Fraport had the right to terminate the 2001 PLTA by giving six months' notice, but only from 31 December 2005. If not terminated, the agreement was tacitly prolonged at the end of each calendar year for another year, but no longer than until 31 December 2010.

Following that report, Fraport mandated a consultant, the Boston Consulting Group (‘BCG’), as well as its own Strategic Department Acquisitions and Holdings (‘SD’) in the beginning of 2001 to develop a strategy for FFHG. Both BCG and SD concluded that a positive long-term development of FFHG was only possible with a substantial improvement of the infrastructure, as a prerequisite to further increase traffic volume. SD also pointed out that such a substantial extension of FFHG would be financially risky, and that even in case of the most positive scenario, a positive annual result (net annual profit after tax) would presumably be reached at the earliest in 2013.

Based on the BCG study and its own analysis, SD drafted a development programme for FFHG, which envisaged investments of EUR 172 million until 2007. Those investments consisted of an ‘emergency’ programme, valued at EUR 27 million, covering the extension of the runway to 3 400 meters and the planning costs for the plan approval procedure (‘Planfeststellungsverfahren’) to extend the runway to 3 800 meters, as well as the additional costs of the commenced construction of the new passenger terminal.

The capital increase was decided by a resolution of Fraport's supervisory board on 14 December 2001 and subsequently by a resolution of FFHG's shareholders on 9 January 2002. Any increase of the authorised capital of a limited liability company, such as FFHG, requires the approval of all participating shareholders.

Following that approval, Fraport and Land Rhineland-Palatinate increased the authorised capital by EUR 27 million from EUR 3,5 million to EUR 30,5 million. On 9 January 2002 Fraport contributed EUR 19,7 million and Land Rhineland-Palatinate EUR 7,3 million. The capital increase was intended to finance the extension of the runway and investments into other infrastructure to increase the profitability of the airport.

On 27 November 2002, it was agreed by Fraport, Land Rhineland-Palatinate, Land Hesse and FFHG that Land Hesse would become the third shareholder of FFHG and would as such contribute EUR […] million at the time when additional capital will be required to finance the investments. It was also agreed to create a close cooperation between Frankfurt Main airport and Frankfurt Hahn airport.

It was agreed that further investments were necessary to increase the profitability of Frankfurt Hahn airport. Those investments concern for example the extension of the runway to 3 800 meters. A draft shareholder agreement between Fraport, Land Rhineland-Palatinate, and Land Hesse was prepared on 22 March 2004. The final shareholder agreement regarding the decision to realise this 2004 capital increase was signed by Fraport, Land Rhineland-Palatinate, and Land Hesse on 30 March 2005 and registered in the commercial registry on 19 May 2005

The three parties agreed on a capital increase of EUR 19,5 million for FFHG's authorised capital, thereby continuing the investment programme proposed in 2001 by SD (see recitals 33-34). Land Rhineland-Palatinate and Land Hesse agreed to this capital increase subject to the condition that a new PLTA between FFHG and Fraport would be concluded, covering the period until 31 December 2014. The shareholders also agreed that any further debt FFHG was going to incur had to be secured by Fraport, Land Rhineland-Palatinate and Land Hesse at a ratio corresponding to the distribution of capital in FFHG. On that basis Fraport, Land Rhineland-Palatinate and Land Hessen committed to re-finance the infrastructure investments of FFHG.

Between 2004 and 2009, fresh capital of EUR 19,5 million was injected into FFHG in several instalments. Fraport's share in the capital increase amounted to EUR 10,21 million, Land Rhineland-Palatinate's to EUR 0,54 million, and Land Hesse contributed EUR 8,75 million.

In addition, both Land Hesse and Land Rhineland-Palatinate committed and injected according to the payment schedule (see Table 5 below) another EUR 11,25 million as capital reserve, to be paid by the former between 2007 and 2009, and by the latter between 2005 and 2009.

Therefore, the total amount of capital increase decided in 2005 was EUR 42 million.

As it had been a condition for approval of the capital increase, FFHG and Fraport extended the duration of the 2001 PLTA until 2014 by an agreement of 5 April 2004. The new PLTA agreement became however only effective after the approval of Fraport's shareholder assembly. As agreed by the shareholders of FFHG with respect to the capital increase, it was laid down in this 2004 PLTA stated that any further debt accrued by FFHG had to be compensated by Fraport, Land Rhineland-Palatinate and Land Hesse at a ratio which corresponded to their equity.

Under the 2004 PLTA, Fraport took over approximately EUR […] million worth of losses until 2009. Therefore, under the two successive PLTA's together, a total of EUR […] million of losses, accrued between 2001 and 2009, were compensated by Fraport. Out of this sum, EUR […] million concern depreciation of assets and EUR […] million the interest payments on loans to finance infrastructure.

In 2009, Fraport sold its entire share in FFHG to Land Rhineland-Palatinate and thereby also terminated the PLTA.

Land Rhineland-Palatinate collects an airport security tax from all departing passengers at Frankfurt Hahn airport. The Land does not carry out the security checks itself, but has subcontracted that task to the airport, which in turn has subcontracted that task by agreement on to a security company. As consideration for carrying out the security checks, the Land transfers the entire revenue from the security tax to the airport.

The direct grants before 12 December 2000 by Land Rhineland-Palatinate to FFHG amount to […] million, whereas the direct grants by Land Rhineland-Palatinate to FFHG between 2001 and 2004 amount to EUR […] million.

The first agreement with Ryanair entered into force with retroactive effect as of 1 April 1999, and had a duration of 5 years (the ‘1999 Ryanair agreement’). Ryanair commenced operating from Frankfurt Hahn airport into London Stansted on 22 April 1999, when all essential conditions of the agreements had already been agreed upon.

A Deckungsbeitragsrechnung (break-even analysis) for the 1999 Ryanair agreement had been submitted by the management board of FFHG to the Supervisory Board in its meeting of 5 May 1999. According to Germany, FFHG's Supervisory Board did not vote on the 1999 Ryanair agreement or the break-even analysis, since the conclusion of the agreement was deemed to be operational day-to-day business being within the sole competence of FFHG's Management Board.

Under Annex 3 of the 1999 Ryanair agreement, FFHG additionally received a […] % commission on each ticket sold (cash or credit card) or issued by FFHG's ticket counters, a […] % commission on excess baggage charges collected by FFHG, EUR […] for each prepaid ticket processed by Ryanair and a […] % commission for each car rental booked through FFHG.

Ryanair was entitled to marketing support amounting to an annual maximum of EUR […], which was to be paid by FFHG in quarterly instalments and only for the first 3 years of operation. The marketing support had to be used exclusively for advertisements concerning routes departing from Frankfurt Hahn airport. Ryanair had to provide supporting invoices and detailed proof of how the money was spent.

As Frankfurt Hahn airport's business strategy was focused on low cost carriers, which typically operate Boeing 737 or Airbus A 319/320 aircraft with a maximum take-off weight (‘MTOW’) of approximately 50 to 80 tonnes, it introduced a zero landing and take-off charge for aircraft between 5,7 and 90 tonnes MTOW.

The passenger charge was set at EUR 4,35 per arriving passenger. The passenger security fee based on the number of passengers aboard the aircraft when departing is EUR 4,35 per passenger, payable to Land Rhineland-Palatinate's Highways and Transport Department — Air Transport Section.

For each approach of an aircraft under Instrument Flight Rules, an Air Traffic Control approach charge has to be paid to the airport operator. That charge for commercial or non-commercial flights is included in the landing and take-off charge if the flight is operated for purposes other than training and instruction. It hence is zero for aircraft to which the zero landing and take-off charge applies.

The second agreement with Ryanair is dated 14 February 2002 (the ‘2002 Ryanair agreement’) and was submitted to FFHG's Supervisory Board held on 16 November 2001. The minutes of that meeting report that the majority of the members of the Supervisory Board approved it.

The copy of the 2002 Ryanair agreement that was transmitted to the Commission is not signed. According to Germany, although that agreement was never signed, it has nevertheless been applied by the parties since 14 February 2002.

According to Germany, the 2002 Ryanair agreement replaced the 1999 Ryanair agreement, and it was concluded for a period of […] years (until […]). The passenger fee however remained identical as in the initial agreement of 1999. Ryanair has the option to prolong the agreement on similar terms and conditions until […].

1. (i)

   The Main Agreement

2. (ii)

   Annex A — Description of Ground Handling Services;

3. (iii)

   Annex B — 1.0 Location, agreed services and charges for Frankfurt Hahn airport;

4. (iv)

   Second Annex B — 1.0 Location, agreed services and charges for Frankfurt Hahn airport;

5. (v)
   Annex 3 and Appendixes 1-323 to the second Annex B — 1.0;
6. (vi)

   Annex C — Airport charges;

7. (vii)

   Annex D — Description of the ground handling service package ‘Hahn-Smart’

8. (viii)

   Third Annex B — Location, agreed services and charges for Frankfurt Hahn airport — ‘Hub Agreement’

9. (ix)

   Annex E — Marketing Agreement

The Main agreement, Annex A and Annex B — 1.0 are simply copies of the standard form. The parties have not filled in any of the fields, as this part of the standard form was not considered applicable.

The second Annex B — 1.0 has been filled in by the parties, in so far as names of the parties, bank accounts and the price for de-icing fluid (EUR […] per litre) and hot water (EUR […] per litre) are concerned.

Annex 3 and its Annexes 1-3 concern ‘further strategic agreements’ between the parties. They relate to the technical arrangements for ground handling, ticketing and branding space at the airport.

The airport fee level was frozen until 30 April 2004 and thereafter was to be adjusted corresponding to the German Consumer Price Index, if the latter increased by more than […] % compared to the previous year.

1. (i)

   one-off payments of EUR […] for each new route departing from Frankfurt Hahn airport and established after 13 February 2002, and

2. (ii)

   rebates on the airport charges dependent on the number of aircrafts based at Frankfurt Hahn airport and on the number of landing passengers as summarised in Table 10.

   Table 10
   Rebates on airport charges
   Number of aircraft based at Frankfurt Hahn airport	Marketing support per passenger (EUR)
   Up to 2	[…]
   3 to 4	[…]
   5-8	[…]25

   25

   […].

Annex E also provides that VAT will be added to every payment or price in the agreement, in so far as turnover tax law is applicable.

[…].

On 4 November 2005, an amendment to the agreement of 2002 was agreed, the ‘Agreement Ryanair/Flughafen Frankfurt-Hahn GmbH Delivery of aircraft 6 to 18 — year 2005 to year 2012’ (the ‘2005 Ryanair agreement’). On 18 November 2005, the conclusion of the 2005 Ryanair agreement was approved by the supervisory board of FFHG.

1. (i)

   […];

2. (ii)

   […];

3. (iii)

   […];

4. (iv)

   […].

The 2005 Ryanair agreement is valid until […]. The other elements of the 2002 Ryanair agreement, in particular the Main Agreement and Annex E (i.e. Hahn Smart-Agreement), were also prolonged until […].

[…].

1. (i)

   Air traffic control charges and ground handling charges are included in the take-off and landing charges;

2. (ii)

   Aircraft with a MTOW of more than 5,7 tonnes do not have to pay take-off and landing charges (or air traffic control charges or ground handling charges) at all.

The 2006 schedule introduces, however, two limitations to those principles. First of all, only passenger aircraft can claim those advantages. Secondly, the advantages are limited to aircraft with a turn-around time of less than 30 minutes.

1. (i)

   eligible are flights to destinations which have not been served from Frankfurt Hahn airport in the last 24 months;

2. (ii)

   the maximum support is 33,3 % of the proven marketing costs for a new destination;

3. (iii)

   the airline has to demonstrate the medium-term profitability of the new destination through appropriate supporting documents;

4. (iv)

   FFHG can request the reimbursement of the marketing support in the event that the airline does not fulfil its obligations with respect to the new destination.

With regard to the 2001 PLTA, the Commission found in the 2008 opening decision that the annual losses were assumed by Fraport, a company which is predominantly publicly owned. The Commission therefore established that it needed to examine whether Germany could be regarded as having been involved in the conclusion of the 2001 PLTA.

Furthermore, in contrast to the arguments raised by Germany, the Commission expressed doubts that a market economy investor would have concluded such an agreement as the agreement clearly seemed to constitute an advantage for FFHG in relieving it from a financial burden which otherwise it would have had to shoulder.

The Commission also considered that the measure was selective as only FFHG's losses were covered and that the measure concerned distorted or threatened to distort competition within the market of airport operators and affected trade between Member States.

The Commission thus took the preliminary view that the measure at issue might constitute State aid in the form of operating aid.

Since Germany did not provide any evidence or argue that such operating aid could be considered compatible with the internal market pursuant to Article 107(3)(c) of the Treaty, and in the light of the 2005 Aviation Guidelines, the Commission raised serious doubts that that aid could be deemed compatible.

The doubts were due to the content of the MEOT carried out by PwC as it was purely qualitative and did not assess the cost of disengagement by Fraport. The report also did not quantify or explain in detail the ‘high risks’ identified by BCG and Fraport's SD, and generally limited the assessment to Fraport, without considering whether Land Rhineland-Palatinate acted like a market economy investor. For those reasons, the Commission could not exclude that the capital increase provided an advantage to FFHG.

The Commission also concluded that the measure was selective as only FFHG was granted the 2001 capital increase and that it distorted or threatened to distort competition within the market of airport operators and affected trade between Member States.

The Commission therefore took the preliminary view that the measure at issue might constitute State aid in the form of investment aid and raised doubts as to its compatibility with the internal market, notably in view of Article 107(3)(c) of the Treaty and the 2005 Aviation Guidelines.

With regard to the second capital increase, the Commission noted that in 2004, FFHG's existing shareholders increased its authorised capital by EUR 10,75 million, Fraport contributing a share of EUR 10,21 million and Land Rhineland-Palatinate a share of EUR 0,54 million. In addition, Land Hesse entered as new shareholder, contributing another EUR 8,75 million. Furthermore, both Land Rhineland-Palatinate and Land Hesse committed to contribute each EUR 11,25 million as capital reserve.

The Commission adopted mutatis mutandis the same reasoning for this capital increase as for the one in 2001 (see Section 4.1.2) for the existence of aid and raised the same doubts as to its compatibility with the internal market.

According to the 2008 opening decision, Fraport took over losses of FFHG amounting to at least EUR […] million under the 2004 PLTA. The Commission applied mutatis mutandis the same reasoning as the one advanced in relation to the 2001 PLTA, see recital 91 and following. In relation to the MEOT submitted by PwC, the Commission doubted its reliability given that the assessment was largely qualitative. Hence, the Commission considered that the 2004 PLTA constitutes operating aid and expressed doubts as regards its compatibility with the internal market, in particular in light of the 2005 Aviation Guidelines.

The Commission then observed that the economic analysis of PwC seemed to indicate that Land Rhineland-Palatinate over-compensated FFHG for carrying out security checks. In that regard the Commission pointed out that that advantage was financed through State resources and had the potential to distort competition and affect trade between Member States. Hence, the Commission considered that the overcompensation constituted State aid within the meaning of Article 107(1) of the Treaty.

With regard to the compatibility assessment of that operating aid, the Commission applied mutatis mutandis the same reasoning as the one advanced in relation to the 2001 PLTA, see recital 95 and following. Another possible legal basis assessed for compatibility with the internal market was Article 106(2) of the Treaty. However, Germany did not provide any indication that a public service obligation had been imposed on FFHG. Therefore, the Commission did not find a legal basis to declare the overcompensation arising from the security charge compatible with the internal market.

The Commission noted in its 2008 opening decision that the direct grants granted in the years 2001 to 2004 appear to have been granted without consideration, from State resources (namely the general budget of Land Rhineland-Palatinate) and in a selective manner (only to FFHG). The Commission considered that those grants have the potential to distort competition and affect trade between Member States. Hence, the Commission took the preliminary view that they constituted State aid within the meaning of Article 107(1) of the Treaty in the form of investment aid.

The Commission also raised doubts as to the compatibility of the aid with the internal market, notably in view of Article 107(3)(c) of the Treaty and the 2005 Aviation Guidelines.

Concerning the 1999 Ryanair agreement, the Commission generally pointed out in the 2008 opening decision that a reduction or system of reductions granting preferential treatment to a specific business was likely to fall within the scope of Article 107 of the Treaty.

The Commission considered that, as FFHG is a predominantly publicly owned undertaking, its resources constitute State resources. The Commission pointed out in relation to the 1999 Ryanair agreement that although the supervisory board did not vote on that agreement, neither did it pass any motion or take any action suggesting that it was opposed to it. Therefore, the Commission noted that it had no indications allowing it to conclude that the 1999 Ryanair agreement was not imputable to the State.

Furthermore, the Commission raised doubts as to whether a private market investor would have concluded the 1999 Ryanair agreement. The Commission noted in this respect that the charges imposed by FFHG on Ryanair did not cover FFHG's full costs and therefore appeared to confer an advantage to Ryanair.

The Commission also pointed out that the costs of the new terminal of approximately EUR […] million had not been taken into account in the MEOT submitted by Germany. As a preliminary observation, the Commission rejected Germany's argument that in 1999 HHN was anyway in need of a new passenger terminal, and that the capacity of 1,25 million passengers per year was far above the expected passenger volume to be generated by Ryanair, since Ryanair was the only major passenger air carrier at Frankfurt Hahn airport in 1999. For those reasons, the Commission raised doubts as to the MEOT handed in by Germany.

The Commission also considered that the 1999 Ryanair agreement is a selective and specific measure as only Ryanair received such conditions in the negotiations with FFHG, and that the measure concerned distorts or threatens to distort competition within the market of airlines and affects trade between the Member States.

Therefore, the Commission took the preliminary view that, since it appeared that it did not fulfil the MEOT and was imputable to the State, the 1999 Ryanair agreement would constitute State aid within the meaning of Article 107(1) of the Treaty. Furthermore, the Commission did see not legal grounds for declaring such a permanent operating aid for an airline compatible with the internal market.

In the 2008 opening decision, the Commission also analysed whether the 2001 schedule of airport charges possibly constituted State aid to Ryanair. It considered in that respect that, as companies in which the public authorities have a predominant share, FFHG's and Fraport's resources constitute State resources and that their conduct would also be imputable to the State.

The Commission expressed doubts as to whether the fee structure of the 2001 schedule of airport charges was set in a manner which would allow the airport to run profitably as Germany had not provided a MEOT for this schedule. As Ryanair seemed to have been the only passenger airline using the airport between 2001 and 2003, and retained more than 95 % of the passenger volume until 2006, the results of the MEOT for the 2002 Ryanair agreement, which was based on the 2001 schedule of airport charges and introduced an additional marketing support, served as a benchmark. Based on the information provided, the Commission doubted whether the MEOT for the 2001 schedule of airport charges was fulfilled.

The Commission considered that the measure was selective as only airlines that use Frankfurt Hahn airport benefited from the 2001 schedule of airport charges and that it distorted or threatened to distort competition and affected trade between the Member States.

Therefore, concerning the 2001 schedule of airport charges, the Commission took the preliminary view that it might constitute State aid within the meaning of Article 107(1) of the Treaty. Furthermore, the Commission did not find legal grounds for declaring such a permanent operating aid for an airline compatible with the internal market.

Regarding the question of State resources, the Commission applied the same reasoning mutatis mutandis as for the 1999 Ryanair agreement, discussed in Section 4.2.1 (recital 110 and following). Concerning imputability of the measure, the 2002 Ryanair agreement was formally approved by the Supervisory Board of FFHG, which is dominated by members nominated by the public authorities. Hence, the Commission took the preliminary view that the 2002 Ryanair agreement was imputable to Germany.

Furthermore, the Commission expressed doubts as to whether a market economy investor would have concluded the 2002 Ryanair agreement. In this respect, the Commission doubted the calculation presented by Germany. Furthermore, the Commission raised doubts regarding the calculation of costs since the costs for general airport infrastructure and general airport administration handed in by Germany were based on marginal, rather than average costs. Also, the level of airport charges was frozen until 30 April 2004, and thereafter was to be adjusted corresponding to the German Consumer Price Index only if this index increased by more than […] % compared to the previous year.

Concerning selectivity, distortion of competition and effect on trade, the Commission applied the same reasoning mutatis mutandis as for the 1999 Ryanair agreement, see Section 4.2.1 (recital 110 and following).

The Commission therefore took the preliminary view that the 2002 Ryanair agreement might constitute State aid within the meaning of Article 107(1) of the Treaty. Furthermore, the Commission did not see any legal grounds for declaring such a permanent operating aid for an airline compatible with the internal market.

Regarding the question of State resources, the Commission applied the same reasoning mutatis mutandis as for the 1999 Ryanair agreement discussed in Section 4.2.1 (recital 110 and following). On the question of whether there was an economic advantage, the Commission expressed doubts with regard to the MEOT presented by Germany since there was insufficient information for verifying the calculations and because the investments induced by increasing passenger numbers were not in any way taken into account or allocated to Ryanair.

The Commission furthermore indicated that although the 2005 Ryanair agreement, differed from the 1999 and 2002 Ryanair agreements, by introducing a kind of contractual penalty system if Ryanair did not generate the contractually determined passenger volume, it doubted whether those sanctions were effective.

Concerning selectivity, distortion of competition and effects on trade, the Commission applied the same reasoning mutatis mutandis as for the 1999 Ryanair agreement, see Section 4.2.1 (recital 110 and following).

The Commission concluded that the 2005 Ryanair agreement would also constitute State aid within the meaning of Article 107(1) of the Treaty. The Commission did not find any legal grounds for declaring such a permanent operating aid for an airline compatible with the internal market.

With regard to the 2006 schedule of airport charges, Germany had only partially provided an economic justification in the form of a MEOT to the Commission. The Commission indicated in its 2008 opening decision that with the incomplete information it was unable to verify whether, as Germany argued, economies of scale justified the differentiation in passenger charges. Furthermore, the economic justifications given for the 2006 schedule of airport charges left several questions open, such as which costs are included in the cost coverage and why the marketing support was not included in the economic justification of the schedule.

The Commission considered that the measure was selective as only airlines using Frankfurt Hahn airport benefited from the 2006 schedule of airport charges and that the measure concerned distorted or threatened to distort competition and affected trade between the Member States.

Therefore, concerning the 2006 schedule of airport charges, the Commission took the preliminary view that it might constitute State aid within the meaning of Article 107(1) of the Treaty. Furthermore, the Commission did not see any legal grounds for declaring such a permanent operating aid for an airline compatible with the internal market.

Germany stated furthermore that no State resources had been employed. In that regard, Germany elaborated that the losses taken over by Fraport did not burden the budget of the State. Furthermore, Germany argued that the decisions taken by Fraport were not imputable to Germany since the public shareholders were not able to exercise a determining influence. In this regard, Germany emphasised that it would have to be verified in each individual case whether resources of a company were actually controlled by the State. According to Germany, the fact that a majority of shareholders was public is not sufficient to assume that the 2001 PLTA involves State resources.

In that regard, Germany explained that Fraport was not in any way incorporated into the structures of public administration, that Fraport was not accountable to Germany for its actions and was in no way subordinated to the public administration. Even though Germany recognised that the public shareholders were involved in the decision-making at the general meeting of shareholders during which the 2001 PLTA was decided, Germany argued that this did not mean that the public shareholders had done anything more than exercise their lawful rights and obligations as shareholders.

In addition, Germany stated that the 2001 PLTA did not confer any advantage on FFHG. It referred to the MEOT undertaken by PwC in that regard, which considered that any market economy investor would also have concluded that agreement. Furthermore, Germany stated that the risks and benefits of the 2001 PLTA were evenly distributed and that it also made sense from a tax law point of view. Overall, Germany depicted the 2001 PLTA as a perfectly normal measure in a corporate group to apply global or sectorial structural policy.

Germany explained that the 2001 capital increase was necessary since an external financing of the investments into its infrastructure would have strained the annual results of FFHG too much in the short-term.

Germany stated that the 2001 capital increase was decided by the supervisory board of FFHG on 14 December 2001 and led to a change in the articles of association of FFHG on 9 January 2002. Therefore, Germany disputed that the rules of State aid are applicable to that measure and referred here also to its reasoning concerning the 2001 PLTA (see recital 134).

Germany furthermore argued that the funds invested by Fraport (EUR 19,7 million out of EUR 27 million) were not State resources since the State had no control over Fraport. In that respect Germany referred to its argumentation on State resources concerning the 2001 PLTA (see recital 136). In addition, Germany stated that the capital increase could also not be imputable to Germany and referred to its explanations on imputability concerning the 2001 PLTA (see recital 134). Germany added that the approval by FFHG's shareholders of the 2001 capital increase could not be a determining factor for its imputability to the State. In Germany's opinion, the actions of the undertaking who handed out the possible aid must be imputable, not those of the undertaking benefitting from the aid. Since FFHG was the undertaking benefitting from the aid, its approval of the capital increase would not make the granting of aid imputable to Germany. According to Germany, nor could the approval of Fraport's supervisory board be taken as an indication for imputability since at that time the supervisory board was already constituted on par of representatives of the employees and the shareholders with a right of codetermination, meaning that there were 10 representatives of the employees and 10 representatives of the shareholders.

Germany also argued that no advantage was conferred on FFHG by the 2001 capital increase. Fraport as well as the Land Rhineland-Palatinate had acted like any market economy investor would have in this matter.

Germany disagreed with the doubts raised by the Commission in relation to the MEOT regarding Fraport's 2001 capital increase decision. Germany submitted all additionally demanded internal documents to the Commission. According to Germany, the decision taken by Fraport in 2001 for a capital increase was based furthermore on an assessment of the measure by the BCG and two general studies ordered by Fraport on the development of air traffic. Germany emphasised that Fraport had increased the capital since the assessment of BCG stated that reaching profitability would not be possible at Frankfurt Hahn airport without further construction and infrastructure measures. The MEOT had taken into account all those documents.

Following the doubts raised by the Commission in relation to the MEOT carried out by PwC, Germany submitted a second, supplementary assessment from PwC to complement and refine the first MEOT. That refined assessment comes to the same conclusion as the first one, namely that the MEOT is fulfilled. Germany rejected Commission's doubts that PwC had not assessed a disengagement of Fraport and that therefore, without knowing the cost of disengagement, it would be impossible to verify whether Fraport had acted like a market economy investor. Germany argued that the cost of disengagement did not make a difference in the assessment. Moreover, Germany pointed out that Fraport had considered disengagement, but that it would not have been possible during the next 5 years due to the 2001 PLTA. Furthermore, the PwC's assessment showed that the investment would have positive results for Fraport in the long run.

Following the 2008 opening decision Germany also submitted a MEOT also in relation to the behaviour of Land Rhineland-Palatinate and its decision to contribute to the capital increase of FFHG with EUR 7,3 million. According to the assessment, also carried out by PwC, Land Rhineland-Palatinate had acted like a market economy operator since the investment measures decided in 2001 were necessary and therefore the capital increase was commercially defendable.

Germany argued that also after the Aéroports de Paris judgment the State aid rules would not be applicable to the 2004 capital increase. According to Germany, the 1994 Aviation Guidelines were in force at that moment and under those Guidelines infrastructure measures at airports were not relevant to the application of State aid rules.

Germany pointed out that according to the MEOT submitted by PwC, supported by supplementary assessments after the 2008 opening decision, Fraport, Land Rhineland-Palatinate and Land Hesse have all acted like market economy investors concerning the 2004 capital increase. Concerning the argumentation for Fraport, Germany referred to its arguments made in relation to the 2001 capital increase (see recital 140 and following). In the first as well as in the supplementary MEOT PwC concluded, according to Germany, that the 2004 capital increase, as well as the conclusion of a new PLTA were to be seen as advantageous for Fraport at the time, qualitatively as well as quantitatively. This was according to Germany justified by the finding of PwC that Fraport's Return on invested capital (hereinafter: ‘ROIC’) when investing into FFHG was above an alternative return of an equivalent capital investment.

In respect to Land Rhineland-Palatinate, Germany pointed to PwC's conclusion that also the Land acted like a market economy investor since the ROIC for the Land was, similarly as for Fraport, above a comparable alternative investment.

In relation to the behaviour of Land Hesse, Germany argued that the restricted growth possibilities for Frankfurt Main airport deriving, inter alia, from the night flight curfew made further development of Frankfurt Hahn airport necessary in the eyes of Land Hesse. Otherwise Frankfurt Main airport would have faced severe economic consequences. Germany pointed out that this development was necessary in order to comprehensively exploit the existing growth opportunities in the framework of the 24 hours-flight permission for Frankfurt Hahn airport together with the envisaged introduction of the airport system Frankfurt Main airport — Frankfurt Hahn airport. Hence, the involvement of Land Hesse in the capital increase was unavoidable, according to Germany.

Germany stated that the 2004 PLTA could only be seen in the light of the capital increase and the changes in the shareholder structure in 2004, especially since Land Rhineland-Palatinate and Land Hesse made the redistribution of FFHG shares subject to the conclusion of the 2004 PLTA between Fraport and FFHG until 2014.

Germany referred to its arguments made in relation to the 2004 capital increase and argued that the State aid rules were also not applicable to the 2004 PLTA (see recital 146 and the following).

Concerning the involvement of State resources, Germany referred to its explanations for the 2001 PLTA (see recital 134 and the following). Hence, in Germany's opinion the resources of Fraport were not State resources since Fraport was not subject to State control.

Germany also argued that for the decision of the 2004 PLTA to be approved, a majority of 75 % was needed, whereas the public shareholders only held approximately 70 % of the shares and were therefore in fact not able to control the decisions of Fraport. Moreover, the remaining 30 % of Fraport's shares were dispersed shareholdings. The vote was taken with 99,992 % positive votes, so also the market economy investors did vote for the 2004 PLTA.

As regards the existence of an economic advantage, Germany referred again to the explanations for the 2001 PLTA (see recital 137), according to which a distribution of profits and losses is an absolutely normal measure within a group of companies. Furthermore, according to PwC, any market economy investor would have taken the same decision of concluding the 2004 PLTA since at that moment a profit was to be expected from the year 2008/2009 onwards. Germany submitted further that on the basis of the doubts expressed by the Commission, PwC tested those measures again in the supplementary assessment according to qualitative calculations and came to the same conclusion.

Germany asserted further that the 2004 PLTA was a condition for the 2004 capital increase and, given the expectation of a positive development as from 2008/2009, it was in the interest of Fraport to conclude the 2004 PLTA for at least 5 years. Also, Germany explained that Fraport would have been allowed to take all profits of FFHG until at least 31 December 2024 while being able, in the opposite scenario, to cancel the agreement by 31 December 2010. Therefore, Germany submitted that Fraport would have been able to benefit 100 % from the agreement and to steer FFHG's day-to-day business, while holding only 65 % of its shares. Germany also took the view that the MEOT is supported by the fact that the private investors, making up 30 % of the shareholders of Fraport at that moment, also approved the decision.

Germany explained that according to §5 Luftsicherheitsgesetz (Air Security Law), it is the State that checks passengers and their luggage in order to protect the security of air traffic against terroristic attacks. Germany asserted further that the authorities charge fees per passenger for this activity to the airlines. Germany stated that the level of the security charge depends on the individual circumstances of the airport and range from EUR 2 up to EUR 10 per passenger. At Frankfurt Hahn, the fee amounts to EUR 4,35 and is therefore appropriate in comparison to other airports.

This security task can also be transferred by the authorities to an airport operator, which is what happened in this case where the security checks are being performed by FFHG who in turn entrusted an external security company.

In addition, Germany stated that the security checks fall within the scope of the public policy remit and do not constitute an economic activity.

Germany shares the opinion of the Commission in this regard, that there should be no overcompensation for the services performed by FFHG. However, Germany emphasised that FFHG was not overcompensated since it has to bear all the costs for the security checks.

Germany clarified that Land Rhineland-Palatinate has made the following payments to FFHG between 2001 and 2004. First, Land Rhineland-Palatinate supported FFHG in some of its infrastructure investments and granted EUR […] to FFHG for this purpose in 2001. According to Germany, those grants were based on decisions taken already in the years 1999 and 2000. Germany argued that at the moment those decisions were taken, State aid rules did not apply to airports as undertakings within the meaning of Article 107(1) of the Treaty.

Second, Germany stated that the financing of personnel costs for security checks was partially taken over by Land Rhineland-Palatinate for the years 2001 (60 % of total costs), 2002 (50 %), 2003 (40 %) and 2004 (30 %).

Third, Germany admitted that Land Rhineland-Palatinate had co-financed two scientific studies which had been ordered by FFHG, but which were mainly in the general public interest according to Germany. Germany stated that Land Rhineland-Palatinate had subsidised the first study on the regional economic effects of Frankfurt Hahn airport at 90 % of total costs, and the second study on the development potentials of the freight carrier business at 70 % of the total costs. Germany argued that Land Rhineland-Palatinate had given those subsidies only because of its own interest in the studies and could just as well have ordered the studies itself. Germany did not see how any advantage was conferred on FFHG through this partial financing since the studies are in the public general interest, neither how this financing might distort competition. As far as those studies were of interest to FFHG, FFHG had also contributed to them financially.

Concerning the 1999 Ryanair agreement, Germany generally remarked that from the beginning Frankfurt Hahn airport built only very basic infrastructure so that this airport could be a cost-efficient and innovative partner for low-cost airlines. According to Germany, also at other European airports the so-called ‘anchor clients’ are the natural drivers of the initial development of the airport. For Frankfurt Hahn, the anchor client, i.e. the client through whom a foothold in the market could be obtained, was Ryanair.

Germany argued that when the first agreement with Ryanair was concluded, the concept of a low-cost carrier airport was still in its infancy. Therefore, through this agreement an incentive was given to Ryanair to start flying to the rarely frequented Frankfurt Hahn airport. Germany stated that committing such a big airline to Frankfurt Hahn airport led to the acquisition of more airline agreements for the airport (‘follow-on principle’). Through the so-called ‘domino-effect’, this ultimately also led to an increase in the profits for the non-aviation sector.

Germany argued that, given these dynamics, airlines such as Ryanair had a great bargaining power, since many other small regional airports tried to conclude agreements with Ryanair at that time.

Furthermore, Germany stated that no State resources were granted through the 1999 Ryanair agreement. Moreover, Germany argued that the contractual relationship between the operator of the airport and the airline was conferring no advantage unto the airline. In Germany's view, the responsibility for the conclusion of this agreement must be attributed exclusively to the management board since the conclusion of the 1999 Ryanair agreement represented day-to-day business and the supervisory board had taken no decision in this matter. In Germany's view, the Commission cannot consider the conclusion of the 1999 Ryanair agreement as imputable to Germany because the supervisory board did not do anything to prevent it. Such actions do not lie within the responsibilities and tasks of the supervisory board, according to Germany. Also, the criteria mentioned by the Court of Justice in Stardust Marine would be led ad absurdum if the fact that a supervisory body of a publicly held company did not act would be enough to conclude on the imputability of the measure to the State. Therefore, according to Germany the agreement was not imputable in any way to the State.

Moreover, Germany argued that the 1999 Ryanair agreement did not confer any advantage on Ryanair since any market economy investor would have also concluded such agreement. Germany especially emphasised that this agreement did not induce any losses, contrary to what the Commission argued in its 2008 opening decision, but produced an enormous amount of revenues which by far surpassed the costs incurred.

In this regard, Germany emphasised that Frankfurt Hahn airport used the ‘single-till-approach’, according to which the revenues of aviation and non-aviation flow into a single pool (‘single till’). Therefore, according to Germany aeronautical and non-aeronautical revenues generated by the airlines and its passengers at the airport have to be taken into account. As Germany stated before, PwC concluded that a market economy investor with a long-term strategy would have signed the 1999 Ryanair agreement, in particular if one considered Frankfurt Hahn airport's situation in 1999. According to Germany, at that time Frankfurt Hahn airport was facing high fixed costs for maintenance of the air and ground infrastructure, whereas the capacity utilisation of the airport was low. Thus, Germany argued, the possibility to generate additional passenger volume was an opportunity to limit losses and acquire clients with growth potential.

Germany is of the opinion that costs which were decided on before the conclusion of the agreement, such as the costs for the general airport infrastructure and general airport administration (in other words costs that arose irrespective of the 1999 Ryanair agreement), should not be included in the profitability analysis of the 1999 Ryanair agreement, and PwC supports Germany in this opinion. Germany argued especially that it would only be possible for an airport with an existing network of clients to have his clients partially bear the costs of infrastructure measures and that Frankfurt Hahn airport was not in such a position.

Furthermore, Germany argued that if one were to consider the actual costs for building the new terminal, at most the envisaged passenger volume to be generated by Ryanair could be taken into account. Germany took the view that a depreciation period of 25 years would then be appropriate, which would mean a depreciation of EUR […] per year. Even in case of a depreciation period of 15 years, as suggested by the Commission, Germany argued that this would mean a depreciation of EUR […] per year, so that the overall break-even analysis would still be positive. Therefore, taking into account the time for initiation of Frankfurt Hahn airport, Germany took the view that this would have sufficed for a market economy investor to conclude the agreement.

The 2001 schedule of airport charges could not be seen as State aid according to Germany. Germany argued that there was no granting of State resources and refers in this regard to its explanations concerning the 1999 Ryanair agreement (see Section 5.3.1 and especially recital 167). Germany stated that the 2001 schedule of airport charges had generated revenues for FFHG and it was not necessary or possible that the schedule of airport charges would lead to coverage of all costs incurred by FFHG. For such a result, according to Germany, the revenues from the non-aviation sector needed be taken into account as well under the single-till-approach (see recital 169).

Germany furthermore disputed that the measure was imputable to the State because of the approval of the airport charges by the Rhineland-Palatinate Transport department. This approval did not mean any economic or political dependence, but was simply a regulatory formality requested under German law which every airport, whether publicly owned or not, has to fulfil according to the law. The reason for this law is to protect the airlines from any possible abuse of the monopolistic power of the airport to set prices for its use.

Moreover, Germany argued that no advantage was granted to Frankfurt Hahn airport through the 2001 schedule of airport charges. It agreed with the Commission that the results of the private market investor test for the 2002 Ryanair agreement, which is based on the 2001 schedule of airport charges and introduces an additional marketing support, can serve as a benchmark. On this basis, since the MEOT is positive for the 2002 Ryanair agreement, Germany argued that no other result can apply to the 2001 schedule of airport charges. Concerning the doubts raised by the Commission in relation to the MEOT, Germany referred to its argumentation in relation to MEOT for the 2002 Ryanair agreement (see recital 178 and following).

Furthermore, Germany expressly disagreed with the Commission as to the assessment concerning the selectivity of the 2001 schedule of airport charges. Germany argued that the 2001 schedule of airport charges was of a general nature and applied to all airlines using the airport, and that hence it could not be selective or specific. According to Germany, the 2001 schedule of airport charges included no differentiations which would give an advantage to one airline over the other and they did not contain any kind of rebate system either. Therefore, Germany took the view that no airline was granted a selective advantage.

Finally, Germany argued in relation to the 2001 schedule of airport charges that this schedule was in accordance with market conform behaviour and as such would not be able to distort competition between airports or the competition on the internal market.

Germany considered, in contrast to the 2008 opening decision, that the 2002 Ryanair agreement did not generate any losses, but instead provided a source of income for FFHG. Concerning the question of imputability of the 2002 Ryanair agreement and the use of State resources, Germany referred to its explanations concerning the 1999 Ryanair agreement (see recital 167 and following). Furthermore, Germany added that in 2002, at the time of conclusion of the agreement, FFHG's shares were already being held mainly by Fraport, whose resources are not State resources and whose actions are not imputable to the State, as Germany already pointed out in relation to the 2001 PLTA (see recital 134 and following).

According to Germany, the supervisory board of FFHG, who approved the conclusion of the 2002 Ryanair agreement, was not dominated by the State. In this regard, Germany contended that the presentation of FFHG's supervisory board members in recital 18 of the 2008 opening decision was erroneous. Germany stated that according to FFHG's articles of association, Fraport had six representatives and Land Rhineland-Palatinate had eight, out of which three were representatives of local authorities. According to Germany, the members had however different numbers of votes and the majority of votes was always with the private company Fraport. This was due to the fact that Fraport's representatives had 12 votes each, while the representatives of the Land only had 5 votes each and those of the local authorities even had only one vote. Therefore, according to Germany, Fraport had 72 votes while the representatives of the Land and local authorities only had 28 votes. Since the supervisory board decides by simple majority, Germany took the view that it would not have been possible to conclude the 2002 Ryanair agreement without the votes of Fraport and therefore the conclusion of the agreement is not imputable to the State.

Furthermore, Germany rejected the doubts of the Commission concerning the conferral of an advantage and the MEOT submitted by PwC on this matter. Germany argued that the figure of […] passengers per flight was not overestimated since already in 2002 […] % of Ryanair flights were carried out by a Boeing 737-800 and the average load factor of those flights was […] %, meaning that the number of passengers per plane was in fact on average […] per Ryanair flight. Therefore, Germany took the view that the estimation of the number of passengers of […] was reasonable and not too high, especially since FFHG had taken into account that the change by Ryanair from Boeing 737-200 to Boeing 737-800 would come very quickly.

As regards the Commission's doubts relating to the cost for general airport infrastructure and general airport administration, Germany referred to its argumentation in relation to the 1999 Ryanair agreement (see recital 171 and following). It also referred to its statements for the 2001 schedule of airport charges (see recital 176) as regards the selectivity of the measure.

In relation to the question of State resources and imputability, Germany referred to its statements for the 1999 and 2002 Ryanair agreements (see recitals 167 and following, and recitals 178 and following). Furthermore, Germany stated that, at the moment of conclusion of the 2005 Ryanair agreement, the supervisory board of FFHG was constituted in a way that the public authorities were not able to exercise a determining influence on the decision. At that moment Fraport held 156 votes while Land Rhineland-Palatinate and Land Hesse held 42 votes each. Therefore, Germany argued that the State could not have a determining influence as it only possessed 84 out of 240 votes.

Furthermore, Germany took the view that no advantage was conferred on Ryanair through this agreement. Germany stated that in contrast to the Commission's suggestion in the 2008 opening decision, PwC had been provided with all relevant figures since it could otherwise not have conducted this comprehensive, neutral and independent MEOT. Germany moreover rejected the doubts of the Commission that the investments induced by Ryanair were not allocated appropriately. Germany stated that PwC had made a second evaluation in its supplementary assessment where it explained that a major part of the costs related to investments of a general nature which the airport made independently of the services provided to Ryanair. As far as costs are induced by the handling of Ryanair passengers, these are according to Germany allocated to Ryanair.

Germany also rejected the doubts of the Commission concerning the effectiveness of the penalty system which was introduced in the 2005 Ryanair agreement. Germany stated that this penalty system reflects market conform behaviour. Germany argued that additional sanctions to the ones agreed upon would have been unnecessary and inappropriate since Ryanair had no exclusive rights to use the airport and was also assuming a risk.

Moreover, Germany stated that the agreement was not a selective measure since the agreed airport charges were based on the general 2006 schedule of airport charges. Germany also argued that any losses incurred by FFHG were not generated by the 2005 Ryanair agreement but by the necessary investments for Frankfurt Hahn airport, whereas the investments induced by Ryanair had been covered by the revenue generated by the 2005 Ryanair agreement.

In relation to the 2006 schedule of airport charges, Germany argued generally that these airport charges had been developed exclusively based on economic considerations taking into account the business model of Frankfurt Hahn airport as a low cost carrier airport, i.e. with the expectation that the costs of operation would be covered in the short term and in the long term a sustainable profit would be generated.

Concerning the questions of State resources and imputability, Germany referred to its argumentation made in relation to the 1999, 2002 and 2005 Ryanair agreements (see recitals 167 and following, 178 and following and 182 and following) and in relation to the 2001 schedule of airport charges (see recital 173 and following).

Germany argued that no advantage was conferred upon Ryanair through the 2006 schedule of airport charges. Firstly, Germany justified the different passenger charges which were created in order to provide an incentive to low cost carriers while covering the operational costs of the airport. A reduction of charges according to the volume of passengers, Germany argued, is a common approach at national and international airports, as was already accepted by the Court of Justice. When such volume based reductions are granted, these must be justified on the basis of objective and non-discriminatory criteria and this was the case at Frankfurt Hahn airport, according to Germany. Since the threshold for acquiring rebates was very low, namely 100 000 passengers per year, these rebates were also supporting smaller airlines.

Secondly, Germany argued that the economic justification of the airport charges relied on the single-till-approach, referring to its statements concerning the 1999 Ryanair agreement (see recital 169). Germany also justified the differentiation according to turn-around-times (hereinafter: TRT) of under or over 30 minutes by explaining that TRT of more than 30 minutes are in fact more cost-intensive. Germany also stated that even though the airport charges were not covering 100 % of the costs, a MEO would still have chosen this schedule of charges since cost-coverage of an infrastructure such as an airport could not be achieved in such a short time. However, FFHG was expecting that through the 2006 schedule of airport charges more passengers would be generated and that by 2008 full cost coverage would be achieved. According to the assessment made by PwC for this schedule of airport charges, this was economically realistic at the moment of introduction of the airport charges, as was also confirmed by PwC's supplementary assessment.

In relation to the marketing support granted under the 2006 schedule of airport charges, Germany argued that this is in fact not an integral part of the schedule. Germany also argued that any market economy investor would have made the same marketing support available for airlines since there are high economic risks attached to the opening of a new route. This support is exclusively given for newly offered routes, meaning routes which have not been served at all or within the last 24 months. The amount of the support is based on the number of departing passengers served within 1 year. On the basis of criteria such as the temporary routes offered at Frankfurt Hahn airport, the weekly connections and the duration of continuous flight operation, it is ensured that support is in fact leading to an expansion of the network of flights offered by the airlines.

Germany argued that the marketing support cannot be seen as a one-sided performance by the airport. According to Germany, the promotion of new routes led to a higher profit for the airport since higher passenger numbers would create higher non-aeronautical revenues. Furthermore, Germany explained that the fixing of the amounts of support was based on reasonable considerations.

Germany also rejected the doubts of the Commission that the risk of marketing was higher for airlines which are not yet active at Frankfurt Hahn airport. For airlines with high passenger numbers servicing an attractive network, Germany argued, requires higher marketing costs which in turn justifies a higher marketing support from the airport, also given that higher passenger numbers increase the profits for the airport. In any case, the amount of support would be no more than one third of the real marketing costs, thereby ruling out any discrimination between airlines already serving Frankfurt Hahn airport and other airlines. Moreover, Germany reasoned that bigger airlines will generally have a larger marketing budget, so the support given will actually be lower in relation to the whole budget than in case of a smaller airline.

Finally, Germany submitted that the MEOT carried out by PwC established that this marketing support was given in a way that was conforming to the market.

As regards selectivity of the measure and distortion of competition on the internal market, Germany referred to its statements concerning the 2001 schedule of airport charges (see recitals 176 and following).

Germany thus argued that the 2006 schedule of airport charges did not involve State aid. Should the Commission establish that the airport charges did constitute State aid, Germany argued in the alternative that the aid was compatible with the internal market.

According to Germany, if it would be considered that measures 1 to 6 involved State aid within the meaning of Article 107(1) of the Treaty, insofar as they were aimed at financing airport infrastructure at Frankfurt Hahn airport this aid could be deemed compatible on the basis of Article 107(3) of the Treaty and the 2005 Aviation Guidelines.

The 2014 Aviation Guidelines provide conditions under which operating and investment aids to airports may be declared compatible with the internal market within the meaning of Article 107(3)(c) of the Treaty. On 17 April 2014, Germany provided its views on the compatibility of the measures under the 2014 Aviation Guidelines. Germany argued that, even if the measures under investigation would constitute operating aid to FFHG, they would be compatible with the internal market according to Article 107(3)(c) of the Treaty and Section 5.1.2 of the 2014 Aviation Guidelines.

Oxera considers that the Commission's approach of only accepting comparator airports in the same catchment area as the airport under investigation is flawed.

Oxera also argues that market benchmark prices obtained from comparator airports are not tainted by State aid given to surrounding airports. Therefore, it is possible to robustly estimate a market benchmark for the MEOTs.

1. (a)

   comparator analyses are widely used for MEOTs outside of 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 submitted reports face only limited competition from State-owned airports within their respective catchment areas (less than 1/3 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 of 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.

Oxera argues that the profitability analysis undertaken by Oxera in its reports submitted to the Commission follows the principles that would be adopted by a rational private sector investor and reflects the approach apparent from Commission precedents.

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 the 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)

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

The paper aims to set out the commercial logic underlying regional airports' decisions to buy advertising on Ryanair.com from AMS.

The paper argues that there are a large number of very strong, well known, and habitually used airports. Weaker competitors must overcome static buying behaviour of consumers 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 submitted further reports by its consultant Oxera. In these reports, Oxera discusses the principles which, according to the airline, should be taken into account as part of the MEOT in the profitability analysis of, on the one hand, airport services agreements between Ryanair and airports and, on the other hand, the marketing agreements between AMS and the same airports. Ryanair emphasised that those reports do not in any way change its position presented earlier that the airport service agreements and the marketing agreements should be analysed under separate MEOTs.

The reports indicate that the profits generated by AMS should be included as revenues in a joint analysis regarding profitability while the expenses of AMS would have to be incorporated in the costs. To do this, the reports suggest the application of a cash-flow-based methodology to the joint profitability analysis, meaning that the expenditure by airports on AMS could be treated as incremental operating expenses.

The reports emphasise that marketing activities contribute to the creation and support of the brand's value, which helps to generate effects and benefits not only for the duration of the contract, but also after its termination. This would especially be the case if, due to the fact that Ryanair has concluded an agreement with an airport, other airlines establish themselves at the airport, which will in turn attract more shops to install themselves there and therefore bring in more non aeronautical revenues for the airport. According to Ryanair, if the Commission proceeds to undertake a joint analysis of profitability, those benefits have to be taken into account by treating the expenses of AMS as incremental operating costs, net of AMS payments.

Furthermore, Ryanair considers that a terminal value (reflecting the value generated after the termination of the agreement) would have to be included in the projected incremental profits at the end of the airport services agreement. The terminal value could be adapted on the basis of a ‘renewal’-probability, measuring the expectation that profits will persist after the termination of the agreement with Ryanair or if similar conditions are agreed with other airlines. Ryanair considers that it would then be possible to calculate a lower limit for benefits generated jointly by the agreement with AMS and the airport service agreement, reflecting the uncertainties of incremental profits after the termination of the airport services agreement.

To supplement this approach, the reports present a synthesis of the results of studies on the effects of marketing on the value of a brand. Those studies consider that marketing can support the value of a brand and can help to build a customer base. According to the reports, in the case of an airport, marketing on Ryanair.com significantly increases the visibility of the brand. The reports moreover state that smaller regional airports wishing to increase their air traffic can therefore especially increase the value of their brand by concluding marketing agreements with AMS.

Ryanair submitted a further report prepared by Oxera regarding the agreements between Frankfurt Hahn airport and Ryanair of 1999, 2002, 2005. The assessment of the 2005 Ryanair agreement takes also into account the marketing agreement concluded directly with Land Rhineland-Palatinate. Oxera's assessment of the Ryanair agreements is based on the information available to the airport around the time of signing the agreement.

The report explains that the forecasts of total passenger numbers have been obtained from FFHG's business plan drawn up in November 2002, as it is the only document available that contains traffic forecasts over the relevant period. According to the report, the aeronautical revenues have been calculated based on the charges specified in the 2002 Ryanair agreement. Non-aeronautical revenues have been obtained from FFHG's business plan drawn up in November 2002, as it is the only document that contains projections of non-aeronautical revenues that was drawn up around the time of the 2002 Ryanair agreement.

Lufthansa stated that the 1999, 2002 and 2005 Ryanair agreements constitute incompatible State aid and provides further comments on the respective agreements.

With regard to the 1999 Ryanair agreement, Lufthansa submitted that the costs for Terminal 1 at the airport are to be fully taken into account when applying the MEOT. To support this, Lufthansa refers to the statement of Ryanair in a parliamentary hearing. According to Lufthansa, Ryanair stated that the airport was built for them. Lufthansa disputed that a proportion of the cost of the terminal could be attributed also to other airlines.

In the opinion of Lufthansa, the MEOT carried out by PwC for the 2002 Ryanair agreement underestimates the marketing costs for the opening of new routes in 2002. According to Lufthansa it was publicly known that at least 7 new routes would be opened in 2002. Hence, Lufthansa stated that the marketing support was underestimated by at least EUR […] in 2002.

With regard to the 2005 Ryanair agreement, Lufthansa stated that the passenger volume forecasts underlying the MEOT of the 2005 Ryanair agreement appear to be overestimated. Lufthansa stated that in the worst case the airport expected that Ryanair would bring 3 million passengers between 2006 to 2012. However, according to Lufthansa this expectations were not based on a real commitment by Ryanair.

With regard to aid to the airport for the financing of infrastructure, Lufthansa is of the opinion that the infrastructure is dedicated to Ryanair and hence the compatibility criteria in the guidelines do not apply.

This non-governmental organization made comments criticizing the 2014 Aviation Guidelines and decisions of the Commission regarding the aviation industry so far, for their allegedly negative effects on the environment.

In 2004, the capital of FFHG was increased by a further EUR 42 million (Fraport invested EUR 10,21 million, Land Hesse invested EUR 20 million and Land Rhineland-Palatinate invested EUR 11,79 million). Land Rhineland-Palatinate and Land Hesse agreed to that capital increase in 2002 subject to the condition that a new PLTA (namely the 2004 PLTA) between FFHG and Fraport would be concluded, covering the period until 31 December 2014.

On 5 April 2004, Fraport and FFHG concluded the 2004 PLTA. That agreement was approved by the shareholders of Fraport on 2 June 2004.

In the light of the considerations in recital 392 and following, the Commission considers that the public funding granted to FFHG, to the extent that the payments of the Land Rhineland-Palatinate for the security checks exceeded the revenue collected from the airlines, constitutes State aid within the meeting of Article 107(1) of the Treaty.

In order to assess whether an agreement between a publicly-owned airport and an airline confers an economic advantage on the latter, it is necessary to analyse whether that agreement complied with the MEO principle. In applying the MEOT to an agreement between an airport and an airline, it must be assessed whether, at the date when the agreement was concluded, a prudent market economy operator would have expected the agreement to lead to a higher profit than would have been achieved otherwise. That higher profit is to be measured by the difference between the incremental revenues expected to be generated by the agreement (that is, the difference between the revenues that would be achieved in case the agreement is concluded and the revenues that would be achieved in the absence of the agreement) and the incremental costs expected to be incurred as a result of the agreement (that is, the difference between the costs that would be incurred in case the agreement is concluded and the costs that would be incurred in the absence of the agreement), the resulting cash flows being discounted with an appropriate discount rate.

The expected incremental revenues must include in particular the revenues from airport charges, taking into account the discounts as well as the additional traffic expected to be generated by the agreement and the non-aeronautical revenues expected to be generated by the traffic. The expected incremental costs must include in particular all the incremental operating and investment costs that would not be incurred in the absence of the agreement as well as the costs of the marketing grants and other financial incentives.

Hence, in order to be able to apply the MEOT the Commission has to place itself at the time when the respective agreements between FFHG and Ryanair were concluded. Also, the Commission in principle must base its assessment on the information at the disposal of the airport manager when the respective agreements were signed or put in place, as well as any reasonable assumptions that it could entertain at such time.

Point 63 of the 2014 Aviation Guidelines provides that arrangements concluded between airlines and an airport can be deemed to satisfy the MEO test when they incrementally contribute, from an ex ante perspective, to the profitability of the airport. While this criterion reflects the logic of the MEO test, it has been spelt out only recently and refers to individual arrangements rather than to the overall business, as is more often the case when applying the MEO test. Therefore, the Commission recognises that it may be difficult for the relevant Member State and for the operators concerned to provide full contemporaneous evidence in respect of arrangements concluded many years ago and will take that into account when applying the criterion at stake in the present case.

Germany submitted that FFHG prepared an ex ante incremental profitability assessment of the agreement before concluding any individual agreement with Ryanair. Hence, Germany argued that FFHG acted as a rational investor when concluding the 1999 Ryanair agreement.

The Commission notes that FFHG had indeed drawn up several business plans and calculations around the time it entered into its commercial relation with Ryanair. FFHG's profitability calculations took into account all revenues (aeronautical and non aeronautical) expected to be generated by Ryanair at the airport and all costs induced by the presence of the airline.

The Commission notes that the 2001 schedule of airport charges entered into force on 1 October 2001. At that point in time, Ryanair was the main passenger airline operating at Frankfurt Hahn airport, as Volare and Air Polonia started operating at the airport only in 2003 and Wizzair and Iceland Express only in 2005.

The 2001 schedule of airport charges applied to all airlines using Frankfurt Hahn airport and offered variable and fixed marketing support for new airlines, new destinations and increased passenger numbers.

The 2001 schedule of airport charges was introduced to enhance the competitiveness of Frankfurt Hahn airport and to support the growth strategy of the airport at that time.

Against that background, Germany argued that no advantage was granted through the 2001 schedule of airport charges and agreed with the Commission that the results of the MEOT for the 2002 Ryanair agreement, which is based on the 2001 schedule of airport charges and introduced an additional marketing support, can serve as a benchmark (see Section 8.2.4).

The Commission agrees that the 2002 Ryanair agreement can serve as a benchmark for the 2001 schedule of airport charges, in particular, given the fact that the main airline at the airport at the time the 2001 schedule of airport charges was introduced was Ryanair and that the charges agreed in the 2002 Ryanair agreement correspond to charges set in the 2001 schedule.

The 1999 Ryanair agreement was replaced by the 2002 Ryanair agreement, which came into effect on 14 February 2002. The 2002 Ryanair agreement was concluded for a period of […] years (that is until […]). Ryanair has the option to prolong the agreement on similar terms and conditions until […].

While FFHG's profitability assessment submitted by Germany did not include a projection for the whole period covered by the 2002 Ryanair agreement, it was clear that the 2002 Ryanair agreement was expected to be profitable from the first year of Ryanair's operation. Even though a MEO would normally conduct a calculation for the overall duration of an agreement, in the present case, due to the fact that the agreement was expected to generate positive contribution as from the first year — even if the number of passengers and the expected revenue would remain stable (while in fact they were expected to increase) — FFHG could reasonably expect that the agreement would provide an overall positive contribution to its profitability (see recital 471).

Even if, as stated by Lufthansa, the New Route Support would have been underestimated in the profitability assessment FFHG, the higher marketing support would have been balanced by the higher revenue from aeronautical and non aeronautical revenue due to a larger volume of passengers.

The incremental costs taken into account include costs of groundhandling, carried out by an external groundhandling company, costs for additional staff to be hired, costs for marketing and new route development and security checks. In addition, also depreciation and costs of financing for investments directly induced by Ryanair were taken into account. Those investments were estimated to amount to approximately DM […] million and concern the extension of the passenger terminal. Even though the Terminal was considered not to be induced by Ryanair, FFHG's calculation took into account the expected additional investment costs for the Terminal.

While FFHG's profitability assessment as submitted by Germany did not discount future payments to the date on which the 2002 Ryanair agreement was concluded, it is clear that the agreement was expected to be profitable. The Commission notes that the assumption underlying the ex ante calculation, taking into account the prevailing market conditions at the time when that calculation was conducted, were reasonable. In particular, the expected passenger volume was even exceeded by the actual passenger development at the airport (see Table 1) and resulted in higher aeronautical and non aeronautical revenues.

Moreover, given that the 2002 Ryanair agreement was expected (not only to cover all incremental costs but) to positively contribute to FFHG's profitability, also the overall business of Frankfurt Hahn airport was expected to become more profitable during the duration of the 2002 Ryanair agreement.

On 4 November 2005, an amendment to the 2002 Ryanair agreement was agreed, the ‘Agreement Ryanair/Flughafen Frankfurt-Hahn GmbH Delivery of aircraft 6 to 18 — year 2005 to year 2012’. On 18 November 2005, the conclusion of the 2005 Ryanair agreement was approved by the supervisory board of FFHG. The 2005 Ryanair agreement is valid until […].

The Commission considers that the incremental cash flow identified as the difference between the two scenarios takes into account all incremental costs and revenues induced by the presence of Ryanair at the airport. In addition, that profitability calculation takes into account also the investments induced by the presence of Ryanair at the airport. According to the supplementary MEOT conducted by PWC following the 2008 opening decision, a total amount of EUR […] million of investments can be attributed to Ryanair, whereas the remaining EUR […] million concern the development of the airport's freight infrastructure (namely. EUR […] million in total).

In that context, the Commission notes that taking into account the prevailing market conditions and the significant growth of low cost carriers since 2000, the assumptions underpinning the ex ante business plan appear to be realistic. At the same time, given the long planning horizon of the actual passenger development at Frankfurt Hahn airport the NPV calculated on the basis a […] % discount rate might not appropriately take into account the risks potentially affecting the underlying assumptions.

The 2006 schedule of airport charges entered into force on 1 June 2006 and replaced the 2001 schedule of airport charges. It follows however the same basic principles as the 2001 schedule of airport charges. The changes compared to the 2001 schedule concern the take-off and landing charges, the passenger fee, and marketing support for the starting-up of a new route and the generated traffic volume depending on the number of total passengers (departing and arriving passengers transported by the airline).

Germany argued that no advantage was conferred on Ryanair through the 2006 schedule of airport charges. Firstly, Germany justified the different passenger charges, on the ground that those were created in order to give an incentive to other low cost carriers while covering the operational costs of the airport. A reduction of charges according to the volume of passengers, Germany argued, is a common behaviour at national and international airports. Since the threshold for acquiring rebates was very low, namely 100 000 passengers per year, those rebates were also open to smaller airlines.

As stated in Section 8.2.1, arrangements concluded between airlines and an airport can be deemed to satisfy the MEOT when they incrementally contribute, from an ex ante point of view, to the profitability of the airport. The airport should demonstrate that, when setting up an arrangement with an airline (for example, an individual contract or an overall scheme of airport charges), it is capable of covering all costs stemming from the arrangement, over the duration of the arrangement, with a reasonable profit margin on the basis of sound medium-term prospects.

Moreover, in order to assess whether an arrangement concluded by an airport with an airline satisfies the MEOT, expected non-aeronautical revenues stemming from the airline's activity must be taken into consideration together with airport charges, net of any rebates, marketing support or incentive scheme). Similarly, all expected costs incrementally incurred by the airport in relation to the airline's activity at the airport must be taken into account. Such incremental costs may encompass all categories of expenses or investments, such as incremental personnel, equipment and investment costs induced by the presence of the airline at the airport. For instance, if the airport needs to expand or build a new terminal or other facilities mainly to accommodate the needs of a specific airline, such costs should be taken into consideration when calculating the incremental costs. By contrast, costs which the airport would have to incur anyway independently from the arrangement with the airline should not be taken into account in the MEOT.

As regards the profitability assessment carried out by FFHG prior the introduction of the 2006 schedule of airport charges, the Commission considers that all incremental costs and revenues induced by the introduction of this schedule were taken into consideration and were based on reasonable assumptions taking into account the prevailing market conditions and the actual results of FFHG. The 2006 schedule of airport charges was not limited in time, hence it was sufficient for the airport operator to calculate the overall profitability of the 2006 schedule of airport charges for several consecutive years. Moreover, FFHG could any time modify the schedule of airport charges, in the even it was proven that the revenue generated was insufficient to cover the incremental costs induced by the airlines using that schedule. In addition, as Ryanair has concluded an individual agreement, the schedule did not apply to the main airline (with a passenger share of around 90 %), but was applied to the remaining airlines with a passenger share of around 10 %. Hence, the incremental costs of the 2006 schedule of airport charges were very limited and the FFHG expected to be able to better use its resources.

While the ex ante-analysis undertaken by FFHG and submitted by Germany did not discount the future payments to the date on which the 2006 schedule of airport charges was put into effect, it is clear that the schedule was expected to be profitable from the first year onwards.

Moreover, given the high fixed costs and very limited incremental costs relating to the provision of services under the 2006 schedule of airport charges, those forecasts were not sensitive to the assumptions regarding the overall traffic development.

The investment aid in favour of FFHG aimed at financing the further conversion of the former US military base into a civilian airport and substantially developing the infrastructure of the airport. Those measures provided a significant contribution to the regional development and connectivity of the Hunsrück region, and the creation of new jobs in an area economically hit by the closure of the US military base as well as the decongestion of Frankfurt Main airport.

The Commission considers that the development of Frankfurt Hahn airport also contributed significantly to the creation of new jobs in the Hunsrück region. As shown by Germany, taking into account all parts of the airport activities, Frankfurt Hahn airport created 3 063 jobs in the Hunsrück region in 2012 out of which 74 % were full-time positions and 90 % of those employees also live in that region.

Moreover, the development of Frankfurt Hahn airport had also positive indirect, induced and catalysing effects on the creation of jobs in the region as well as regional development in general through an increasing number of economic and touristic activities. According to the information provided by Germany, Frankfurt Hahn airport contributes significantly to the development of incoming (~ 33 % of passengers corresponding to approximately 1 million passengers in 2005) and outgoing tourism (~ 67 % of passengers) in the Land Rhineland-Palatinate. As pointed out by Germany, 88 % of the incoming passengers stay at least one night in the region and generated approximately 5,7 million overnight stays in 2005. Since 88 % of incoming tourists from Frankfurt Hahn stay at least one night and more than 80 % of those even stay two to 10 days, they generate a total turnover of about EUR 133,7 million per year. Moreover, incoming tourism generated around 11 000 jobs in Rhineland-Palatinate.

The aided investments at issue also helped to improve the accessibility of the area. Nevertheless, the duplication of unprofitable airports (or the creation of additional unused capacity) does not contribute to an objective of common interest. In this case, the Commission takes the view that the investment aid does not lead to such a duplication which would diminish the medium-term prospects for the use of existing infrastructure at other, neighbouring airports. Indeed, there are no other airports within 100 kilometres or 60 minutes travelling time from Frankfurt Hahn airport. The closest airports to Frankfurt Hahn are Frankfurt Main airport, which is located at 115 kilometres distance or 1 hour 15 minutes traveling time by car, and Luxembourg airport, which is located 1 hour and 30 minutes travelling time (111 kilometres) away.

Frankfurt Main airport is an international hub airport with a wide variety of destinations and is predominantly served by network carriers offering connecting traffic, whereas Frankfurt Hahn airport serves low-cost point-to-point flights. Traffic at Frankfurt Main airport has continuously increased since 2000, from 49,4 million passengers in 2000 to approximately 58 million in 2012. However, during that period growth has been affected by congestion problems and capacity constraints. As pointed out by Germany, the capacity limits of Frankfurt Main airport were constantly exceeded. Therefore, according to Germany, especially in the light of its 24 hour operating licence, Frankfurt Hahn airport played an important role in providing additional capacity in order to relieve the congestion at Frankfurt Main airport. In fact, until 2009 Fraport was the majority shareholder of FFHG, the operator of Frankfurt Hahn airport (2,7 million passengers in 2013, around 4 million passengers in 2007 at its peak) and the operator of Frankfurt-Main airport (58 million passengers and 2,1 million freight), and was as such pursuing a diversification strategy.

Luxembourg airport, which is the nearest airport to Frankfurt Hahn but still around 111 kilometres or 1 hour 30 minutes traveling time by car away, had around 1,7 million passengers in 2008 and experienced a rapid growth to 2,2 million in 2013. Even though Luxembourg airport is slightly smaller than Frankfurt Hahn airport in terms of passenger traffic, its freight activity is substantially larger with 674 000 tonnes in 2013. It offers a variety of scheduled flights to European capitals and charter flights to leisure destinations. That selection of destinations to a large extent meets the needs of the employees of the financial and international institutions located in Luxembourg.

Saarbrücken airport is located around 128 kilometres away from Frankfurt Hahn airport which amounts to over 2 hours traveling time by car. In addition, Frankfurt Hahn is served mainly by low-cost carriers (Ryanair) and freight constitutes a rather important element in its business model whereas Saarbrücken airport offers mainly scheduled flights to national destinations and has only limited air freight transport.

With regard to Zweibrücken airport, Germany emphasised that the distance of 127 km to Frankfurt Hahn airport translates into a travelling time of 1 hour and 27 minutes by car or around 4 hours by train. Moreover, Germany submitted that, looking at passenger and air freight traffic between 2005 and 2012, no relationship of substitution between the airports can be deduced.

At the same time it should be noted that, before Zweibrücken entered the market in 2006, Frankfurt Hahn airport was already a well-established airport with more than 3 million passengers and channelling 123 000 tonnes of freight. In view of the historical development of the two airports, their geographical location and the free capacity available at Frankfurt Hahn airport at the time when Zweibrücken airport entered the commercial aviation market in 2006, the Commission concludes that it is rather the opening of Zweibrücken airport which constituted an unnecessary duplication of infrastructure.

Therefore, the Commission concludes that the investments into Frankfurt Hahn airport do not constitute a duplication of existing non-profitable infrastructure. On the contrary, Frankfurt Hahn airport has played an important role in decongesting Frankfurt Main airport without limiting the latter's plans to expand. Without the investments into Frankfurt Hahn airport there was in fact a risk that the region would be underserved in terms of its transport needs.

In the light of the considerations in recitals 512 to 523, the Commission therefore concludes that the investment aid directed at the construction and operation of infrastructure at Frankfurt Hahn airport meets a clearly defined objective of common interest, namely regional economic development, creation of jobs and improvement of the accessibility of the region.

According to Germany, the investments were undertaken according to the needs (and were thus proportionate) and the constructed infrastructure was necessary for the airport in order to serve the connectivity and the development of the region and to decongest Frankfurt Main airport.

Based on the information provided by Germany, the Commission agrees that the financed investments were necessary and proportionate to the objective of common interest. Indeed, without those investments the conversion of the former U.S. base into a fully functioning civil aviation airport could not have been completed. The construction of passenger and freight facilities, aprons and modernisation of taxiways had to be carried out in order to further develop civil flight operations. Hence, the constructed infrastructure was necessary for the airport in order to serve the connectivity and the development of the region.

Also, the infrastructure project was undertaken only to the extent it was necessary to attain the goals set: while the infrastructure was built for a maximum passenger traffic of around 4 to 5 million passengers and 500 000 tonnes of freight, the traffic statistics displayed in Tables 1 and 2 show that the passenger traffic steadily increased until 2007 to reach a record of 4 million passengers (following by a decline to 2,7 million in 2013 for the reasons set out in recital 532) and that the freight volume increased to more than 500 000 tonnes of freight in 2011. This means that the expected traffic demand largely corresponded to the actual demand and that the investments were not disproportionately large.

While it is important to avoid that the investment constitutes a duplication of an existing unprofitable infrastructure, that is not the case here. As already explained in recitals 516 to 523, there are no other airports within 100 kilometres distance and 60 minutes travelling time, and even if a wider catchment area was to be considered there are no duplications effects. The closest airport is Frankfurt Main airport, which Frankfurt Hahn airport was intended to decongest.

In the light of those considerations, the Commission considers that this compatibility condition is met.

Germany submitted that before the decision to further develop the airport infrastructure was taken, traffic forecast studies were conducted by external experts in order to identify the traffic potential for Frankfurt Hahn airport.

The information submitted shows that at that time the external experts forecasted significant growth from 0,3 million passengers in 2000 to up to 3,8 million passengers by 2010 (see Figures 2, 3 and 4). With regard to freight development, the experts projected a development from 151 000 tonnes in 2001 to up to 386 000 tonnes in 2010 (see Figure 5), with the growth in the freight business between 2006 and 2010 coming from the freight flights diverted from Frankfurt Main airport due to curfew. However, those projections could only be fulfilled if the investments were undertaken to the planned extent.

The Commission notes that those traffic forecasts (see recital 531) were confirmed by the actual traffic development at Frankfurt Hahn airport (see Tables 1 and 2). In 2007 Frankfurt Hahn airport served around 4 million passengers. Following a period of significant growth, air traffic in Germany and the Union in recent years has been negatively affected by the economic and financial crisis in 2008/09, which resulted in a decrease in passenger air transport in Germany in 2009. The passenger development at Frankfurt Hahn airport was further impacted by the introduction of an air passenger tax in Germany in 2011. Currently Frankfurt Hahn airport serves around 2,7 million passengers p.a. With regard to freight, Frankfurt Hahn airport handled 565 000 tonnes of freight in 2011. Due to the bankruptcy of one of its clients, the airport processed only 447 000 tonnes in 2013.

In the light of those considerations, it can therefore be concluded that Frankfurt Hahn airport is already using most of its capacity and that the medium-term prospects for the use of the capacity were satisfactory.

Hence, the Commission considers that this condition is satisfied.

According to point 39 of the 2005 Aviation Guidelines the category of an airport can provide an indication of the extent to which airports are competing with one another and therefore also the extent to which public funding granted to an airport may distort competition.

Within the standard catchment area of Frankfurt Hahn airport (1 hour travelling time by car or 100 kilometres distance) there are no other commercially exploited airports. Even if one were to extend the catchment area, the Commission considers that the aid does not create undue negative effects on competition and trade between the Member States.

As far as Frankfurt Main airport (the closest airport at around 115 kilometres distance and 1 hour 15 minutes travelling time) is concerned, the investments at Frankfurt Hahn airport did not result in negative substitution effects. In fact, before getting involved in Frankfurt Hahn airport, Fraport was already the operator of Frankfurt Main airport, but was nevertheless investing into Frankfurt Hahn airport with a view to de-congesting Frankfurt Main airport as a future capacity overload was foreseeable for that hub. In particular, the ban on night flights at Frankfurt Main airport was one of the main factors to be taken into consideration as Frankfurt Hahn airport had a 24 hour operating license.

Even though Frankfurt Hahn experienced significant growth in the period from 2000 until 2007 (Tables 1 and 2) shows that in comparison to Frankfurt Main the traffic share remained very limited. From 2000 to 2003 Frankfurt Main airport experienced steady passenger growth from 48 million in 2000 to 54,2 million in 2007. Due to the economic crisis, Frankfurt Main experienced a slight decrease to 50,9 million in 2009, followed by a rapid increase to 58 million. With regard to the freight activities, Frankfurt Main airport experienced steady growth from 1,6 million to 2,2 million tonnes in 2013.

In addition, contrary to Frankfurt Main and Luxembourg airports Frankfurt Hahn airport is not served by a train connection. Overall, no substitution effect on rail transport can be expected.

In view of the considerations in recitals 536 to 541, the Commission considers that any undue negative effects on competition and trade between Member States are limited to the minimum.

The Commission must establish whether the State aid granted to Frankfurt Hahn Airport has changed the behaviour of the beneficiary in such a way that it engaged in activity contributing to the achievement of the objective of common interest that (i) it would not have carried out without the aid, or (ii) it would have carried out in a more restricted or different manner. In addition, the aid is considered to be proportionate only if the same result could not be reached with less aid and less distortion. That means that the amount and intensity of the aid must be limited to the minimum needed for the aided activity to take place.

According to the information submitted by Germany, without the aid the investment could not have been realised. Germany submitted that the aid was necessary as it compensated only the costs of financing and a lower amount would have led to lower levels of investment.

Indeed, according to the financial results summarised in Tables 3 and 4 the airport is still loss-making and not able to finance its investment costs. Therefore, it can be concluded that the aid was necessary to make investments in order to decongest the airport infrastructure and to meet the current requirements for modern airport infrastructure. Without the aid, Frankfurt Hahn airport would not have been able to meet the expected demand of airlines, passengers and freight forwarders and the level of the economic activity of the airport would have been reduced.

It should also be noted that the public support was granted in a period when FFHG realised very significant investments into the infrastructure (more than EUR 220 million in 2001-2012). It follows that the investment aid covers only a fraction of the overall investment costs.

The Commission therefore considers that the aid measure at stake had an incentive effect, that the amount of aid was limited to the minimum necessary for the aided activity to take place, and was thus proportionate.

On the basis of the above, the Commission concludes that the investment aid granted to Frankfurt Hahn airport is compatible with the internal market pursuant to Article 107(3)(c) of the Treaty as it complies with the compatibility conditions laid down in point 61 of the 2005 Aviation Guidelines.

According to Section 5.1.2(a) of the 2014 Aviation Guidelines, in order to give airports time to adjust to new market realities and to avoid any disruptions in the air traffic and connectivity of the regions, operating aid to airports will be considered to contribute to the achievement of an objective of common interest, if it: (i) increases the mobility of Union citizens and connectivity of regions by establishing access points for intra-Union flights; (ii) combats air traffic congestion at major Union hub airports; or (iii) facilitates regional development.

In the light of the considerations in recitals 512 to 519, the Commission considers that the continued operation of Frankfurt-Hahn airport increased the mobility of Union citizens and connectivity of regions by establishing an access point for intra-Union flights in the Hunsrück region. In addition, the continued operation of the airport facilitated the regional development of the Hunsrück region and the creation of new jobs. Moreover, the operation and development of Frankfurt-Hahn airport also served to decongest Frankfurt Main airport.

The Commission therefore concludes that the measure at stake meets a clearly defined objective of common interest.

According to Section 5.1.2(b) of the 2014 Aviation Guidelines, in order to assess whether State aid is effective in achieving an objective of common interest, it is necessary to identify the problem to be addressed. In that respect, any State aid to an airport must be targeted towards a situation where aid can bring about a material improvement that the market cannot deliver itself.

The Commission notes that Frankfurt Hahn airport is a regional airport with approximately 2,7 million passengers p.a. which experience in the period under investigation a significant growth in passengers (see Table 1). It has high fixed operating costs and under present market conditions it is not able to cover its own operating costs. Therefore, there is a need for State intervention (see point 89 of the 2014 Aviation Guidelines).

According to Section 5.1.2(c) of the 2014 Aviation Guidelines, any aid measure to an airport must be an appropriate policy instrument to address the objective of common interest. The Member State must, therefore, demonstrate that no other less distortive policy instruments or aid instruments could have allowed the same objective to be reached.

According to Germany, the aid measures at stake are appropriate to address the intended objective of common interest that could not have been achieved by another less distortive policy instrument.

In this case the aid amount corresponded to the uncovered operating losses (see Table 4) actually incurred and was limited to the minimum necessary as it was granted only as to the extent of actually incurred operating losses. No other policy measure would allow the airport to continue its operation. Hence, the compensation of losses is limited to the minimum and does not provide for any profits.

In view of recitals 557 and 558, the Commission considers that the measures at stake were appropriate to reach the desired objective of common interest.

According to Section 5.1.2(d) of the 2014 Aviation Guidelines, the operating aid has an incentive effect if it is likely that, in the absence of operating aid, the level of economic activity of the airport would be significantly reduced. That assessment needs to take into account the presence of investment aid and the level of traffic at the airport.

Without the aid the scale of the operations at Frankfurt-Hahn airport would be severely impacted and reduced, leading eventually to the market exit of the airport due to uncovered operating losses.

Therefore, the Commission considers that the aid measures at stake had an incentive effect.

According to Section 5.1.2(e) of the 2014 Aviation Guidelines, in order to be proportionate, operating aid to airports must be limited to the minimum necessary for the aided activity to take place.

In this case, the aid amount was limited to the extent of uncovered operating losses, as it compensated only the costs actually incurred.

Therefore, the Commission considers that the operating aid amount in this case was proportionate and limited to the minimum necessary for the aided activity to take place.

According to Section 5.1.2(f) of the 2014 Aviation Guidelines, when assessing the compatibility of operating aid account will be taken of the distortions of competition and the effects on trade.

Within the standard catchment area of Frankfurt Hahn airport (1 hour travelling time by car or 100 kilometres distance) there are no commercially exploited airports. Even if this standard catchment area was to be further extended to other airports in the proximity of Frankfurt Hahn airport, as demonstrated in recitals 537 and 541 there are no undue negative effects on competition between the airports located in the proximity of Frankfurt Hahn airport (that is Frankfurt Main, Luxembourg and Saarbrücken airports).

In view of the above, the Commission considers that any undue negative effects on competition and trade between Member States due to the operating aid granted in favour of FFHG are limited to the minimum.

In light of the considerations in recitals 551 to 568, the Commission concludes that the measures are compatible with the internal market on the basis of Article 107(3)(c) of the Treaty.