(1)

In February 2005 the Commission received a complaint from Blue1 Oy (‘Blue1’), a Finnish airline that is part of the SAS Group. Blue1 alleged, among other things, that Ryanair Ltd (‘Ryanair’) was receiving aid due to lower-than-average airport charges at Tampere-Pirkkala airport (‘TMP airport’ or ‘the airport’).

(2)

The Commission requested Finland to provide further information in relation to the complaint by letters of 2 March 2005 and 23 May 2006. Finland replied by letters of 27 April 2005 and 27 July 2006.

(3)

By letter dated 10 July 2007 the Commission informed Finland of its decision to initiate the procedure provided for in Article 108(2) of the Treaty on the Functioning of the European Union (TFEU) (2) (‘the opening decision’) in respect of the agreement between Airpro Oy and Ryanair and the implementation of the low-cost strategy by Finavia and Airpro Oy at TMP airport. Finland provided its comments on the opening decision on 28 November 2007.

(4)

The Commission’s decision to initiate the procedure was published in the Official Journal of the European Union (3). The Commission invited interested parties to submit their comments on the measure in question within one month of the publication date.

(5)

The Commission received comments on the subject from four interested parties (Ryanair, SAS Group, Air France and the Association of European Airlines). It transmitted these comments to Finland by letter dated 13 February 2008. Finland transmitted its comments on 15 April 2008.

(6)

By letter dated 25 June 2010 the Commission requested further information. Finland replied by letter dated 1 July 2010. By letter dated 5 April 2011 the Commission requested further information on the financing of the airport. Finland replied by letter dated 5 May 2011. However, Finland’s reply was incomplete. Therefore, the Commission sent a reminder pursuant to Article 10(3) of Council Regulation (EC) No 659/1999 of 22 March 1999 laying down detailed rules for the application of Article 93 of the EC Treaty (4). Finland replied by letter dated 15 June 2011.

(7)

TMP airport is located in Pirkkala, 13 kilometres south-west of the City of Tampere in southern Finland. It is the third largest airport in Finland (measured in number of passengers, see table in paragraph (10)). Besides handling civil aviation, the airport also serves as a base for the Finnish Air Force.

(8)

TMP airport has two scheduled passenger terminals:

(9)

TMP airport, with the exception of T2, is owned and operated by Finavia Oyj (5) (‘Finavia’). T2 is rented out by Finavia to its subsidiary Airpro Oy (6) (‘Airpro’). Airpro operates the terminal and provides ground handling services there. Furthermore, Airpro entered into an agreement with Ryanair […] (*1) starting from 3 April 2003.

(10)

Passenger traffic at the airport increased from 304 025 in 2003 to 617 397 in 2010. This is due to the development of passenger numbers at T2. In 2010, Ryanair’s passenger share at TMP airport amounted to approximately […]. The following table summarises the development of passenger numbers at TMP airport from 2003 to 2010:

(11)

The opening decision raised the following questions:

(12)

As regards the first question, the Commission expressed doubts as to whether Finavia was guided by prospects of long-term profitability when it decided to transform the cargo hangar into a low-cost terminal. Furthermore, the Commission had doubts as to whether the investments made by Finavia to transform this former cargo hangar into a low-cost terminal could also be considered a selective advantage in favour of Airpro that it would not have obtained under normal market conditions.

(13)

As regards the second question, the Commission had to examine whether, in this particular case, the behaviour of Airpro had been guided by prospects of long-term profitability and whether the advantage allegedly conferred on Ryanair was an advantage it would not have obtained under normal market conditions. The Commission expressed, in particular, doubts as to whether the ‘all-inclusive charge’ paid by Ryanair was based on costs for the provision of services to the airline by Airpro. Furthermore, Finland did not provide the Commission either with the terms of the agreement with Ryanair or with the business plan evaluating the profitability of the agreement for Airpro. Hence in its opening decision the Commission expressed doubts as to whether the behaviour of Airpro had been guided by prospects of long-term profitability. Accordingly, it could not be excluded that the agreement provided Ryanair with an advantage it would not have benefited from under normal market conditions.

(14)

The Commission expressed doubts as to whether the conditions for compatibility as set out in the Community guidelines on financing of airports and start-up aid to airlines departing from regional airports (7) (‘the 2005 Aviation Guidelines’) had been satisfied in the present case, and whether the State aid measures could be declared compatible with the internal market pursuant to Article 107(3)(c) of the TFEU.

(15)

Finland began its observations by providing background information on Finavia’s and Airpro’s low-cost strategy at TMP airport. Finland explained that T2 was built in 1979 for temporary use as an airport building. In 1995 it was converted into a cargo hangar suitable for freight operations and was used by DHL. In 2002 DHL terminated the lease agreement and the terminal became vacant.

(16)

Finland indicated that, as Finavia was not able to attract any other cargo operator to Tampere or to rent out the hangar, it decided to convert the hangar into a low-cost terminal suitable for basic ground handling services. The initial construction costs of T2 had by that time already been depreciated and the refurbishment of the terminal required only minor renovations (8). The following table details the investment costs of the refurbishment of T2, amounting to EUR 760 612.

(17)

In view of the above calculation Finland indicated that even if Finavia had been able to find another tenant to use T2 as a cargo hangar, it would have been necessary to carry out certain construction engineering works amounting to approximately EUR 100 000. Furthermore, the conveyors could always be used at Finavia’s other airports.

(18)

Finland explained further that Finavia’s intention was to make the new low-cost terminal available to all airlines willing to accept the lower quality of service. The following table provides a comparison of the level of service and of facilities at T1 and T2 at TMP airport:

(19)

Finland indicated that as T2 could provide ground handling services for only one outbound aeroplane an hour, it was suitable only for point-to-point carriers using large aircraft. At the same time, in order to optimise the use of its staff, the operator of the terminal required airlines to enter into long-term agreements and also agreements on timetables; for instance flights could not always be operated at the times requested by the airlines, as was the case in T1. According to Finland, the optimisation of staff expenses and the service levels provided allowed cost savings of approximately […] compared to T1.

(20)

Finland indicated that before starting the refurbishment of T2 and adopting a low-cost strategy there, the issue was discussed several times at the meetings of Finavia’s board of directors. A business plan was also prepared for this purpose. The following table summarises the business plan (worst-case scenario) for the refurbishment of T2 and the implementation of a low-cost strategy: […]

(21)

Finland indicated that the ex ante business plan was based on prudent assumptions, leading to an underestimation of the revenues and an overestimation of the costs expected in the last years of the period under consideration. Under the other scenarios the low-cost strategy was expected to be even more profitable. The all-inclusive charges paid by the airlines using T2 varied in the different scenarios between […] per aircraft turnaround. As the decision on the low-cost strategy was made by Finavia’s board of directors on the basis of calculations and studies, it was not imputable to the State. The measures were not the result of requirements or orders by authorities, nor were the authorities involved in the adoption of the measures.

(22)

Finland indicated that Finavia and Airpro operated in compliance with business principles and financed their operations from the service charges and revenues collected from customers and from other business operations. In particular, neither Finavia nor Airpro received funding from the State budget: they operated profitably and annually distributed part of their profit to the State in accordance with the profit requirements imposed on them.

(23)

Finland indicated that the Ministry of Transport and Communications decided on Finavia’s performance targets. These performance targets, however, concern the group as a whole and individual business decisions were taken at Finavia’s own discretion. In the past few years (2003 to 2005) Finavia’s profit requirement had been approximately 4 % of the invested capital. The following table summarises Finavia’s performance:

Key financial data of Finavia in million EUR (actual figures)

(24)

Finland indicated that Finavia did not prepare airport-specific financial statements, as all its airports were part of the same legal entity. However, since 2000 Finavia had nevertheless collected airport-specific information based on its own internal calculations (actual data). This information was based on airports’ volume trends and associated revenue and on the costs of the resources used at airports, namely personnel, contracted services and the depreciation of fixed assets. The overall performance of Finavia at TMP airport (excluding services provided by Airpro) is summarised in the following table: […]

(25)

Besides commercial operations, the financial results of Finavia at TMP airport also included operations falling within the public policy remit, such as air traffic control and use of the runway at TMP airport for military purposes. Finland explained that the runway at TMP airport had to be available for military purposes 24 hours a day, 365 days a year. The runway was indeed used for military purposes (at least 30 % of the actual aircraft movements a year). The air traffic control cost amounted to approximately […]. The above figures took into account the rent paid by Airpro to Finavia for the use of T2 and the landing charges as well as other airport charges for the services provided to airlines using T2.

(26)

As regards Airpro, Finland explained further that it was a limited company and legally distinct from Finavia. The following table summarises the actual financial results of Airpro’s operations at TMP airport: […]

(27)

Airpro’s financial results at TMP airport included costs, such as the rent for T2 at TMP airport, Airpro’s own costs for personnel and equipment, and also the cost of services provided by Finavia. The financial statements included revenues, such as the all-inclusive charge paid by Ryanair, parking fees and other commercial revenues.

(28)

Consequently, Finland argued that Finavia and Airpro acted as market economy investors when they decided to implement the low-cost strategy and convert the cargo hangar into a low-cost passenger terminal.

(29)

Finland argued that even if the financing of the refurbishment of T2 were considered State aid, it would be compatible on the basis of Article 107(3)(c) of the TFEU, as it complied with the compatibility criteria set out in the 2005 Aviation Guidelines.

(30)

Finland argued further that the measures could be considered to meet objectives of general interest, which in its view related not only to the general-interest nature of airport operations, but also to the diversification of traffic connections in the region in a manner that met the needs of the residents and society. According to Finland, therefore, the alterations to T2 were proportional to their purpose and to the result achieved.

(31)

In addition, Finland stated that the operations of airports had special characteristics that needed to be taken into account. For example TMP airport helped to improve mobility at more congested airports in accordance with the Union’s objective. Operating TMP airport contributed to regionally balanced development in a sparsely populated country such as Finland. In this regard, it was particularly important to safeguard traffic connections from the more remote regions in Finland to Europe, since other forms of transport were not a viable alternative. The costs incurred for the construction of the terminal were proportional to the purpose as well as necessary. On the basis of the business plans and the actual figures, the infrastructure in question had sufficient medium-term prospects for use. T2 was open in a fair and non-discriminatory manner to all airlines. So far, however, no airline but Ryanair had shown interest in it.

(32)

According to Finland the infrastructure in question did not affect trade to an extent contrary to the interests of the Union. TMP airport was small and therefore the impact of the measures at Union level was not significant. In addition, the benefits of the measures for the region outweighed any negative impact at Union level.

(33)

Finland indicated that on 23 February 2003 Finavia concluded a lease agreement with Airpro concerning T2 for the period between 1 April 2003 and 31 March 2013 (referred to also as ‘the lease agreement’). Even though Finavia originally paid for the costs of the refurbishment, Airpro would reimburse Finavia for these costs in its rent. Finland also provided a copy of the lease agreement.

(34)

Pursuant to the lease agreement, Airpro pays a monthly rent amounting to […] plus […] VAT for the use of the facilities. Accordingly, the rent including VAT totals […] a month. The agreement provides that in addition to the basic rent the rent also includes the costs incurred for turning the cargo hangar into a low-cost passenger terminal, plus the related interest.

(35)

Finland indicated that at the time of concluding the lease agreement, the alterations to T2 were still ongoing and the refurbishment costs of the terminal had to be estimated in order to determine the amount of rent. The costs were estimated at EUR 700 000 and their monthly impact on the rent was expected to be approximately […]. In addition to the estimated refurbishment costs Finavia estimated that the costs of additional works and arrangements made after the commencement of the operations of T2 would be approximately […] and their monthly impact on the rent would be […]. In accordance with the calculations above, Airpro compensated Finavia for the costs incurred by the alterations to T2 with a monthly rent amounting to […].

(36)

Finland argued that the monthly rent paid by Airpro was not below the market price. The rent paid by Airpro was actually higher than the rent paid by the previous tenant, DHL. DHL paid a monthly rent amounting to […] excluding VAT for the use of the facilities, which corresponded to approximately […] (9). The share of VAT amounted to […], so the total monthly rent including VAT was […], which corresponded to approximately […].

(37)

Finland noted further that without the implementation of the low-cost strategy and conversion of the cargo hangar into a low-cost terminal, T2 might have remained vacant, which would have encumbered the finances of TMP airport.

(38)

As regards the implementation of the low-cost strategy by Airpro, Finland explained that discussions with airlines had started earlier. There had been ongoing discussions for example with Ryanair for a few years before the decision was taken to implement a low-cost strategy at TMP airport.

(39)

According to Finland the letter sent by Airpro to a number of airlines inviting them to consider starting up operations at the low-cost terminal was only one part of the marketing strategy for T2. T2 at TMP airport was actively marketed at the Routes trade fair (10) for several years starting in 2002. It was assumed that other airlines, in addition to Ryanair, would also be interested in establishing their operations at this terminal.

(40)

Finland provided a copy of the marketing letter. The letter indicates the charges applicable at T2, such as the charge for ground handling and terminal use, the amount of which depends on the aircraft type used. In addition to the charges applicable at T2, the airlines are to pay the normal landing, terminal navigation and security charges.

(41)

Finland provided a copy of the agreement with a period of validity of […] concluded between Airpro and Ryanair on 3 April 2003 (‘the agreement’). The agreement sets out the operational and financial conditions under which Ryanair is to establish and operate commercial flights to and from T2 at TMP airport. The agreement took effect on the day after the signature of that agreement (i.e. 4 April 2003) and will end on […].

(42)

For services provided at TMP airport Ryanair is to pay a single charge for each aircraft turnaround (departure and arrival), i.e. an all-inclusive charge, for each B737-800 aircraft or other variant of the B-737 aircraft with a maximum MTOW (11) of 67 000 kg as from 4 April 2003. This charge includes the landing and take-off charge, lighting charges, noise and night fees, the terminal navigation charge, ramp and passenger handling charges including the security and safety charges, and the passenger charge.

(43)

As summarised in the tables below the all-inclusive charge depends on the daily frequencies of Ryanair at the airport and on the year of the agreement: […]

(44)

In the agreement, Ryanair commits itself to commencing operations at TMP airport with […] daily turnarounds. Furthermore Ryanair agrees to give […] notice of any reduction in the number of daily turnarounds at the airport.

(45)

[…]

(46)

Pursuant to the agreement Ryanair expected to generate approximately […] departing passengers at TMP airport during the first 12 months and approximately […] departing passengers during the following 12 months.

(47)

Pursuant to the agreement, T2 at TMP airport has a maximum capacity of one turnaround an hour between 7:00 and 24:00. Ryanair and Airpro will agree beforehand on the flight schedules.

(48)

Airpro will operate a passenger service desk in a prime location in the main airport terminal (T1) and will provide reservations facility for Ryanair’s passengers. Pursuant to the agreement Ryanair pays a commission to Airpro at the rate of […] for all Ryanair flights (excluding taxes, fees and other charges) sold by Airpro and paid by debit/credit card.

(49)

The agreement also provides for arrangements during the necessary maintenance of the runway at TMP airport during summer 2003, when the airport will be closed to all traffic. During this period the traffic of TMP airport will be diverted to Pori airport and Airpro will arrange bus transportation for Ryanair’s passengers.

(50)

According to Finland the agreement between Airpro and Ryanair was on commercial terms and did not involve State aid. Other airlines had also had the possibility to agree with Airpro on similar contractual terms and conditions to those obtained by Ryanair. For example the marketing brochure The Case for Tampere-Pirkkala Airport, which had been prepared for the 2004 trade fair, highlighted the fact that T2 was open to all operators, as at that time the terminal still had capacity available for two more airlines.

(51)

Finland considered further that the charges paid by Ryanair at TMP airport were cost-based and generated an economic profit for Airpro’s and Finavia’s operations at TMP airport. Airpro collected charges from Ryanair for services it provided and also for services provided by Finavia. Airpro subsequently disbursed to Finavia the charges resulting from Ryanair’s operations at the airport pursuant to Finavia’s Aeronautical Information Publication (‘AIP’) (12). Any differences in charges were based on the nature and scale of the services concerned.

(52)

Finland indicated that all airlines using TMP airport paid the same charges for services of the same quality. For instance, the passenger charge collected for the services provided at T2 depended on the quality of the services provided at the terminal. Neither Finavia nor Airpro played any role in the collection of the passenger service charge marked on Ryanair’s air ticket, which was collected by Ryanair from its passengers. Contrary to the allegations of Blue1, Ryanair was not exempted from paying the passenger charge. The fact that Airpro’s operations at T2 were profitable was evidence that Ryanair had to pay a charge for the services provided by Airpro.

(53)

Finavia collected the following charges from Ryanair through Airpro at TMP airport, amounting to […] in total:

(54)

As regards the air traffic navigation charges, Finland stated that they depended on the weight of the aircraft, the length of the flight and the content of the services used. Finavia’s profits also included an annual route charge (14), which amounted to approximately […] in 2006 and would increase with the additional frequencies operated by Ryanair.

(55)

Finland explained further that in 2005 the operating benefit from Ryanair’s operations at TMP airport totalled […]. Finally, Finland argued that pursuant to the agreement, Ryanair had also committed itself to increasing traffic and to meeting the passenger targets indicated in the agreement.

(56)

The Commission has received observations from four interested parties.

(57)

Ryanair began its observations dated 16 November 2007 by stating that in its opinion the initiation of a formal investigation procedure was unfair and unnecessary. It also stated that it regretted that the Commission had not given Ryanair the possibility to participate in the preliminary examination.

(58)

On the substance of the case Ryanair was of the opinion that the Commission should have based itself on standard commercial arrangements and decided that the agreement complied with the market economy operator principle and hence did not involve State aid. As in Ryanair’s opinion both Finavia and Airpro benefitted from its presence at TMP airport, both were acting as market economy operators and the financing of T2 was void of any aid.

(59)

As regards the development of the low-cost terminal at TMP airport, Ryanair explained that there were ongoing projects to differentiate services provided by airports in the Union in order to serve the needs of low-cost airlines and their passengers. The differentiated level of services provided by airports resulted in differentiated charges paid by airlines. TMP airport was among the first to follow the model of differentiated service levels at the same airport. Ryanair confirmed that the airport operator Finavia had decided on the development of T2 on the basis of a sound business plan that was swiftly implemented and resulted in an increase in Finavia’s revenue. Therefore, Ryanair was of the opinion that the development of the low-cost terminal did not contain any elements of State aid towards Finavia’s activity at TMP airport.

(60)

With regard to the management of T2, Ryanair explained that competition between terminals at the same airport resulted in improved efficiency and reduced costs. In Ryanair’s view, the higher efficiency standards at T2 improved the efficiency of T1 to the benefit of all airlines using the airport. To Ryanair’s knowledge, Airpro was renting the terminal on commercial terms. Finavia benefitted additionally from increased traffic at the airport and an increase in revenue from landing and air traffic control charges. Consequently, in Ryanair’s view no State aid was involved in the commercial agreements between Finavia and Airpro with regard to the management of T2.

(61)

As regards the agreement concluded between Ryanair and Airpro, Ryanair first stated that its business model was based on increasing efficiency, which was passed on to passengers in the form of lower air fares. The all-inclusive fee paid at TMP airport included all charges applicable to airlines at the airport. The differentiated charges for the use of T2 were justified by the level of services provided. With regard to the discount on airport charges related to the increase in frequencies, Ryanair argued that this was normal commercial behaviour applied in all industries. Most of the conditions of the agreement between Ryanair and Airpro at T2 were generally applicable to all airlines willing to fly from T2. Therefore, Ryanair was of the opinion that its agreement with Airpro was not selective. Ryanair further argued that both Finavia and Airpro benefitted from its presence at TMP airport.

(62)

SAS Group submitted its comments by letter dated 16 November 2007. SAS Group pointed out that its comments focused on the link between Finavia and Airpro, the costs of the conversion of T2, and the preferential treatment of Ryanair at TMP airport.

(63)

As regards the link between Finavia and Airpro, SAS Group stated that the managing director of TMP airport was a member of the board of directors of Airpro when Finavia decided to lease T2 to Airpro. In addition, the close link between Finavia and Airpro was evident in the publication Tampere-Pirkkala Airport Finland’s Future-Ready Airport.

(64)

SAS Group argued that Finavia was cross-subsidising T2 with revenues from T1. SAS Group was in particular of the opinion that no passenger charges were paid at T2. Furthermore, Airpro administered the car park located outside T2 and kept the revenues generated by the car park. The parking charges at the car park next to T2 were twice as high as those at T1.

(65)

As regards the costs for the services at T2, SAS Group argued that Finland had not granted it access to this information. SAS Group had no information on whether T2 or TMP airport were profitable and whether Airpro paid for the infrastructure supplied by Finavia. For example Finavia had acquired security screening equipment for T2. SAS Group stated that according to Finland and Airpro the price level at T2 related to the level of services. SAS Group argued that the level of services was normally based on the ground handling concept agreed between an airline and the ground handling company and not on the space or facilities available.

(66)

SAS Group argued further that the arrangements concerning T2 at TMP airport favoured one business model and were clearly contrary to Article 107(1) of the TFEU.

(67)

Air France provided comments by letter dated 16 November 2007. Air France started by explaining its commercial situation in Finland. In Finland, Air France did not operate services from and to TMP airport. However it operated five daily frequencies between Charles de Gaulle airport in Paris and Helsinki airport (located approximately 180 kilometres from TMP airport) through a code sharing arrangement with Finnair.

(68)

Air France said it endorsed the 2005 Aviation Guidelines and the preliminary assessment conducted by the Commission as regards the financial arrangement at TMP airport. In particular, Air France was of the opinion that an exception from the payment of the passenger fee provided benefits to Ryanair and was clearly of a discriminatory nature, and therefore should not be considered compatible with the internal market.

(69)

The Association of European Airlines (‘AEA’) provided its comments by letter of 16 November 2007. AEA’s comments were entirely in line with those provided by SAS Group and Air France.

(70)

Finland received the comments of the four interested parties.

(71)

As regards Ryanair’s comments, Finland observed that the airline had commented on both general developments in the aviation market in Europe and on developments at TMP airport. With respect to these aspects, Finland referred to its earlier observations submitted following the opening of the formal investigation procedure.

(72)

Finland observed that SAS Group’s comments raised new issues that needed to be clarified. Finland stated that, as it had already pointed out, Airpro was a legally distinct company and did not benefit from any support from its owner Finavia.

(73)

Finland indicated that TMP airport’s managing director was not a member of the board of directors of Airpro at the time when the lease agreement was signed. TMP airport’s managing director was on Airpro’s board of directors only from May 2003 to April 2007. As regards the marketing publication concerning TMP airport and its low-cost strategy, Finland argued that such marketing operations could not prejudge the legal and economic links between the companies concerned. SAS Group, which operated from T1 at TMP airport, was not mentioned in the publication, because the publication was aimed at marketing TMP airport’s low-cost strategy.

(74)

As regards SAS Group’s allegations concerning possible cross-subsidisation between T2 and T1 at TMP airport, Finland stated that it had already provided evidence that Airpro’s operations at TMP airport were profitable and that Airpro did not receive any subsidies from Finavia.

(75)

As regards the different infrastructure adjustments related to the refurbishment of T2, Finland indicated that the rent paid by Airpro to Finavia covered these costs plus interest. With regard to the purchase of security screening equipment for T2 by Finavia, Finland indicated that these costs were reflected in the rent paid. The car park located next to T2 was part of the area rented out to Airpro. Airpro was free to set the charges as long as it did so in a transparent way.

(76)

As regards SAS’s allegations concerning differentiated pricing at TMP airport’s T2, Finland referred to its comments on the opening of the procedure.

(77)

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

(78)

The criteria set out in Article 107(1) are cumulative. A measure constitutes aid within the meaning of Article 107(1) of the TFEU only if all of the following conditions are fulfilled. The financial support must:

(79)

In assessing whether there is any aid component in the financial arrangements related to the low-cost strategy at TMP airport, in particular with regard to the conversion of a vacant cargo hangar into a low-cost terminal and the subsequent lease agreement with Airpro, the Commission has to examine whether in similar circumstances a market economy investor would have entered into the same or similar commercial arrangements as Finavia (15).

(80)

Pursuant to the principles established in the case-law, the Commission has to compare the conduct of Finavia to a market economy investor who can be guided by prospects of long-term profitability (16). In addition, pursuant to the Charleroi judgment (17), when assessing the measures in question the Commission has to take into account all the relevant features of the measures and their context. In other words, the Commission has to analyse the decision of Finavia to refurbish the cargo hangar at TMP airport and the planned implementation of the low-cost strategy at TMP airport by Airpro on the basis of an integrated approach taking into account all the features of the measures in question.

(81)

The Court declared in the Stardust Marine Judgment that, ‘[…] in order to examine whether or not the State has adopted the conduct of a prudent investor operating in a market economy, it is necessary to place oneself in the context of the period during which the financial support measures were taken in order to assess the economic rationality of the State’s conduct, and thus to refrain from any assessment based on a later situation’ (18).

(82)

In order to be able to apply the market economy investor test the Commission has to place itself in the context of the period when Finavia took the decision to refurbish the vacant cargo hangar and subsequently to rent it out to Airpro i.e. the beginning of 2003. The Commission must also base its assessment on the information and assumptions which were at the disposal of the operator when the decisions on the financial arrangements for the implementation of the low-cost strategy were taken.

(83)

Finland argues that Finavia acted rationally and substantiates its arguments with a copy of Finavia’s ex ante business plan and the actual results of Finavia and Airpro at TMP airport.

(84)

In this context, the Commission notes that the cargo hangar at TMP airport became vacant after DHL had terminated its rental agreement. Finavia was losing the monthly rent of approximately […]. After some months, it became evident that Finavia would not be able to attract another air cargo company to TMP airport. In addition, low-cost airlines were not ready to use Terminal 1 at the airport, because the costs of the ground-handling services were higher than these airlines were ready to accept. However, the 2002 forecasts for the aviation transport sector indicated a high growth potential for low-cost carriers, such as Ryanair, of approximately 30 % a year.

(85)

The Commission observes further that the empty cargo hangar was fully depreciated and the refurbishment costs for transforming the hangar into a low-cost passenger terminal amounted to EUR 760 612. Even if the cargo hangar had not been converted into a passenger terminal, Finavia would have nonetheless had to undertake certain refurbishment works amounting to approximately EUR 100 000.

(86)

In addition, Finavia was obliged to keep TMP airport’s runway available for military purposes 24 hours a day, 365 days a year. Therefore, an increase in traffic at the airport might well result in a better allocation of resources and a reduction in possible overcapacities. At the same time, the diversification of airlines using the airport might also reduce the business risks of the airport (such as the risk of unused capacity in the event that one of the airlines terminated its operations) and improve the efficient utilisation of the runway.

(87)

This situation is explained in Finavia’s business plan for implementing the low-cost strategy. As shown in the worst-case scenario in Finavia’s business plan, the investment project was expected to make a positive contribution: the average profit margin (19) was expected to be around […] (see table in paragraph (20)), which according to the data available to the Commission is broadly in line with the profit margins of other airports in the Union (20). The Commission observes further that the ex ante business plan was based on prudent assumptions which led to an underestimation of the revenue and an overestimation of the costs in the last years of the period under consideration. In addition, the ex ante business plan did not take into account the profit gained by Finavia from the landing charges, as these costs were deducted from the expected revenue. Furthermore the refurbishment costs and an appropriate remuneration for the capital invested were fully reflected in the rent paid by Airpro to Finavia, which was also deducted from the expected revenue.

(88)

In order to assess the low-cost strategy of Finavia and Airpro on the basis of an integrated approach, the Commission’s expert consolidated the revenues and costs of the ex ante business plan (base-case scenario). In particular, the inter-company payments (such as the rent paid by Airpro to Finavia for the use of T2, landing charges and terminal navigation charges) were taken into account as revenue. The following table summarises the revenue and cost calculations related to the implementation of the low-cost strategy at TMP airport as described above and its contribution to the earnings before interest and taxes (‘EBIT’) at a consolidated level (i.e. for Finavia and Airpro) over the next ten years: […] (21)

(89)

The Commission observes that on the basis of the ex ante business plan and the positive NPV (22) Finavia’s decision to implement the low-cost strategy at TMP airport was in line with the behaviour of a market economy investor. The positive NPV of the low-cost strategy increased the equity value of Finavia. The Commission further notes that the assumptions of the ex ante business plan and the expected results of the low-cost strategy are further supported by the actual positive results of Airpro’s activity at TMP airport (see in particular the table in paragraph (26)). Moreover, the combined actual financial results of TMP airport (taking into account the financial results of Airpro’s and Finavia’s activity at TMP airport, see tables in paragraphs (24) and (26)) show that due to the operation of the low-cost terminal the entire airport’s activity became profitable.

(90)

In view of the above, the Commission can conclude that Finavia’s decision to implement the low-cost strategy at TMP airport and the underlying financial arrangements are in line with the market economy investor test and therefore free of any economic advantage that does not correspond to normal market conditions.

(91)

As one of the cumulative criteria in Article 107(1) of the TFEU is not fulfilled, the Commission considers that Finavia’s decision to implement the low-cost strategy at TMP airport and the underlying financial arrangements are void of any State aid within the meaning of Article 107(1) of the TFEU.

(92)

As regards a possible cross-subsidisation of Airpro by Finavia (such as lost rent revenue or compensation for operating losses), the Commission notes that given that all financial arrangements related to the low-cost strategy at TMP airport are based on an ex ante business plan in accordance with the market economy investor principle, that Airpro pays a market rent for the use of T2 and the full costs of Airpro’s activity at TMP airport are covered by the charges paid by the airlines using T2 (i.e. Ryanair), and that Finavia’s activity at TMP airport is profitable only due to the operation of T2, the cross-subsidisation of Airpro by Finavia can be excluded.

(93)

As regards the agreement between Airpro and Ryanair, Finland has argued that Airpro acted as a market economy operator would have done in a similar situation. If this is the case, Ryanair has not been favoured by the agreement and no State aid is involved.

(94)

In assessing whether the agreement was concluded under normal market conditions, the Commission has to examine whether in similar circumstances an airport operating under normal market economy conditions and guided by prospects of long-term profitability would have entered into the same or similar commercial arrangements as Airpro (23). Furthermore, the Commission has to analyse the expected impact of the agreement on Airpro’s and Finavia’s activity at TMP airport on the basis of an integrated approach taking into account all the features of the measure in question (24).

(95)

In order to be able to apply the private investor test, the Commission has to place itself in the context of the period when the agreement was signed. The Commission must also base its assessment on the information and assumptions available to the operator when the agreement was signed. Airpro signed the agreement with Ryanair on 3 April 2003 for a period of validity of […].

(96)

Pursuant to the agreement, Ryanair committed itself to commencing operations at TMP airport with […] daily turnarounds. On this basis Ryanair expected to generate approximately […] departing passengers at TMP airport during the first 12 months, and approximately […] departing passengers during the following 12 months. The agreement provides for a schedule of charges per turnaround depending on the number of daily frequencies (see in particular the tables in paragraph (43)). The average price for one turnaround (based on three flights a day) is […]. The following table compares the charges paid by airlines using T1 at TMP airport and the average price paid by Ryanair:

(97)

The Commission observes that Ryanair pays the same landing, terminal navigation and security charges as airlines using T1 at TMP airport. According to the information provided by Finland Ryanair is not exempted from the passenger fee. The only difference in the price paid by Ryanair relates to the charges paid for terminal (passenger) services and ground handling. However the quality of the services provided to Ryanair and its passengers at T2 is lower than the quality of services provided at T1, and the reduction achieved in underlying costs, in particular personnel costs, represents approximately […] of Airpro’s total costs (including the rent, landing and terminal navigation charges paid to Finavia). Contrary to T1, the number of staff at T2 is kept at a low level and the staff performs a variety of operations related to check-in, security checks and ground handling. According to the information provided by the airport to the Commission’s expert, T2’s personnel costs are about […] lower than T1’s. In addition, the Commission observes that the airport charges paid by Ryanair for the terminal (passenger) services and ground handling are only around […] lower than the charges paid at T1. The divergence between the cost savings (around […]) and the difference in the charges paid by airlines using the two terminals (around […]) reflects the additional profit margin generated by Airpro (around […], see also table in paragraph (20)). Hence, the Commission considers that the difference between the charges paid by Ryanair at T2 and those paid at T1 is justified.

(98)

On the basis of the above, Airpro was able to forecast the revenue generated by the agreement with Ryanair. Airpro assumed that in year 1 Ryanair would perform […] daily turnarounds with a load factor of […]; as of year 2 it was expected that Ryanair would operate […] daily turnarounds for the remaining period of validity of the agreement with the same load factor as in year 1. The result takes into account Airpro’s aeronautical and non-aeronautical revenues (including the car park revenue, etc.). Airpro’s costs over the period of validity of the agreement were estimated by using the projected costs related to the implementation of the low-cost strategy at TMP airport. For instance, the costs of personnel were expected to amount to […] per turnaround (and […] when calculated on the basis of daily aircraft turnaround).

(99)

The following table summarises the revenue and cost calculations related to the agreement and the positive contribution of the agreement to the equity value of Airpro during its period of validity. These calculations are based on the business plan provided by Finland and the assumptions set out above. […] (25)

(100)

The Commission notes that during its period of validity the agreement with Ryanair was expected to generate a positive contribution to Airpro’s equity value, with an NPV amounting to EUR 0,5 million. Furthermore Airpro’s and Finavia’s overall activity at TMP airport was expected to be positive over the period of validity of the agreement.

(101)

The Commission also observes that the revenues stemming from the agreement cover all of Airpro’s costs at TMP airport and all of Finavia’s costs related to the agreement. The full-cost approach in this case includes the cost of capital (i.e. depreciation costs for the airport infrastructure) and operating costs (such as costs of personnel, energy, material, etc.). It also includes costs for security and safety measures that may represent measures falling within the public policy remit which would not be considered an economic activity within the meaning of Article 107(1) of the TFEU. Thus the calculated NPV is underestimated and the positive contribution of the agreement may indeed be even higher.

(102)

The Commission observes that on the basis of the ex ante business plan the decision of Airpro, as a subsidiary of Finavia, to conclude the agreement in question with Ryanair was in line with the conduct of a market economy investor. The Commission further notes that the assumptions of the ex ante business plan and the expected results of the agreement are further supported by the actual positive results of Airpro’s activity at TMP airport (see in particular the table in paragraph (26)). Moreover, the combined actual financial results of TMP airport (taking into account the financial results of Airpro’s and Finavia’s activity at TMP airport, see in particular the tables in paragraphs (24) and (26)) show that not only the operations of the low-cost terminal but also those of the airport as a whole became profitable.

(103)

On the basis of the foregoing, the Commission concludes that Airpro’s decision to enter into the agreement in question with Ryanair is in line with the market economy investor test and therefore free of any economic advantages that do not correspond to normal market conditions.

(104)

As the cumulative criteria in Article 107(1) of the TFEU are not fulfilled, the Commission considers that the agreement of 3 April 2003 between Airpro and Ryanair is void of any State aid within the meaning of Article 107(1) of the TFEU,

(1)

After becoming aware of the entry into force, on 27 February 2011, of the law converting Decree-Law No 225 of 29 December 2010 into law, which granted a deferral of payment of an instalment of the milk levies payable by Italian milk producers under the scheme for payment by instalments approved by Council Decision 2003/530/EC of 16 July 2003 on the compatibility with the common market of an aid that the Italian Republic intends to grant to its milk producers (1), (2), the Commission asked the Italian authorities, by means of a letter dated 17 March 2011, for further information on the matter in question.

(2)

The Italian authorities sent the Commission this additional information by letter dated 24 June 2011 and registered on 29 June 2011.

(3)

After examining the information provided by the Italian authorities and taking into account the fact that the deferral of payment in question had taken place without the Commission having been notified of it in advance, or having authorised it, the Commission informed the Italian authorities by fax dated 14 October 2011 that a file for non-notified aid had been opened, under reference number SA.33726 (2011/NN).

(4)

By letter of 11 January 2012, the Commission informed Italy of its decision to initiate the procedure provided for under Article 108(2) of the Treaty as regards the aforementioned deferral and the programme for payment by instalments approved by Decision 2003/530/EC as amended by the addition of the deferral, which constitutes a new aid (SA.33726 (11/C)]), asking the Italian authorities to comment on the opening of the procedure within one month..

(5)

The Commission’s decision to initiate the procedure was published in the Official Journal of the European Union (3). The Commission asked interested parties to submit their comments on the aid in question.

(6)

The Commission received comments from interested parties which it forwarded to Italy, giving it the opportunity to respond.

(7)

By e-mail dated 13 February 2012, the Italian Permanent Representation to the European Union sent the Commission a letter from the Italian authorities requesting a two-month extension for commenting on the opening of the procedure. That extension was granted in a message sent by fax dated 21 February 2012.

(8)

By e-mails dated 26 April 2012 and 27 April 2012, the Italian Permanent Representation to the European Union sent the Commission the Italian authorities’ reply to the opening of the procedure under Article 108(2) of the Treaty.

(9)

The Italian authorities did not comment on the interested parties' comments.

(10)

Article 1 of Decision 2003/530/EC states that:

‘The aid the Italian Republic intends to grant to milk producers, by itself making payment to the Community of the amount due from them to the Community by virtue of the additional levy on milk and milk products for the period 1995/1996 to 2001/2002 and by allowing these producers to repay their debt by way of deferred payment over a number of years without interest, is exceptionally considered to be compatible with the common market on condition that:

(11)

Law No 10/2011 introduces into Article 1 of Decree-Law No 225 of 29 December 2010 a paragraph 12 duodecies providing for the deferral to 30 June 2011 of payment of the instalment of the milk levy due on 31 December 2010. The cost of this deferral was charged to an overall budget allocation of EUR 5 million covering multiple purposes.

(12)

In their letter of 24 June 2011, the Italian authorities explained that the grant equivalent for this measure would be counted among the de minimis aid for Italy provided under Commission Regulation (EC) No 1535/2007 of 20 December 2007 on the application of Articles 87 and 88 of the EC Treaty (4) to de minimis aid in the sector of agricultural production (5).

(13)

The Commission decided to initiate the proceedings provided for under Article 108(2) of the Treaty for the following reasons:

(14)

In their letter sent by e-mail on 26 April 2012, the Italian authorities first reported on the application of the system of staggered payments of milk levies approved under Council Decision 2003/530/EC, explaining that there were 11 271 beneficiaries under the scheme. Of these, 9 965 (i.e. 88,41 % of the total) had paid their instalments of levies due on 31 December 2010 on time. 1 291 had done so by the deferred deadline and 15 had not made any payments, resulting in their exclusion from the programme.

(15)

The Italian authorities then explained that, in order to calculate the grant equivalent of the aid received by beneficiaries of the deferral, account was taken of interest for the period between 1 January 2011 and the date of actual payment of the instalments which were the subject of the deferral, using the three-month Euribor rate as of 1 October 2010, plus 100 basis points (1,942 %). The results of that calculation indicated a grant equivalent of between EUR 0,08 and EUR 694,19 and also showed that 1 187 of the 1 291 beneficiaries of the deferral had benefited from aid of less than EUR 100,00. According to the authorities, these figures indicate that the deferral of payment under Law No 10/2011 did not compromise the smooth running of the programme for payment by instalment, which continues to be in compliance with the provisions of Decision 2003/530/EC, as evidenced by the fact that only 11,45 % of producers involved in the programme in question benefited from the deferral.

(16)

For these reasons, the Italian authorities confirm, as stated in the letter of 24 June 2011 (see paragraph 13 above), that the deferral granted in respect of payment of the levy constitutes de minimis aid. They also point out that they have established that the individual ceiling referred to in Article 3(2) of Regulation (EC) No 1535/2007 has been complied with in full, as has the ceiling of EUR 320 505 000 over a period of three fiscal years established for Italy under the same Regulation, and that the grant equivalent of the deferral of payment was equal to a total of EUR 50 877,41. Lastly, they reported that they were in the process of checking whether these ceilings had been complied with, taking into account the other de minimis aid schemes granted during 2009, 2010 and 2011.

(17)

As regards the Commission’s position that the aid approved by Decision 2003/530/EC had to be considered, given its nature and exceptional character, to be a single maximum aid which cannot be cumulated with any other form of measure, the Italian authorities stressed firstly that the decision in question had recognised the existence of the exceptional circumstances which led the Council to consider the aid to be compatible with Article 107 of the Treaty, subject to certain conditions being met. They also highlighted the fact that the checks carried out showed that the programme for payment by instalments complied with the provisions of Decision 2003/530/EC, since all producers had made the seventh instalment payment, with the exception of 15 producers who had already been removed from the scheme. In their view the exceptional nature of the circumstances resulting in the adoption of Decision 2003/530/EC does not in itself prevent recipients of the aid approved by the Council from accessing any other benefit. The Treaty refers only to the exceptional circumstances mentioned above, without restricting in any way the nature of the aid authorised or the detailed rules for its implementation; it simply makes the derogation from Article 107 and the regulations referred to in Article 109 of the Treaty subject to the adoption of a unanimous Council decision. In this specific case, the exceptional character which led to the adoption of Decision 2003/530/EC is fully reflected in the way in which the decision in question was adopted, namely on a unanimous basis, and relates to the circumstances requiring the adoption of the aid rather than the aid itself.

(18)

The Italian authorities also claimed that the deferral of payment constitutes de minimis aid and should therefore be considered an isolated measure, given its low take-up rate among producers, the low value of the amounts in question, and the absence of changes made to the programme for payment by instalments, the structure of which has remained the same, both as regards the total number of instalments and the expiry date.

(19)

Lastly, the Italian authorities have once again stated that, in accordance with the Italian Ministerial Decree of 30 July 2003 implementing the Council Decision, participants in the programme for payment by instalment are required give up any legal action in respect of payment of the levies due and debtors who do not make payments are excluded from the programme. The Italian authorities assert that this condition would involve the initiation of enforced recovery procedures resulting in producers bringing new appeals. It would therefore be reasonable to avoid legal disputes for the recovery of very low amounts through proceedings that cost more than the amounts to be recovered. In this respect, the Italian authorities refer to Article 32(6) of Council Regulation (EC) No 1290/2005 of 21 June 2005 on the financing of the common agricultural policy (7), which states that, in duly justified cases, Member States may decide not to pursue recovery procedures if the costs already incurred and likely to result from the recovery are greater than the amount to be recovered. In their opinion, this provision should be applied by analogy to this case. In any event, similar provisions are also made by Article 25(4) of Law No 289/2002 (the 2003 financial law), in accordance with which the sum of EUR 12 is considered a low amount and not subject to recovery. Of the beneficiaries of the deferral, 559 received aid less than EUR 12.

(20)

In the letter sent by e-mail on 26 April 2012, the Italian authorities provided a list of beneficiaries of the deferral and the amount of aid which each of them received.

(21)

On 7 March 2012, the Commission received comments from a third party on the opening of the procedure.

(22)

The interested party essentially wished to know why the Commission had restricted the opening of the procedure to the deferral of payment provided for under Law No 10/2011 and not extended it to the provisions of Article 40 bis of Law No 122/2010, which provides for the deferral of payment of the instalments paid under an additional programme of payment by instalment set up by Law No 33/2009 and urged the Commission to extend the scope of the procedure accordingly. In this respect, the interested party made the point that a complaint regarding the provisions of Article 40 bis of Law No 122/2010 had already been submitted to the Commission and the case closed by the Commission.

(23)

On 10 March 2012, the Commission received comments from a second interested party on the opening of the procedure.

(24)

The interested party in question drew the Commission’s attention to the provisions of Article 1(4) of Decree-Law No 16/2012, allowing firms in financial difficulty to pay sums due in regular instalments. It asked the Commission to intervene, pointing out that these measures were not compatible with the single market.

(25)

On 14 March 2012, the Commission received comments from a further interested party on the opening of the procedure.

(26)

In these comments, the interested party also made reference to Decree-Law No 16/2012, stressing the resulting difference in treatment between farmers and also the accuracy of the data used by AGEA (Agenzia per le Erogazioni in Agricoltura — the Italian paying agency) in order to calculate the additional levy.

(27)

In accordance with Article 107(1) of the Treaty, aid granted by a Member State or by means of State resources in any form whatsoever which distorts or threatens to distort competition by favouring certain undertakings or the production of certain goods, insofar as it affects trade between Member States, is to be deemed incompatible with the common market.

(28)

The measure in question, namely the aid connected to the deferral of payment (the granting of the equivalent of an interest-free loan, see paragraph 13, second indent above), but also the new aid arising from the breach of Decision 2003/530/EC (interest not paid on annual instalments already made and capital and interest not yet paid in respect of remaining years until the expiry of the payment by instalment, i.e. until 31 December 2017) (new aid, see paragraph 13, third indent) falls under the following definition:

(29)

The measure is imputable to the State since it results from a national law; it is financed using public resources in the sense that the Italian State, by granting the deferral of payment of an annual instalment established in Decision 2003/530/EC and by creating a new aid through that deferral, has denied itself for a specific period of time a sum of money that could be used for other purposes.

(30)

This situation favours certain undertakings, in particular milk-producing agricultural holdings.

(31)

It may also have an impact on trade, given the Italian position on the market (8).

(32)

Equally, it has the potential to distort competition, since the undertakings which benefited from it have secured an advantage (the deferral does not earn interest and is therefore equivalent to an interest-free loan) which could not have been acquired under normal market conditions and which has placed the undertaking concerned in a more advantageous competitive situation compared to undertakings which have not received it (9).

(33)

However, in the light of the additional information provided by the Italian authorities in response to the opening of the procedure under Article 108(2) of the Treaty, there is a need to establish whether the measure in question can be considered de minimis aid in accordance with Regulation (EC) No 1535/2007, and therefore not be considered State aid within the meaning of Article 107(1) of the Treaty.

(34)

In their letter sent by email on 26 April 2012, the Italian authorities explained that the interest connected to the deferral of payments was between EUR 0,08 and EUR 694,19. They also stated that checks carried out had shown that the ceiling established for Italy over three fiscal years had not been exceeded, but that they would still have to verify whether there continued to be a risk of an individual ceiling being exceeded in the event of cumulated de minimis aid for the 2009, 2010 and 2011 fiscal years.

(35)

The Commission can certainly note that the amount of interest relating to the deferral, taken in isolation, does not exceed the EUR 7 500 provided for in Article 3(2) of Regulation (EC) No 1535/2007. It also notes that the total aid amount granted by the deferral, i.e. EUR 50 877,41, has not resulted in the ceiling of EUR 320 505 000 allowed for Italy in the Annex to the Regulation being exceeded. Nevertheless, the Commission does not have any new information to indicate that the individual ceiling of EUR 7 500 has not been exceeded in any cases, also taking into account all de minimis aid received by the same beneficiary during the period of three fiscal years, because as of 26 April 2012, it had not received any information from the Italian authorities involved in performing these checks. It cannot therefore conclude that that individual aid ceiling has been respected in all cases, particularly since the Commission also has to take into account the new aid arising from the breach of Decision 2003/530/EC. Indeed, it has to examine the measure in question in its entirety (i.e. the aid related to the granting of the deferral, the granting of the equivalent of an interest-free loan and the new aid arising from the breach of Decision 2003/530/EC): a considerable number of beneficiaries (more than 1 250) have benefited from this deferral and the amount of the aid also includes part of the principal sum (i.e. that corresponding to the annual instalments due on 31 December of the years 2013, 2014, 2015, 2016 and 2017) plus interest, which far exceeds the interest relating to the deferral of payment taken into account by the Italian authorities in support of their arguments.

(36)

Article 3(7) of Regulation (EC) No 1535/2007 also states that ‘de minimis aid shall not be cumulated with State aid in respect of the same eligible costs if such cumulation would result in an aid intensity exceeding that laid down by Community rules in the specific circumstances of each case’.

(37)

In this regard, the Commission has already indicated, by initiating the procedure provided for in Article 108(2) of the Treaty, that this deferral was in addition to the aid approved by the Council, which should be regarded as the maximum which could be granted in this context.

(38)

The Italian authorities also take the view that the deferral of payment should be regarded as a stand-alone measure, given the low take-up rate amongst producers, the low value of the amounts in question, and the fact that no changes have been made to the programme for payment by instalments, the structure of which has remained the same, both as regards the total number of instalments and the expiry date.

(39)

The Commission does not share this opinion. Indeed, it is clear that the deferral of payment is directly linked to a reimbursement, the payment in instalments of which was provided for in detail in Decision 2003/530/EC. The first indent of Article 1(1) of that Decision clearly states that the repayment ‘shall be […] by yearly instalments of equal size’. The deferral cannot therefore be considered as being entirely unrelated to the system of instalments established by Decision 2003/530/EC.

(40)

The Italian authorities also dispute the fact that the aid authorised by the Council is the maximum amount that may be granted to milk producers. They take the view that the decision in question has recognised the existence of exceptional circumstances resulting in the approval of the programme for repayment in instalments, but that this exceptional character does not in itself justify beneficiaries having no possibility of any other support, since the Treaty only refers to exceptional circumstances, without restricting the nature of the aid authorised or the detailed rules for its implementation. In this specific case, the exceptional character which led to the adoption of Council Decision 2003/530/EC is fully reflected in the way in which the decision in question was adopted, namely on a unanimous basis, and relates to the circumstances requiring the adoption of the aid rather than the aid itself.

(41)

The Commission does not agree with the Italian authorities. In fact, although the third paragraph of Article 108(2) of the Treaty states that ‘[…] the Council may, acting unanimously, decide that aid […] shall be considered compatible with the internal market […] if such a decision is justified by exceptional circumstances’ and also Recital 8 to Decision 2003/530/EC states that ‘[…] exceptional circumstances exist which justify considering the aid […] to be compatible with the common market’, the fact remains that the Council itself, in the operative part of the Decision, established that the aid is considered to be compatible with the internal market ‘exceptionally’ and not ‘taking account of the exceptional circumstances’. The term ‘exceptionally’ clearly indicates the Council’s intention to draw attention to the granting of the aid, assigning it a unique nature, despite the existence of exceptional circumstances as mentioned in Recital 8. While the reference to unanimity made by the Italian authorities can indeed demonstrate that the procedure was exceptional, it does not call into question the unique nature of the aid as set out in the Decision.

(42)

In view of the fact that the aid approved by the Council, given its unique nature, was the maximum amount permissible in that given context, i.e. the equivalent of aid at 100 %, the addition of the deferral of payment would entail the automatic application of the provisions of Article 3(7) of Regulation (EC) No 1535/2007, meaning that the grant equivalent of the deferral cannot be considered to fall within the scope of that Regulation, and therefore constitutes State aid. Its compatibility with the internal market must be assessed in the light of the rules on competition in force when the deferral was granted, as must that of the new aid arising from the breach of Decision 2003/530/EC.

(43)

The competition rules which applied when the deferral was granted are contained in the Community guidelines for State aid in the agriculture and forestry sector 2007 to 2013.

(44)

The position of the Italian authorities in their letter sent by e-mail on 26 April 2012 was based on the argument that the deferral of payment should be regarded as part of a de minimis scheme. The authorities did not therefore provide any explanation of compatibility of the deferral of payment with the internal market, or that of the new aid falling outside the framework of Decision 2003/530/EC, in the light of the rules laid down in the guidelines referred to above.

(45)

The Commission therefore has no new information to dispel the doubts it had when it initiated the procedure provided for in Article 108(2) of the Treaty. The aid connected to the deferral of payments and, therefore, the new aid established by the breach of Decision 2003/530/EC therefore constitutes unilateral aid which is solely intended to improve the financial situation of producers without contributing to the development of the sector. It is therefore operating aid which is incompatible with the internal market within the meaning of point 15 of the Guidelines referred to above.

(46)

In accordance with the Treaty and European Court of Justice case law, if aid is found to be incompatible with the internal market, the Commission is authorised to decide whether the State concerned must abolish or alter the aid (10). European Court of Justice case law also states that a State’s obligation to abolish aid which the Commission regards as incompatible with the internal market is intended to restore the previously existing situation. In this context, the Court has declared that this objective has been achieved once the recipient has repaid the amounts awarded to him, thus losing the advantage gained over market competitors, and thus restoring the situation in existence prior to the payment of the aid (11).

(47)

In keeping with that case law, Article 14 of Council Regulation (EC) No 659/1999 of 22 March 1999 laying down detailed rules for the application of Article 93 of the EC Treaty (12) states that, where negative decisions are taken in cases of unlawful aid, the Commission shall decide that the Member State concerned shall take all necessary measures to recover the aid from the beneficiary (in the present case, all beneficiaries that have benefited from the deferral of payment).

(48)

Italy is therefore required to take all necessary measures to recover the incompatible aid from the beneficiaries. In accordance with paragraph 42 of the Notice from the Commission ‘Towards an effective implementation of Commission decisions ordering Member States to recover unlawful and incompatible State aid’ (13), Italy has four months from the entry into force of this Decision to implement its provisions. Interest is to be paid on the amounts to be recovered, calculated on the basis of Commission Regulation (EC) No 794/2004 of 21 April 2004 implementing Council Regulation (EC) No 659/1999 laying down detailed rules for the application of Article 93 of the EC Treaty (14).

(49)

This Decision is to be implemented immediately, in particular as regards the recovery of all incompatible individual aid granted.

(50)

In view of the very specific context in which the aid was granted (the aid having been added to a programme forming a package approved by the Council) and the consequences of the aid (the breach of Decision 2003/530/EC for those who had benefited from the deferral of payment, while the aid had already been approved, exceptionally, by the Decision), the following should be recovered in respect of those parties who had benefited from the deferral of payment:

(51)

The importance attached by the Italian authorities to the low value of the amounts to be recovered and the risk of producers making new appeals to the national courts do not change the fact that State aid which does not meet the conditions required in order to benefit from the derogations provided for in Article 107 of the Treaty, and which is therefore incompatible with the internal market, should be recovered from the beneficiaries in order to restore the competitive situation in existence prior to the granting of the aid. Indeed, European Court of Justice case law indicates that the removal of illegal aid which is declared incompatible with the single market is the logical result of such illegality, since the sole purpose of recovery is reinstate a previously existing situation (15). The objective of reinstating a previously existing situation is achieved once the illegal aid incompatible with the internal market has been repaid by the beneficiary, and once the latter has consequently been deprived of the previously existing advantage over market competitors. In such cases, the situation prior to the granting of the aid has therefore been resumed (16).

(52)

Furthermore, as regards the low value of the amounts for recovery, the Italian authorities appear to restrict the scope of recovery only to the interest which has to be added to the annual payment for the year subject to the deferral. However, recovery, which affects only those who actually benefited from the deferral of payment, must include all aid declared as incompatible, in addition to any interest due (please refer to paragraph 50 above).

(53)

Finally, the argument that producers might appeal to national courts cannot be considered relevant, because according to European Court of Justice case law, the mere possibility of internal difficulties, even insurmountable ones, cannot justify a failure by a Member State to comply with its obligations under Union law (17).

(54)

Consequently, Italy could apply the de minimis rules applicable to the agricultural sector for recovery of the individual aid from beneficiaries which met all the requirements of the applicable de minimis regulation (Regulation (EC) No 1535/2007) at the time that the unlawful aid incompatible with the internal market was granted. Paragraph 49 of the Notice from the Commission ‘Towards an effective implementation of Commission decisions ordering Member States to recover unlawful and incompatible State aid in the case of aid schemes unlawful and incompatible with the internal market’ (18) stated that a Member State will be required to carry out a detailed analysis of each individual aid granted on the basis of the scheme in question. In order to quantify the precise amount of the aid to be recovered from each individual beneficiary under the scheme, Italy will therefore need to establish the extent to which the aid has been granted to a specific project, which, at the time of granting, met all conditions of a block exemption regulation or an aid scheme approved by the Commission. In such cases, the Member State may also apply the substantive de minimis criteria applicable at the time of the granting of an unlawful and incompatible aid which is the subject of a recovery decision pursuant to Article 2 of Regulation (EC) No 994/98 of 7 May 1998 on the application of Articles 92 and 93 of the Treaty establishing the European Community to certain categories of horizontal State aid (19). Under this criterion, the individual aid granted under this measure does not constitute aid for beneficiaries which, at the time of granting, met the conditions stipulated in the de minimis Regulation in force (Regulation (EC) No 1535/2007).

(55)

As regards the comments made by the first interested party (paragraph 22), the Commission would stress that the postponement of the payment pursuant to Article 40 bis of Law No 122/2010, for one instalment payable under an additional programme for payment by instalment established by Law No 33/2009, is not covered by the proceedings under this Decision, since it does not concern the additional instalment programme established by Decision 2003/530/EC.

(56)

Concerning the comments made by the other two interested parties on Decree-Law No 16/2012 (paragraphs 24 and 26), the Commission is currently examining the comments in question. However, it is of the opinion that they need to be examined separately for reasons of administrative efficiency, inter alia, relating to the fact that the joining of the two proceedings by a widening of proceedings and the application of all related administrative formalities would significantly delay closure of the proceedings under this Decision.

(57)

The Commission finds that Italy has unlawfully implemented the deferral of payment in question, rendering unlawful also the aid to which it relates (see paragraph 13, second indent, above) and the new aid scheme determined by the infringement of Decision 2003/530/EC (see paragraph 13, third indent). Consequently, none of the aid can be considered compatible with the single market because the Italian authorities have not provided any information to indicate compatibility under the competition rules applicable to the agricultural sector (see paragraphs 43 to 45). (They have merely argued that the deferral of payment should be viewed in isolation i.e. without taking account of the impact on Decision 2003/530/EC, and could be considered a de minimis scheme). The Commission has therefore been unable to resolve the doubts already expressed by the initiating of the procedure provided for in Article 108(2) of the Treaty.

(58)

The incompatible aid should be recovered with interest from the relevant beneficiaries, in other words those who have actually made use of the deferral of payment in question,