On 3 March 2003, Flugplatz Altenburg-Nobitz GmbH (named ‘AOC’ in the agreement) and Ryanair (‘Ryanair Limited’) signed an agreement for airport services for a duration of 10 years. The agreement entered into force with the daily scheduled service to London-Stansted, which was to start on 1 May 2003.

1. (a)

   a fee for the operation of passenger air services according to AOC's scale of charges in effect on the day of the service;

2. (b)
   an amount equal to passenger security taxes and state fees (‘DE tax’) at the rate in force at the time of operation of the flight. The original charge amounts to ‘Four euro and fifty one cents (EUR 4,08)’43. The agreement also specifies the intention of both parties to try to reduce the DE tax if the passenger volume through the airport grows. Ryanair is to collect the original charge as a minimum charge in any event.

1. (a)

   provide a runway meeting specific technical specifications by 31 December 2003, to be completed and extended by 31 May 2004;

2. (b)

   provide terminal and infrastructure services ([…]*) and services in terms of sales, marketing and public relations (services set out in Annex A to the service agreement);

3. (c)

   provide handling and related services (services set out in Annex B to the service agreement);

4. (d)

   ensure the operation of a bus service at standard local fares between AOC and Leipzig-Bahnhof and between AOC and Dresden-Bahnhof;

5. (e)

   operate a reservations facility (service set out in the Appendix to Annex B to the service agreement).

1. (a)

   terminal and infrastructure services: […]* and other ‘reasonable requirements of Ryanair on an ad hoc basis to ensure that Ryanair can maintain a 25-minute turnaround’;

2. (b)

   services in terms of sales, marketing and public relations: […]*.

According to the Appendix to Annex B, ‘Reservations Facility’, to the airport services agreement of 3 March 2003, the handling agent has to establish and operate a passenger service desk, keep reservation staff adequately trained, and pay for computer hardware and telephone, fax, IT and telecommunication devices in air transport (SITA) and all equipment maintenance and replacement costs incurred by the handling agent in the running of the passenger desk. However, […]*.

Germany also rejects the argument advanced by the complainant that the runway was extended especially for Ryanair's Boeing 737-800 (107 planes in 2007), since this aeroplane is actually also widely used by other airlines, for example by Deutsche Lufthansa (132 planes in 2007). Furthermore, Germany points out that the suggestion made by the complainant that until 2007 public funds of EUR 28 million have been invested for the modernisation of the airport is erroneous. The complainant would be referring to information in which only estimations about the possible costs were being made. Real investments amounted to EUR 16,7 million according to Germany.

In addition, Germany argues that the obligations required by Ryanair in the service agreement, Annexes A, B and in the Appendix to Annex B are general obligations that an airport has to fulfil in order to be able to provide the service requested by airline companies: Germany states that the services referred to at recitals 50-53 are normal obligations of any airport and that its infrastructure is open to all users. Germany adds that some services mentioned in Annex A to the service agreement, such as press conferences, journalists' trips and travel agency evenings, have not been provided.

Between 1993 and 1997, the Land of Thuringia invested EUR 12,25 million in the airport's infrastructure. For the years 1998 to 2011, the Land of Thuringia approved fund contributions of EUR 4,5 million to Flugplatz Altenburg-Nobitz GmbH. These funds were provided on the basis of published aid schemes of the Land of Thuringia, the notification of which was not deemed necessary. According to Germany, aid under these schemes is open to all airport operators in Thuringia. Under these aid schemes, public funds are to be granted for infrastructure investments which are necessary for air traffic, are open for use to all potential users and serve the general public interest. These funds are also limited to appropriate and necessary amounts and Germany points out that, since 1997, airports have also been sharing part of the infrastructure costs. Therefore, Germany states that no distortion of competition could arise from these schemes.

As regards infrastructure investments made between 12 December 2000 — the date of the Court judgment in the Aéroports de Paris case — and 9 December 2005 — the date on which the 2005 Aviation Guidelines became applicable — Germany considers that the criteria applicable are unclear: with the application of the 1994 Aviation Guidelines, the infrastructure cannot be considered State aid from the outset. Germany argues in this regard that the 1994 guidelines were applicable until the 2005 guidelines came into force and the Aéroports de Paris judgment does not change this. Therefore, since the 1994 guidelines are binding on the Commission under the principle of legitimate expectations, these should be applied to the infrastructure investments up until 2005. Therefore the measure cannot be classed as State aid: although infrastructure payments were made through public funding, this funding relates to public policy remit activities and does not pertain to an economic activity.

1. (a)

   As to the first requirement, Germany claims that the infrastructure investments aim at a clear objective of common interest, which is to provide transport infrastructure and regional development in a structurally weak region. In this regard, AOC was the first military airport to be converted for civil use after the reunification of Germany. AOC is also of importance for companies situated in the nearby industrial area. Incoming tourism should furthermore help in improving regional tourism and creating jobs.

2. (b)

   As to the second requirement, Germany claims that the infrastructure investment is necessary and proportional to the objective set. Germany reiterates that all investments were made to renovate and update the airport. Since the operator, Flugplatz Altenburg-Nobitz GmbH, did not have sufficient funds, public funding was needed.

3. (c)
   As to the third requirement, Germany is of the opinion that the medium-term prospects for use of the existing infrastructure were satisfactory, at least until 2009. According to three studies carried out in 200757, the operator of the airport was to improve its annual results and achieve an almost balanced operating income by the year 2015, together with the strengthening of the nearby industrial area. One study58 refers especially to the profitability of low-cost carrier traffic and sets out a possible scenario that AOC could reach 500 000 passengers by 2015, which is even described as a conservative estimate. This proves, according to Germany, that Flugplatz Altenburg-Nobitz GmbH and its shareholders always acted as private investors.
4. (d)

   As to the fourth requirement, Germany explains that all potential users of the infrastructure have access to it in an equitable and non-discriminatory manner.

5. (e)

   As to the fifth requirement, Germany states that the development of trade is not affected to an extent that is contrary to the common interest. AOC is an airport with fewer than 150 000 annual passengers, hence a category D airport, and there is no distortion of competition vis-à-vis other airports.

When it became apparent that the scenario predicted in the 2007 studies would not materialise, the airport asked the consulting firm KE-Consult to draw up a study on AOC and the adjoining industrial area; the study was submitted in 2010. It concludes that further developments of the airport as a low-cost airport would not be commercially viable and recommends focusing on general aviation. Therefore, in September 2011, the management board of Flugplatz Altenburg-Nobitz GmbH submitted a new development plan for the airport, which was agreed by the supervisory board and the shareholder's meeting. AOC will not be open to low-cost airlines or to any commercial aviation business, but to general aviation and should become profitable through this new business development by 2015.

The KE-Consult study recognises that shareholders of Flugplatz Altenburg-Nobitz GmbH continuously subsidised the company. Given this constantly increasing need for subsidies, the limit of economic efficiency had been reached for shareholders.

The KE-Consult study was conducted to explore possible development prospects for AOC on the basis of the airport's regional, political, economic and fiscal impact. In this respect, various scenarios were elaborated on the discontinuation, the unchanged continuation or the expansion of low-cost carrier aviation as well as the development of the industrial park around the airport.

Only the ‘general aviation’ scenario, which implies the discontinuation of low-cost carrier aviation at AOC, can meet the requirements for microeconomic and fiscal equilibrium. This is the only scenario where the airport only needs the shareholders' obligatory annual additional contribution of EUR 227 000 per shareholder but no other payments. This scenario shows a macroeconomic benefit. Up to 2015, this scenario would cost EUR 0,83 million for the shareholders and can be covered by the mandatory contributions of EUR 227 000 per year. No further subsidisation by shareholders would be necessary after 2015, as long as depreciation continues to fall. The regional economic efficiency is much higher than in all other scenarios. The 2015 fiscal balance for Thuringia and its municipalities is also positive.

All other scenarios, in which low-cost carrier aviation is continued or expanded, are economically not sustainable through the shareholders' mandatory contributions. The fiscal effect for Thuringia would amount to between EUR 115 000 and EUR 375 000 per year, depending on the scenario. In all low-cost carrier scenarios, the positive fiscal effect resulting from AOC and the municipalities would be lower than the contributions needed by the airport and therefore the fiscal income-costs balance is negative.

The additional macroeconomic impact of low-cost carrier aviation will only be achievable if investments of EUR 6,7 to 10 million are provided, in addition to the shareholders' mandatory contributions. The regional economic efficiency in the low-cost carrier scenarios is lower than in the general aviation scenario. Compared with the general aviation scenario, the level of necessary contributions is 11 to 15 times higher in the low-cost carrier scenarios, while the added value effects are only two to three times higher. Whereas the fiscal income-costs balance is positive in the general aviation scenario, it is negative in all low-cost carrier scenarios.

1. (a)

   Uncertainty due to monopoly users and external influences: aviation development at AOC is dependent to a large extent, at least in relation to low-cost carrier traffic, on the contracts with relevant airlines and on external influences such as the British tourist tax or the German air traffic tax, which can have an enormous negative impact on the volume of low-cost carrier traffic.

2. (b)

   Non-approval of further continual subsidies: fair and subsidy-free competition would be jeopardised and this would not be in accordance with the air traffic plan for Germany and the agreements of the political coalition at Land level.

3. (c)

   Lack of sustainability: in the low-cost carrier scenarios, no improvement of the fiscal and microeconomic balances can be seen. The low-cost carrier business model would only incur an increasing need for subsidies until 2015 and beyond.

The KE study therefore concludes that continuation or expansion of low-cost carrier traffic at AOC cannot be recommended to shareholders and to the Land of Thuringia.

The Klophaus study from 2007 draws the following conclusions. It states that the direct, indirect, induced and catalyst effects of AOC for the economy and attractiveness of the region, especially in terms of jobs, are positive and significant. Future prospects for AOC are also positive, according to the study, as AOC has the potential to become the Ryanair base for central Germany, which is what Flugplatz Altenburg-Nobitz GmbH is striving for. Therefore, with so many Ryanair planes stationed at AOC, passenger numbers could potentially grow to 1 million per year in the medium term. This would allow AOC to become a regional airport offering the chance to Altenburger Land to change its international profile and thus improve its economic and business structures. The study states that AOC, as a low-cost airport, will bring significant overall economic benefits.

According to the study's calculations, by 2015 AOC would be expected to provide 658 jobs (a 95,3 % growth compared with 2006). In addition, 881 indirect jobs (157,6 % growth) and 438 induced jobs (184,4 % growth) would be created. The study furthermore emphasises the importance for regions to be nationally and internationally accessible, which has an enormous influence on the economic development of the region concerned.

In this respect, according to the study, not only public contributions for the renovation and expansion of AOC and the related marketing costs, but also tax incomes for the Land of Thuringia and its municipalities should be considered. The study concludes that, not only microeconomic aspects, but also macroeconomic effects should be considered.

Monthly expenses taken into account in Table 13 include personnel costs, de-icing of the runway and snow clearing services. The Commission notes that the document presented to the shareholders' meeting of 22 April 2003 shows a total of annual investments of EUR 902 155. This sum was not taken into account in the forecasts shown in Table 13.

Germany states that the services to be provided by AOC under Annex A of the agreement of 3 March 2003 with Ryanair were not provided. The services included in Annex B and in the appendix to Annex B ‘Reservations Facility’ of the agreement of 3 March 2003 were provided at no extra charge for Ryanair.

Germany states that, further to Ryanair's announcement that it would discontinue the routes from AOC in March 2011, the airport operator did not pay any further marketing contributions in February and March 2011.

Germany argues that Ryanair provided publicity for AOC and the region on its website. This website is the second most popular European website after the Google website and is therefore priced accordingly. An adword on Google costs per click between EUR 0,05 and EUR 2,00. Germany calculates that 100 000-150 000 annual Ryanair passengers at AOC with an adword price of EUR 1 per click generate an advertising price of EUR 100 000-150 000 per year, assuming that each passenger makes only one click. Since passengers usually make not only one click but several and since there are passengers who already clicked without booking, the German authorities come to the conclusion that the marketing agreement concluded between Flugplatz Altenburg-Nobitz GmbH and Ryanair is based on a reasonable price that does not provide any advantage to Ryanair.

Germany claims that the success fees do not constitute an advantage for Ryanair, since they are a market-compliant payment for marketing activities undertaken by Ryanair. According to Germany, marketing measures were successful since passenger numbers rose from 25 000 (2002) to 140 000 (2009), which led to a rise in overall income from EUR 316 000 to EUR 1,12 million, while income from airport charges rose from EUR 132 000 to EUR 530 000 and income from parking rose from zero to EUR 263 000.

1. (a)
   Germany stresses that, contrary to the assertions of the Commission in the opening decision71, the relevant ministry had no say in the conclusion of the agreements, except where infrastructure measures were concerned. Paragraph 43 of LuftVZO72 does not mean that approval by the ministry was necessary.
2. (b)
   The fact that the local chamber of commerce backed AOC73 only shows that the private market was in favour of the Ryanair connections.
3. (c)

   Germany states that marketing payments made by Flugplatz Altenburg-Nobitz GmbH to Ryanair do not constitute start-up aid under the 2005 Aviation Guidelines, but are simply commercial contractual agreements falling outside the field of State aid.

Ryanair argues that State aid to airports should not be imputable to Ryanair. A presumption of transfer of State aid by airports to airlines would be in breach of EU law. This presumption discriminates against public airports, while competition rules should apply without distinction to public and private undertakings. Ryanair claims that the evidence used by the Commission in order to show imputability to the state is not sufficient. The evidence may reflect the public authorities' interest in the airport's commercial relations and future, but does not prove any actual involvement of any of the public authorities in the airport's negotiations and agreements with Ryanair. Evidence that the ministries of the Land of Thuringia were actually opposed to the agreements with Ryanair would indicate that, at the very least, a more robust examination by the Commission of the imputability of the Ryanair agreements to the state is required.

Ryanair submits that the question is not whether the state should have invested its money elsewhere but whether the state confers an advantage on an airline which it would not have obtained otherwise. Ryanair has merely negotiated terms with public airports similar to what it was able to obtain at comparable private airports.

Ryanair submits that it is not an indirect recipient of State aid. As long as the terms of a commercial relationship between Ryanair and an airport can be justified under the market economy investor principle (hereinafter: ‘MEIP’), any recovery obligation cannot extend to Ryanair. Ryanair argues that the MEIP should be applied to any case of an alleged grant of State aid to Ryanair by publicly owned airports. Indeed, according to the airline, there is no economic or legal justification for the exclusion of public airports from the MEIP and the Commission has applied the MEIP to agreements involving financing of major public infrastructure in other modes of transport, such as public seaports. The airport is exercising an economic function in entering into agreements. In addition, private and public sector airports compete in the market and contracts between airlines and airports can be profitable for the latter.

Ryanair thinks that an efficiency assessment should not take into account cash injections for public remit investments, should consider incremental costs and not sunk costs and should, lastly, be made against the benchmark of a typically well-run airport. Ryanair argues that if a regional airport believes that an agreement will help improve its efficiency, a deal could be profitable even if it appears to involve below-cost pricing at the time of signing. Inefficient and underutilised airports can be expected to become profitable only once they achieve economies of scale and network externalities, the time frame for which can last 25 to 30 years. Low-fare airlines are ideally positioned to provide a significant increase in revenues to regional airports, usually without any need for new infrastructure or other investments. In support of this, Ryanair cites the UK Civil Aviation Authority's decision of 27 May 2011 recognising low-fare airlines' less costly reliance on airport services.

Ryanair argues that sunk costs should be disregarded in the application of the MEIP, both in a comparator analysis and in a cost analysis. Ryanair states that a private investor operating AOC from 1992 onwards would have to consider both the infrastructure and the fixed operating costs of the airport as sunk costs. Realistically, there was no way to recover such costs, given the AOC's low commercial appeal and very limited market power. Under such circumstances, the acceptance of any alternative scenario offering better, or simply less onerous, prospects to the airport owner(s) than the counterfactual of doing nothing or closing the airport at a potentially significant cost, would be fully consistent with the market economy investor principle.

Ryanair also stresses that the specific costs linked to Ryanair have to be considered separately from the costs incurred by the airport, but may be overall lower than the revenues deriving from the positive network externalities generated by Ryanair's activities at the airport.

Ryanair states that the fee agreement with AOC fulfils the requirements of the market economy investor principle. To that end, Ryanair provided the Commission with two reports prepared by a consultancy firm. These studies compare the deal in question with other fee agreements signed between Ryanair and airports which are either majority privately owned and funded, or operating as market economy investors in a situation that is sufficiently similar to AOC.

Ryanair explains the method applied in the reports for comparing the airports as follows: the analysis was only made based on other Ryanair contracts, because Ryanair has different operating modes compared with most other carriers, namely no use of air bridges, buses or lounges, no transfer flights, turnaround time of 20 minutes and mostly carry-on luggage. In addition, only airports that are operated according to a market economy investor logic were included in the scope of the study. Airports that may have received substantial State aid support were ruled out. As a result, around 15 airports in Ryanair's network meet these criteria and were included in the scope of the study.

The first report considers […]* to be the most appropriate comparator airport. The report states that ‘ideally, the comparator airport that is selected for the purposes of the analysis would be of a similar size to Altenburg Airport. Although it has not been possible to find a comparator airport that is very similar to Altenburg Airport across all relevant dimensions, […]* Airport is sufficiently similar for the purposes of the analysis presented here’. The second report extended the comparator set to […]* airports and compared charges at these airports between 2003/2004 and 2010/2011, on both a per passenger and a per turnaround basis.

The reports conclude that the overall level of charges paid by Ryanair to AOC is on average higher than, or in line with, the comparable level of charges paid by the airline over the period under investigation at the comparator airports. This suggests that the charges paid by Ryanair at AOC under the various agreements are compatible with a level of charges that would have been offered to Ryanair by an airport-owning market economy investor in similar circumstances.

Ryanair claims that airport charges should be regarded at levels corresponding to the marginal costs rather than looking at the average variable costs or average total costs.

Ryanair stresses that AOC's agreements with Ryanair and AMS should be assessed separately and both companies cannot be considered a single beneficiary of the alleged State aid. The agreements were separate, negotiated independently, relate to different services and were not subject to any linkage that would justify their consideration as a single source of alleged State aid. The conclusion of a marketing agreement with AMS was not a condition for the operation of routes by Ryanair to and from an airport. Based on their own perception of their marketing needs, many airports served by Ryanair do not conclude agreements with AMS. Ryanair stresses that the purchase of marketing services at market rates should be considered separately from a related airport-airline contractual agreement.

Ryanair further explains that there is no suggestion that an airline committing to deliver a similar number of passengers and/or aircraft rotations would not have received similar ‘reduced fees’. The Commission also does not examine whether an airline offering similar commitments would have obtained a similar level of fees from a comparable private airport.

As to the value of marketing, Ryanair claims that marketing space on Ryanair's website is a limited resource and demand for that space is high, including from businesses other than airports. The website currently records approximately 4,5 billion page views per year. Even legacy airlines now realise the value of their website for marketing and advertising. On the other hand, many airports make the commercially rational choice to build up a brand by advertising on ryanair.com or on other airline websites. This increased brand recognition can benefit airports in a number of mutually reinforcing and complementary ways. AOC is far less renowned internationally than either Aéroports de Paris or Heathrow Airport, and it therefore needs to invest in advertising to improve its brand recognition and maximise the share of inbound passengers.

Ryanair provides an analysis prepared by the consultancy firm comparing the prices charged by AMS for web marketing services with prices charged for similar services by other travel-related websites. The analysis benchmarks the prices charged by AMS in its first 2005 rate card against comparable services provided by travel websites at that time, and also compares prices in AMS' current (2013) rate card with the prices of comparable services sold by other travel-related websites. The analysis concludes that, in both periods, prices charged by AMS for advertisements on ryanair.com were either lower than the average, or within the mid-range of rate card prices charged by websites in the comparator sets. This conclusion confirms, according to Ryanair, that public airports' arrangements with AMS meet the market economy operator test.

Ryanair also provides evidence of the services provided to the airport through various screenshots which show that services provided under contracts with AMS were monitored. These screenshots were generally provided to the airport contracting with AMS to demonstrate the activation of the purchased services on ryanair.com. Ryanair stresses the value of the AMS services provided to airports and is of the opinion that benefits to airports of entering into deals with AMS should be seriously quantified.

Without prejudice to Ryanair's position that the AMS agreement and the air services agreement (hereinafter ‘ASA’) should be treated separately, Ryanair provides a market economy operator profitability analysis carried out by the consultancy firm encompassing both the air services agreement concluded between Ryanair and the airport and marketing agreements concluded between AMS and the airport. According to Ryanair, this analysis should help the Commission in its approach to considering the ASA jointly with the AMS agreements, by considering how AMS could be incorporated within a joint AMS-ASA profitability analysis.

The consultancy firm concludes that the cash-flow approach is an appropriate method for incorporating the value of AMS within a joint AMS-ASA profitability assessment. This approach captures the aggregated incremental profits that accrue to the airport as a result of signing the ASA, as well as the benefits of advertising through the AMS agreement. Under this approach, expenditure by the airport on AMS could be treated as an incremental operating expense within the discounted cash flow profitability analysis. This approach also takes into account the benefits of both marketing activities arising from the AMS agreements and through the ASA, for the duration of the agreement and beyond the scheduled end of the ASA, as marketing activities contribute towards enhancing brand value, and are likely to generate future business and profits.

As a conclusion from this study, Ryanair stresses that, in so far as the Commission continues to treat ASA and AMS agreements together, it should apply the principles set out by the consultancy firm to the case at issue, in order to properly apply the market economy operator profitability analysis to the investigation of both ASA and AMS agreements.

Furthermore, Ryanair submitted a series of notes prepared by the consultancy firm, and an analysis prepared by Professor Damien P. McLoughlin.

1. (a)

   comparator analyses are widely used for MEO tests outside the field of State aid;

2. (b)

   companies affect each other's pricing decisions only to the extent that their products are substitutes or complements;

3. (c)

   airports in the same catchment area do not necessarily compete with each other, and the comparator airports used in the reports submitted face only limited competition from State-owned airports within their respective catchment areas (less than one third of commercial airports within the catchment areas of the comparator airports are fully state- owned, and none of them were subject to State aid investigations, as at April 2013);

4. (d)

   even where comparator airports face competition from state-owned airports within the same catchment area, there may be reasons to believe their behaviour is in line with the MEO principle (for example, where there is a large private ownership stake or where the airport is privately managed);

5. (e)

   MEO airports will not set prices below incremental cost.

1. (a)

   the assessment is undertaken on an incremental basis;

2. (b)

   an ex ante business plan is not necessarily required;

3. (c)

   for an uncongested airport, the single-till approach is an appropriate pricing methodology;

4. (d)

   only those revenues associated with the economic activity of the operating airport should be considered;

5. (e)

   the entire duration of the agreement, including any extensions, should be considered;

6. (f)

   future financial flows should be discounted in order to assess profitability of the agreements;

7. (g)

   the incremental profitability of Ryanair agreements for the airports should be assessed on the basis of estimates of the internal rate of return or net present value (NPV) measures.

This paper aims to set out the commercial logic underlying regional airports' decisions to buy advertising on ryanair.com from AMS. It argues that there are a large number of very strong, well-known, and frequently used airports. Weaker competitors must overcome consumers' static buying behaviour to expand their business. Smaller regional airports need to find a way to consistently communicate their brand message to as wide an audience as possible. Traditional forms of marketing communication require expenditure beyond their resources.

Ryanair asks the Commission to reassess its approach regarding AMS contracts so far. Ryanair believes that AMS arrangements should be considered separately from Ryanair's airport services arrangements and be subject to a separate market economy operator test. Should the Commission insist on including AMS arrangements and Ryanair airport services arrangements in a joint market economy operator test, the value of AMS services to the airport should not be disregarded.

The report by the consultancy firm of 20 December 2013 on AMS prices refers to the conclusions of earlier reports submitted outlining the importance of advertising for small brands, which confirm that Ryanair is a strong pan-European brand capable of attracting a premium for its advertising services. The AMS rates are compared with a sample taken at the same time of website advertising prices with reference to advertisements of equal size for the 2004-2005 period, i.e. when the AMS rate card was first introduced, and for 2013. ryanair.com has more than twice as many monthly visitors as the next most popular travel site, and visitors are more likely to enter into other e-commerce transactions. These unique characteristics combined with high brand awareness allowed the airline to charge a premium.

The comparison took place between advertisements of equal size determined by available data and placed on the homepage of each website. Only rate card prices were compared due to the lack of transparency relating to special offers and discretionary discounts, which are however standard commercial practice. A rate card price is quoted in terms of price per thousand impressions, namely the price to be paid for every thousand times the advertisement is viewed by visitors to the website. Prices for web advertisements vary according to their size, measured in pixels, and location on a webpage. The primary homepage advertising service offered on ryanair.com from 2004 to 2005 was a banner of 468 by 60 pixels. Banners are usually located in the centre top section of a webpage. For the period 2004-2005, the 2005 AMS rate card price for advertising in the form of banners was compared with that of 54 European travel websites.

For 2013, two other types of advertisement are considered: skyscrapers of 120 by 600 pixels and mid page units of 300 by 250 pixels. Skyscraper advertisements are tall and located along the side of a webpage, while mid page units usually sit within online editorial content, making them highly visible. The AMS rate card prices for skyscraper advertisements and mid page units are compared with those of 22 travel websites and 135 other websites. For both periods and across sectors, AMS rates are found to be lower than or within the range of prices charged by websites in the comparator sets.

In addition, a terminal value should be included in projected incremental profits at the end of the air services agreement in order to record value accruing beyond expiry of the agreement. The terminal value can be adjusted by a conservative assumption as to the probability of the agreement being renewed with Ryanair or similar terms being agreed with other airlines. This will allow an estimation of a lower bound for the benefits arising jointly out of the AMS and air services agreements, taking into account the uncertainty of incremental profits beyond the expiry of the air services agreement.

The report suggests that the cash-flow approach is to be preferred to a capitalisation approach under which AMS expenditure would be treated as capital expenditure on an intangible asset (namely the brand value of the airport). Marketing expenditure would be capitalised as an intangible asset and then amortised over its useful asset life, with a residual value at the end of the scheduled expiry of the air services agreement. This approach would, however, not capture additional benefits to the airport resulting from signing the air services agreement with Ryanair. Furthermore, estimating intangible asset value is difficult due to brand expenditure and the length of useful asset life.

Regarding the moment in time as from which the construction and operation of an airport becomes an economic activity, the Commission would point out that the gradual development of market forces in the airport sector does not allow a precise date to be determined. However, the European Courts have recognised the evolution in the nature of airport activities. In Leipzig/Halle Airport, the General Court held that from 2000 onwards the application of State aid rules to the financing of airport infrastructure could no longer be excluded. Consequently, from the date of the judgment in Aéroports de Paris (12 December 2000), the operation and construction of airport infrastructure must be considered an economic activity.

As assessed in recitals 168 and 169, the operation of an airport is an economic activity. Competition takes place, on the one hand, between airports to attract airlines and the corresponding air traffic (passengers and freight), and, on the other hand, between airport managers, which may compete between themselves to be entrusted with the management of a given airport. Moreover, in particular with respect to low-cost carriers and charter operators, airports that are not located in the same catchment areas and even in different Member States may also be in competition with each other to attract those airlines.

The Commission notes that the airport infrastructure in question in the present Decision is to be operated on a commercial basis by the airport operator, Flugplatz Altenburg-Nobitz GmbH. Since the airport operator will charge users for the use of this infrastructure, the latter is commercially usable. It follows that the entity using this infrastructure constitutes an undertaking for the purposes of Article 107(1) TFEU.

Germany explains that the public subsidies for infrastructure investments mentioned at recital 71 are exclusively linked to non-economic activities: Germany includes within these non-economic activities security investments and investments into public and aviation safety. In particular, Germany points out that security and policing activities, fire protection measures, public and operational safety, meteorological services and flight security are part of the public policy remit.

The relevant legal framework in Germany is in particular defined by §8 Luftsicherheitsgesetz (Air Security Law), which regulates airport security measures, and §27c(2) Luftverkehrsgesetz (Air Traffic Law), which regulates measures ensuring operational safety, air traffic control and air safety measures.

The Commission is of the view that measures pursuant to §8 Luftsicherheitsgesetz, measures pursuant to §27c(2) Luftverkehrsgesetz, meteorological services, and the fire brigade can, in principle, be considered to constitute activities falling within the public policy remit.

Regarding fire protection, the Commission observes that the payment of costs is subject to regional responsibilities and these costs are usually paid by the relevant regional authorities. The payment of these costs is limited to the extent necessary to cover them.

With respect to measures pursuant to §8 Luftsicherheitsgesetz, it appears that Germany considers that all costs related to the measures prescribed therein may be borne by the relevant public authorities. The Commission notes, however, that pursuant to §8(3) Luftsicherheitsgesetz only the costs related to the provision and maintenance of premises and surfaces necessary for the performance of the listed activities pursuant to §5 Luftsicherheitsgesetz may be reimbursed. All other costs must be borne by the airport operator. Hence, to the extent that public financing granted to Flugplatz Altenburg-Nobitz GmbH thus relieved this undertaking of costs it had to bear pursuant to §8(3) Luftsicherheitsgesetz, that public financing is not exempt from scrutiny under EU State aid rules.

To conclude, as regards infrastructure investments and operating expenses incurred between 2000 and 2011, the Commission accepts that expenses directly related to fire protection and the provision of meteorological services qualify as public policy remit expenses, in so far as the payment of these costs is strictly limited to what is necessary to perform these activities. As regards investments and operating costs linked to measures taken pursuant to §8 Luftsicherheitsgesetz, the Commission considers that only those costs for which the airport operator is entitled to reimbursement pursuant to §8(3) Luftsicherheitsgesetz qualify as public policy remit costs.

With respect to investments linked to air traffic control and air safety measures pursuant to §27c(2) Luftverkehrsgesetz, and noting that AOC is not one of the airports covered by §27d of that law, the Commission finds that investments and operating costs linked to air traffic control and air safety measures cannot qualify as public policy remit costs. Investments and operating costs related to ensuring the operational safety of the airport do not, finally, qualify as public policy remit costs. In particular, this means that the investments for the modernisation and extension of the runway, as well as the installation of guard lights, etc., cannot be qualified as falling within the public policy remit.

In any case, regardless of the legal classification of those costs as falling within the public policy remit or not, it has been demonstrated that they must be borne by the airport operator, under the applicable legal framework. Accordingly, if the state paid for those costs, the airport operator would be relieved of costs that it should normally have incurred.

Therefore, the Commission considers that the public funding provided to Flugplatz Altenburg-Nobitz GmbH in relation to the financing of infrastructure investments and operating losses relieves it from bearing costs that are inherent in its economic activity, with the exception of the public remit costs as set out in recitals 182 and 183. Financing from the Land of Thuringia set out in Table 7 to cover air traffic control and airport control services therefore cannot qualify as public remit activities, contrary to the opinion of Germany. Likewise, part of the infrastructure investments set out in Table 3 do not fall within the public policy remit, contrary to the opinion of Germany: this is in particular the case with the modernisation and extension of the runway.

The Commission has to assess whether the aid can be found compatible with the internal market. Article 107(3) TFEU provides for certain exemptions to the general rule set out in Article 107(1) TFEU that State aid is not compatible with the internal market. The aid in question can only be assessed on the basis of Article 107(3)(c) TFEU, which stipulates that: ‘aid to facilitate the development of certain economic activities or of certain economic areas, where such aid does not adversely affect trading conditions to an extent contrary to the common interest’, may be considered to be compatible with the internal market.

In this regard, the 2014 Aviation Guidelines provide a framework for assessing whether aid to airports may be declared compatible pursuant to Article 107(3)(c) TFEU. As provided for in recital 173 of the 2014 Aviation Guidelines, the Commission will apply the rules in force at the time when the aid was granted to unlawful investment aid to airports. Accordingly, it will not apply the principles set out in the 2014 guidelines in the case of unlawful investment aid to airports granted before 4 April 2014, the date of adoption of these guidelines.

The financing of AOC's infrastructure was granted between 2000 and 2011. Therefore, the principles set out in the 2005 Aviation Guidelines apply for the assessment of the compatibility of the infrastructure financing granted between 2005 and 2011. As regards infrastructure financing granted before 2005, no specific compatibility criteria were in force at the time to assess the compatibility of investment aid to airports. The Commission has therefore to assess these measures directly on the basis of Article 107(3)(c) TFEU, taking into account its decision-making practice in this matter. The Commission's practice regarding the assessment of the compatibility of aid granted to airport managers was consolidated in the 2005 Aviation Guidelines. Therefore the Commission will assess the compatibility of investment aid granted to Flugplatz Altenburg-Nobitz GmbH before 2005 on the basis of the criteria set out in the 2005 Aviation Guidelines.

1. (a)

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

2. (b)

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

3. (c)

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

4. (d)

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

5. (e)

   the development of trade is not affected to an extent that is contrary to the EU interest.

1. (a)

   the measure must contribute to a well-defined objective of common interest;

2. (b)

   there must be a need for state intervention;

3. (c)

   the aid measure must be an appropriate policy instrument to address the objective of common interest;

4. (d)

   there must be an incentive effect;

5. (e)

   the aid must be limited to the minimum necessary; and

6. (f)

   undue negative effects on competition and trade between Member States must be avoided.

Germany claims that the airport services contract and the marketing services agreements do not constitute State aid and therefore Germany does not provide any legal basis for potential compatibility with the internal market. Under these circumstances, it can be concluded that the aid is incompatible with the internal market given that the burden of proof of the compatibility of aid with the internal market, by way of derogation from Article 107(1) TFEU, is borne principally by the Member State concerned, which must show that the conditions for that derogation are satisfied. Moreover, the Commission considers that the State aid in question cannot be considered compatible start-up aid under the relevant rules.

Therefore, the State aid mentioned above must be reimbursed to Germany, in so far as it has been paid out.

1. (a)

   The aid amount to be recovered should correspond to the negative incremental cash flow at the time when the decision was taken to sign the agreement. The negative cash flow corresponds to the amount of financing needed for the agreement to be market-compliant.

2. (b)

   The Commission considers that the time-frame to take into consideration for this business plan is the 2010 summer season. Indeed, the effective advantage conferred on the airline is limited to the effective duration of the agreement in question, as once this agreement was terminated Ryanair/AMS did not benefit from any more advantages from the airport.

Results showing the indicative amount to be recovered by Germany from Ryanair/AMS are indicated in Table 20.

To take into account the actual advantage conferred on the airline and its subsidiaries under the combination of the airport services agreement of 3 March 2003, the marketing agreement of 7 April 2003 and the marketing agreement of 25 January 2010, the amounts indicated in Table 20 may still be adjusted in accordance with the supporting evidence provided by Germany. This adjustment is based on: (i) the difference between, on the one hand, actual payments as presented ex post that were made by the airline with regard to the airport charges, and on the other hand, the forecast cash flows (ex ante) on these items of income shown in Table 19; and (ii) the difference between, on the one hand, the actual marketing payments as presented ex post which were paid to the airline or its subsidiaries under the marketing agreement and, on the other hand, the marketing costs as specified ex ante corresponding to the amounts indicated in Table 19.

As explained at recital 212, the Commission considers that, for the purpose of the application of State aid rules, AMS and Ryanair are considered to be a single undertaking. Therefore, Ryanair and AMS are jointly and severally liable for the entire reimbursement of the aid received under the combination of the airport services agreement of 3 March 2003, the marketing agreement of 7 April 2003 and the marketing agreement of 25 January 2010.