State aid: Commission approves aid scheme for airlines launching new routes to Canary Islands

The European Commission has found that a Spanish scheme aimed at providing “start-up” aid to airlines launching new routes to the Canary Islands is in line with EU state aid rules. The Commission has concluded that the project will boost the economic development of the region, in line with EU objectives, without unduly distorting competition in the Single Market.

The scheme aims both to support the further development of the tourism sector in the Canary Islands, and to improve connections with this remote region. It is also expected to create jobs.

The scheme will allow the Canary Islands regional government to subsidise up to half of the airport charges paid by airlines for the operation of new routes to the islands for a period of up to three years. The new routes must be genuinely new routes to destinations not currently connected to the Canary Islands. The destinations do not necessarily have to be inside the EU, and therefore the scheme will allow the region to achieve a greater geographical diversification of its tourism sector, and rely less on its traditional markets. The aid will be granted to airlines following a call for proposals. The total budget is for up to €10 million until the end of 2017.

This is the first start-up aid scheme that the Commission has assessed under its new guidelines on state aid to airports and airlines which came into force on 4 April 2014 (see IP/14/72). The guidelines have simplified the rules on public support granted by Member States for the start-up of new air transport routes.

The scheme allows the granting of aid up to 50% of the costs (so-called “aid intensity”) for a maximum duration of three years, in line with the guidelines. Airlines are required to submit business plans to demonstrate how the new routes will become profitable after the aid period has expired.

This scheme provides a good example of state aid which is useful for the development of remote regions while keeping distortions of competition to a minimum. The Commission’s guidelines encourage this type of aid.