Competition Law in Tourism

152 COMPETITION LAW IN TOURISM An aid to an airline can thus be excluded if the price charged for the airport services generates a reasonable return on capital26 for the airport manager on the basis of a sound and realistic ex-ante business plan, drafted for the duration of the contract concluded with the airline27. The revenues from non-aeronautical activities should be taken into consideration along with the airport charges, net of any rebates, marketing support or incentive schemes. Similarly, the business plan must include on all incremental costs incurred by the airline and the rebates and marketing support or incentive schemes. Such incremental costs could encompass all categories of expenses or investments, such as incremental staff, equipment and investment costs induced by the presence of the airline at the airport28. The Commission will also take into consideration the incentives paid directly by public authorities to the airline concerned if there are structural links between them and the airport served by this airline. They must be integrated as costs in the airport’s business plan29. Different measures in favour of airlines at both airports can be considered and even combined under the MEOP: – Selective rebates on airport charges (if the airport has less than 5 million passengers per year or in small Member States is not with the highest passenger movement); – Selective rebates on ground-handling charges (if the airport has less than 2 million passengers per year); – Marketing support (online advertisements, posters in the terminal, marketing campaigns, ads in newspapers or on shuttle buses); – Bonus for the launch of new routes; – Support for the accommodation or training of navigation staff or pilots; etc. 26 A reasonable return on capital is a rate of return that would be required by a typical company for an investment of similar risk. The return is measured as an Internal Rate of Return (IRR) over the envisaged cash flows induced by the arrangement with the airline. 27 The contract may induce losses for the first year(s) of the contract as long as the expected profits throughout the arrangement may offset those initial losses. 28 For example, 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. 29 2014 Guidelines, footnote 61: “any public support, such as for example marketing agreements directly concluded between authorities and the airlines, designed to offset part of the normal costs incurred by the airport in relation to the airport / airline arrangement will likewise be taken into account. This is irrespective of rather such a support is directly granted to the airline concerned, or channelled through the airport or another entity”.

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