1. (a)

   Prior to the operation of the new hub on 1 October 2007, Leipzig Airport must complete the construction of the southern runway and ensure that the 24/7 operation of the airport will be possible. If Leipzig Airport cannot fulfil the conditions precedent to the start of the new hub, Leipzig Airport and MFAG may become liable to pay compensation up to EUR […] (according to section 5 of the framework agreement).

2. (b)

   Subsequent to the start of operations at the new hub, Leipzig Airport must continue to ensure the 24/7 operation of the airport and provide sufficient capacity to ensure DHL's operations as agreed in the operating terms for the following […] years. If Leipzig Airport cannot fulfil the conditions subsequent to the start of the new hub, Leipzig Airport and MFAG are liable to compensate all damages and losses which DHL incurs. If DHL is essentially limited in its operations, DHL will also have the right to terminate the contract and receive compensation for all direct and indirect costs of moving to an alternative airport (according to sections 8 and 9 of the framework agreement). Leipzig Airport and MFAG have thus an unlimited obligation to compensate DHL for any resulting losses and damages — independently of whether caused by circumstance within or outside of Leipzig Airport's control. Germany estimates that in case night flights were to be banned by the regulatory authorities and DHL had to relocate to another airport, Leipzig airport could be liable to pay DHL up to EUR […].

The airport fees will be the major source of revenue for financing the new southern runway. It is estimated that DHL will pay about EUR […] in 2008 which is the first full year for the operation of the new hub. The airport fees are agreed in a separate contract which is attached to the Framework agreement.

All air carriers — either DHL or any other carrier — will be entitled to the same landing fees. The amount of the landing fee will decrease with the total traffic volume of Leipzig Airport. Therefore an air carrier which only undertakes a small number of movements will pay the same landing fee as DHL which will apparently be the heaviest user of the airport.

The airport has concluded two lease contracts with Deutsche Post Immobilien GmbH (hereinafter DPI) and a building lease contract with Deutsche Post Grundstücksvermietungsgesellschaft beta mbH & Co Objekt Leipzig KG (hereinafter DPBS) in respect of certain constructions at the airport. The latter companies are part of the Deutsche Post World Net group. They will rent the properties to DHL by separate contracts.

1. (a)

   DPI pays the interest for the financing of the costs for the land and the construction, and a yearly amortisation of […] percent of the construction costs.

2. (b)

   Leipzig Airport is obliged to raise a credit to finance the construction of the apron. Thereby, Leipzig Airport must solicit offers from three different banks including Postbank (which is also a member of Deutsche Post World Net group) and choose the most favourable offer.

3. (c)

   The contract is concluded for […] years. DPI will be able to terminate the contract after […] years without any reason or if DHL terminates the Framework agreement. If the contract is terminated within the first […] years, DPI is obliged to pay the rental charges for […] years less rent already paid.

The second lease contract concerns further ground handling areas which Leipzig Airport rents to DPI at the same conditions as with the foregoing lease contract. The construction costs are estimated to be about EUR […].

1. (a)

   DPI pays a rent of EUR […] for […] m² which works out at about EUR […] per m².

2. (b)

   This rent is fixed until […] and is then adjusted by […] of the change of the general price index.

The lease contract for the apron and the building lease contract include provisions so that DHL has an option to rent further designated land plots until […]. These options are granted […] until […]. Afterwards DHL has to pay EUR […] per m² to keep the option. This option price will increase until […].

Both contracts include the provision that these land plots — independently of whether DHL executes its option or not — shall not be rented to competitors of DHL. The following companies are explicitly mentioned: […], and […].

In relation to the construction costs of the new southern runway the Commission expressed the opinion that Leipzig Airport should earn enough revenue from the investments in the new southern runway as to cover (at least) its incremental costs, an appropriate contribution to the fixed costs of the existing facilities. However, on the basis of the business plan submitted by the German authorities, the Commission came to the preliminary conclusion that the expected increase in revenue from the operation of the new southern runway will not cover its incremental costs and that therefore the investment therein constituted State aid.

The opening decision set out that DHL will benefit of State aid if Leipzig Airport has offered more favourable contract terms than a private undertaking would have done. A private airport operator would expect to earn sufficient revenues from the investments in the new southern runway to cover (at least) its incremental costs, and to make an appropriate contribution to the fixed costs of the existing facilities, as well as offering appropriate remuneration for the capital employed while reflecting the risks assumed under the Framework agreement.

The opening decision asserted that the expected increase in revenues from the operation of the new southern runway would not even cover its incremental construction costs and lead in 2006 to a loss of about EUR […] (see paragraph 70 of the opening decision). Consequently, Leipzig Airport would not be able to finance the risks assumed under the Framework agreement out of its own revenues.

1. (a)

   Agreed on airport fees and lease contracts which do not even finance the incremental costs of the southern runway;

2. (b)

   Assumed the commitments of the Framework agreement which further decrease the expected profitability of the airport operations;

3. (c)

   Concluded lease contracts which do not seem to correspond to local market conditions and limit the business opportunities.

The Commission noted that DHL's investment into its new European hub at Leipzig Airport has been the subject of a previous state aid decision (N 608/03). The Commission approved the maximum regional aid intensity of 28 per cent for DHL's investments at the airport under the 1998 Multisectoral framework rules3, whereupon the Land Sachsen granted an aid amount of EUR 70,8 m to DHL.

As the Commission had already authorised the maximum regional aid intensity of 28 per cent for the DHL investments, any further aid — which DHL could be granted under the comfort letter or the Framework agreement — can not be considered compatible with the common market.

The safety facilities and the security measures carried out correspond to obligations for airport operators arising from national legislation, namely the Aviation Security Act (LuftSiG), as well as the Air Traffic Act (Luftverkehrsgesetz, hereinafter: LuftVG) and the recommendations of the International Civil Aviation Organisation (ICAO) regarding measures to avert danger to aviation in the planning, construction and operation of commercial airports.

In order to avoid unauthorised access to the secured area of the airport all persons, vehicles and goods have to pass through access control points, which are equipped with secured gates, x-rays and hand probes. A security and control system is used to operate and supervise access to the security area. The security control centre also allows access to the hazard alert system (i.e. fire detectors and building technology centre etc.) and the access control system (i.e. burglary, hold-up alarm system, video control monitoring etc.). Because of the change in the alignment of the new southern runway it was necessary to re-build the perimeter fence and furthermore to construct two additional access control points (control points 2 and 4).

The airport is obliged to have a back-up electricity supply. Due to the regulatory requirements this can only be achieved with an Uninterruptible Power Supply (UPS). For this purpose, diesel dynamic UPS systems have been installed in each of the three navigation lighting stations on the southern runway.

According to the German authorities, in order to secure the power supply including the redundancy capability and to create capacities for the establishment of further businesses on Leipzig/Halle Airport, it became necessary to expand the power supply. For this purpose, the construction of a transformer station at a cost of EUR 5 million was planned.

The airport also incurred expenses (i.e. high and low voltage cabling) relating to the new orientation of the southern runway in relation to its obligations under air traffic control regulations (§ 27(d) LuftVG) and in relation to its obligations vis-à-vis the German Weather Service (§ 27(f) LuftVG).

According to the German authorities the planned construction of further aprons in the years after 2010 will necessitate the provision of corresponding navigation lighting systems for the apron areas. They add that operational costs need to be taken into account (see table 4 above).

According to Germany, the airport has followed the market economy investor principle when signing the Framework Agreement because the positive effects and profitability of the agreement with DHL outweigh the risks and commitments assumed by the airport. The remaining risk assumed by Leipzig Airport regarding obligations in terms of capacity and operation is very low.

Germany is of the opinion that the airport acted as a private investor in first taking the decision to build the southern runway on 21 November 2004 and only a year later on 21 September 2005 to decide whether or not to sign the framework agreement. The relevant test is therefore whether the airport expected in 2005 to earn a higher cash-flow in the business scenario ‘expansion with DHL’ than in the alternative scenario ‘expansion without DHL’. Due to the fact that the construction of the southern runway was already well advanced in September 2005, a stop of the works would not have been anymore an economically viable alternative.

Contrary to earlier submissions, Germany also introduces terminal values in the cash-flow calculations, seeking to demonstrate a higher profitability of the southern runway. The calculation of the terminal value is based on a linear expansion of the business results in the years 2038 — 2042 with an average revenue growth of 3 percent.

The introduction of the terminal values has a significant effect on the profitability of the business scenarios. While Germany calculates a discounted cash-flow for the period 2006 to 2042 of about EUR […] for the expansion with DHL and of about — EUR […] for the expansion without DHL, the terminal values — which are also discounted to 2006 — amount to about EUR […] and respectively EUR […]. As can be seen from these figures, the terminal values increase the profitability of the expansion scenario with DHL by a factor of almost […] and turn the expansion without DHL from a loss-making into a profitable project with a cash-flow of about EUR […].

Besides this consideration for the risk of a night flight ban, Germany regards a discount rate of 6.5 percent as reasonable given that the revenues in the calculations are not adjusted to inflation and the low risks assumed by Leipzig Airport,. This assessment is backed up by references to decisions of the UK airport regulator concerning the setting of airport fees for the period 2008 to 2013. These calculations relied on comparable costs of capital (in real terms and pre-tax) of 6.2 percent for Heathrow Airport and 6.7 percent for Gatwick Airport.

Furthermore, Germany emphasises that for assessing the proportionality of the Framework Agreement it has to be taken into account that (i) DHL assumes major business risks by investing about EUR 250 million in its new European hub and tying itself to Leipzig in the long term and (ii) Leipzig Airport would be compensated if DHL decided to stop its operations before the expiration of 15 years.

Germany concludes that signing the Framework Agreement carries a greater economic advantage than not signing it and, therefore, a private investor would have signed the Framework Agreement with DHL. Consequently, the Framework Agreement has no element of State aid.

Germany points out that a lease contract had to be agreed for the apron because the airport should always remain the owner of the infrastructure in order to guarantee the public access to the apron for reasons of air transport and planning rules, also in the case the contract with DHL is cancelled.

According to Germany the airport has acted like a private investor as the starting and landing fees agreed with DHL correspond to normal market conditions being even considered to be in upper boundary compared to what DHL pays in other European hubs (see also below the comments and documentation by DHL). Thus Germany submits that the landing fees charged to DHL at Leipzig airport are far from preferential.

Germany holds firstly that the Land Sachsen is indirectly remunerated for the guarantee by way of the additional profit generated by the investments. Secondly, Germany considers that the issuing of comfort letters is standard business practice since the Land Sachsen granted the comfort letter of EUR […] to DHL in exchange for the comfort letter of EUR […] provided by Deutsche Post AG, DHL's parent company, to cover any possible claims of Leipzig Airport against DHL (e.g. DHL would be liable to pay a contractual indemnity equal to the sum of […]-years landing fees if it decided to quit Leipzig Airport during the first […] years of the framework agreement).

Furthermore, Germany underlines that the comfort letter is subject to Commission approval, and has yet to enter into force.

DHL argues that the Commission's questioning whether a private investor would have agreed to the liability obligation in the framework agreement is carried out without comparing the totally different economic risks of the parties.

The establishment of the central hub at the airport Leipzig/Halle represents for DHL not only an investment of more than EUR 250 m but also a complete economic dependence on the usage and the indispensable availability of night flight slots in the long term. In case that night flight slots are no longer available, not only the investment of EUR 250 m would be devalued but it would also lead to a long-term impairment of the entire worldwide DHL express service with non-foreseeable consequential damages. According to DHL, each private investor who tries to induce a major customer to make an establishment with major financial risks would have to consider such risks in the sense of ‘do ut des’ if it wants to win the customer.

Additionally, after the Airport's decision to build a second runway (which was taken independently from DHL), the Airports' risks are far lower than those of DHL. Thus, the very disproportionate distribution of economic risks can only be reflected in the liability provisions. Whereas DHL would suffer form excessive damages in case of a prohibition or reduction of night flights, the airport's damages would only amount to the loss of landing fees which would be easily replaceable by another user. However, a voluntary leave from DHL is already improbable because of the very high investment costs. Consequently, the liability provision in the framework agreement is objectively necessary and therefore also customary in the market.

1. (a)

   The runways at Liège Airport are reserved for unlimited duration for 140 % of the activity volume of TNT at a specific point of time between 9 pm and 6 am (according to cipher 32.1 of the SAB-TNT contract). This clause, which goes far beyond the framework agreement in the present case as it warrants a capacity reserve at any time of 40 %, reflects only the objective necessity to warrant contractually and permanently essential night flight slots for the business to secure the high investments made.

2. (b)

   In addition to the above, SAB and the Region of Wallonia have accepted liability for all damages without limitation, including loss of profit, in case of non-fulfilment of such warranty for 20 years (according to cipher 8.c of the SAB-TNT contract).

Furthermore, for DHL, the unequal distribution of damages' risks is reflected in the differing regulation concerning the amount and duration of the obligation to compensate: Whereas TNT holds the right to claim compensation from SAB for the whole contract duration in case of non-fulfilment of the warranty, the right to claim compensation from SAB decreases with the length of duration; in case of termination notice by TNT with the expiration of 10 years to the simple of the yearly average of the landing fees (according to cipher 10.3 c of the SAB-TNT contract).

As far as the Commission criticises a missing connection of the rental fees to the locally customary real estate prices concerning the apron, DHL points out that the rental contract does not constitute an ordinary rental contract in legal terms. Based on its legal form and nature, a leasing agreement does not tie up with the locally customary rental fees but is orientated at the interest rate of the lessor's provided capital. A connection of the user fee to the locally customary rental fee would therefore be off-topic and cannot be found in comparable leasing contracts.

As far as the Commission criticises the airport's limited freedom of action resulting from the rental agreement to finance the investment costs through credits or equity, this criticism is based upon an unfounded interpretation of the rental agreement. As a matter of fact, the contract only obliges Leipzig Airport to obtain credit offers in order to receive an objective basis for the calculation of the user's fee and not to raise a credit. Thus, the airport is not obliged to make use of such offers but is free in the financing.

The Commission's consideration concerning the building lease interest seems to be based on wrong information of the size of the building lease area according to cipher 1.5 of the building lease contract. In fact, the area amounts to […] m² so that instead of the assumed rent of […] EUR/m² a rent of […] EUR/m² is applicable. The Commission's assumed disproportion between building lease rent and option fees is therefore not given if the correct building lease area is taken into account.

The average fee is calculated based on the aircraft types (A300, B757) used by DHL.

The average fee is calculated based on the aircraft types (A300, B757) used by DHL.

The Commission has to establish whether Leipzig Airport is an undertaking subject to EC competition law.

Until recently, the development of airports was often determined by purely territorial considerations or, in some cases, military requirements. The operation of airports was organised as part of the administration rather than like a commercial undertaking. Competition between airports and airport operators was also limited. The liberalisation of the market for air transport services has also meant that there are more airlines flying to more airports thereby increasing competition between airports. Taking into account these conditions, the financing of airports and airport infrastructure had previously been considered as falling within the public policy remit and, in principle did not raise State aid issues.

This situation has however changed in recent years. Although these land-use planning considerations and administrative structures may still persist in some cases, in many others airports have been transferred from State to regional control, in some cases to be operated by public companies, or even to the private sector. The process of transfer to the private sector has normally taken the form of privatisation or a progressive opening-up of capital. In recent years, private equity firms and investment and pension funds have shown a great interest in acquiring airports.

The Community's airport industry has therefore undergone in the recent years fundamental organisational changes that reflect not only the active interest of private investors in the airport sector but also a change of attitude on the part of the public authorities regarding the contribution of private investment to airport development. This development has led to greater diversification and complexity of the functions undertaken by airports.

These recent changes have also led to a change in the commercial relationships between airports. Whereas in the past airports were mostly managed as infrastructures with a view to ensuring accessibility and territorial development, in the last few years, more and more airports also have commercial objectives and are competing with each other in order to attract air traffic.

The changing nature of airports has therefore to be reflected in the legal assessment of airport activities under State aid law. It is no longer possible to consider the operation and construction of airports as a task carried out by an administration, which in principle is outside the ambit of State aid control.

Given the ongoing developments of the sector, this approach has since been extended by the Commission to all kind of airports, including smaller ones (such as the one considered in the present decision) in its guidelines adopted in 2005. In the light of this recent transformation, the Commission considers that it is no longer possible a priori to exclude the application of State aid rules to airports as of 2000.

In this regard the Commission notes that the infrastructure which is the subject of the present decision will be operated on a commercial basis by the airport manager; it is therefore commercially exploitable infrastructure. The airport operator will charge users rates for the use of this infrastructure rather than infrastructure being made available without charge to users in the common interest.

In the case at hand the continuous losses of the airport and the infrastructural investments have been financed by the public shareholders' equity and long-term debts. The extension and the realignment of the second, southern runway were planned to boost the airport's position at the freight traffic market. However, this being said certain of the investments may fall within the public policy remit. The investments Germany considers falling within the public policy remit have been set out previously.

Having carried out an evaluation of the nature and the figures supplied by Germany in relation to investment and operational costs relating to the new southern runway, the Commission can conclude that in the present case certain costs fall within the public policy remit. These costs relate to security and police functions, fire and public safety measures, operational safety, German Weather Service and German Air Traffic Control. It is also the case that the users of the airport may also be charged for certain of these public policy measures.

Therefore, to the extent that they fall within the public policy remit as set out above the costs in question may not amount to State aid within the meaning of Article 87(1) EC. However in the present case independently whether the Commission was to accept the approach advanced by the German authorities that none of the costs should be considered as State aid, the final assessment of the measure would not change. Even if these costs were to amount to state aid, such aid would be compatible aid (see below). Therefore the Commission does not have to reach a definitive conclusion on this question.

In the case under discussion, at all material times the State exercised direct or indirect control on the resources under consideration. Leipzig Airport has financed the enlargement by equity contributions of the public shareholders and has received long-term loans from its parent company Mitteldeutsche Flughafen AG (hereinafter MFAG), which has only public shareholders.

The decision to grant these State resources is imputable to public authorities: The supervisory board of MFAG, a publicly owned company, declared that sufficient equity will be raised to finance the expansion of the airport. The majority of the MFAG's Supervisory Board members are representatives of public authorities (e.g. Land Ministers, Mayors etc.).

The capital contributions and shareholder's loans previously mentioned reduce the investment costs that the airport operator would normally have to bear and therefore confer an advantage on the airport.

However, it could be argued that the capital contributions granted to Leipzig Airport do not constitute State aid within the meaning of Article 87(1) EC if the market economy investor test can be shown to be applicable in this case.

The Commission must then analyse whether Leipzig Airport's shareholders have acted as private investors in financing the expansion of the airport. It has to be assessed whether in similar circumstances a private investor operating under normal conditions of the market economy would have entered into the same or similar commercial arrangements as MFAG for the realignment of the southern runway.

In this particular case in relation to the investments relating to the new southern runway the German authorities appear to call into question the applicability of the market economy investor test. They argue that the test is not applicable to transport infrastructure because there are no comparable private investors. According to the German authorities, private investors have no interest in airports, especially where large renewal investments are necessary.

Therefore, notwithstanding the assertions of the German authorities, in order to be able to apply the private investor test the Commission has to substitute itself for the public authority in question at the time the decision to make the investment was taken.

In November 2004 when Leipzig Airport decided to start the construction works for the southern runway DHL had not yet entered into a legally binding commitment to move to Leipzig Airport. To have a conservative profitability assessment, the following analysis will make a comparison between ‘Status quo’ and ‘Expansion without DHL’ and will disregard ‘Expansion with DHL’.

The German authorities argue that Leipzig Airport acted like a private market investor. The German authorities submit that the realignment of the southern runway has helped to reduce the losses of Leipzig Airport and in the medium to long term, the financed investments allow to reach the break-even point.

The German authorities need to be able to prove that the public authorities acted in a way that would be acceptable to a private investor. However, according to the information provided to the Commission, it is not ascertainable that the realignment of the southern runway was the most favourable solution for economic purposes.

As previously mentioned Germany has submitted a business plan for the realignment of the southern runway. On the basis of the included income data and cost figures the Commission can review whether Leipzig Airport acted like a private investor with regard to financing, building and operating of the southern runway.

1. (a)

   ‘Expansion with DHL’: Rebuilding of the southern runway, DHL comes to Leipzig Airport;

2. (b)

   ‘Status quo’: No rebuilding or realignment of the southern runway;

3. (c)

   ‘Expansion without DHL’: Rebuilding of the southern runway, DHL does not come to Leipzig Airport.

The business plans are based on the following assumptions, cost figures and income data as provided by the German authorities for the period from 2006 until 2042, no terminal value for the time after 2042 is specified.

The forecast development of sales for the scenario ‘Expansion without DHL’ is based on two main assumptions: The investor expects a displacement effect of night-flight restrictions at Frankfurt/Main Airport in 2012, and capacity bottlenecks at other airports will lead to further growth between 2013 and 2018. The provisions of the enlargement were deemed necessary in order to ensure sufficient capacity to meet the expected growth of air freight. However, while the increasing demand for air freight traffic from Leipzig airport is mentioned as the reason for investment, this is not justified by in the present case by a specific cost-benefit-analysis.

The risk of overcapacity existed when the decision to rebuild the southern runway was taken. Vacancy costs resulting from possible overcapacity (e.g. without DHL) would not be compensated. However, the presented calculations do not seem to take this risk into consideration.

The Commission firstly notes that it has taken into account the total amount of the investment and operational costs for security and safety measures for the purposes of the Cash-flow calculations. However, as previously explained (see recitals 180 to 183) part of these expenses (operations and also investment costs) may represent measures which fall within the public policy remit

This fact notwithstanding, the cash-flow of the airport for the period 2005-2042 totals to approximately [negative cashflow] euro. The Commission cannot therefore accept that a market economy investor would have decided to make the investment in the construction of the southern runway.

The calculations show that Scenario B generates a cash-flow lower than Scenario A by about EUR [100-200] million. Building the southern runway reduces the cash flow in real terms, which is at disposal for the financing of the pre-existing facilities.

As the airport has still to finance the existing capital assets amounting to EUR 642 million (book value 2005), it will not reach the required EBITDA to refinance completely the existing capital assets in Scenario B. On the basis of the presented cash flow calculations it cannot be assumed that the business operations of Leipzig Airport will reach break-even in the future. It cannot therefore be assumed that the Southern runway would have been built by a private investor on the basis of Scenario B.

The Commission concludes that a private investor, even one operating at the scale of a group in a broader economic context, could not, in the normal circumstances of a market economy and even in the longer term, have expected an acceptable return on the capital invested in the case at hand.

In these circumstances the Commission is entitled to consider that a private investor, even one pursuing a comprehensive long-term policy without regard to immediate returns, would not, in the normal circumstances of a market economy, have made the injections of capital in question.

Furthermore, and without prejudice to the arguments set out and the conclusions reached above the Commission is obliged to observe that the discount rate applied by the German authorities in their calculations of 6.5 % (see point 117) implies that the calculations assume a very low risk investment premium of approximately 3.25 % based on a beta factor of 0.65. A beta of 0.65 means that if the value of the overall market decreases by 1 %, the value of the investment decreases by 0.65 %, which implies a lower volatility of the investment than the overall capital market and therefore results in a lower risk.

Article 87(1) EC 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 Leipzig airport only. The public funding is directed at a single undertaking. The capital contributions granted by public authorities have not been made available to any competing airports Airport. Thus it is a selective within the meaning of Article 87(1) EC.

Any economic advantage which the airport Leipzig/Halle receives from the financing of the southern runway 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

For the reasons set out above the Commission concludes that the public financing of the development of the southern runway at Leipzig-Halle airport involves State aid within the meaning of Article 87(1) EC Treaty.

The concept of State aid applies to any advantage, granted directly or indirectly, financed out of State resources, granted by the State itself or by any intermediary body acting by virtue of powers conferred on it.

It is evident that the Framework Agreement and letter of comfort are financed by State resources and the decisions to grant them are imputable to public authorities: MFAG's supervisory board authorised on 3 June 2004 the conclusion of the Framework agreement. The majority of MFAG's supervisory board members are representatives of public authorities (e.g. finance ministers of Sachsen and Sachsen-Anhalt, mayors of Leipzig, Dresden, and Halle). The letter of comfort was signed by the finance minister of Land Sachsen on 21 December 2005.

To the extent that the measures grant a selective advantage to DHL and Leipzig Airport, the Commission considers that they are liable to distort competition and affect trade between Member States.

It is also evident that the express parcel business is a market in which companies from different Member States compete. Any economic advantage which DHL receives from the listed public measures will strengthen its position vis-à-vis its competitors on the European express parcel market.

As this assessment remained undisputed by Germany and third parties, the following discussion will focus on the extent to which the Framework agreement and the comfort letter favour DHL.

The Commission will analyse for each of the offered services — warranties, lease, and airport services — whether the Framework Agreement offers an appropriate remuneration which a private investor would have accepted.

1. (a)

   The guarantee could in principle be obtained on market conditions from the financial markets.

2. (b)

   The market premium for the guarantee is paid.

1. (a)

   According to Germany56, Leipzig Airport sought, but was unable to cover the risks eventually addressed by the comfort letter through private financial institutions.

2. (b)

   As neither DHL nor MFAG nor Leipzig Airport is obliged to pay any premium for the comfort letter, the risk exposure of Land Sachsen is not directly remunerated.

Furthermore, it can also not be said that Land Sachsen is indirectly remunerated as shareholder of Leipzig Airport because the airport's share value will effectively decrease due to the cash-flow losses of the expansion with DHL. By the same token, any arguments about proportionality between the comfort letters granted by Land Sachsen and Deutsche Post AG are irrelevant because the incremental cash-flow for the southern runway is just not sufficient to finance the risk exposure of the airport and its owners.

The Commission finds that the (i) unlimited warranties granted by the Framework Agreement (according to sections 8 and 9); and (ii) the comfort letter constitute aid in the meaning of Article 87(1) EC Treaty because the Land Sachsen, MFAG, and Leipzig Airport hedge business risks for DHL at terms which a private investor would not have accepted. Without public support Leipzig Airport would have neither been able to finance the southern runway nor to enter into the Framework Agreement with DHL.

As the Framework agreement had been signed and put it into effect before Germany notified it, the unlimited warranties granted by the Framework Agreement constitute unlawful aid in contravention of Article 88(3) EC Treaty.

The project aims at the creation of a new air-freight hub and multimodal cargo centre based on the airport. The air freight sector, in particular express freight, is showing considerable growth rates. Air freight carriers are expanding their operational capacities. However, the three main air-freight hubs in Germany — Frankfurt Main, Munich and Köln/Bonn are facing night flight capacity constraints. In the event that Frankfurt Main Airport should have to discontinue its night flight operations or decrease the number of the night flights, Germany would face a serious air-freight capacity crunch.

The envisaged project forms part of the strategy for the development of the airport contained in the Trans-European Transport Network Outline Plan (2020 horizon) from 2004 as a ‘Community connecting point’. The airport is located in the region of Middle Germany (close to five major Trans-European transport axes and Pan-European corridors) between the axes from North to South Europe (i.e. Federal motorway A 9) and from the West to Eastern Europe (i.e. Federal motorway A 14) with an access to excellent rail and road network. The access to rail and road network facilitates intermodality of freight transport and results in more efficient and environmentally friendly transport, and furthermore, contributes to sustainable development. Therefore the project is in line with the ‘development of an integrated European air transport network’ as set out in Point 12 of the abovementioned Action Plan which notes that ‘it would be desirable to unlock existing latent capacity at regional airports provided that Member States respect Community legal instruments relating to state aids’.

It is foreseen that the implementation of the project will have a positive impact on the entire region and will significantly influence its economic and social development. It will in particular improve access to the Region and increase its attractiveness for investors and visitors. This should have a positive on employment bearing in mind that unemployment is significantly higher in the Leipzig-Halle region than the national average.

The investment work at stake will facilitate a better, safer, more environmentally friendly and more rational use of the existing infrastructure and will therefore improve airport safety, security and efficiency. The new alignment of the southern runway avoids that in the future densely populated areas in the north of Leipzig and in the south of Halle are over-flown. In particular, an area of Leipzig, which is located close to the airport grounds at the head of the original southern runway, was affected by the noise because of the location of take-off and approach paths. In addition, the old southern runway was not facing in a direction with favourable meteorological conditions for take-off and landing. The most common prevailing wind direction, taken over the year and for individual months, is south-west. This can be disadvantageous with regard to disruptive crosswind components. The new alignment satisfies meteorological requirements enabling ILS CAT III (all weather) instrument flight operations. Furthermore, the distance between the two runways allows independent operation of air traffic, which was not the case previously for safety reasons because of risk of collision.

The Commission can therefore conclude that the construction and operation of the infrastructure meets a clearly defined objective of general interest, being the development of an airport with a large air freight component in line with EU policy in this respect due account being taken of regional and environmental aspects and that this criterion of compatibility is fulfilled in the present case.

The figures provided by the German authorities clearly show that the airport as currently laid out cannot meet expected growth foreseen in either passenger or freight traffic. As previously mentioned, it is expected that the airport will experience a gradual but significant increase in passenger and freight traffic over the lifetime of the new southern runway. In 2006 the airport handled 2.3 million passengers and according to estimates it will serve about 6-7 million passengers in 2010. Further increase is expected in the future in the freight traffic operations in particular with regard to further night flights restrictions at other German airports (i.e. Frankfurt Main, Köln/Bonn etc.).

For various reasons the old southern runway was considered as deficient infrastructure not suitable for purpose. First, it has to be recalled that in the present case the old southern runway was built between 1957 and 1960. The alignment of the old southern runway was decided on the basis of the military airspace structure of the former German Democratic Republic and not the meteorological requirements for aviation. Around 1980, defects (i.e. cracks in the pavement slabs, spalling and washout of the runway bed) had already started to appear. In order to rectify these defects, a new concrete surface was built on top of the damaged runway in 1983/84. However, the new concrete surface was not connected to the original surface and the renewal of the runway was only superficial and proved to be inadequate.

This inadequacy became particularly apparent from 1990 on, when the runway was used much more often. For example, cracks in the lower surface created cracks in the new upper surface causing extensive spalling and major longitudinal distortions at both ends of the runway which resulted in pavement buckling. Buckling of the pavement poses a serious danger to aviation safety when pavement blowups occur in summer as a result of higher temperatures. The consequences of this were an increasing level of damage and expensive and disproportional maintenance.

In addition, the original southern runway was 2 500 m long and as such could only be used for short-haul flights. It could not be used for fully loaded aircraft weighing more than 30 t. Consequently, the efficiency of Leipzig Airport was seriously impaired (aircraft of the types Boeing B 747, B 767 and McDonnell Douglas MD 11 when fully fuelled and loaded require runways of between 2 925 m und 3 320 m for take-off). This deficiency also significantly increases the likelihood of interruptions in operations (e.g. in the event of the northern runway being closed). Also from the aviation safety perspective it was necessary to adapt the alignment of the old southern runway. Even with aircraft landing in the westerly direction, the two runways could not operate in parallel because there was always a possibility that approaching planes would have to abort the landing and take off again in order to avoid a collision. Therefore, the German Air Traffic Control Service (Deutsche Flugsicherung GmbH, DFS) had to treat the two runways as if they were a single runway for flight operations.

In view of the conditions mentioned above, the maximum number of take-offs and landings which could occur on the original runway was calculated and a simulation conducted on the basis of the forecast flight schedule for a freight hub at Leipzig Airport. The results of the simulation of the forecast flight schedule showed there would be significant time delays for planes taking off and landing during peak hours. Planes landing could, on average, expect to wait around 21 minutes (in both directions of operation) and planes departing around six minutes. In specific cases, there were even delays of between 30 minutes and one hour for landings, and up to 18 minutes for take-offs.

As noted previously, the capacity of the airport to obtain finance other than from or through the intercession of its public shareholders is very limited and therefore an aid intensity of 100 % was necessary. The German authorities have been able to show that all of the infrastructure that they will undertake and finance are necessary to attain the goals that they have set and the project is not disproportionately large or elaborate.

Thus, taking all of the above considerations into account the Commission can reach the conclusion that the infrastructure in question is necessary and proportional to the objectives which have been set.

With regard to the freight growth at Leipzig airport the German authorities expect high growth rates in the first years and as from 2013 an average growth rate of 3 %. In comparison, IATA expects an average annual growth rate for 2007-2011 for passengers of about 5.1 % and freight of 4.8. The German authorities forecasted (in 1999) about 4 million passengers in 2004 and 6-7 million passengers in 2010. According to the German authorities a more recent study expects an increase from 2.1 million passengers in 2005 to 4.8 million passengers per year.

Thus, in the medium term, the new infrastructure offers good perspectives for use, especially in relation to existing infrastructure, which the planned works will optimise.

As indicated by the German authorities, all potential users (airlines) will have access to the new infrastructure on an equal and non-discriminatory basis. DHL will use the new southern runway only 19 % of the time amounting to only 9.4 % of the overall capacity of the airport as a whole. With regard to the use of the runway capacity by DHL the Commission notes, that in most (hub) airports it is not unusual that the incumbent airline utilise approximately 60 — 80 % of the overall runway capacity, effectively functioning as anchor tenants. This phenomenon is also becoming more prevalent in the low cost sector in their use of regional or secondary airports.

The reservation of certain time frames (in effect slots) to DHL reflects the commercial reality of the express cargo business. Moreover, in the present case, Leipzig Airport is not a congested airport (‘slot-constrained’ airport) and therefore, there are no capacity restrictions. This means that the reservation of certain time frames does not have a negative impact on DHL's competitors. This has been largely confirmed by the observations received from cargo operators and passenger air carriers (i.e. Panalpina, Jade Cargo International, Ruslan-Salis, Lufthansa Cargo, CARGOLUX Condor etc.).

With regard to the allocation of time frames (or slots) in Leipzig/Halle airport as with most (uncongested) airports the available slots are allocated on a ‘first come first served’ basis. Intrinsic to the operation of all airports is the concept that the air carriers retain the slots that they have received. This is referred to as ‘grand-father rights’. The allocation of slots to DHL at this uncongested airport and the possibility for DHL to retain these slots is therefore not an advantage to DHL in State aid terms

In the view of the above the Commission can conclude that all potential users of the infrastructure have access to it in an equal and non-discriminatory manner.

The airport falls in category C, as defined by paragraph 15 of the 2005 Guidelines. Although there will be an impact on competition and trade at Community level, the Commission has to determine if this is to an extent contrary to the Common interest.

The Commission firstly notes that the new southern runway while it optimises capacity at the airport is no more than a replacement for a pre-existing runway which was not optimally positioned.

As previously referred to, the main cargo airports in Germany with which Leipzig-Halle competes are facing capacity or night flight restrictions and therefore future competition is unlikely. There is therefore little or no risk of distortion of competition with these airports.

As previously indicated, when DHL was canvassing for possible European hubs it settled on a short-list of Leipzig/Halle, Vatry and Brussels. In this regard the Commission notes that neither Brussels nor Vatry has commented during the opening of procedure. The Commission also notes that no other European airport has indicated during the opening of procedure that the development of Leipzig/Halle airport as set out above gives them cause for concern. Nor has the Commission identified specific competition concerns vis-à-vis any other EU airport.

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.