His Excellency Luigi Di Maio Minister of Foreign Affairs and International Cooperation Piazzale Della Farnesina, 1 00135 Roma

EUROPEAN COMMISSION

Brussels, 29.1.2021 C(2021) 431 final

PUBLIC VERSION

This document is made available for information purposes only.

Subject: State Aid SA.54765 (2020/N) – Italy – Investment aid to Rimini airport

Excellency,

1. PROCEDURE

(1) Following pre-notification contacts,1 on 7 May 2020 Italy notified to the Commission an investment aid for the airport of Rimini (“the Airport”, “Rimini airport” or “AIRiminum”). In response to the requests for information sent by the Commission, the Italian authorities supplemented the notification on 30 July, 26 August, 4 September, 28 October, 17 November and 17 December 2020.2

2. DESCRIPTION OF THE AID

2.1. The beneficiary

(2) The Airport is an international passenger airport located in Miramare, approximately 5 km south-east of Rimini and 16 km east of San Marino. According to data released in 2018 by ENAC (the Italian Civil Aviation

1 Italy submitted versions of a draft notification form on 24 June and 16 December 2019.

2 The Commission sent Italy requests for information on 17 July, 19 and 20 August, 2 September 2020, 26 and 30 October, and 3 December.

His Excellency Luigi Di Maio Minister of Foreign Affairs and International Cooperation Piazzale della Farnesina, 1 00135 Roma

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

Authority), Rimini airport is the second airport of the Emilia-Romagna Region and the twenty-seventh in Italy by number of passengers.3

(3) According to Italy, passenger traffic at the Airport has grown exponentially since 2002, from 209 598 passengers in 2002 to 920 641 passengers in 2011 (an almost five-fold increase in less than ten years). Following the bankruptcy of the Rimini airport operator in November 2013, the Airport was completely closed from 31 October 2014 until 1 April 2015, when operations started again under the management of the new concessionaire AIRiminum 2014 S.p.A. (“AIRiminum”). Since then, the Airport has recorded a steady increase in passengers (+49% in 2016, +27% in 2017 and +28% in 2019). In both 2017 and 2018, the Airport registered approximately 300 000 passengers per year; in 2019, it counted about 393 000 passengers. So far, passenger traffic has been mostly concentrated in the summer period and is linked to routes from Eastern Europe (about 85% of passenger traffic). On the other hand, Rimini airport does not serve domestic flights.

(4) The Airport is open to all users. It is currently used by several airlines, including Deutsche Lufthansa, Luxair, Finnair and Ryanair.

(5) The Airport is operated by AIRiminum under a 30-year concession granted by ENAC. AIRiminum is a private company4 that has three fully-owned subsidiaries: AIRhandling s.r.l., which provides airport handling services; AIRsecurity s.r.l., which provides airport security services; and AIRcourtesy s.r.l., which manages commercial activities in the airport.

(6) The Airport is 125 kilometres from Bologna airport (approximately 1 hour and 30 minutes by car or up to 2 hours and 10 minutes by public transport). Forlì airport, which is located at 60-km distance from Rimini airport, is mainly a general aviation airport and does not have scheduled commercial flights.5 However, Rimini airport is only 86 kilometres from Ancona airport. For the purposes of the Aviation Guidelines,6 Ancona airport is thus in the same catchment area7 as Rimini airport.

3 Source : Assaeroporti, Annual Data Report 2019 (available at https://assaeroporti.com/wp- content/plugins/multipage_xls_reader/pdf_file/2019.pdf).

4 AIRiminum is owned by four private shareholders: Armonie S.r.l. (57.88%); Alquimie 4 Metropolis S.r.l. (23.75%); Synergie 4 AIRiminum S.r.l. (16%); and Free Energia S.p.A. (2.375%).

5 Italy submitted that according to the National Airport Plan (PNA), i.e. the document by which the Italian Government outlines its investment strategy for national airport infrastructures, Forlì airport is a secondary airport “that, by its own features, may become a cargo airport and a hub for aeronautical training and aircraft maintenance”. The activities of Forlì airport are currently limited to general aviation, with no scheduled commercial flights. Further, the airport has not yet submitted to ENAC for approval the business plan that is required by law to initiate the authorisation procedure to be in full operation, which will normally take at least five years.

6 Communication from the Commission - Guidelines on State aid to airports and airlines, OJ C 99, 4.4.2014, p. 3.

7 As defined in point 25(12) of the Aviation Guidelines: the two airports are located within less than 100 kilometres or 60 minutes travelling time by car, bus, train or high-speed train.

(7) According to the Italian authorities, Rimini and Ancona airports present different operational profiles in terms of configuration and functionality.

(8) Firstly, there are significant differences in the origin of the flows of passenger traffic at the two airports. For Rimini airport, most passengers arrive from outside the Union (36% of which in charter flights), while for Ancona airport only 15% of passengers arrive from third countries.

(9) Secondly, there are significant differences in the type of traffic of the two airports. Freight traffic is relatively important in Ancona airport due to its location in an intermodal hub, while it is virtually inexistent in Rimini airport.8 As regards passenger traffic, the split between leisure and business trips is balanced in Ancona airport, while leisure travel constitutes the great majority in Rimini airport. Furthermore, while passenger traffic is relatively stable throughout the year in Ancona airport, traffic in Rimini airport is very seasonal and concentrated in the summer period, with no flights on some days in the winter.

(10) The Italian authorities claim a positive and meaningful correlation between the growth of passenger traffic at the two airports, because increases in passenger traffic in Ancona airport do not coincide with decreases in passenger traffic in Rimini airport and vice versa.

(11) As for the Airport’s financial situation, according to the Italian authorities, AIRiminum has a particularly efficient business model, which enabled it to achieve positive economic and financial results in parallel with a constant increase in passenger traffic. Based on the 2018 financial statement, revenues amounted to approximately EUR 8.6 million and the consolidated net profit was approximately EUR 0.7 million.9 The good management of AIRiminum is also demonstrated by the solidity of the capital structure of the Airport, which shows a positive net financial position due to the cash flow from operating activities and the lack of bank liabilities.

(12) However, the Italian authorities explained that AIRiminum is not able to finance the planned investment project with only its own resources. Based on the estimates developed by AIRiminum, without public funding, the operator of Rimini airport would incur approximately EUR 5.6 million total losses over the period 2021-2033. The result would be even worse in a scenario involving a higher percentage of debt capital used instead of AIRiminum’s own resources. As a result, AIRiminum could not implement its business plan without the aid to be granted by the Emilia-Romagna Region.

8 According to data published by Assoaeroporti, the Italian Airports association, in 2018 Ancona airport handled 6.741 tons freight, compared to only 34 tons freight handled at Rimini airport. In addition, the PNA identifies Ancona airport amongst the airports with existing cargo traffic to be further developed, while Rimini airport is not even mentioned in that context.

9 In 2017, the volume of revenues at consolidated level was EUR 9.6 million and the consolidated net profit amounted to approximately EUR 1.7 million.

2.2. Legal basis

(13) Italy notified the draft text of the legal basis for the investment aid to Rimini airport. The relevant provision of the regional law, which will be passed by the Emilia-Romagna Region, authorises the regional Government to adopt the decisions needed to allocate the aid funds from the regional budget to AIRiminum.

2.3. Overview of the investment aid

(14) The Italian authorities have notified an investment aid to AIRiminum to support the investments contemplated in its business plan for the years 2021-2033. The business plan aims at increasing the connectivity and accessibility of the Romagna area,10 which is crucial to the economic development of the Emilia- Romagna Region. It promotes the development of further routes between the Emilia-Romagna Region and the other Italian regions, while also strengthening the international connections of the area.

(15) The investments set out in the business plan will improve the quality of the infrastructure of the Airport, which is a relevant access point to the region for intra-Union flights. For that reason, the investment aid will guarantee a greater flow of visitors and tourists, in particular in the Romagna area, a major touristic center with 3 000 hotels and 1 million beds in the several accommodation choices.11

(16) The Italian authorities stated that those infrastructural investments are necessary to achieve four main objectives:

(i) to align the airport infrastructure with the requirements set out by the EASA certification for aerodromes under Regulation (EC) No 216/200812 and the standard of service requested by ENAC in light of the so-called “Gap Analysis” carried out in December 2018 under Regulation (EU) No 139/2014.13 ENAC issued the EASA certification for Rimini airport on 28 December 2017 conditional upon the implementation by 2022 of an action plan for flight operations infrastructures;14

10 The Emilia-Romagna Region consists of two main geographical areas: the Emilia area extends from Bologna (included) going westward and northward; the Romagna area goes from Bologna eastwards.

11 Source: data submitted by the Italian authorities.

12 Regulation (EC) No 216/2008 of the European Parliament and of the Council of 20 February 2008 on common rules in the field of civil aviation and establishing a European Aviation Safety Agency, and repealing Council Directive 91/670/EEC, Regulation (EC) No 1592/2002 and Directive 2004/36/EC, OJ L 79, 19.3.2008, p. 1.

13 Commission Regulation (EU) No 139/2014 of 12 February 2014 laying down requirements and administrative procedures related to aerodromes pursuant to Regulation (EC) No 216/2008 of the European Parliament and of the Council, OJ L 44, 14.2.2014, p. 1.

14 In greater detail, the action plan includes: the expansion of the RESA (Runway End Safety Area); the covering of 135 pits in the runway strip; road marking and light tables; light towers; runway edge lights; the construction of a turn pad (direction 31); work on the taxiway.

(ii) to complete the interventions required by the change of status of Rimini airport, from military airport to civil airport. That change brings about the creation of new services for the civil area of the Airport;15

(iii) to renovate the Airport and carry out multiple interventions that had been left aside by the previous airport operator during the years immediately preceding its bankruptcy in 2013 (e.g. renovation of the cargo area and the terminal area; replacement of check-in desks, BHS system and luggage belts, heating and air conditioning systems, and anti-fire system etc.);

(iv) to effectively handle the increase in air passenger traffic experienced in recent years, which is mostly due to AIRiminum’s new business model focused on scheduled flights. Scheduled flights at Rimini airport doubled from 38% in 2015 to 76% in 2019.16 They are expected to grow further over the next few years thanks to the operation of new routes, some of which were already opened in 2020.17 In parallel, the 393 000 passengers recorded in 2019 are expected to increase in the coming years.

(17) In their passenger traffic forecasts, the Italian authorities took into account the negative impacts and uncertainties connected to the current COVID-19 crisis. In 2020, passenger traffic in Rimini airport is expected to decrease by 84.8%. Based on the ACI’s forecast released on 6 July 2020, and taking into account the peculiarities of Rimini airport,18 Italy developed three scenarios: a base scenario; a pessimistic scenario; and an optimistic scenario. Under the base scenario, Rimini airport is expected to return to the level of passenger traffic it saw before the COVID-19 crisis in 2023 and to reach an annual traffic of 831 405 passengers in 2033. Under the pessimistic scenario, the return to the pre-crisis level would happen in 2024 and Rimini airport would count 674 942 passengers in 2033. The optimistic scenario foresees a return to the pre-crisis level already in 2022 and up to 987 868 passengers in 2033.19

(18) According to the Italian authorities, the forecast increase in passenger traffic could not be satisfied by existing unused capacity at other airports. Although Ancona airport is located in the same catchment area as Rimini airport, Ancona airport would be unable to attract that additional passenger traffic that is mostly due to seasonal leisure and business travelers attracted by the touristic and fair

15 AIRiminum needs to carry out a series of electrical wiring installations to make the airport separate from existing military installations.

16 Accordingly, the percentage of charter flights decreased from 62% in 2015 to 24% in 2019.

17 For the years 2021-2024, the Airport has already concluded several multiannual agreements to increase the frequency of existing routes and to open new routes operated by the following carriers: Pobeda; Aeroflot; Ural Airlines; Albawings; Sky Up; Ryanair; and Iran Air.

18 Passenger traffic in Rimini airport is predominantly leisure; non-domestic; originating from destinations outside the Schengen area. The forecast took into account the multiannual agreements already concluded with various carriers (see footnote 17).

19 Figures provided by the Italian authorities, based on AIRiminum’s forecast in the business plan.

activities in the Romagna area.20 The Italian authorities underlined that Ancona airport is located almost at the end of the catchment area of Rimini airport, and that connections between Ancona airport and the Romagna area are mostly unpractical in terms of speed and duration.21 Moreover, as illustrated above (recitals (7)-(10)), Ancona airport is characterised by a different business model and type of traffic.

(19) The planned infrastructural investments will lead to material increase in the Airport capacity, in particular as to passport checks; luggage belts; check-in; and safety lines.22 However, the Italian authorities noted that the need to increase the Airport’s capacity is mostly due to the fact that most passenger traffic at the Airport is highly concentrated in the summer period (in 2019, 72% of yearly passenger traffic took place between May and September) and comes from outside the Schengen area. For instance, the arrival of two flights from outside the Schengen area within half an hour is enough to exceed the current maximum capacity for passport controls.23 In the 2018 and 2019 flight schedules at the Airport, it was frequently the case that as many as four aircraft arrived in the same hour band, especially on Saturdays.

(20) Based on the business plan submitted by AIRiminum for the years 2021-2033, total investments will amount to EUR 47.153 million (discounted value EUR 33 775 867).24 Of that total planned capital expenditure, a nominal EUR 38.353 million (discounted value EUR 27 460 006) are eligible investment costs of economic nature, consisting in interventions on both the departure/arrival terminal and flight operations infrastructures as detailed in Table 1:

20 It is noteworthy that Rimini hosts one of the most important exhibition centres in Italy, where around 2 million visitors arrive every year.

21 The Italian authorities submitted that, despite a distance of 95 km, it can take up to 3 hours to get from Ancona airport to the Rimini Fair (the main exhibition centre of the area) by public transportation (bus/train). On the other hand, the high traffic congestion of the Adriatic Highway A14 makes the road connection between Ancona and Rimini much longer than a one-hour drive. For this reason, if one could not fly from/to Rimini airport, he/she may well consider Bologna airport (which is further in terms of distance, but better connected) as a preferable alternative over Ancona airport.

22 According to estimates calculated by AIRiminum based on the LoS Guidelines of the IATA Airport Development Reference Manual (11th edition), after the planned interventions the peak capacity of the Airport will increase in: a) passport checks, from 211 passengers/hour to 383 passengers/hour on the arrivals air side and from 178 passengers/hour to 350 passengers/hour on the departures air side; b) Schengen arrivals baggage belts, from 263 baggages/hour to 1050 baggages/hour; c) check-in, from 469 passengers/hour to 800 passengers/hour; d) drop-off baggage belts, from 2000 baggages/hour to 4000 baggages/hour; e) safety lines, from 456 passengers/hour to 916 passengers/hour. In addition, two new stands for aircraft and some new parking areas will be created.

23 Current maximum capacity for passport controls is 211 passengers/hour, and in 2018 and 2019 during the summer there were often more than 282 passengers from outside the Schengen area arriving at the Airport within half an hour.

24 AIRiminum will receive a contribution of EUR 3.983 million from ENAC.

Table 1: Eligible Infrastructural Investments 2021-2033 (nominal, in thousands EUR)

COST (in TYPES OF INVESTMENTS thousands EUR) TECHNICAL ADVICE 545 Advice on planning and design 245 Consultancy on Planning and Design — Phase II 300 FLIGHT INFRASTRUCTURES 20.953 Luminous visual aids – electricity supply by operator 100 Runway end safety area extension 1.200 Extraordinary maintenance plan 1.000 Cover of 135 pits in the runway strip 500 Construction of a turn pad at the end of the runway 1.300 Work on the taxiway (drainage and sewage) 850 Runway edge lights 600 New cabin for luminous visual aids 1.183 New aircraft stands for commercial aviation (part 1) 3.700 New aircraft stands for commercial aviation (part 2) 1.070 Refurbishment of cargo infrastructure 500 Road markings and light tables 500 Flagship towers 300 Work on the taxiway (dust strips and gradients) 1.000 Expansion stand commercial air No 2 stands 5.000 Turn-pad direction 13 1.300 Light tower 100 Removal of installations on areas currently occupied by Aeroclubs 20 Airport fencing — military/civil separation 700 Perimeter fence 30 SAFETY OF MACHINES AND LANDSIDE INTERVENTIONS 4.550 Acquisition of new premises 2.000 Ramp facilities 600 New access system 300 New internal road system 250 New entry gate area air side and a new desk of finance 350 Perimeter deposit oil area (airside) 100 Fencing 150 Perimeter fence 150 Video cameras 100 Fuel warehouse 550 TERMINAL 12.305 Modernisation of check-in areas 400 Check-in (counters and wiring) 100 Extension and restructuring of areas for airport operators and airlines 500 Fire system (emergency lights + smoke detection) 450 Baggage Handling System plant 800 New heating and air conditioning system 700 Refurbishment works outside the Schengen area 350 7

Rehabilitation works in the landside (lobby area) 200 Works for the extension of the Schengen area (enlargement and terrazzo tiles) 450 Works for the extension of the Schengen area 300 Baggage belts (trip – purchase of a quarter) 100 Layout upgrading (bathrooms/floors/ceilings/movement of customs offices) 530 Check-in (hardware and software) 300 Desk checks for arrivals (4x2 locations including new technologies) 75 Controls stations (4x2 workstations including new technologies) 50 Enlargement of the Schengen Area 7.000 TOTAL 38.353

(21) The Italian authorities confirmed that the aid will be limited to 31% of the total eligible investment costs (EUR 38 353 000), namely to EUR 12 million to be granted by the Emilia-Romagna Region.

(22) The Italian authorities submitted that they calculated the capital cost funding gap of the investment project within the meaning of point 99 of the Aviation Guidelines. The Italian authorities took into account the expected positive and negative cash-flows, including investment costs, over the lifetime of the assets, considering all the economic activities foreseen by AIRiminum’s business plan covering the period up to 2033.

(23) The Airport’s business plan shows a capital cost funding gap for the economic activities amounting to EUR 14 927 343. Italy underlined that the regional investment aid will not exceed the capital cost funding gap of the project.

(24) For the calculation of the investment funding gap based on discounted values, the applicable discount rate used corresponds to the weighted average cost of capital (WACC) and amounts to 5.52%.

(25) The Italian authorities submitted that certain investments of the Airport associated with air navigation, firefighting, security, police and customs are of non- economic nature. Therefore, in their calculations the Italian authorities distinguished those costs from non-economic activities of the Airport.25

(26) The Italian authorities committed to comply with the rules on transparency set out in points 162 and 163 of the Aviation Guidelines as amended by the transparency communication26 (the “Transparency Communication”). That commitment includes the publication of the relevant information as well as keeping it public

25 Those investment costs related to non-economic activities at the Airport amount to EUR 560 000 distributed as follows: EUR 70 000 for the control room; EUR 70 000 for the access control system; EUR 420 000 for X-ray screening units.

26 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 Sate aid for 2015-2020, 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.

for at least 10 years. The Italian authorities declared that the information will be available to the interested public without restrictions.

(27) The Italian authorities further undertook measures to keep detailed records of the aid measure. Such records will contain all information necessary to establish that the compatibility conditions have been observed, in particular those regarding eligible costs and the maximum allowable aid intensity, where applicable. Those records will be maintained for 10 years from the date on which the aid is granted and will be provided to the Commission upon request.

(28) The Italian authorities committed that the aid will not be cumulated with any other aid for the same eligible expenses.

3. ASSESSMENT OF THE AID

3.1. Existence of aid (29) By virtue of Article 107(1) of the Treaty on the Functioning of the European Union (the “TFEU” or the “Treaty”) “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.”

(30) 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. (31) In the following sections the Commission assesses whether the measure described above meets those cumulative criteria and thus constitutes aid in the meaning of Article 107(1) TFEU.

3.1.1. Notions of undertaking and economic activity

(32) According to settled case law, the Commission must first establish whether AIRiminum is an undertaking 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 financed.27 Any activity

27 Judgment of the Court of Justice of 18 June 1998, Commission v Italy, C-35/96, EU:C:1998:303, paragraph 36; judgment of the Court of Justice of 23 April 1991, Höfner and Elser, C-41/90, EU:C:1991:161, paragraph 21; judgment of the Court of Justice of 16 November 1995, FFSA and Others, C-244/94, EU:C:1995:392, paragraph 14; judgment of the Court of Justice of 11 December 1997, Job Centre, C-55/96, EU:C:1997:603, paragraph 21.

consisting in offering goods and services on a given market is an economic activity.28

3.1.1.1 Undertaking (33) It is settled case law that the operation of an airport, including the provision of airport services to airlines and to the various service providers within airports, is an economic activity.29 The Court of Justice has confirmed that the operation of an airport for commercial purposes and the construction of airport infrastructure constitute an economic activity.30 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 for the purposes of Article 107(1) TFEU.31

(34) The Commission notes that the airport infrastructure and equipment are operated by AIRiminum, the beneficiary of the public funding under assessment. AIRiminum charges airlines, as well as general aviation, fees for the use of the airport infrastructure, and thus exploits the Airport commercially. It follows that the entity operating the Airport constitutes an undertaking for the purposes of Article 107(1) TFEU.

3.1.1.2 Economic activity (35) While AIRiminum constitutes an undertaking for the purposes of Article 107(1) TFEU, not all the activities of an airport operator are necessarily of an economic nature.32

(36) As explained in point 35 of the Aviation Guidelines, activities that normally fall under State responsibility in the exercise of its official powers as public authority are not of an economic nature and do not fall within the scope of the rules on State aid.

(37) However, as stated in point 37 of the Aviation Guidelines, public financing of non-economic activities must not lead to undue discrimination between airports. There is an advantage when public authorities relieve undertakings of the costs

28 Judgment of the Court of Justice of 16 June 1987, Commission v Italy, 118/85, EU:C:1987:283, paragraph 7; judgment of the Court of Justice of 18 June 1998, Commission v Italy, C-35/96, EU:C:1998:303, paragraph 36.

29 Judgment of the Court of First Instance of 12 December 2000, Aéroports de Paris v Commission, T- 128/98, EU:T:2000:290, confirmed by the judgment of the Court of Justice of 24 October 2002, Aéroports de Paris v Commission, C-82/01 P, EU:C:2002:617.

30 Judgment of the Court of Justice of 19 December 2012, Mitteldeutsche Flughafen and Flughafen Leipzig-Halle v Commission, C-288/11, EU:C:2012:821; see also judgment of the Court of Justice of 24 October 2002, Aéroports de Paris v Commission, C-82/01, EU:C:2002:617, and judgment of the Court of First Instance of 17 December 2008, Ryanair v Commission, T-196/04, EU:T:2008:585.

31 Judgment of the Court of Justice of 17 February 1993, Poucet and Pistre, Joined Cases C-159/91 and C-160/91, EU:C:1993:63.

32 Judgment of the Court of Justice of 19 January 1994, SAT Fluggesellschaft v Eurocontrol, Case C- 364/92, EU:C:1994:7.

inherent to their economic activities.33 Therefore, if in a given legal system it is normal that civil airports bear the costs of certain services, whereas some airports providing the same services on behalf of the same public authorities do not have to bear those costs, the latter may enjoy an advantage, even if those services are considered in themselves as non-economic.

(38) Italy has explained that some of the activities related to air navigation, firefighting, security, police and customs fall within the public remit, confirming that the Italian State finances the costs of those activities for all airports in that Member State, in a non-discriminatory manner. The Italian authorities thus excluded the investment costs related to the non-economic activities of the Airport (recital (25)).

(39) The Commission therefore considers the activities related to air navigation, firefighting, security, police and customs to be of non-economic nature.

3.1.2. Use of State resources and imputability to the State

(40) The investment aid for the Airport will be based on a provision included in a regional law, which will be passed by the Emilia-Romagna Region, and granted by administrative acts of the regional Government, which will finance the aid with its own budget (recital (13)).

(41) The aid thus involves State resources and is imputable to the State.

3.1.3. Economic advantage

(42) The public funding provided through the measure under examination reduces the investment costs that AIRiminum would have to bear in the absence of aid. The public funding, therefore, confers an economic advantage on AIRiminum.

3.1.4. Selectivity

(43) 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 public funding in question will be granted to AIRiminum only. The measure is therefore selective.

3.1.5. Distortion of competition and effect on trade

(44) According to settled case law,34 an aid measure may distort competition if the recipient of the aid competes with other undertakings on markets open to competition.

33 See i.a. judgment of the Court of Justice of 3 March 2005, Heiser, C-172/03, EU:C:2005:130, paragraph 36, and case-law cited.

34 Judgment of the Court of First Instance of 30 April 1998, Het Vlaamse Gewest v Commission, T- 214/95, EU:T:1998:77.

(45) Therefore an airport operator that receives public funding obtains an economic advantage, which strengthens its position compared with its competitors on the market of providers of airport services.

(46) The Commission notes that many operators compete for the management of airports infrastructure in the intra-Union market, including local and regional airports. In addition, airport operators compete for air carriers to operate routes from their airports. The investment aid to AIRiminum may thus distort competition in the market for airport infrastructure operation as it reinforces the economic position of AIRiminum, and it may also reduce business opportunities for competing airports.

(47) Therefore the public funding granted by the Emilia-Romagna Region distorts or threatens to distort competition and affects trade between the Member States.

3.1.6. Conclusion on the existence of State aid

(48) For the above reasons, the Commission concludes that the public funding for the planned infrastructural investments at the Airport constitutes State aid within the meaning of Article 107(1) TFEU.

3.1.7. Lawfulness of the aid

(49) Under the standstill clause of Article 108(3) TFEU and Article 3 of Council Regulation No 2015/1589,35 a new aid measure must not be put into effect before the Commission has authorised that measure. The aid measure may be deemed to be put into effect if the legally binding act providing for the aid has been adopted.

(50) The Commission notes that Italy has respected the standstill obligation laid down by Article 108(3) TFEU with regard to the investment aid to Rimini airport and that the Emilia-Romagna Region has not yet adopted the legally binding act providing for the aid.

3.2. Compatibility of the aid 3.2.1 Basis for assessing the compatibility of the aid with the internal market

(51) Article 107(3)(c) TFEU states 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.

(52) With the notified State aid, the Italian authorities intend to provide financial support to Rimini airport for investments in infrastructure and equipment. By means of that investment, the aid will facilitate the development of certain economic activities, namely those carried out by the Airport, as well as of certain economic areas, namely the Romagna area.

35 Council Regulation No 2015/1589 of 13 July 2015 laying down detailed rules for the application of Article 108 TFEU, OJ L 248, 24.9.2015, p. 9.

(53) The Aviation Guidelines provide for principles to assess the compatibility with the internal market of investment aid to airports.

(54) Point 79 of the Aviation Guidelines sets out cumulative common principles with which a State aid measure must comply in order to be compatible with the internal market:

(a) contribution to a well-defined objective of common interest; (b) need for State intervention; (c) appropriateness of the aid measure; (d) incentive effect; (e) proportionality of the aid (aid limited to the minimum); (f) avoidance of undue negative effects on competition and trade between Member States; and (g) transparency of aid. (55) Investment aid granted to airports is compatible with the internal market under Article 107(3)(c) TFEU provided that those cumulative conditions are fulfilled as set out in points 84 to 108 of the Aviation Guidelines. The aid measure must comply also with the transparency criteria set out in points 162 and 163 of the Aviation Guidelines as amended by the Transparency Communication.

(a) Contribution to a well-defined objective of common interest (56) Under point 84 of the Aviation Guidelines, investment aid to airports may be considered to contribute to the achievement of an objective of common interest36 if it (a) increases the mobility of Union citizens and the connectivity of the regions by establishing access points for intra-Union flights; or (b) combats air traffic congestion at major Union hub airports; or (c) facilitates regional development.

(57) According to Italy, the Airport is of great importance for the Emilia-Romagna Region as an access point for intra-Union flights (recital (15)). Rimini airport is the twenty-seventh Italian airport for passenger traffic and the 10th Italian airport for passenger traffic from outside the Schengen area, and has steadily recorded strong growth rates in recent years (recital (3)).

(58) In terms of economic development, the Romagna area is a major touristic destination. The investments planned by AIRiminum will help increase the flow of visitors and improve the quality of transport infrastructures and services in the area (recital (15)).

(59) Therefore the aid contributes to regional development in line with point 84(c) of the Aviation Guidelines.

36 According to settled case law, the Commission may declare State aid compatible only if it is necessary for achieving a legitimate objective (see judgment of the Court of Justice of 17 September 1980, Philip Morris, 730/79, EU:C:1980:209, paragraph 17; judgment of the Court of 15 April 2008, Nuova Agricast, C-390/06, EU:C:2008:224, paragraph 68; judgment of the Court of First Instance of 14 January 2009, Kronoply, T-162/06, EU:T:2009:2, paragraph 65).

(60) Point 85 of the Aviation Guidelines deals with the creation of additional capacity which would contribute to the duplication of unprofitable airports or the creation of additional unused capacity in the same catchment area. In case of investment projects primarily aimed at creating new airport capacity, the Commission must assess whether the investment has satisfactory medium-term prospects for use and does not diminish the medium-term prospects for use of an existing infrastructure in the catchment area. In addition, according to point 86 of the Aviation Guidelines, when the airport is located in the catchment area of an existing airport which is not operating at near or full capacity, the medium-term prospects for use of the airport infrastructure must be demonstrated based on sound forecasts in an ex ante business plan and must identify the likely effect of the investment on the use of existing infrastructure. The catchment area is defined in point 25(12) of the Aviation Guidelines as “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; 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.”

(61) The Commission notes that Ancona airport is in the same catchment area as Rimini airport according to the definition set out in the Aviation Guidelines.37

(62) However, as the Commission stated in its previous decision on the restructuring aid to Ancona Airport,38 the degree of actual competition between Rimini and Ancona airports is limited. The commercial services they provide and their respective business models do not greatly overlap at present, and there are various consistent indications of relatively low substitutability between the two airports. Indeed, they present different operational profiles in terms of configuration and functionality. In particular, there are significant differences in the traffic configuration of the two airports (recital (9)). Based on the figures for passenger traffic at the two airports, nothing indicates that the growth in passenger traffic at one airport has an impact on passenger traffic at the other airport (recital (10)).

(63) The Commission notes that the investment aid for the Airport aims only partially at creating new airport capacity (recital 17 and footnote 22). As illustrated in the business plan submitted by the Italian authorities, the planned investments pursue also three other main objectives: (i) aligning the airport infrastructure with the requirements set out by the EASA certification for aerodromes; (ii) completing the change of status of Rimini airport from military airport to civil airport; and (iii) renovating and modernizing existent airport structures (recital (17)).

(64) The increase in passenger traffic foreseen in the business plan for the upcoming years, once the COVID-19 crisis is over (recital (17)), could not be satisfied by existing unused capacity at other airports. Ancona airport would be unable to

37 As defined in point 25(12) of the Aviation Guidelines: the two airports are located within less than 100 kilometres or 60 minutes travelling time by car, bus, train or high-speed train.

38 Commission decision of 22 February 2019 in case SA.49901 (2017/N) – Italy – Restructuring aid to Aerdorica S.p.A. – Airport Marche/Ancona, OJ C 200, 14.06.2019, p. 1, at paragraph 100.

attract that additional passenger traffic since it is characterised by a different business model and type of traffic (recital (17)). Moreover, transport connections between Ancona airport and the Romagna area are mostly unpractical in terms of speed and duration (recital (18)), so that any traveler would prefer the airport of Bologna over Ancona airport, if he/she could not fly from/to Rimini airport. Finally, Forlì airport is mainly a general aviation airport and does not have scheduled commercial flights (recital (6)). Therefore, the condition of positive medium-term prospects for use of the airport infrastructure is met.

(65) Finally, as Italy submitted, the increase in the Airport capacity is also justified by the fact that most passenger traffic at the Airport is highly concentrated in the summer period and comes from the Extra-Schengen area. As a result, at certain times, current maximum capacity of the Airport is not sufficient to handle the arrival of two Extra-Schengen flights within half an hour with a good standard of quality (recital (19)).

(66) The Commission concludes that the modernisation of the airport infrastructure at Rimini airport meets clearly defined objectives of common interest.

(b) Need for State intervention (67) Point 87 of the Aviation Guidelines stipulates that State aid should be targeted towards situations where such aid can bring about a material improvement that the market itself cannot deliver. Point 89 of the Aviation Guidelines also establishes the categories of airports that have more difficulties in securing financing for their investments without public funding.

(68) Pursuant to point 89(b) of the Aviation Guidelines, airports with annual passenger traffic between 200 000 and 1 million are usually not able to cover their capital costs to a large extent. With an annual passenger traffic of approximately 300 000 passengers in 2017 and 2018 and 393 000 passengers in 2019, the Commission notes that the Airport is well below the 1 million threshold.

(69) The Italian authorities explained that AIRiminum cannot finance the planned investments without public funding, because in that scenario AIRiminum would have to increase its exposure to banks and would potentially incur approximately EUR 5.6 million total losses over the years 2021-2033 (recital (12)). Consequently, the aid is necessary to enable AIRiminum to implement its business plan in a financially viable manner.

(70) This is in line with points 88 and 89 of the Aviation Guidelines, which outline that smaller airports may have difficulties in ensuring the financing of their investments without public funding.

(71) The Commission therefore concludes that there is a need for State intervention.

(c) Appropriateness of the aid measure (72) Pursuant to point 90 of the Aviation Guidelines, Member States must demonstrate that the aid measure is an appropriate policy instrument to achieve the intended objective or resolve the problems intended to be addressed by the aid. An aid measure will not be considered compatible with the internal market if other less distortive policy instruments or aid instruments allow the same objective to be reached. 15

(73) The Italian authorities submitted that the AIRiminum’s ex-ante business plan shows an existing funding gap that is calculated for the economic lifespan of the investments (recitals (22)-(23)). Therefore, they concluded that covering the funding gap with aid granted by the Emilia-Romagna Region is an appropriate manner to finance the investments. The Italian authorities added that AIRiminum could not finance the planned investments only by its own resources and debt capital, with no public funding, because a greater exposure to banks would lead the airport to serious losses (recital (12)).

(74) The Commission therefore concludes that the aid measure is an appropriate policy instrument.

(d) Incentive effect (75) Point 93 of the Aviation Guidelines requires that works on an individual investment have not started before an application has been submitted to the granting authority. Point 94 of the Aviation Guidelines requires that it needs to be verified that the project is not economically attractive in its own right and that the investment would not have been undertaken or would not have been undertaken to the same extent without any State aid.

(76) The Italian authorities confirmed that the application was submitted to the granting authority before the start of works.

(77) Based on the information submitted by the Italian authorities, the Commission further notes that AIRiminum could not implement the submitted business plan for the years 2021-2033 in its entirety without the grant from the Emilia-Romagna Region covering part of the project cost. The net present value of the investment project is indeed negative, so that it is not economically attractive in its own right.

(78) The Commission therefore concludes that the aid has an incentive effect for AIRiminum that would not undertake the investment without the aid in question.

(e) Proportionality of the aid amount (aid limited to the minimum) (79) State aid is deemed to be proportional if its amount is limited to the minimum needed to induce the additional investment or activity in the area concerned.

(80) Point 97 of the Aviation Guidelines states that the maximum permissible amount of State aid must be expressed as a percentage of the eligible costs (the maximum aid intensity). The eligible costs are the costs relating to the investments in airport infrastructure, including planning costs, ground handling infrastructure (such as baggage belt etc.) and airport equipment. Point 101 of the Aviation Guidelines specifies that the maximum permissible aid intensity for airports with less than 1 million passengers is 75% of the eligible costs.

(81) As listed in recital (20), the aid will support investments in airport infrastructure and airport equipment within the meaning of point 97 of the Aviation Guidelines. The investments are not related to non-aeronautical activities.

(82) As the Airport has fewer than 1 million passengers per year (recital (3)), the maximum aid intensity is 75% of the eligible costs; the beneficiary itself must make at least a 25% contribution.

(83) As the investment aid is limited to 31% of the eligible costs (recital (21)), the investment aid complies with the maximum intensity for investment aid set out in points 101, 102 and 103 of the Aviation Guidelines.

(84) Point 99 of the Aviation Guidelines maintains that in cases where no specific alternative project/activity is known that the beneficiary would have undertaken if it had not received the aid, in order to be proportionate, the amount of the aid should not exceed the capital cost funding gap of the investment project. That gap is determined on the basis of an ex ante business plan as the net present value of the difference between the positive and negative cash flows, including investment costs, over the lifetime of the investment. For investment aid, the business plan should cover the period of the economic utilisation of the asset.

(85) In the case at hand, no alternative project/activity is known that would have been undertaken without the aid. In the absence of aid, AIRiminum would not be able to make the necessary investments (recital (12)).

(86) The aid amount of EUR 12 million does not exceed the capital cost funding gap of the project of EUR 14 927 343 (recital (23)).

(87) Therefore, considering that the aid does not exceed the capital cost funding gap, nor the maximum permissible aid intensity, the Commission concludes that the investment aid is proportional.

(f) Avoidance of undue negative effects on competition and trade between Member States (88) The negative effects of the aid must be sufficiently limited, so that the overall balance of the measure is positive.

(89) Point 106 of the Aviation Guidelines specifies that in particular the duplication of unprofitable airports or the creation of additional unused capacity in the catchment area of existing infrastructure might have distortive effects.

(90) Ancona airport is in the same catchment area as Rimini airport for the purposes of the Aviation Guidelines (recital (6)).

(91) However, the Commission notes that the degree of actual competition between Rimini and Ancona airports is limited, and there are various consistent indications of relatively low substitutability between the two airports (recital (62)).

(92) The measure does not lead to any duplication of unprofitable airports and also does not create additional unused capacity in an existing airport’s catchment area (recital (63)).

(93) Point 108 of the Aviation Guidelines specifies that in order to further limit any distortions, the airport, including any investment for which State aid is granted, must be open to all potential users and not be dedicated to one specific user.

(94) Italy confirmed that Rimini airport is, by its very nature, open to all users and it is not dedicated to one specific user (recital (4)).

(95) Based on the above, the Commission concludes that the investment aid to AIRiminum has no undue negative effects on competition and trade between Member States.

(g) Cumulation of aid (96) Pursuant to point 159 of the Aviation Guidelines, aid authorised under the Aviation Guidelines may not be combined with other State aid, de minimis aid or other forms of Union financing, if the combination results in higher aid intensity than the one laid down therein.

(97) The Italian authorities confirmed that the investment aid granted under the Aviation Guidelines will not be cumulated with other aid (recital (28)).

(98) The Commission therefore concludes that the conditions on the cumulation of aid under the Aviation Guidelines are met.

(h) Transparency (99) Under section 8.2 of the Aviation Guidelines as amended by the Transparency Communication, the Member States, the Commission, economic operators and the public shall have easy access to all relevant acts and to pertinent information about the aid granted. Point 162 of the Aviation Guidelines sets out specific criteria for the publication of the relevant information. Point 163 of the Aviation Guidelines requires Member States to ensure that detailed records are kept of all measures involving the granting of State aid.

(100) The Italian authorities committed to observe the transparency requirements (recitals (26) to (27)).

(101) The Commission therefore concludes that the aid is transparent within the meaning of the Aviation Guidelines.

(i) Conclusion (102) In light of the foregoing, the Commission considers that the investment aid to Rimini airport fulfils the compatibility conditions set out in the Aviation Guidelines.

(103) The investment aid measure is thus compatible with the internal market under Article 107(3)(c) TFEU.

4. CONCLUSION

The Commission has accordingly decided not to raise objections to the aid 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.

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 Competition State Aid Greffe B-1049 Brussels [email protected]

Yours faithfully,

For the Commission

Margrethe VESTAGER Executive Vice-President