Concession Fee Deferral Burgas

EUROPEAN COMMISSION Brussels, 14.8.2020 C(2020) 5713 final In the published version of this decision, PUBLIC VERSION some information has been omitted, pursuant to articles 30 and 31 of Council This document is made available for Regulation (EU) 2015/1589 of 13 July 2015 information purposes only. laying down detailed rules for the application of Article 108 of the Treaty on the Functioning of the European Union, concerning non-disclosure of information covered by professional secrecy. The omissions are shown thus […] Subject: State Aid SA.58095 (2020/N) — Bulgaria — Covid-19: Concession fee deferral for Burgas and Varna airports Excellency, 1. PROCEDURE (1) By letter of 17 July 2020, registered on 20 July 20201, the Bulgarian authorities notified in accordance with Article 108(3) of the Treaty on the Functioning of the European Union (TFEU), their intention to grant aid to the operator of Burgas and Varna airports. (2) In their notification, the Bulgarian authorities have exceptionally accepted to waive their right under Article 342 TFEU in conjunction with Article 3 of Regulation 1/19582 and to obtain a Commission decision on the matter in the English language. (3) By email of 31 July 2020, the Bulgarian authorities completed their notification with additional information. 1 Under State aid case number SA.58095. 2 Regulation No 1 determining the languages to be used by the European Economic Community, OJ 17, 6.10.1958, p. 385. Екатерина ЗАХАРИЕВА Министър на външните работи ул.„Ал. Жендов“ No2 1113 СОФИЯ/Sofia БЪЛГАРИЯ/BULGARIE Commission européenne/Europese Commissie, 1049 Bruxelles/Brussel, BELGIQUE/BELGIË - Tel. +32 22991111 2. DESCRIPTION OF THE MEASURE (4) The aid measure notified by the Bulgarian authorities takes the form of a moratorium allowing the operator of Burgas and Varna airports to defer concession fee payments for 2020 towards the Republic of Bulgaria, in exchange for the payment of interest on the sums due (“the measure”). This form of aid is equivalent to a subsidised interest-bearing loan within the meaning of the Temporary Framework for State aid measures to support the economy in the current context of the coronavirus outbreak (Section 3.3)3. (5) According to the Bulgarian authorities, Fraport Twin Star Airport Management AD (“Fraport”)4, the concessionaire operating and managing Burgas and Varna airports in Bulgaria, is facing significant difficulties following the COVID-19 crisis. (6) The concessionaire of the two airports expects losses of approximately 4.3 million passengers (-86%) and EUR (…) in revenue (-84%) through 2020 compared to the forecast made before the pandemic. The negative economic consequences suffered by the operator of the airports in Varna and Burgas as a result of the pandemic amount to EUR (…) for Varna airport and to EUR (…) for Burgas airport, as the difference between the projected revenues from March 13 to the end of 2020 compared to the same period in 2019. Forecasts for recovery of demand to 2019 levels vary widely, from several months to two years, and studies show that it will depend on several factors such as the time to control the pandemic, to restore confidence in air transport, and to return to normal economic and social activity. (7) For those reasons, the Council of Ministers of the Republic of Bulgaria approved on 3 June 2020 a series of measures to support air transport. One of these measures concerns the deferral of the payment of the concession fee for 2020 for the Burgas and Varna airports.5 3 Communication from the Commission - Temporary framework for State aid measures to support the economy in the current COVID-19 outbreak, OJ C 91I, 20.3.2020, p. 1, as amended by the Communication from the Commission C(2020) 2215 final of 3 April 2020 on the Amendment of the Temporary Framework for State aid measures to support the economy in the current COVID-19 outbreak, OJ C 112I, 4.4.2020, p. 1, by the Communication from the Commission C(2020) 3156 final of 8 May 2020 on the Amendment of the Temporary Framework for State aid measures to support the economy in the current COVID-19 outbreak, OJ C 164, 13.5.2020, p. 3, and by the Communication from the Commission C(2020) 4509 final of 29 June 2020 on the Amendment of the Temporary Framework for State aid measures to support the economy in the current COVID-19 outbreak, OJ C 218, 2.7.2020, p. 3. 4 Fraport Twin Star Airport Management AD is a German-Bulgarian company that won in 2006 a concession to manage Burgas and Varna airports for 35 years. 5 Other measures include a reduction of the airport parking fees and the postponement of air navigation charges. 2 (8) The measure is based on Article 107(3)(b) TFEU as interpreted by section 2 of the Temporary Framework. 2.1. Background data (9) From 17 March to 27 April 2020, the Aviation Administration of the Republic of Bulgaria implemented a set of measures to contain the spread of COVID-19.6 Temporary border restrictions on entry into the Bulgarian territory7, as well as related quarantine measures8, had a negative impact on the entire transport sector. At the peak of the crisis, regular and charter flights remained grounded, resulting in significant losses for all undertakings in the aviation sector. Although there is currently no ban in place for passenger and cargo flights to/from other countries, the revenues and liquidity generated by the Bulgarian aviation sector remain substantially impaired due to the very low demand for air transport services. (10) Since the beginning of the COVID-19 outbreak in mid-March 2020, air traffic in Bulgaria has dropped by as much as 89% compared to its level at the beginning of March 2020: (11) With regard to passenger traffic, both Burgas and Varna airports had to suspend all commercial passenger flights due to the restrictive measures taken by the various Member States and the decisions of their main customers to interrupt serving routes to these airports. Furthermore, several companies announced they would not fly to Bulgaria before the end of summer 2020. 6 Such as banning all flights to and from certain countries affected by the infection, preventing a number of citizens from various countries from entering the country, and a ban on certain commercial activities. 7 As of 18 March 2020, the Bulgarian authorities restricted the arrival of non-Bulgarian nationals to Bulgaria from the following countries: the People’s Republic of China, the Islamic Republic of Iran, Bangladesh, the Republic of India, the Republic of Maldives, the Federal Democratic Republic of Nepal, the Democratic Socialist Republic of Sri Lanka, the Kingdom of Spain, Italy, the Republic of Korea, The People's Republic of Korea (PRK), the United Kingdom of Great Britain and Northern Ireland, France, Germany, the Netherlands, and the Swiss Confederation. These restrictions were gradually lifted at the beginning of the Bulgarian summer season (July 2020) with certain quarantine measures remaining in place until now. 8 Travellers entering Bulgaria were obliged to provide personal location data and follow a strict isolation protocol of up to 14 days. 3 (12) According to the Bulgarian authorities, it is expected that for the whole of 2020 the passenger flow will decrease by 86% compared to last year and the number of total passengers served at both airports will reach about 690 thousand passengers. The decrease in passenger traffic when compared to last year is for Burgas airport -57% in March, -99% in April,–-99% in May and -99% in June, and for Varna airport -42% in March, -98% in April, -92% in May and -91% in June. (13) According to the Bulgarian authorities, the decrease in cargo traffic when compared to last year is for Burgas airport -66% in March, -94% in April, -96% in May and -100% in June, and for Varna airport -26% in March, -98% in April, - 99% in May and -90% in June. (14) There has been a significant decrease in aircraft movements at Burgas and Varna airports between 2019 and 2020 as follows: Burgas - 2019 Burgas - 2020 January – 167 January – 116 February – 161 February – 131 March – 168 March – 65 April – 275 April – 27 May – 1106 May – 67 June – 3926 June – 126 Total: 5803 Total: 532 Varna - 2019 Varna - 2020 January – 513 January – 636 February – 469 February – 566 March – 513 March – 427 April – 683 April – 104 May – 1166 May – 224 June – 2220 June – 461 Total: 5564 Total: 2418 (15) By June 2020, the number of scheduled passenger services in Bulgaria had dropped by more than 90% compared to the same month in 2019. Nevertheless, according to the concession agreement, the airports in Burgas and Varna must remain open and operational for maintenance, military, police and customs flights, as well as for medical flights. They must therefore keep some of their staff on site and bear the operating costs. In addition, there must be a minimum of staff to maintain the infrastructure. (16) This has created significant financial difficulties for both airports, impairing also the airport operator’s working capital. A number of measures were taken to reduce costs and operating expenditures to an absolute minimum. However, the ability to mitigate revenue losses is limited, given that 80% of the airports’ operating costs are fixed costs for maintaining and operating these critical infrastructures. The notified aid will contribute towards payment of those costs. 4 2.2. Nature and form of the aid (17) The aid will be granted to the managing company operating Burgas and Varna airports in the form of a suspension of the invoicing of the fees payable by the management company to the Bulgarian authorities for 2020.9 The Bulgarian authorities will apply an interest rate to the amount of the fees for which invoicing is suspended.

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