Notification of the traffic distribution rule for Lelystad Airport and Schiphol, the Netherlands

1. INTRODUCTION

Having regard to article 19 (3) of Regulation (EC) no. 1008/2008 (‘the Regulation’), the Netherlands’ Minister of Infrastructure and Water Management hereby notifies the European Commission of her intention to distribute air traffic between Lelystad Airport and Schiphol.

This notification first explains the need for the proposed traffic distribution rule. It then considers the substantive aspects of the measures and looks at their main features. An explanation is then provided of the rules’ compliance with article 19 of the Regulation. Finally, in accordance with article 19 (3) of the Regulation, the European Commission is requested to examine and approve the proposed measure.

2. NEED FOR TRAFFIC DISTRIBUTION RULE

A. EU hubs

The presence of several major hubs on EU territory is of great economic and strategic importance. The European Commission (‘the Commission’) recognises their importance in its external aviation policy,1 partly in view of the competition from Dubai and other rapidly growing hubs. Brexit will probably only increase the importance of strong EU hubs.

B. Schiphol

Schiphol is one of the biggest hub airports in the EU and provides both the Netherlands and northwest Europe with access to a highly sophisticated continental and intercontinental route network that is a pillar of the Dutch and the regional economy. The statistics provided in paragraph 3 of the explanatory memorandum illustrate this importance of Schiphol as a hub.

Schiphol’s extensive continental and intercontinental route network underpins the national economy, creates jobs and attracts international enterprises to the Netherlands. The annual added value of Schiphol’s mainport function to the

1 The EU's External Aviation Policy - Addressing Future Challenges, COM (2012) 556 final of 27.09.2012.

AVT18/IW126397A 1

Netherlands alone has been calculated at approximately €9 billion, and 114,000 jobs are directly or indirectly related to the airport.2

The Commission stated in its Aviation Strategy for Europe that aviation was a strong driver of growth, jobs, trade and the economy. A 10% increase in air connectivity adds 1% to gross domestic product; a 10% increase in the supply of intercontinental flights results in a 4% increase in the number of headquarters of large firms, and one euro of added value in the aviation industry creates nearly three euros of added value in the economy as a whole. Finally, a job in the aviation industry generates more than three jobs in other sectors.3

A European route network from Schiphol serving continental and intercontinental destinations is essential to retain and develop this strong EU hub. Schiphol’s hub function is a vital public interest that must be maintained and strengthened.4

Doing so is important given the hub’s vulnerability to a decline in the continental and intercontinental route network. This vulnerability is due more specifically to: a. the Netherlands’ small domestic market for intercontinental and transfer traffic; b. this traffic’s reliance on Schiphol’s physical and logistical infrastructure, for which there is no alternative in the Netherlands; and c. its very limited ability powers of recovery; if an airport loses its hub function, the negative impact on seat capacity and frequencies is felt for many years.

The abovementioned reasons that underlie Schiphol’s vulnerability as a hub areelaborated in paragraph 5 of the explanatory memorandum.

C. Scarcity and pressure on the network

Schiphol has experienced strong growth in recent years. The agreed environmental ceiling of 500,000 flight movements until 2020 has nearly been reached. The airport’s design and traffic management system are complex and the growth has brought the limits of safe traffic management into view.5 Runway use is regulated by a preferential runway use system. Different runway combinations need to be used depending on the circumstances, chiefly wind speed and direction, but also cloud cover and visibility. The increase in the number of flight movements at Schiphol is making it harder to manage the traffic in all circumstances and change runway combinations ‘smoothly’, and there is less capacity to mitigate disruptions. Furthermore, there are limits on the airspace and substantial investments must be made in the airport infrastructure to handle the increase in traffic and passenger numbers responsibly and safely. It must be emphasized that these investments themselves do not make growth possible, but are preconditions for this.

2 Directly and indirectly upstream; the downstream impact or the wider economic impact is not taken into account. Economic Importance of Mainport Schiphol. Analysis of direct and indirect relations, Decisio (2015). 3 The Aviation Strategy of the European Union (speech by DG Mobility and Transport, European Commission, 2016). 4 Schiphol Action Agenda (2016). 5 Air Traffic Safety at Schiphol (Dutch Safety Board, 2017).

AVT18/IW126397A 2

In this light, traffic at Schiphol must be developed selectively, with available capacity being used wherever possible by the traffic that contributes the most to Schiphol’s hub operation in order to retain the Netherlands’ and the EU’s global connectivity. These handling and operational limits, together with the environmental limits, mean that Schiphol cannot grow beyond 500,000 flight movements per year until the end of 2020. This ceiling has already nearly been reached. As a consequence, the scope to retain and develop Schiphol’s continental and intercontinental hub function is coming under enormous pressure.

At the end of 2018, discussions have been conducted at the Schiphol Airport Environment Council (ORS) about the growth at Schiphol. The parties involved did not reach a compromise, not even with regard to a possible growth to 510.000 aircraft movements. On the basis of the report from the chairman of the ORS, and in the context of the White Paper on Dutch Aviation, the available capacity at Schiphol airport will be clarified in the upcoming year (2019).

The current and future scarcity at Schiphol is also explained in section 4 of the explanatory memorandum to the traffic distribution rule.

D. Package of measures

Political and public support for growth and the technical potential to increase capacity from approximately 440,000 to 500,000 flight movements has arisen in the past decade as part of an overall package of measures that can be regarded as a balanced approach within the meaning of EU Regulation 598/2014. Plans for the further development of Schiphol have therefore been given form and substance and a balance has been struck between the further growth of the sector and local safety. The measures had their origin in the Alders Agreement of 2008 and were re-affirmed in the White Paper on Dutch Aviation (2009), the Schiphol Action Agenda (2016) and the coalition agreement (2017). The measures are inseparable from each other and should be implemented as a coherent package. The package was agreed by the relevant parties: representatives of local residents, the sector, umbrella organisations and public authorities.

Measures that have already been implemented include a new standards and enforcement system to protect local residents that is less complex and easier to understand. An operational concept is also employed which involves preferential runway use based strictly on noise levels. In addition, environmentally friendlier flight procedures and fixed flight paths have been introduced. Significant investments have also been made to reduce nuisance and improve the quality of life around Schiphol. Finally, it is of importance that the quality of Schiphol’s network has been strengthened by the creation of additional regional capacity at Lelystad Airport (45,000 flight movements) and Eindhoven Airport (25,000 flight movements).

As the upper limit of 500,000 flight movements at Schiphol was already reached in 2018, the package of measures based on the 2008 Alders Agreement must be further implemented and developed. This will include: a. long-term aviation strategy (Aviation 2020-2050 policy document)

AVT18/IW126397A 3

b. safety measures (e.g. implementation of the recommendations by the Dutch Safety Board (OVV)) c. airspace measures (e.g. airspace revision) d. operational measures (e.g. more efficient use of the runways) e. nuisance abatement measures (e.g. by using 50% of the environmental gain to reduce nuisance to local residents) f. sustainability measures (e.g. via tariffs, taxes and subsidies) g. selectivity measures (e.g. via traffic distribution rules)

E. Selectivity policy

The aviation sector has several subsectors (such as in particular transfer traffic and point-to-point traffic). Each of them needs its own operational conditions and facilities to function. Owing to the physical requirements (e.g. runway length) and logistical requirements (e.g. transfer options and baggage system), intercontinental traffic and the associated transfer passengers can only be handled in the Netherlands at Schiphol.

This crucial subsector for the Dutch and European economy is under pressure due to scarcity at Schiphol. The only way to offer the various subsectors capacity – in line with the EU’s external aviation policy – is to use the existing scarce capacity as efficiently as possible and to create additional capacity elsewhere in order to distribute the traffic selectively. This selectivity policy has created additional regional capacity in recent years to accommodate traffic that does not need the conditions and facilities at Schiphol.

A central aspect of the 2008 agreements on the development of Schiphol is that Lelystad Airport will be developed as an overflow airport with a maximum capacity of 45,000 flight movements. The additional capacity at Lelystad Airport will be dedicated to point-to-point traffic. Lelystad Airport will be open from 06.00 to 23.00 hours local time, with regulations providing for an extension to 24.00 hours. The airport does not have the infrastructure necessary to accommodate cargo flights or widebody aircraft or flights from destinations with 100% customs checks. The airport will be developed by the Schiphol Group on a commercial basis, without financial support from the government.

Additional capacity of 25,000 flight movements has also been agreed for Eindhoven Airport. This capacity is already almost fully utilised. Maastricht Aachen Airport and Groningen Eelde Airport still have some spare capacity to meet the demand for large commercial traffic. A decision on the possible provision of additional capacity for large commercial flights at Eindhoven Airport and Rotterdam The Hague Airport, and on what conditions, will be taken in 2019 as part of the Aviation 2020-2050 policy document.

The Schiphol Group’s incentive policy encourages point-to-point traffic that is distributed from Schiphol to use the products, services and facilities of the regional airports. Eindhoven Airport cannot form a traffic distribution system with Schiphol because it does not meet the legal requirement that it serve the same urban agglomeration and provide the same accessibility within a given time period (as a result of which Lelystad Airport is the only alternative as an overflow airport for Schiphol). Moreover, the Schiphol Group’s policy over the past five years has been ineffective. Most of the additional capacity created at Eindhoven

AVT18/IW126397A 4

Airport is being used for traffic that has not been distributed from Schiphol. The incentives to use Schiphol’s capacity selectively and for transfer traffic when Schiphol had sufficient growth potential were also inadequate. Because of reaching the ceiling at Schiphol this is different now. Lelystad Airport will be developed specifically to relieve Schiphol of traffic that is not strictly reliant on it.

F. Traffic distribution rule

In the light of the above, rules to distribute traffic between Schiphol and Lelystad Airport are necessary to ensure that Lelystad Airport is used as an overflow airport for Schiphol. Lelystad Airport is accordingly being transformed into an airport for large commercial traffic. The traffic distribution rule is one of the instruments in the overall package of measures to implement the selectivity policy effectively.

In general terms, traffic distribution rules distribute air traffic between two or more airports that serve the same urban agglomeration. In the specific case of Schiphol and Lelystad Airport, the rules comprise the following two elements:

1. Lelystad Airport’s capacity up to 25,000 slots will be provided with priority to traffic distributed from Schiphol. After three years an evaluation of the workings of the traffic distribution rule will be conducted. Based on this evaluation, and after approval by the European Commission, the slots between 10,000 and 25,000 at Lelystad Airport will also be distributed with priority to traffic originating from Schiphol; 2. the capacity released at Schiphol as a result of the rules will be used exclusively by transfer traffic.

The traffic distribution rule will thus contribute to the two airports’ specialisation in their respective subsectors. Lelystad Airport will serve as the ‘overflow airport’ for Schiphol and accommodate point-to-point flights distributed from Schiphol so that Schiphol has sufficient capacity for the traffic that contributes most to its continental and intercontinental connectivity and hub function. Traffic that is the least reliant on Schiphol and does not necessarily support its hub function, point- to-point traffic, will be accommodated at Lelystad Airport. The selectivity policy will be the most effective if capacity at Lelystad Airport is provided with priority to traffic that does not rely on Schiphol’s hub function.

It should be noted that the traffic distribution rule do not force air carriers to relocate their flights from Schiphol. They create the legal conditions but the market itself must implement the rules by means of the incentive policy. The rules are voluntary and rely on market forces in so far as possible.

3. Compatibility with article 19

General

The previous section considered the Netherlands’ selectivity policy. Traffic distribution rules have been drawn up to implement the policy. Under article 19 of Regulation (EC) no. 1008/2008 (‘the Regulation’), member states may regulate the distribution of air traffic between airports. The Commission has explained the scope of this article in several decisions. Regarding the regulation of air traffic

AVT18/IW126397A 5

distribution, as referred to in article 8 (1) of Regulation (EEC) no. 2408/92, the Commission stated:

‘By allowing Member States to distribute traffic between the airports of an airport system, Article 8(1) of Regulation (EEC) No 2408/92 recognises in principle the legitimacy of an active airport planning policy which complies with the general principles of Community law. Such a planning policy may have regard to a large range of factors considered by the competent authorities to have priority. The concrete measures which must be taken for the implementation of airport planning policy may also differ from one airport system to another. All those implementing measures will, if they are to be effective, restrict to some extent access to the individual airports of the system. It would be inconsistent with those considerations if the scope of Article 8(1) were determined in such a way as to exclude a priori the possibility of pursuing a specific airport policy for a given airport system. For example, a Member State may legitimately wish to promote the development of one airport of an airport system at the expense of the other airports located therein. In such a case, the imposition of restrictions on access to those other airports alone may constitute a reasonable means of pursuing that objective. The Commission therefore takes the view that the scope of Article 8 (1) cannot be restricted to schemes which allocate different types of air services to the airports of an airport system on a mutually exclusive basis.’6

This passage, which is endorsed in full by the Dutch authorities, allows member states to pursue an active airport planning policy. Member states can therefore take account of many different factors that, according to the competent authorities, deserve to be given priority. Hence, as a member state, the Netherlands in principle enjoys policy freedom. This has led to the Netherlands’ selectivity policy considered in the previous section. The selectivity policy is an active planning policy, as referred to above. The Netherlands’ selectivity policy strengthens Schiphol’s hub function by distributing point-to-point traffic to Lelystad Airport and so freeing up capacity at Schiphol for hub-related traffic. It bears repeating that the Netherlands’ policy is to have Lelystad Airport facilitate the development of Schiphol and its hub function.

To pursue this policy, the Netherlands may take measures that restrict access to its airports in some measure. As the above passages show, this inherent feature of traffic distribution rules is necessary for the rules to be effective.

It goes without saying that traffic distribution rules must comply with the requirements set in the Regulation. Each of the requirements is considered below. Section i below considers the relationship with Regulation (EEC) no. 95/93 (the Slot Regulation). a. Consultation

The first draft of the traffic distribution rule was the subject of public, internet- based consultation between 8 November 2017 and 6 December 2017, followed by a new internet consultation of the current draft between 17 January and 7

6 Commission Decision of 14 March 1995 (95/259/EC), L 162/25. This is also repeated in Commission Decision of 21 December 2000 (2001/163/EC), L 58/29.

AVT18/IW126397A 6

February 2019. All stakeholders were informed and asked to participate publicly or privately in the consultation.

Both air carriers and airports, amongst others, took part in the consultation.

Consultation November-December 2017 The main concerns regarding the traffic distribution rule to emerge from the consultation at the end of 2017 were: 1) their proportionality in relation to the limited capacity at Lelystad Airport restricting the air carriers’ business opportunities, 2) their possible discriminatory impact regarding the type of traffic and the identity of the air carriers, and 3) the distortion of market forces.

Further to the consultation, the traffic distribution rule of 2017 was revised in a number of areas. The compulsory element, the prohibition on serving destinations from Schiphol at certain times, was scrapped. This overcame the objections of some carriers that they were being forced to serve certain destinations from Lelystad Airport while Lelystad did not suit their business model. The rules still regard Lelystad Airport as the overflow airport for Schiphol but they do not oblige air carriers to leave Schiphol. They therefore make more allowance for the air carriers’ own considerations.

The former traffic distribution rule was notified to the European Commission on 12 July 2018. Contact and consultation with the European Commission clarified that the traffic distribution rule would not be approved in that form. That is why it was decided to withdraw it, to make a new design and to consult it. This was accompanied by extensive consultations with interested parties.

Consultation January-February 2019 During the public consultation of the current draft traffic distribution rule, the parties also gave its input to the revised version of the rules. Based on the latest input, various adjustments have been incorporated into the traffic distribution rule in order to meet the objections of the parties. These adjustments are:

 The traffic distribution rule contains an anti-misuse provision to ensure that a slot that has once been designated as a transfer slot ("earmarked" on the basis of the rule) cannot replace a slot that was previously used for transfer flights and then use the replaced slot for a point-to-point destination. The anti-misuse provision stipulates that this replaced slot must be used for transfer flights.  Flights from certain destinations require a 100% customs control upon arrival in the Netherlands. These are so-called “risk flights” and are designated as such by the Minister of Justice and Security. It is also stipulated in Dutch law that flights from these destinations must be accommodated at Schiphol Airport. Therefore, flights to these destinations can also be served on relinquished slots at Schiphol Airport (also if they do not meet the 10% threshold).  A clarification has been added to the rules, explaining that an air carrier can suffice with information relating to the air carrier in question (instead of all air carriers combined) to substantiate the transfer share of a new destination.

AVT18/IW126397A 7

b. Accessibility and infrastructure

Regarding the location and accessibility requirements, both Schiphol and Lelystad Airport serve Amsterdam and the Randstad conurbation. The distance from Amsterdam to Lelystad Airport via the A6 motorway is 57 kilometres. This distance can easily be travelled within the 90-minute time limit set in the Regulation. Lelystad Airport and Schiphol are connected to each other and to Amsterdam by public transport. The journey time by train between Lelystad Central Station and Amsterdam Central Station is 38 minutes, and that between Lelystad Central Station and Schiphol is 42 minutes. The journey from Lelystad Central Station to Lelystad Airport takes 15 minutes by bus. A shuttle bus service between Lelystad Central Station and Lelystad Airport with a journey time of 10 minutes will be introduced when Lelystad Airport is opened. Depending on the airport’s flight schedules, the shuttle bus will depart every 30 minutes.

It can also be noted in this connection that it has already been decided to widen the A6 motorway to Lelystad Airport from two to three lanes and build an exit to the airport as from 2021.

The Dutch authorities wish to emphasize that the required transportation services will be provided for to ensure that passengers have sufficient connection options with their flight. Understandably, not all of these transportation services are available at the moment, since Lelystad Airport is not yet open for commercial traffic. The necessary infrastructure, such as a railway connection, is already in place. Lelystad Airport will confer with public transport companies. Schiphol and, if applicable, with air carriers to guarantee that the airport is accessible by public transport in order that passengers can reach the airport in time for the first flight of the day. The Ministry of Infrastructure and Water Management will support this process. In any case, adequate infrastructure will be in place when Lelystad Airport opens for commercial traffic and the traffic distribution rule enters into force in order for passengers to reach the airport in time for the first flight, both by public and private transport. c. Necessary services

The airports must also provide the necessary services. Air Traffic Control the Netherlands (LVNL) will be responsible for air traffic control at Lelystad Airport. The airport will also provide ground handling and passenger handling services. The runway will be 2,700 metres long (including the runway end safety area). Under the Lelystad Aviation Order, 2,400 metres of this total will serve as the take-off runway and 2,100 metres as the landing runway. As the runway will be 45 metres wide, the airport will be suitable for ICAO/EASA CAT C traffic and, in particular, for special aircraft such as the Boeing 737 and Airbus A320 and A321. Four positions will be available for these aircraft. Air carriers will therefore be able to offer their services from Lelystad Airport. Lelystad airport will not be open to night flights. The airport does not have the facilities necessary to handle cargo flights or widebody intercontinental flights.

AVT18/IW126397A 8

d. No undue prejudice to commercial opportunities

First of all, air carriers are under no obligation to relocate their operation from Schiphol to Lelystad Airport. Air carriers can consider for themselves whether such a relocation suits their commercial plans. To avoid unnecessarily impeding air carriers’ operations, all destinations may be served from Lelystad Airport (this is in contrast with the draft version of the traffic distribution rule that was consulted in 2017); there is no (limitative) list of destinations for Lelystad Airport. Air carriers may operate to any destination from Lelystad Airport. They may operate throughout Lelystad Airport’s opening hours, i.e. from 06.00 to 23.00 hours local time, with an extension to 24.00 hours if necessary in unforeseen circumstances.

The traffic distribution rule provides for the possibility for air carriers to develop new routes. When an air carrier can substantiate that it will serve a (new) destination from Schiphol with flights with a share of at least 10% transfer passengers, such a destination will be deemed to be part of the list with transfer destinations. The commercial opportunities of an air carrier will thus be respected without detracting from the goal of the rules.

The selectivity policy was drawn up within the scope allowed to member states to pursue an active airport planning policy subject to the set priorities. This restriction is compatible with the wording of the Regulation, which refers only to unduly prejudicing commercial opportunities. It may also be noted, as the Commission has explained in its decisions, that traffic distribution rules always entail a certain restriction on market access.7

With regard to new entrants, it is noteworthy to mention that the Slot Regulation, which will apply at Lelystad Airport from its opening for commercial traffic, carries with it certain guarantees for the position of such new entrants. Within the context of these traffic distribution rules the rules of the Slot Regulation will be applied first. Only in case of equal priority under the Slot Regulation priority will subsequently be given to traffic originating from Schiphol.

Regarding new entrants, capacity that becomes available at Schiphol in addition to the 500,000 flight movements per year, although the possibilities are limited as described, is not subject to the traffic distribution rule. There is no constraint on the attainment of such capacity. In such instances the Slot Regulation again provides a position for new entrants. Capacity that otherwise becomes available, for instance if carriers give up their position without moving to Lelystad Airport, will also be available to new entrants. On the whole, therefore, new entrants will have access to the Dutch market. e. Non-discrimination

Traffic distribution rules may not discriminate on the grounds of the air carriers’ nationality and identity or by destination.

Regarding discrimination among air carriers, the proposed traffic distribution ruleis based on objective criteria that are not related to the identity or nationality of air carriers. In other words, the criteria apply equally to all air carriers

7 See for example, Commission Decision of 14 March 1995 (95/259/EC), L 162/25.

AVT18/IW126397A 9

regardless of their nationality or identity. No exceptions from this rule are made for any individual or category of air carriers.

Hence there is in any event no direct discrimination. Previous decisions by the Commission8 have considered whether traffic distribution rules are discriminatory in practice, in other words whether there is indirect discrimination. This, too, is not the case. A distinction is first made by destination based on the average transfer percentage of flights to a particular destination. All flights to a given destination will be classified as either point-to-point flights or transfer flights, regardless of which carrier operates the flight. All carriers that serve a particular destination will therefore be in the same position. Secondly, under the traffic distribution rule, relocation from Schiphol to Lelystad Airport is voluntary. Carriers will not be forced to move their operations. They will decide for themselves. The traffic distribution rule are therefore not more disadvantageous to some carriers than to others.

A distinction is made by destination based on objective criteria that are directly related to strengthening Schiphol’s hub function. The criteria will be applied equally to each destination in pursuit of a legitimate goal: strengthening Schiphol’s hub function and network quality, which is considered in detail elsewhere in this letter. Moreover, the traffic distribution rule does not contain an absolute prohibition on serving certain destinations from Schiphol. Every destination can therefore retain its connection with Schiphol. This distinction is based on objective criteria and is non-discriminatory.

The Dutch authorities would like to focus on a specific type of distinction that has attracted the attention of several stakeholders. This is the distinction between air carriers that are part of a group on the one hand and air carriers that are not part of such a group on the other hand. The concern that was expressed during the consultation was that air carriers that are part of a group would benefit from the traffic distribution rule since these carriers have more possibilities with the mobility of their slots. This is even more so the case when it is possible within a group to use slots for both point-to-point and transfer flights. The Dutch authorities would like to state that such a benefit is a direct result of the Slot Regulation. The Slot Regulation explicitly allows air carriers to transfer slots between the parent and subsidiary companies. Next to this, the current version of the traffic distribution rule contains an anti-misuse provision to guarantee that a slot that has been “earmarked” under the traffic distribution rule as a transfer slot cannot replace a slot that was used in the first place for a transfer flight, but subsequently deployed for a point-to-point destination. The anti-misuse provision regulates that such a replaced slot needs to be used henceforth for transfer flights.

Finally, without prejudice to the above, the Dutch authorities would like to stress that making a distinction does not entail discrimination in and of itself, not even if a measure affects some stakeholders more than others. An important principle in law is that a distinction must be objectively justifiable. It must be appropriate, necessary and proportional to achieve a legitimate goal. The Dutch authorities have no doubt that strengthening Schiphol’s network quality and hub function is a legitimate goal. For brevity’s sake, reference is made to those sections of this letter that specifically consider necessity and proportionality. The distinction made

8 See for example, recital 49 of Commission Decision of 21 December 2000 (2001/163/EC), L 58/29.

AVT18/IW126397A 10

by the traffic distribution rule is linked directly to the goal of strengthening Schiphol’s hub function. f. Proportionality

The scope of the measure must not extend further than necessary to achieve the legitimate goal that underlies it. Less radical measures to achieve the same result, moreover, must not be available.

With regard to the possible use of less radical measures, Lelystad Airport is being developed to accommodate traffic that is not necessarily reliant on Schiphol, thus releasing capacity at Schiphol for the benefit of the hub function. This active airport policy has been drawn up because Schiphol has only limited ability to create additional capacity itself and, as explained above, is currently operating at full capacity.

In brief, the Netherlands’ active airport policy reserves capacity at Lelystad Airport for traffic distributed from Schiphol. This requires a formal government measure. Without such a measure, Lelystad Airport’s capacity would be available to all traffic, including traffic that has not been distributed from Schiphol. There would then be a risk of the same scenario arising as that at Eindhoven Airport, where organic growth prevented it from contributing to the selectivity policy.

The same is true of Schiphol. If a formal government measure does not require the capacity released by relocation to Lelystad Airport to be used in a particular way, the operator is unable to allocate it for that use. As a result, the capacity released at Schiphol could be used by traffic that does not contribute to Schiphol’s hub function. This is at odds with the selectivity policy.

The traffic distribution rule address the above points in a transparent and non- discriminatory manner and are therefore an appropriate and necessary means to implement the selectivity policy.

In the initial years, the number of flights distributed to Lelystad Airport may seem modest in relation to the 500,000 flight movements at Schiphol but the scarcity at Schiphol is so great that any capacity released for hub-related traffic is welcome. The number of flights concerned in the initial years will make an undeniable positive contribution. The restrictions imposed by the traffic distribution rule, moreover, will not extend further than the number of flights that can be handled at Lelystad Airport. With a relatively small contribution in terms of the number of flights, the traffic distribution rule entails a correspondingly small limitation. The contribution to the hub function and the limitation are thus directly proportionate to each other.

The traffic distribution rules’ scope is no greater than necessary. They restrict only the use of the additional capacity released at Schiphol under the rules. They do not apply to an increase in Schiphol’s capacity beyond 500,000 flight movements, for example by tightening standards and strict noise preferential runway use For proportionality purposes it is particularly important that the traffic distribution rule is based on the voluntary relocation of air carriers to Lelystad Airport. Air carriers will not be forced to move all or part of their operations to Lelystad

AVT18/IW126397A 11

Airport or be forced into a situation that is unworkable for them or does not suit their business model. They themselves will decide whether a move to Lelystad Airport would be workable for them and commercially attractive.

Finally, two aspects were incorporated into the traffic distribution rule that are of particular importance to the proportionality of the rules. Firstly, Lelystad Airport will be a slot coordinated airport from its opening.The rules from the Slot Regulation will be applied first and afterwards the priority rule from the traffic distribution rule. In such a manner the traffic distribution ruleis aligned with the EU framework that is in place for the distribution of capacity at an airport. Secondly, after the first 10,000 flights an evaluation will be conducted, after which – by approval of the European Commission - the rule applies to 25,000 flights. The reach of the rules is thus initially limited and consequently more proportional. g. Objective criteria

The traffic distribution rules contain only objective criteria that apply equally to all air carriers and all destinations. The criteria are also related directly to the legitimate goal of distributing point-to-point traffic to Lelystad Airport in order to release capacity at Schiphol for transfer traffic that contributes to the hub function.

The most essential criterion is the transfer percentage. The Dutch authorities therefore want to give this element specific attention. Firstly, the transfer percentage is directly related to Schiphol’s hub function. Passengers transfer from one flight to another at a hub airport, making the transfer percentage a relevant criterion. Secondly, the level of the chosen transfer percentage is relevant. The goal is to distinguish between transfer flights and point-to-point flights. The percentage therefore needs to be at a sufficient level in order to be effective. At the same time consideration must be given to the impact that a transfer percentage has on the air carriers in question. A balance needs to be struck between the ability to be effective on the one hand and the (negative) impact such a transfer percentage as a threshold has on air carriers. Within this context a quantitative study on the impact of different transfer percentages on air carriers were commissioned by the Dutch authorities. On the basis of this information the Dutch authorities have chosen for a transfer percentage of 10%. In the view of the Dutch authorities a balance is found at this percentage between the goal of the traffic distribution rule and the impact this rule may have on air carriers. h. Transparency

Under national law, the traffic distribution rule is laid down in an order in council and a ministerial order. In accordance with national regulations, orders in council are published in the Bulletin of Acts and Decrees before they enter into force. Ministerial orders are published in the Government Gazette before they enter into force. Both the Bulletin of Acts and Decrees and the Government Gazette are publicly available. Destinations are designated every two years in accordance with the criteria set in the traffic distribution rule. The destinations will be published in a schedule to the ministerial order.

AVT18/IW126397A 12

In the context of transparency it can further be noted that - as explained under a - a public consultation has taken place. All stakeholders have been able to take cognizance of the design and have been given the opportunity to respond to it through a public or confidential response. i. Relationship with the Slot Regulation

The traffic distribution rule may not contravene the Slot Regulation. The Dutch authorities consider Regulation no. 1008/2008 and the Slot Regulation to be two complementary regulations, whereby one does not prevail over the other.

The following is important for a proper understanding of the relationship between the traffic distribution rule on the one hand and the Slot Regulation on the other. The allocation of slots is legally distinct from the ability to exercise traffic rights under Regulation no. 1008/2008. The Commission’s stance in this respect is as follows:

“On air slots, the Commission considers that air slot allocation, which is covered by Council Regulation (EEC) No 95/93 (4), is legally distinct from the question of granting of traffic rights, which is covered by Regulation (EEC) No 2408/92. Consequently, an airline's application for traffic rights may not be refused for the simple reason that the airline does not have the necessary air slots to be able to provide the service covered by the application. Knowing or not knowing whether an airline has the appropriate air slots therefore has no bearing on the matter and airlines must therefore not be asked to provide this information. Similarly, a carrier who has, or can obtain, the slots he needs to operate a given service may not assume that this authorizes him to exercise traffic rights in respect of the service.’ […].”9

The proposed traffic distribution rule work in exactly the same way. Although they affect the use of slots, they do not interfere in any way in the slot allocation process. It is important to bear in mind the distinction between the distribution on the one hand and the use of slots on the other.The Slot Regulation will continue to be applied in full when the proposed traffic distribution rule enters into force.

In the current draft of the traffic distribution rule Lelystad Airport will be designated as slot coordinated from its opening for commercial traffic; scarcity is assumed. The rules of slot allocation, as laid out in the Slot Regulation, will therefore be applied to the capacity at Lelystad Airport. It is self-evident that the Slot Regulation will continue to apply at Schiphol.

The traffic distribution rule provides for the use of slots allocated in accordance with the Slot Regulation. This is inherent in traffic distribution rules. That they can affect how the slots are used is evident from several Commission decisions.10

9 Commission Decision of 28 May 1993 (93/347/EEC), L. 140/51. This is also repeated in Commission Decision of 14 March 1995 (95/259/EC), L 162/25. 10 See, for example, Commission Decision of 21 December 2000 (2001/163/EC), L 58/59. Article 4 of those traffic distribution rules, which were approved by the Commission, sets limits on the slots. Under the French traffic distribution rules, which were the subject of Commission Decision of 14 March 1995 (95/259/EC), air carriers were not permitted to operate more than four flights a day on a particular route to and from Orly. This restricted the use of the slots and was specifically designed to encourage air carriers to use slots to serve other destinations.

AVT18/IW126397A 13

4. CONCLUSION

As noted above, capacity at Schiphol is scarce and will remain so in the future. Measures have been taken to improve the efficient and safe use of Schiphol’s infrastructure and the airspace and to enhance the quality of life near the airport. More specifically, the selectivity policy developed for Schiphol in combination with the additional capacity at the regional airports will allow the selective growth of Schiphol’s transfer traffic, which is vital to the hub function. The traffic distribution rule is based on market forces and the voluntary distribution of point- to-point flights from Schiphol to Lelystad Airport. They are consistent with these measures and the policy of seeking further selective growth at Schiphol. It is particularly relevant that the traffic distribution rule respects the Slot Regulation and that the Slot Regulation will continue to apply in full. At Lelystad Airport the Slot Regulation will also be applied, since the airport - under the scope of the traffic distribution rule - will be designated as slot coordinated.

Against this background, the Netherlands considers the traffic distribution rule to be a justified instrument to support and strengthen Schiphol’s hub function in keeping with the Commission’s position on the strategic importance of hub airports to the EU. The Dutch authorities ask the Commission to approve the proposed measure.

The Netherlands hereby notifies the Commission of the traffic distribution rule.

Appendices

1. The order in council (Schiphol and Lelystad Airports (Traffic Distribution) Decree; ‘the Decree’) and the accompanying Explanatory Memorandum and notes on individual articles. 2. The ministerial order pertaining to the Decree, including the list of destinations that, under the traffic distribution rule, can be served from Schiphol.

AVT18/IW126397A 14