Seiner Exzellenz Herrn Guido WESTERWELLE Bundesminister Des Auswärtigen Werderscher Markt 1 D - 10117 Berlin

EUROPEAN COMMISSION

Brussels, 20.12.2010 C (2010) 9523 final

PUBLIC VERSION

This document is made available for information purposes only.

Subject: State aid No N 335/2010 – Germany Financing of extension of Kassel-Calden airport

Sir,

1 PROCEDURE

(1) By letter of 28 July 2010 the German authorities notified the Commission an increase in budget of the measures planned by the Land Hessen, the City of Kassel, the District of Kassel and the Municipality of Calden in support of the development of Kassel-Calden Airfield into a regional airport for scheduled, charter, executive and cargo traffic. The measures had been previously approved by Commission decision NN 14/2007 and N 1127/20081. This new notification has been registered under the case number N 335/2010.

(2) The Commission requested Germany to provide further information on the matter at stake by letter of 27 September 2010. Germany provided information on 27 October 2010.

1 Decision of the Commission of 25 February 2009, NN 14/2007 and N 112/2008 – Deutschland Flughafen Kassel-Calden, OJ C 97 of 28.04.2009, p.4.

Seiner Exzellenz Herrn Guido WESTERWELLE Bundesminister des Auswärtigen Werderscher Markt 1 D - 10117 Berlin

Commission européenne, B-1049 Bruxelles / Europese Commissie, B-1049 Brussel - Belgium. Telephone : (32-2) 299 11 11.

2 DESCRIPTION OF THE MEASURE

2.1 The notified measure

(3) The title of the notified measure is: "Finanzierung des Verkehrslandeplatzes Kassel-Calden". It is an individual aid aiming at regional and sectoral development.

(4) The overall amount of the aid is EUR 225 million. The measure will be financed through the State budget of the Land Hessen and the budgets of the communal entities. Each entity will bear the following amount: Land Hessen EUR 187 million (83.1 %), Landkreis Kassel EUR 15.5 million (6.9%), city of Kassel EUR 15.5 million (6.9%) and municipality of Calden EUR 7.0 million (3.1%).

(5) The beneficiary is "Flughafen GmbH Kassel", which is owned by the Land Hessen (68 %), the city of Kassel (13%), the Landkreis Kassel (13 %) and the municipality of Calden (6 %).

(6) The shareholders of Flughafen GmbH Kassel were informed of the updated investment plan on 18 March 2010. They have not yet formally approved the plan. The German authorities stated that the financing measures will not be implemented and that no formal shareholder's approval will be taken prior to the Commission decision.

(7) The notification concerns an increase in the budget for the construction measures at airport Kassel-Calden without any change of the initially planned capacity. The measures for the construction and extension at airport Kassel-Calden have been approved by the Commission decision NN 14/2007 and N112/2008 of 25 February 2009. The approved measures (construction of a runway, taxiways, aprons, buildings and technical facilities) remain unchanged insofar as capacity is concerned; the only substantial change concerns the increase in budget.

(8) This case was also the subject of a complaint of a citizen's initiative against the construction of Kassel-Calden airport alleging that public authorities intend to grant illegal State aid in connection with the development of Kassel Calden airfield. The complaint was registered under the case number CP 191/2010. In this context the Commission requested the views from the German authorities by letter dated 05 November 2010, to which Germany replied by letter of 16 November 2010.

2.2 The previous decision taken by the Commission on the investment project at Kassel-Calden airfield (NN 14/2007 and N112/2008)

(9) In its decision NN 14/2007 and N 112/2008 of 25 February 2009, the Commission approved the aid measure, the development project of the

2 airfield Kassel-Calden into a regional airport, on the basis that it is compatible with the internal market according to Article 107 (3) (c) TFEU.

(10) The development project includes in particular the following measures which were approved. These approved measures are still planned to be carried out:

(a) Construction of a runway and associated taxiways and aprons, as well as other air traffic areas: It is planned to construct a runway that is 2 500 metres long and 45 metres wide with an east-west orientation, taxiways (parallel, connecting and rapid-exit taxiways), aprons for commercial and general air traffic, de-icing points, drainage facilities and other measures (e.g. construction of a grass runway, airport safety).

(b) Construction of the necessary buildings: It is foreseen to construct a tower with the necessary technical equipment, a terminal for handling incoming and outgoing passengers, a building for fire fighters and associated functions and also buildings for airlines and companies involved in aviation-related activities.

(c) Construction of technical facilities: The technical facilities involve in particular visual landing aids, precision instrument landing systems, navigation lights, markings and meteorological facilities.

(11) The following table shows the approved investment costs of then EUR 151 million and the increase for which the notification became necessary:

Table 1: Total estimated investment cost of the development of Kassel-Calden airfield into a regional airport.

Description of the investment Estimated investment costs Estimated investment in EUR million as costs in EUR million as submitted in NN 14/2007 submitted in July 2010 and N 112/2008 (1) Purchase of land and compensatory measures 27.30 36.90 (2) Measures within public policy remit 12.20 17.30 (a)+(b)+(c) (a) fire fighters station and equipment 4.30 7.70 (b) flight navigation and control, 7.90 7.90 airport safety c) rooms for customs, police, security - 1.70 control (3) Construction and construction related costs 111.50 161.60 (4) Risk surcharge - 9.20 Total investment costs (1) + (2) + (3)+(4) 151.00 225.00

2.3 Reasons for the increase of the investment costs after the previous decision

(12) The German authorities name three reasons which increased the total investment costs to EUR 225 million. Firstly, when the measures where first notified, the planning dated back to April 2004 when the shareholders agreed

3 in a Declaration of Intent to implement the development project at Kassel- Calden airport2. The development project was partially based on concrete planning but depended also to a large extent on rough estimates which had been derived from other airport projects. Due to the standstill clause in Article 108 (3) TFEU neither planning nor tendering procedures were carried out during the notification period until the development project had been approved by the Commission. After the measure had been approved by the Commission, the Flughafen GmbH Kassel then replaced the estimates by concrete cost planning for the airport pavements, earthworks and other compensatory measures. It also carried out the design and permit planning for the buildings and technical equipment. This has resulted now in a far more detailed cost and investment plan.

(13) Secondly, the updated total investment plan takes many, and in some cases considerable, price and cost increases into account which have taken place since the original investment plan was drawn up in 2004, the large majority of which had not been taken into consideration in the original notification. Price increases for the period 2004-2010 for raw materials and for certain types of construction reached between 13% and 28.2%3. A considerable increase is also shown in the costs for the purchase of land and especially the compensatory measures. It became necessary to pay compensation for farmland to a larger extent than foreseen due to court proceedings initiated by the land owners.

(14) Thirdly, the updated total investment plan takes account of the comprehensive amendments to the plans for the new concept for the airport infrastructure which Flughafen GmbH Kassel has decided on in light of increased safety requirements following numerous discussions it has held with the Hessen safety authorities.

(15) In order to control a potential increase in costs for the future the actual planning foresees also an entry for "additional costs" in the amount of EUR 9.2 million. In addition, a special group inside the board of directors will be established for the monitoring of costs as well as an anti-claims- management. Most importantly, an external certified accountant will be chosen in order to carry out an additional cost controlling.

2.4 Economic prospects of the airfield development project

(16) The German authorities do not expect any change in the demand of air transport for Kassel-Calden in comparison to the forecast on which the

2 Paragraph 13 of decision NN 14/2007 and N 11272008 – Germany – Financing of extension of Kassel-Calden airport, of 25 February 2009, OJ C 97 of 28.04.2009, p.4.

3 Data submitted by the German authortities based on the index for construction prices by the German Statistics Office (Statistisches Bundesamt):

Earth works for technical amenities +13.7%; Nieder- und Mittelspannungsanlagen +15.5%; Rohbauarbeiten (Beton, etc.) +13%; Metallbauarbeiten (Stahl, etc.)+28.2%

4 previous decision is based4. The updated analysis upholds the prognosis on the passenger development as the economic crisis has not led to a change in the development of air traffic and the growth of the economy has recovered in Germany5. The German authorities submit that the timeframe might only be slightly delayed.

(17) The adapted business plan of 12 October 2010 postpones the initial plan for two years as the airport is expected to start operation now only in 2013 instead of 2011. Thus the forecasted period encompasses now the years 2013 until 2042 instead of 2011 until 2040. The prognosis takes into account the risen costs for the construction thus increasing the amount of operating expenses. Without any change compared to the previous prognosis, Flughafen GmbH Kassel expects in the first year of operation approximately 302 000 passengers. It is expected that in 2042 the airport will handle over 1 million passengers per year6.

(18) The break-even of the airport is now expected to be postponed by two years, due to the delayed opening of two years. Break-even is now expected in 2017. Due to higher investment costs the forecasted cumulated earnings before depreciation, amortisation and interest (hereinafter: "EBITDA") for 2013 to 2042 amount now to EUR 19.2 million instead of 19.6 million.

3 ASSESSMENT OF THE MEASURE

3.1 Existence of aid (19) By virtue of Article 107(1) TFEU "any aid granted by a Member State or through State resources in any form whatsoever which distorts or threatens to distort competition by favouring certain undertakings or the production of certain goods shall, in so far as it affects trade between Member States, be incompatible with the internal market."

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

• is granted by the State or through State resources,

4 The previous decision was based on „Bedarfsprognose für den Verkehrsflughafen Kassel-Calden“ provided by Intraplan, December 2006. This forecast expected in the first year of operation approximately 302 000 passengers based on an average annual growth rate of 4 % and 640,000 passengers and 300 t freight for 2020. In 2040 the airport would handle over 1 million passengers per year.

5 Confirmation of Intraplan of „Ergänzende Stellungnahme zur Bedarfsprognose für den Verkehrsflughafen Kassel-Calden“ by letter of 13 December 2010, p.2

6 Aktualisierter Businessplan der FGK of 12 October 2010, p. 3 and 4

5 • favours certain undertakings or the production of certain goods,

• distorts or threatens to distort competition, and

• affects trade between Member States.

3.1.1 Economic activity and notion of undertaking (21) The Commission has to establish whether the beneficiary "Flughafen GmbH Kassel" is an undertaking subject to EU competition law.

(22) It must first be noted that, according to settled case-law, 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 financed7 and that any activity consisting in offering goods and services on a given market is an economic activity.8 As regards the existence of State aid, it is necessary to determine whether the beneficiary is engaged in an economic activity.9

(23) In its "Aéroports de Paris" judgement the European Court of First instance found that the airport operator, providing airport facilities to airlines and other service operators, in return for a fee at a rate freely fixed by the manager, and when the latter is public, does not fall within the exercise of its official powers as a public authority and is separable from its activities in the exercise of such powers10. The Court established that the airport operator is then, in principle, engaged in an economic activity. Once an airport operator engages in economic activities, regardless of its legal status or the way in which it is financed, it constitutes an undertaking within the meaning of Article 107(1) TFEU, and the rules on State aid therefore apply.11 Since then the Commission has applied this jurisprudence to all sizes of airports and based on this adopted its airport guidelines in 200512 (hereinafter the 2005 Guidelines).

(24) In the case at hand the measures in question constitute infrastructure for operating the airport. The Commission notes that this infrastructure belongs to

7 Case C-35/96 Commission v Italy [1998] ECR I-3851, para 36; C-41/90 Höfner and Elser [1991] ECR I-1979, para 21; Case C-244/94 Fédération Française des Sociétés d'Assurances v Ministère de l'Agriculture et de la Pêche [1995] ECR I-4013, para 14; Case C-55/96 Job Centre [1997] ECR I-7119, para 21.

8 Case 118/85 Commission v Italy [1987] ECR 2599, para 7; Case 35/96 Commission v Italy [1998] ECR I-3851, para 36.

9 According to the European Court of Justice case law, any activity consisting in offering goods and services on a given market is an economic activity. See Case C-35/96 Commission v Italy [1998] ECR I-3851 and Cases C-180/98 to 184/98 Pavlov [2000] ECR I-6451.

10 Cases T-128/98 Aéroports de Paris v Commission [2000] ECR II-3929, confirmed by C-82/01 P, [2002] ECR I-9297.

11 Cases C/159/91 and C-160/91, Poucet v AGV and Pistre v Cancave [1993] ECR I-637.

12 Community guidelines on financing of airports and start-up aid to airlines departing from regional airports, OJ C 312, of 9.12.2005, p. 1.

6 and is commercially operated by the airport manager Flughafen GmbH Kassel13.

3.1.2 State resources and imputability to the State

(25) As has been stated by the Court14, for the measures to be qualified as State aid in the sense of Art 107(1) EC, (a) they have to derive from the State's resources, either indirectly or directly and (b) they have to be imputable to the State.

(26) In the case at hand the measures will be financed through the budget of the Land of Hessen and the budgets of the communal entities, hence state resources. These resources are imputable to the state.

3.1.3 Economic advantage (27) The before mentioned public financings from the state budgets reduce the investment costs that the airport operator would normally have to bear and therefore confer an advantage on the airport.

(28) However, it could be argued that the public financings made to Flughafen GmbH Kassel do not constitute State aid within the meaning of Article 107(1) TFEU if the market economy investor principle can be shown to be applicable in this case. A capital injection is considered not to involve State aid when it is made in circumstances which would be acceptable for an investor operating under normal market conditions having regard to the information available and foreseeable developments at the date of the investment. This is the situation where the structure and future prospects of a company are such that a normal return can be expected within a reasonable period of time.

(29) The assessment should leave aside any positive repercussions on the economy of the region in which the airport is located, since the Commission according to the 2005 Airport Guidelines assesses whether the given measure constitutes aid by considering whether "in similar circumstances a private shareholder, having regard to the foreseen ability of obtaining a return and leaving aside all social, regional-policy and sectoral considerations, would have subscribed the capital in question"15.

(30) In order to be able to apply the private investor test, the Commission has to substitute itself for the public authorities in question at the time the decision to make the investment was taken. So far, there has been no formal decision. In March 2010 the public shareholders were informed of the updated investment

13 See Case T-128/89 Aéroports de Paris v Commission [2000] ECR II-3929

14 See Case C-482/99 France v Commission (Stardust Marine) [2002] ECR I-4397.

15 C.f. Communication from the Commission — Community guidelines on financing of airports and start-up aid to airlines departing from regional airports, paragraph 46, OJ C 312 of 9 December 2005.

7 plan and the increase in budget in order to develop the airfield of Kassel- Calden into a regional airport.

(31) The previous decision made reference to the then valid forecast of an expected break-even of the airport in 2015 and an accumulated EBITDA for 2011 to 2040 of EUR 19.6 million and thus came to the conclusion that the return on investment is extremely low. Compared to the previous forecast, the updated forecast foresees an even lower return on investment with an expected break-even in 2017 and an EBITDA of 19.2 million EUR for the period 2013 until 2042.

(32) It has also to be taken into account that the state considers in the current planning, regional and social aspects when carrying out the investment other than a private investor would have done. The German authorities have not argued and the Commission has not found evidence that the public shareholders had respected the market investor principle when planning the public financing. On this basis, it cannot be concluded that the investment is market conform. Therefore the Commission concludes that the public financings provide an advantage to Flughafen GmbH Kassel.

3.1.4 Specificity (33) 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". In the case at issue, the Commission notes that the advantages in question were granted to Flughafen GmbH Kassel only. The public funding is directed at a single undertaking. Thus it is a selective measure within the meaning of Art. 107(1) TFEU.

3.1.5 Distortion of competition and affectation of trade (34) When aid granted by a Member State strengthens the position of an undertaking compared with other undertakings competing in intra-Community trade, the latter must be regarded as affected by that aid. In accordance with settled case law16, for a measure to distort competition it is sufficient that the recipient of the aid competes with other undertakings on markets open to competition.

(35) As previously explained, the operation of an airport is an economic activity17. Competition takes place not only between air carriers but also between airport operators. Regional airports, even in category D, currently compete more and more to attract low-cost carriers. As mentioned in paragraphs 39 and 40 of the 2005 Airport Guidelines, it is not possible to exclude from the outset airports in category D from the scope of application of Article 107(1) TFEU. The forecast in terms of traffic of Kassel-Calden Airport

16 Case T-214/95 Het Vlaamse Gewest v Commission [1998] ECR II-717.

17 See above, paragraphs 20-24.

8 does not allow to consider that trade between Member States is not liable to be affected. With respect to distortion of competition, the Commission considers that State aid to an airport operator may distort competition both at the level of airports and at the level of airlines.

(36) With regard to airports, any economic advantage which Flughafen GmbH Kassel receives from public financings to finance its development would strengthen its position vis-à-vis its competitors on the European market of providers of airport services. Therefore, the public funding under examination distorts or threatens to distort competition and affects trade between the Member States.With regard to airlines, the Commission notes that financial support for an airport, as in the present case, may be passed on to airlines in the form of lower landing fees. This in turn may distort competition between airlines serving airports in the same catchment area. Therefore, the Commission concludes that the measures have the potential to distort competition at the level of airlines.

3.1.6 Conclusion (37) For the reasons set out above the Commission concludes that the public financing of the construction measures at Airport Kassel-Calden involve State aid within the meaning of Article 107(1) TFEU.

3.2 Compatibility of the aid

3.2.1 Legal basis for appraisal

(38) As set out above the decision of the shareholders of Flughafen GmbH Kassel to grant public financing involves State aid as far as it is not used for financing activities which fall within the public policy remit.

(39) The Commission must therefore establish if the aid can be found compatible with the internal market.

(40) In this regard, the 2005 Aviation Guidelines provide that if it is confirmed that a measure involves State aid, such a measure may be found compatible with the common market “in particular pursuant to Articles 107(3) (a), (b) or (c) or 106(2) and, where applicable, their implementing provisions”.

(41) The 2005 Aviation Guidelines18 lay down in points 55 et seq. the rules for assessing the compatibility of aid for the construction of the airport infrastructure and equipments listed in point 53 (i): such as runways terminal, aprons, control tower, fire fighting facilities security and safety equipment).

(42) The Commission must examine in particular, according to paragraph 61 of the 2005 Airport Guidelines, whether:

18 OJ 2005 C/312/1.

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

• the infrastructure is necessary and proportional to the objective which has been set;

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

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

• the development of trade is not affected to an extent contrary to the Community interest. (i) construction and operation of the infrastructure meets a clearly defined objective of general interest (regional development, accessibility, etc.)

(43) The project still aims at the same objectives under transport, regional and structural policy as those which are listed in the previous decision NN 14/2007 and N 112/2008. The objective is also to provide regional economy with a regional airport and to create employment in a region with continued structural weakness. It has to be also noted that Kassel-Calden airfield forms an integral part of the Trans-European transport network. In 2009, Germany had applied for funding under the Trans-European transport network for Kassel-Calden airport. The application was then rejected because the project was not yet ready for building ("keine Bau- bzw. Antragsreife"). Once the readiness is given, airport Kassel-Calden plans to apply again. Since the measures concern the same construction project that has already been approved by the Commission, reference is made to the reasoning in paragraphs 64-71 of previous decision NN 14/2007 and N 112/2008. The Commission notes that the reasoning still applies.

(44) The Commission can therefore conclude that the construction and operation of the infrastructure meets a clearly defined objective of general interest.

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

(45) In its previous decision NN 14/2007 and N 112/2008 the Commission has found that the infrastructure in question is necessary and proportional to the objectives which have been set. The new notification concerns the same measures for infrastructure which have already been approved. The Commission notes that the reasoning still applies.

(46) The Commission can therefore conclude that the infrastructure in question is necessary and proportional to the objectives which have been set notwithstanding the increased costs.

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

(47) The significant increase in air traffic in Germany and Europe in the recent years has been negatively affected due to the economic and financial crisis in 2009 and resulted in a 4.6% decrease in passenger air transport in Germany in 2009, which resulted in one of the worst years for flight traffic. However, the general trend of growth in air transport has not been stopped but only delayed. Since June 2010 the monthly growth rates in passenger air traffic in Germany have been increasing and were above 7 % compared to the monthly growth rates of the previous year. It also has to be taken into account that according to forecasts, the economic growth in Germany in 2010 is expected to be between 3.3% and 3.5%.It is expected that the forecasted passenger numbers of the Federal Transport Network Plan of 2003 will be soon reached again19. Based on these assumptions the prognosis drawn up for Kassel-Calden airport still holds true, if at all with a slightly delayed development. Reference is made to paragraphs 78 and 79 of the previous decision NN 14/2007 and N 112/2008.

(48) The airport is now expected to break-even in 2017 after losses in the first four years.

(49) Following the termination of scheduled and charter flights at Kassel-Calden airport, the passengers from the catchment area of Kassel-Calden are using also the airports of Paderborn-Lippstadt, Hannover and Erfurt. The prognosis for the airport Kassel-Calden foresees that Kassel-Calden (category D) will reach a market share which is typical for a regional airport within this catchment area. The reason for this is that the destinations offered from Kassel-Calden will be limited so that there still remain many destinations for which passengers will need to use other airports. In the "most probable" scenario examined, the market potential is 3.1 million passengers for Kassel- Calden and Kassel-Calden airport would in any scenario use not more than 20% of the market potential.

(50) The German authorities explain that the airport Frankfurt/Main is currently facing capacity constraints because it does have less capacity then actually needed. A decrease in passengers from the Kassel-Calden catchment area at the Frankfurt/Main Airport should therefore have a positive impact on its existing capacity bottlenecks.

(51) Concerning the perspective of the airport Kassel-Calden compared to high- speed train connections the German authorities also examined this effect. The existing high-speed train connection to and from Kassel was taken into account when identifying potential commercial flight destinations. Commercial flights from Kassel-Calden to Berlin, Hamburg or Düsseldorf are not regarded as potentially viable since there are existing high-speed train connections. Therefore, those destinations are not taken into account. On the

19 „Ergänzende Stellungnahme zur „Bedarfsporgnose für den Verkehrsflughafen Kassel-Calden Dezember 2006““ p. 3-4

11 other hand, Munich is a potential commercial flight destination since Munich serves as a major hub for international flights.

(52) Thus, also on the basis of the updated forecasts, in the medium term, the development project of the Kassel-Calden Airfield to a regional airport offers good perspectives for use, especially in relation to existing infrastructure at the airfield, which the planned works will optimise.

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

(53) On the basis of a corresponding declaration of the Germans authorities the Commission can conclude that, all potential users (airlines and air cargo carriers) will have access to the new infrastructure in an equal and non- discriminatory manner.

(54) The German authorities have also confirmed that any volume rebates will be designed so that they do not benefit de facto only one airline, but reflect economies of scale or other costs reductions.

(v) the development of trade is not affected to an extent contrary to the Community interest

(55) The airfield currently falls in category D, as defined by paragraph 15 of the 2005 Airport Guidelines. Even after the development of the airfield to a regional airport it is expected that it will serve for approximately 640 000 passengers (and 1 800 tonnes cargo by 2022) and will remain a category D airport.

(56) In its previous decision NN 14/2007 and N 112/2008 the Commission has considered that although there will be an impact on competition and trade at Community level, it will be very limited.

(57) Since the increase in budget does not increase the capacity of the airport in relation to the capacity envisaged by the approved measures the same reasoning as in the previous decision still applies on the new notification as the competitive situation with the airports in the same catchment area remains thus the same. Reference is made to paragraphs - 87 and 88 of decision NN 14/2007 and N 112/2008.

(58) The increase in budget did not increase the aid intensity which in both cases, the previous decision and the current decision, reaches 100%.

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

(60) The Commission considers that the decision of the shareholders of Flughafen GmbH Kassel to increase the budget of the investment of the

12 development of Kassel-Calden airfield into a regional airport in accordance with the conditions described previously, is not prejudicial to the common interest and that the five criteria set out in the 2005 Airport Guidelines have been satisfied in the present case.

3.2.2 Aid is necessary and proportional

(61) The Commission must also assess whether the aid is necessary and proportional. As regards necessity, the German authorities have shown that the airport in its existing form cannot fulfil the required safety standards and needs therefore to be modernised. In addition, the airport could not provide sufficient capacity to handle the expected increase in passengers20 and has therefore to be extended. Moreover, the existing runway is worn out and is detrimental to the efficiency of the airport. Due to the fact that the runway is only open for restricted use, regular flight traffic was limited and no charter flights were carried out21. The analysis developed below concerning the non conformity of the present measure with the behaviour of a private investor in a market economy shows also that market forces alone would not be sufficient to ensure the financing of the project in question.

(62) As regards proportionality, the German authorities demonstrated that before starting the planning they have examined four alternative solutions for construction of a runway. Of these, two were non-feasible and one was more expensive. They have also examined a refurbishment of the runway. This would have been no economically viable alternative. Hence, there was no less expensive alternative for the relocation and new construction of the runway which would have allowed for the same results. The rise in budget is owed to the three factors which are described above in paragraphs 11-13, mainly the new calculation which had to take into account new figures and risen costs in raw material and works. Also the fact that safety measures had to be replanned was increasing costs. Taking into account the mentioned factors the aid is proportional.

(63) In the light of the above the Commission concludes that the aid is necessary and proportional too the realisation of the infrastructure in question.

20 C.f. section 3.2.1.

21 For further details see N NN 14/2007 and N 112/2008, par. 6 and 7.

4 CONCLUSION

The Commission has therefore accordingly decided not to raise any objections to the investment of the shareholders of Flughafen GmbH Kassel on the grounds that it is aid compatible with the common market under Article 107 (3) (c) TFEU.

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

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

European Commission Directorate-General for Competition Directorate for State Aid State Aid Greffe B – 1049 Brussels Fax No.: +32 2 296 12 42 Yours faithfully, For the Commission

Joaquín ALMUNIA Vice-president of the Commission