent contrary to the Union interest (109) As stated in recital (24), the closest airports to Antwerp airport are Brussels airport and Eindhoven airport.

(110) As regards competition with Brussels airport, Brussels airport serves as a hub for various airlines and currently offers 248 destinations. In 2018, the airport served 25.7 million passengers, wich qualifies it, according to the 2005 Aviation Guidelines, as a large Comminity airport (category A). There are many flag and low-cost carriers operating flights to and from Brussels airport (see recital (25)) .

(111) In contrast, Antwerp airport is a regional airport with an average annual passenger traffic of 220 000 (during the period 2013-2018) and limited services and infrastructure. Antwerp airport serves less than 1 million passengers per year, which qualifies it, according to the 2005 Aviation Guidelines, as a small regional airport (category D).

(112) Its runway is only suitable for small 120 seat aircraft and not for A310-330 or Boeing 737 type aircraft, which are typically operated by low-cost carriers and other airlines. The airport is mainly used by passengers coming from Flanders. In addition, Antwerp airport’s growth prospects are limited due to the strict terms of its environmental permit (see recitals (18) and (19)).

(113) Antwerp airport has a "point-to-point" profile limited to short-haul flights, which prevents it from being a viable alternative to Brussels airport for airlines operating connecting flights. In 2018, 18.4 % of departing passengers at Brussels airport were transfer passengers (see recital (25)).

(114) Antwerp airport might not constitute an alternative to Brussels airport for certain categories of passengers (particularly price-sensitive passengers traveling with the low-costs carriers or passengers traveling on long-haul flights).

(115) The Commission observes that the same airline, TUI fly, flies from both Brussels airport and Antwerp airport, and that the presence of TUI fly at Antwerp airport did not lead to the cancellation of TUI fly flights at Brussels airport and vice

38 See Eurocontrol Seven-Year Forecast report, https://www.eurocontrol.int/sites/default/files/2019- 03/eurocontrol-7-year-forecast-february-2019-main-report.pdf, page 5, accessed on 5 July 2019.

versa. These observations contribute to the conclusion that both airports are rather complementary than substitutable (see recital (34)).

(116) The Commission also observes that the number of equivalent links offered by Antwerp airport and Brussels airport in 2016 was small, with only 6 overlapping routes (see recital (28)). By way of comparison, in 2015, Charleroi airport had 102 routes of which 63 were overlapping with Brussels airport. As a consequence, this does not allow Antwerp airport to exert considerable competitive pressure on Brussels airport.

(117) The Commission notes that during the period from 2012 to 2016, passenger traffic has grown at both Antwerp airport and Brussels airport, and that the increase in traffic at Antwerp airport has not adversely affected the traffic at Brussels airport or vice versa. Moreover, according to information submitted by Belgium, the number of passengers on the six overlapping routes has grown at both airports.

(118) As regards competition with Eindhoven airport, traffic at Eindhoven has increased continuously since 200339. The airport served 6.2 million passengers in 2018, which qualifies it, according to the 2005 Aviation Guidelines, as a national airport (category B). Moreover, until 2018, Eindhoven airport served as a base for Ryanair, whereas Antwerp airport is not suitable for low-cost carriers, due to its short runway (see recital (29)).

(119) The Commission observes that the same airline, TUI fly, flies from both Eindhoven airport and Antwerp airport, and that the presence of TUI fly at Antwerp airport did not lead to the cancellation of TUI fly flights at Eindhoven airport and vice versa. This again suggests that both airports are complementary and serve a different audience (see recital (34)).

(120) Given that Eindhoven airport is fast-growing and that the planned growth at Antwerp airport will be minimal, the aid for the LOM Antwerp will not diminish the medium-term prospects for use of Eindhoven airport's infrastructure or prevent the airport from achieving full capacity.

(121) 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. 4.2.6. Necessity of the aid and incentive effect

(122) The Commission must also assess whether the aid is proportional, necessary and has an incentive effect.

(123) The incentive effect is present if the investment would not have been undertaken or would not have been undertaken to the same extent without State aid (through counterfactual analysis, comparing the level of intended activity, with and without aid, or through a funding gap analysis based on an ex-ante business plan).

(124) In addition, the aid is considered proportionate, only if the same result could not be reached with less aid and less distortion. This means that the amount and

39 The average passenger growth rate (based on the Compound Annual Growth Rate) at Eindhoven Airport from 2004 to 2018 is 17%.

intensity of the aid must be limited to the minimum needed for the aided activity to take place.

(125) With regard to the incentive effect of the aid, the Commission notes that the aid was granted before the start of the project (see recital (37)). In addition, as shown in recital (40), the calculations of the capital costs funding gap of the investments carried out by the LOM Antwerp shows a capital cost funding gap of EUR 8 956 436 (difference between the positive and negative cash flows including the investment cost of EUR [10 000 000 – 20 000 000] (in 2015 values)) over the lifetime of the investment in net present value terms. This shows that the investment is not economically attractive in its own right and that the LOM Antwerp would not undertake the investment without the aid in question. Moreover, as stated in recital (45), without the necessary investments in basic infrastructure the airport would have to close. (126) Even though Antwerp airport attracted a private operator in 2013, given the high funding gap, it does not seem likely that the LOM Antwerp would have been able to obtain private financing to cover the entire cost of the project. It follows that the aid must be regarded as having an incentive effect.

(127) As regards proportionality, the Commission notes that the aid measure, i.e. the public funding provided for the project, is capped by the Flemish Region to the capital cost funding gap (EUR 8 956 436 discounted at 2015 values). The remaining amount of the investment project to be executed by the LOM Antwerp (EUR [1 000 000 – 5 000 000] discounted at 2015 values) will be financed through a private loan (see recitals (40) and (42)).

(128) As described in recital (43), only 60 % of the total eligible investment cost in Antwerp airport will be financed by the State. As the 2005 Aviation Guidelines leave open the issue of aid intensities, the maximum permissible aid amount has to be limited to the funding gap calculated on the basis of an ex-ante business plan of the airport. Nevertheless, the Commission notes that the proposed aid intensity, which is lower than 75 %, is in line with the Commission's decision- making practice40. Therefore, the aid intensity of 60 % is justified in the present case.

(129) In the light of the above, the Commission concludes that the investment aid is necessary, proportionate and has an incentive effect. 4.2.7. Conclusion

(130) 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.

40 See Commission decision of 11 February 2009 in State aid case N 472/2008 – Poland – Investment aid for airports under the infrastructure and environment operational programme, OJ C 79, 2.4.2009, Commission decision of 13 July 2009 in State aid case N 196/2008 – Poland – Investment aid for the airports under Regional Operational Programmes, OJ C 204, 29.8.2009 and Commission decision of 28 April 2010 in State aid case N41/2010 – Latvia – State aid related to investments in Riga airport infrastructure, OJ C 143, 2.6.2010.

4.3. Past operating aid – compliance with the 2014 Aviation Guidelines

(131) The 2014 Aviation Guidelines specify the conditions under which operating aid to airports may be declared compatible with the internal market within the meaning of Article 107(3)(c) TFEU.

(132) In order for operating aid granted before the publication of the Guidelines to be considered compatible with the internal market, the following cumulative conditions must be met:

(a) the aid must contribute to a well-defined objective of common interest;

(b) there must be a need for State intervention;

(d) there must be an incentive effect;

(e) the aid should be limited to a minimum; and

(f) undue negative effects on competition and trade between Member States should be avoided.

(133) Point 137 of the Aviation Guidelines specifies that operating aid granted before the beginning of the transitional period may be declared compatible to the full extent of uncovered operating costs if all those conditions, as set out in section 5.1.2 of those guidelines are met, with the exception of points 115, 119, 121, 122, 123, 126 to 130, 132, 133 and 134.

4.3.1. Past operating aid to Antwerp airport

Contribution to a well-defined objective of common interest

(134) Point 113 of the 2014 Aviation Guidelines stipulates that, in order to give airports time to adjust to new market realities and to avoid any disruptions in the air traffic and connectivity of the regions, operating aid to airports will be considered to contribute to the achievement of an objective of common interest, if it: a) increases the mobility of European Union citizens and connectivity of regions by establishing access points for intra-European Union flights; or b) combats air traffic congestion at major European Union hub airports; or c) facilitates regional development.

(135) Following a similar reasoning as for investment aid, as set out in recitals (91) to (96), the operating aid to Antwerp airport can be considered to contribute to the accessibility and development of the Flemish Region.

(136) In line with point 114 of the 2014 Aviation Guidelines, the Commission has to assess whether the aid would contribute to the duplication of unprofitable airports

and what the effect would be on the traffic of other airports located in the same catchment area41.

(137) As set out in recitals (97) and (98), both Brussels and Eindhoven airports are profitable and thus there is no duplication of unprofitable airports within the catchment area of Antwerp airport. Both the airports of Brussels and Eindhoven are much bigger than Antwerp, so additional traffic at Antwerp airport will not significantly affect the traffic at Brussels and Eindhoven. In addition, the investments in Antwerp airport are merely meant to keep the basic airport infrastructure intact and do not aim to increase the capacity of Antwerp airport.

(138) The Commission therefore concludes that the operating aid to Antwerp airport contributes to a well-defined objective of common interest.

Need for State intervention

(139) Points 116 to 118 of the 2014 Aviation Guidelines provide that the aid should be targeted towards situations where the market itself cannot deliver. The 2014 Aviation Guidelines further recognise that the need for public funding to finance operating costs will normally be proportionately greater for smaller airports, due to high fixed costs, and that airports with annual passenger traffic between 200 000 and 700 000 passengers may not be able to cover their operating costs to a substantial extent.

(140) The Commission recognises that Antwerp airport is a small regional airport with on average about 220 000 passengers per year during the period 2013-2018 (see Table 2 above) and that it would not be able to fully cover its own operating costs. Therefore, there was a need for State intervention.

Appropriateness of the aid measure

(141) Point 120 of the 2014 Aviation Guidelines states that any measure of aid to an airport must be an appropriate policy instrument to address the objective of common interest. Therefore, the Member State must demonstrate that no other less distortive policy instruments or aid instruments could have allowed the same objective to be met.

(142) According to the Belgian authorities, other instruments, such as loans or repayable advances, must be considered as unsuitable in the light of the intention to give Antwerp airport the opportunity to develop into an economic player that can survive independently in a competitive market. This intention would be undermined by making the future of the airport depend on future repayments while the investments financed therewith are essential in the context of its development.

41 Catchment area is defined in point 25 (12) of the 2014 Aviation Guidelines as “a geographic market boundary that is normally set at around 100 kilometres or around 60 minutes travelling time by car, but, train or high-speed train; however, the catchment area of a given airport may be different and needs to take into account the specificities of each particular airport. The size and shape of the catchment area varies from airport to airport, and depends on various characteristics of the airport, including its business model, location and the destinations it serves”.

(143) The Commission observes that the fixed component of the concession fee paid by the LEM Antwerp is established ex-ante and therefore encourages the LEM Antwerp to manage the airport efficiently. Moreover, the public funding granted by the Flemish Region for personnel and operating costs depended on the costs incurred and did not exceed the maximum amounts defined in the Subsidy Agreements.

(144) The Commission therefore concludes that the operating aid granted to the LEM Antwerp encourages the latter to manage the airport efficiently and constitutes an appropriate policy instrument.

Incentive effect

(145) According to point 124 of the 2014 Aviation Guidelines, the incentive effect for operating aid is present if it is likely that, in the absence of operating aid, the level of economic activity of the airport would be significantly reduced. This assessment needs to take into account the presence of investment aid and the level of traffic at the airport.

(146) The Belgian authorities submitted that without the operating aid the scale of the operations at Antwerp airport would be impacted and reduced.

(147) The financial statements of the LEM Antwerp (see Table 6)42 show that the LEM Antwerp accumulated losses until 2015. The operating results (negative EBIT and EBITDA), as well as the total profitability of the airport were negative. Therefore, until 2016 the airport was not attractive to be operated by a private operator without public support. As of 2016, the LEM Antwerp is generating yearly profits, but these were so far only sufficient to compensate for the losses carried over from the first years of operation. While the carried over losses started declining since 2017, the cumulative result of the LEM Antwerp since the start of the LOM-LEM structure in October 2014 is close to break-even in July 2019 (the small cumulative profit of EUR […] represents only […] % of the total turnover achieved by the LEM Antwerp in the first semester of 2019)43. Therefore, the cumulative result reached by the LEM Antwerp at the end of the period can be considered negligible in the context of the assessment of the incentive effect of the operating aid over the entire 5-year period of the Subsidy Agreement.

42 See Financial Statements 2013-2018 registered at the National Bank of Belgium. Available at: https://cri.nbb.be/bc9/web/catalog;jsessionid=243C5A7D4A0D56682D92221B1E9F399B?execution= e1s1.

43 The financial results for the first half of 2019 are based on estimates by the LEM Antwerp for the first semester of 2019. It is unlikely that the actual figures will alter the conclusions of the analysis.

Table 6: Profitability of the LEM Antwerp (in EUR) 2014 2015 2016 2017 2018 2019 (Oct-Dec) (Jan-Jul) EBIT -80 680 -477 980 325 729 279 578 287 300 […] EBITDA -74 813 -335 902 499 011 571 936 639 749 […] Profit (+) / -86 048 -529 523 271 905 230 084 236 849 […] losses (-) of the year

Cumulative na (*) -615 571 -343 666 -113 582 123 267 […] profit (+) / losses (-)

(*) Only the results since the start of the LOM-LEM structure in October 2014 have been taken into account

(148) In view of the above, the Commission considers that the aid measure has an incentive effect.

Proportionality of the aid amount (aid limited to the minimum necessary)

(149) Point 125 of the 2014 Aviation Guidelines states that in order to be proportionate, operating aid to airports must be limited to the minimum necessary for the aided activity to take place.

(150) First, the operating aid granted to the LEM Antwerp enables Antwerp airport to be operational, while maintaining the LEM Antwerp’s operating costs at a level allowing it to offer conditions that are attractive to the airlines using the airport, without experiencing major financial difficulties.

(151) In this regard, the Commission observes that airport charges at Antwerp airport remain at a level comparable to airport charges at other airports in the catchment area of Antwerp airport, i.e. Brussels and Eindhoven44.

(152) Second, the Commission observes that for the period October 2014-July 2019, the exploitation of Antwerp airport generated a cumulative result of EUR […] (see Table 6 above). While the this cumulative result is slightly positive, it represents only […] % of the turnover estimated for the first semester of 2019 (see recital (147)). Therefore, the operating aid granted since October 2014 (the Subsidy agreement was signed in July 2013 but only entered into force in October 2014 when the LOM-LEM structure started, see recitals (7) to (12) and Table 4) only served to reduce the losses of the LEM Antwerp and did not generate excessive profits over the period, and the small positive cumulative result can be considered

44 E.g. passenger service charges per departing passenger applicable from 1 April 2019 are respectively: EUR 21.29 at Brussels airport, EUR 7.47 at Eindhoven airport and EUR 17.03 (including security charge) at Antwerp airport. See Charges and fees at Brussels Airport: https://media.brusselsairport.be/bruweb/default/0001/23/5af91f3fb34251deebcfa562282ea5e94b77687 8.pdf, and Airport charges and conditions Eindhoven Airport: https://www.eindhovenairport.nl/sites/default/files/downloads/airport_charges_and_conditions_eindho ven_airport_april_1_2019_-_march_31_2020_en.pdf.

negligible in the context of the assessment of the proportionality of the operating aid45.

(153) In view of the above, the Commission considers that the operating aid amount was proportional and limited to the minimum necessary for the aided activity to take place.

Avoidance of undue negative effects on competition and trade between Member States

(154) Point 131 of the 2014 Aviation Guidelines states that when assessing the compatibility of operating aid, the Commission will take account of the distortions of competition and the effects on trade. Where an airport is located in the same catchment area as another airport with spare capacity, the business plan, based on sound passenger and freight traffic forecasts, must identify the likely effect on the traffic of the other airports located in that catchment area.

(155) In this context, it is first reiterated that the Commission's assessment has not led to any indication that passenger growth at Antwerp airport has had a detrimental effect on other airports in the catchment area (see recitals (117) and (120)).

(156) Brussels and Eindhoven airports were able to cover their operating costs and there is no indication that this should change in future (see recitals (27) and (32)).

(157) The Commission therefore considers that the undue negative effects on competition and trade between Member States are limited to the minimum.

Transparency of the aid

(158) Belgium commits to comply with the rules on transparency as provided for in points 162 and 163 of the 2014 Aviation Guidelines and amended by the “Transparency Communication”46.

Conclusion

(159) In view of the above assessment, the Commission considers that the past operating aid to the LEM Antwerp is in accordance with the compatibility conditions set out in the 2014 Aviation Guidelines.

45 In addition, the assessment does not take into account the registered losses of the first year of existence of the LEM Antwerp, covering the periods July-December 2013 and January-September 2014. During these periods the LEM Antwerp registered losses of EUR -120 686 and EUR -258 145 respectively. If these losses were also to be taken into account, the cumulative result of the LEM Antwerp until July 2019 would be negative. The Commission takes a conservative approach by not taking these losses into account in its assessment since the LEM Antwerp only started operating the airport of Antwerp in October 2014 and it is not clear which expenses of the LEM Antwerp were inducing the losses generated over the period July 2013 until September 2014.

46 Communication from the Commission amending the Communications from the Commission on EU Guidelines for the application of State aid rules in relation to the rapid deployment of broadband networks, on Guidelines on regional State aid for 2014-2020, on State aid for films and other audio- visual works, on Guidelines on State aid to promote risk finance investments and on Guidelines on State aid to airports and airlines, OJ C 198, 27.6.2014, p. 30-34.

(160) Therefore, the past operating aid is compatible with the internal market on the basis of Article 107(3)(c) TFEU.

4.3.2. Past operating aid to Ostend airport

Contribution to a well-defined objective of common interest

(161) As described in recital (14), Ostend airport is located in a densely populated area where is a high demand for air transport.

(162) The Commission notes that the airport plays an important role as an employer. According to the information provided by the Belgian authorities, the airport has created 633 direct and indirect jobs at the airport itself or in other related sectors in 2015 (see recital (16)).

(163) The airport had also direct and indirect added value of EUR 37.1 million to the Flemish Region in 2015 (see recital (16)). Thus, the Commission concludes that Ostend airport facilitates regional development of the Flemish Region.

(164) In line with point 114 of the 2014 Aviation Guidelines, the Commission has to assess whether the aid would contribute to the duplication of unprofitable airports and what the effect would be on the traffic of other airports located in the same catchment area.

(165) As stated in recital (17), Kortijk-Wevelgem airport is located approximately 69 km, or 50 minutes by car from Ostend airport and hence falls within the catchment area of Ostend airport. The Commission however observes that Ostend airport mainly focuses on scheduled flights and cargo whilst Kortijk-Wevelgem airport does not operate scheduled flights, but is solely used for private flights and, occasionally, medical flights and pilot training.

(166) Therefore, the Commission concludes that Kortrijk-Wevelgem airport has a different business model than Ostend airport and thus there is no duplication of unprofitable airports within the catchment area.

(167) The Commission therefore concludes that the operation of the airport meets a clearly defined objective of common interest.

Need for State intervention

(168) According to point 118 of the 2014 Aviation Guidelines, the Commission considers that airports with annual passenger traffic between 200 000 and 700 000 passengers may not be able to cover their operating costs to a substantial extent and will be in need of public funding to finance operating costs.

(169) The Commission recognises that Ostend airport is a small regional airport with on average about 330 000 passengers per year over the period 2013-2018 (see Table 1 above) and that it woud not be able to fully cover its own operating costs. Therefore, there was a need for State intervention.

Appropriateness of the aid measure

(170) According to the Belgian authorities, other instruments, such as loans or repayable advances, must be considered as unsuitable in the light of the intention 26

to give Ostend airport the opportunity to develop into an economic player that can survive independently in a competitive market. This intention would be undermined by making the future of the airport depend on future repayments while the investments financed therewith are essential in the context of its development.

(171) The Commission observes that the fixed component of the concession fee paid by the LEM Ostend is established ex-ante and therefore encourages the LEM Ostend to manage the airport efficiently. Moreover, the public funding granted by the Flemish Region for personnel and operating costs depended on the costs incurred and did not exceed the maximum amounts defined in the Subsidy Agreements.

(172) The Commission therefore concludes that the operating aid granted to the LEM Ostend encourages the latter to manage the airport efficiently and constitutes an appropriate policy instrument.

Incentive effect

(173) The Belgian authorities submitted that without the operating aid the scale of the operations at Ostend airport would be significantly impacted and reduced.

(174) The financial statements of the LEM Ostend (see Table 7)47 show that the LEM Ostend accumulated significant losses until 2015. The operating results (negative EBIT and EBITDA), as well as the total profitability of the airport were negative. Therefore, until 2016 the airport was not attractive to be operated by a private operator without public support. As of 2016 the LEM Ostend is generating yearly profits, but these were so far insufficient to compensate for the losses carried over from the first years of operation48. While the carried over losses started declining since 2017, the cumulative result since the entering into force of the LOM-LEM structure in October 2014 remains highly negative due to the carried over losses from previous years.

Table 7: Profitability of the LEM Ostend (in EUR) 2014 2015 2016 2017 2018 2019 (Oct-Dec) (Jan-Jul) EBIT -179 698 -1 314 430 207 285 103 922 528 112 […] EBITDA -170 565 -1 109 995 428 381 470 631 1 054 821 […] Profit (+) / -188 823 -1 396 838 125 399 24 035 493 658 […] losses (-) of the year

Cumulative na (*) -1 585 661 -1 460 262 -1 436 227 -942 569 […] profit (+) / losses (-)

(*) Only the results since the start of the LOM-LEM structure in October 2014 have been taken into account

47 See Financial Statements 2013-2018 registered at the National Bank of Belgium. Available at: https://cri.nbb.be/bc9/web/catalog;jsessionid=243C5A7D4A0D56682D92221B1E9F399B?execution= e1s1.

48 The financial results for the first half of 2019 are based on estimates by the LEM Ostend for the first semester of 2019, but it is unlikely that the actual figures will alter the conclusions of the analysis.

(175) In view of the above, the Commission considers that the aid measure has an incentive effect.

Proportionality of the aid amount (aid limited to the minimum necessary)

(176) The operating aid granted to the LEM Ostend enabled Ostend airport to be operational, while maintaining the LEM Ostend’s operating costs at a level allowing it to offer conditions that are attractive to the airlines using the airport, without experiencing major financial difficulties.

(177) The Commission observes that for the period October 2014-July 2019, the exploitation of Ostend airport generated a cumulative loss of EUR […] (see Table 7 above). Therefore the operating aid granted since 2014 (the Subsidy agreement was signed in July 2013 but only entered into force in October 2014 when the LOM-LEM structure started, see recitals (7) to (12) and Table 5) only served to reduce the losses of the LEM Ostend and did not generate excessive profits49.

(178) Therefore, the Commission considers that the operating aid amount was proportional and limited to the minimum necessary for the aided activity to take place.

Avoidance of undue negative effects on competition and trade between Member States

(179) As explained in recitals (17) and (166), Kortijk-Wevelgem airport, which falls within the catchment area of Ostend airport, has a different business model than Ostend airport. Therefore, the operating aid to the airport of Ostend will not have a significant impact on the competitiveness of Kortijk-Wevelgem airport.

(180) In order to further limit the negative effects on competition and trade, the Belgian authorities submited that Ostend airport's infrastructure is and will remain open to all potential users and is and will not be dedicated to one specific user.

(181) In view of the above, the Commission considers that the undue negative effects on competition and trade between Member States are limited to the minimum.

Transparency of aid

(182) As described in recital (158), the Belgian authorities have committed to respect the transparency requirements as provided for in points 162 and 163 of the Transparency Communication.

Conclusion

49 In addition, the assessment does not take into account the registered losses of the first year of existence of the LEM Ostend, covering the periods July-December 2013 and January-October 2014. During these periods the LEM Ostend registered losses of EUR -141 324 and EUR -566 468 respectively. If these losses were also to be taken into account, the cumulative result of the LEM Ostend until July 2019 would be negative. The Commission takes a conservative approach by not taking these losses into account in its assessment since the LEM Ostend only started operating the airport of Ostend in October 2014 and it is not clear which expenses of the LEM Ostend were inducing the losses generated over the period July 2013 until October 2014.

(183) In view of the above assessment, the Commission considers that the past operating aid to the LEM Ostend is in accordance with the compatibility conditions set out in the 2014 Aviation Guidelines.

(184) Therefore, the past operating aid is compatible with the internal market on the basis of Article 107(3)(c) TFEU.

4.3.3. Future operating aid to Antwerp and Ostend airports

(185) The Commission notes that operating aid to the LEMs has been granted on the basis of the 5-year Subsidy Agreements, expiring in October 2019. Consequently, this decision only covers the operating aid granted to the LEMs during the period October 2014-October 2019. Any future operating aid granted to the LEMs on the basis of a prolongation of the Subsidy Agreements or new agreements between Egis/the LEMs and the Flemish Region will have to be subject to a new notification and a new compatibility assessment by the Commission.

5. CONCLUSION

The Commission regrets that Belgium put the notified measures under assessment into effect before they had been notified and approved by the Commission in breach of Article 108(3) TFEU. However, it has decided, on the basis of the foregoing assessment, not to raise objections to the aid on the grounds that it is compatible with the internal market pursuant to Article 107(3)(c) TFEU.

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 electronically to the following address:

European Commission, Directorate-General for Competition State Aid Greffe B-1049 Brussels [email protected]

Yours faithfully For the Commission

Margrethe VESTAGER Member of the Commission