Spanish airports account for subsidies: The picture’s not pretty

Posted by airobserver on October 10, 2011 · 2 Comments 

It’s too bad that the Spanish low-cost market is lightly covered by the english press, as it is probably one of the most active. Booming, would actually be the word, with low-cost airlines fighting nasty for every possible market shares and even airports and ATC sporadically joining in the fun. Actually, Spanish airports have a bit of a love-hate relationship with low-cost airlines – particularly Ryanair. They desperately need the passengers they bring, but can hardly withstand their demands.

 Well, in case you found the subject boring, don’t worry, the Spanish National Commission on Competition (Comision Nacional de la Competencia, CNC) is here to put some salt on airport wounds. The commission is preparing the release of an in-depth report on airports and state-aids in Spain, and apparently the conclusions won’t please everybody. From what is known of it now, a few salient points stand-out:

 1° The most subsidized airports are not the largest. Spain’s largest airports in terms of passenger volumes (Madrid’s Barajas and Barcelona’s El Prat) are hardly the ones to receive and spend the most State-aids. Instead, the bulk of subsidies is concentrated among sixteen mid-size regional airports with traffic figures around 1,5 million yearly passengers.

 2° Not all companies benefit from those subsidies in the same extent. Unsurprisingly the most voracious ones are low-cost and regional airlines. Out of the 250 million euros distributed between 2007 and 2011, Air Nostrum took home a hefty 3€ per passenger transported. Second only to Air Nostrum is Ryanair which, during the same period, got 0,6€ for each passenger it transported. It might not sound like much but, if you take into account the fact that Ryanair has refocused much of its business on El Prat, and seeing the sheer volume of its traffic in Spain, I wouldn’t be surprised if Ryanair took the crown in terms of total subsidies engrossed. Apart from Ryanair, the only companies to get hold of a sizeable ratio of subsidies (around 0,4€ per passengers) were smaller scale low-cost and regional airlines such as Lagunair and Vueling.

 3° Most other low-cost airlines don’t get that much subsidies. Between 2007 and 2011, Air Berlin, Air Europa, Spanair, Wizz Air and easyJet got subsidies below the 5 million euros bar. This is probably due to the fact that most of these airlines compete on international routes landing in Spain’s major – and less subsidized – hubs.

 4° On a case by case approach of airports state-aids, the degree of subsidization can reach absurd levels. On the period 2007-2011, Burgos has been paying a mean 226,62€ per passenger, Albacete 98,36€ per passenger and Salamanca 82,24€ per passenger. This has led the National Commission on Competition to the conclusion that subsidies are counter-productive and artificially sustain airports that are miles away from profitability while destroying competitiveness.

 5° Unsurprisingly, the Commission found that not a single case of subsidization had been declared to the European Commission, even though European regulations stipulate subsidies must be notified beyond a certain sum. This puts most Spanish airports in violation of European regulations and Spanish authorities in an awkward situation regarding the EC.

 It’s hard not to agree, even a little, with the conclusions drawn by the National Commission on Competition. The staggering amount of subsidies distributed clearly represents a distortion of competition. The problem is, by artificially sustaining demand for some routes, the subsidies system has profoundly distorted the distribution of ressources and airlines on the Spanish market, something which will probably end up durably hampering the optimal allocation of players on the market. Worst, they’ve put some regional airports on life support at the expenses of Spanish taxpayers, at a time when the Spanish government is recounting every penny it spends, it remains to be seen whether the national government itself will do anything.

Filed under AO Article · Tagged with Air Berlin, Air Europa, Air Nostrum, airports, Albacete, Barajas, Barcelona, Burgos, CNC, competition, Easyjet, El Prat, European commission, Lagunair, Madrid, National Commission on Competition, Ryanair, Salamanca, spain, spanair, State-Aids, subsidies, Vueling, Wizz Air