EUROPEAN COMMISSION Brussels, 27.03.2017 C (2017)1866 final PUBLIC VERSION This document is made available for information purposes only. Subject: SA. 46709 (2016/N) – Italy Start-up aid for new routes from/to the airports in the Region of Calabria Sir, 1. PROCEDURE (1) On 26 October 2016, the Italian authorities notified the Commission of their intention to introduce an aid scheme, in accordance with Article 108(3) of the Treaty on the Functioning of the European Union (the "TFEU")1. The scheme would provide support for the opening of new air passenger transport services from airports in Region of Calabria, namely the Lamezia Terme, Reggio Calabria and Crotone airports. (2) By letter of 21 December 2016, the Commission requested further information, which was provided by the Italian authorities on 19 January 2017. 2. DESCRIPTION OF THE AIRPORTS AND THE MEASURE 2.1. Airports in the Region of Calabria (3) The annual passenger traffic registered at the Lamezia Terme, Reggio Calabria and Crotone airports in 2014 and 2015 was as follows: Table 1: Passenger number at Lamezia Terme, Reggio Calabria and Crotone airports Airport 2014 passengers 2015 passengers Lamezia Terme 2 414 277 2 332 126 1 OJ C326, 26.10.2012, p. 47. Onorevole Angelino Alfano Ministero degli Affari Esteri e della Cooperazione Internazionale Piazzale della Farnesina, 1 00135 Roma Commission européenne/Europese Commissie, 1049 Bruxelles/Brussel, BELGIQUE/BELGIË - Tel. +32 22991111 Crotone 65 793 280 037 Reggio Calabria 517 159 482 028 (4) There is no high-speed rail in the Region of Calabria. 2.1.1. Lamezia Terme Airport (5) Lamezia Terme Airport is the main airport in Region of Calabria and one of the most important airports in southern Italy. The airport is situated in the centre of Calabria. It serves mainly passengers from the Region of Calabria and, to a lesser extent, passengers from the Basilicata and Salerno provinces. Lamezia Terme Airport offers scheduled flights to the main Italian airports. There are also international routes served from this airport. (6) The airport is operated by Società Aeroportuale Calabrese SpA ("SACAL"). (7) The two closest airports to Lamezia Terme airport are: Reggio Calabria airport (in the distance of around 130 km and 1h 20 minutes by car) and Crotone airport (in the distance of around 90 km and 1h 15 minutes by car). There are no other airports within a radius of 100 km or 60 minutes by car. 2.1.2. Reggio Calabria Airport (8) Reggio Calabria Airport is located near Reggio Calabria, in southern Calabria. It serves mainly the Province of Reggio Calabria and the Province of Messina. Currently, 16 airlines operate out of the Reggio Calabria Airport. (9) The airport is operated by SOGAS Societa di gestione dell'Aeroporto dello Stretto SpA ("SOGAS"). (10) The two closest airports to Reggio Calabria airport are: Lamezia Terme airport (in the distance of around 130 km and 1h 20 minutes by car) and Catania airport (in the distance of around 140 km and 2h 15 minutes by car). There are no other airports within a radius of 100 km or 60 minutes by car. 2.1.3. Crotone Airport (11) Crotone Airport is a small regional airport serving Crotone city in the Region of Calabria. (12) Since 2015, Crotone airport is under bankruptcy administration and the airport was closed in November 2016. The Region of Calabria plans to resume traffic at the airport and it has organized a public tender to select a new airport operator. (13) The two closest airports to Crotone airport are: Lamezia Terme airport (in the distance of around 90 km and 1h 15 minutes by car) and Reggio Calabria airport (in the distance of around 217 km and 2h 20 minutes by car). There are no other airports within a radius of 100 km or 60 minutes by car. 2 2.2. Overview of the measure 2.2.1. Objective of the aid (14) The proposed measure is designed to improve the connectivity between the Region of Calabria and other regions across Europe. 2.2.2. Form of the aid (15) Under the proposed aid scheme, passenger airlines will be selected via a call for tenders for the opening of new routes connecting Lamezia Terme, Reggio Calabria and Crotone airports with other airports located in the Common European Aviation Area (the "CEAA"). (16) The start-up aid will be provided as a direct grant to passenger airlines whose proposals have been accepted. (17) The aid awarded under the proposed scheme will be paid from the general budget of the Region of Calabria. The granting authority is the Region of Calabria. 2.2.3. National legal basis (18) The payments made under the proposed scheme will be based on the Decision of the Regional Executive of Calabria No 306 of 9 August 2016. 2.2.4. Budget (19) The proposed scheme will have a maximum total budget of EUR 11 852 000. 2.2.5. Duration of the scheme and the aid (20) The proposed scheme will run from 1 January 2017 to 31 December 2022. The implementation of the proposed scheme will only start when approval of the Commission has been obtained. Aid may be granted only for a maximum of the first three years of the operation of the new route in question. 2.2.6. Beneficiaries (21) The beneficiaries of the aid will be airlines which are chosen following the tendering procedure. Airlines of all sizes are eligible to apply. The estimated number of beneficiaries of the scheme is under ten. 2.2.7. The tendering and selection procedures (22) The Region of Calabria will organise the call for tenders that will select airlines that might have an interest in inaugurating new services to and from any of those three airports. (23) The Region of Calabria will make their plans public in good time and with an adequate publicity to enable all interested airlines to offer their services. A call for a public tender will be published in Official Journals (of the EU and Italy, as well as the Region of Calabria), newspapers (four national daily newspapers) and on the website of each airport operator. 3 (24) The Italian authorities have submitted tender specifications which they intend to publish. These tender specifications set out the general framework and describe the purpose of the call, requirements with regard to the new routes, requirements for participating and criteria for the selection procedure. (25) The Italian authorities consider that the routes to be supported by the proposed aid have a higher risk factor for airlines than existing routes, and therefore would not otherwise be operated without aid. The Italian authorities submitted that this stems from the fact that airlines are unwilling to set up new routes from small regional airports if there is a risk they will be unprofitable in the early years. The Italian authorities state that they opted for the proposed support method after carrying a comparison survey within the operators of the airports located in the Region of Calabria. 2.2.8. Eligible routes (26) Under the proposed scheme, start-up aid to airlines can only be provided if the following cumulative criteria are met: a) the proposed air service is not already being operated between the two airports of the proposed route; b) there is no high speed rail between the city pairs served by the two connected airports; or c) the proposed air route is not already operated from another airport in the same catchment area under comparable conditions. (27) As indicated in recitals (7) and (13), Lamezia Terme and Crotone airports are less than 100 km apart. Therefore, these two airports are within the same catchment area. However, the Italian authorities confirmed that will be no overlap between any of the routes operated as part of the scheme from those two airports. The Region of Calabria administration will monitor and ensure that the airlines comply with this requirement and no aid is granted to operate a new route which is already being operated from another airport in the same catchment area. (28) No aid will be given for routes that are not actually new routes, but only involve a more frequent schedule on a route already served. 2.2.9. Business Plan (29) Applicant airlines have to produce a business plan for each route. The business plan has to include at least the following information: a) new route linked to any of the Lamezia Terme, Crotone and Reggio Calabria airports; b) frequency of the connection and aircraft type used; c) time necessary to start operating the new route; d) number of passengers guaranteed each year over the duration of the aid; e) a financial plan showing the viability of the route without public funding after three years. 4 (30) Applicant airlines will also be asked to include in their business plans a justification of why they would not have operated the route in question in the absence of the aid. (31) Airlines are required to keep operating new route for which they received start-up aid for additional three years. (32) If despite these expectations, the route does not prove commercially viable, the air carriers are given the possibility to change to a new route which was already included in the tender procedure, respecting all the selection standards, in particular submitting a new business plan which envisages the profitability of the route after three years. 2.2.10. Aid intensity and cumulation (33) The proposed aid will cover up to 50% of the cost of airport charges incurred by the airline for the operation of the new route.