State aid: Commission opens investigation into public support for Air Nostrum’s fleet renewal in Spain

The European Commission has opened an in-depth investigation to assess whether the plan by the Spanish region of Valencia to grant €9 million of public support to regional airline Air Nostrum for the renewal of its fleet is in line with EU State aid rules.

Air Nostrum is a regional airline headquartered in Valencia (Spain).

Grant of Subsidy

As part of its plans to boost the economic development of the region, the Regional Government of Valencia, in 2018, approved the granting of a subsidy of maximum €3 million to Air Nostrum. Furthermore, the regional government intends to grant an additional subsidy of maximum €6 million over the period 2019-2020. The measures are aimed at supporting the renewal of the airline’s fleet through the acquisition of additional more environmentally friendly aircraft.

Spain argues that the measure falls under the environmental protection rules of the 2014 General Block Exemption Regulation (“GBER”) and that it does not therefore need to be notified for the Commission’s assessment under State aid rules.

Guidelines on State aid

The GBER and the Guidelines on State aid for environmental protection and energy enable Member States to support measures that have a positive impact on the environment (for example because they reduce fuel consumption, noise or greenhouse gases). In order to be in line with EU State aid rules, however, these measures need to fulfil certain conditions to ensure that they have the intended positive effect on the environment. This includes that the support must incentivise private investment in the more environmentally friendly option, enable the beneficiary to increase the level of environmental protection from its activities, be kept to the minimum necessary and not unduly distort competition in the Single Market.

The Commission’s investigation

At this stage, the Commission has doubts that the total intended aid support of €9 million to Air Nostrum falls within the GBER and complies with the Guidelines on State aid for environmental protection and energy. In particular:

•  The Commission has doubts on whether the aid has an “incentive effect”. In this respect, the Commission will investigate whether the decision by Air Nostrum in 2017 to acquire 10 more fuel-efficient Bombardier CRJ-1000 aircraft was directly triggered by the support, in line with the requirements set out in the GBER and the Guidelines, or whether the investment in the more environmentally friendly option would have been carried out in any event, even absent the public support. Notably, Air Nostrum had already renewed its fleet with 18 Bombardier CRJ-1000 aircraft before 2017 without any State aid.
•  Moreover, the GBER only applies to measures to support investments by the beneficiary airline. Under the GBER, for a leasing to qualify as an investment, the leasing contract needs to include the obligation (and not merely the option) to purchase the aircraft. The Commission has doubts at this stage that the type of leasing used by Air Nostrum meets this condition.

The Commission will now investigate further to determine whether or not these initial concerns are confirmed. The opening of an in-depth investigation provides all interested parties with an opportunity to comment on the measure. It does not prejudge in any way the outcome of the investigation.

More information

Press release

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