WORLD ROUTES: EC Plans for Start-Up Aid for Airlines a “Missed Opportunity”

New plans by the European Commission (EC) to allow start up aid for airlines are a “missed opportunity” to deliver meaningful support for the aviation industry in Scotland, according to regional airport operator HIAL. The publicly owned company, which operates eleven airports across Scotland, has criticised plans by the EC to limit funding support for new routes to just two years.

The Commission is currently consulting on new guidelines on state aid to airports and airlines, due to come into effect in 2014, which includes support for route development for airports with less than three million passengers. Under the proposals, start up aid can be offered to airlines to launch a new route (or a new schedule involving increased frequencies). The aid will cover 50 per cent of start-up costs for a maximum of 24 months, after which a new route is expected to become profitable. The new proposals are an attempt to encourage growth in the European aviation sector following the worst downturn in the industry’s history.

In its response to the consultation, HIAL said: “While we welcome the decision by the EC to refresh its guidelines for state aid to airlines and airports, following a hugely challenging period for the industry, we believe that the proposals, in their current form, represent a missed opportunity to support an industry which sustains tens of thousands of jobs across Scotland, encourages business investment and economic growth, and delivers lifeline services to some of the most remote areas of Europe.

“In particular, we do not believe the proposals reflect the distinct challenges facing small, regional airports in Scotland and would urge the EC to reconsider its proposal to limit start up aid to airlines to 2 years. From experience we know that this is an insufficient period to allow a new route to become profitable, particularly in the current economic climate, and especially in the context of small regional airports,” it added.

The company said that its airports – among the most peripheral in Europe – faced distinct challenges in securing and sustaining new routes. Given their distance from key business and leisure markets, the size of the local population and the higher cost of serving remote areas, HIAL said that “a period of three years is required, as a minimum, to allow a new route to mature sufficiently.”

The company’s position was endorsed by Fraser Grieve, Highlands and Islands Manager for the Scottish Council for Development and Industry: “Two years is not long enough to establish and develop a commercial operation, particularly where there are growing pressures on major airports to squeeze out the size of aircraft that are able to make a commercially viable service given the low population density of the Highlands and Islands region. Measures proposed in these guidelines may go some way to helping airports such as those operated by HIAL but they will not give sufficient time to grow services where they can be self-sustaining,” he explained.

HIAL also said that support should not be aimed solely at funding new international services, and should be offered to new or expanded services from regional airports to larger domestic hub airports. “Smaller regional airports like Inverness cannot realistically sustain the range of international services as larger airports such as Edinburgh, Manchester or Stansted. Therefore access to key domestic hubs – such as London City from Dundee and Manchester and London Gatwick from Inverness – is of critical importance, particularly for business connectivity,” it said.

Inglis Lyon, Managing Director of HIAL, has offered to meet officials at the European Commission to discuss the particular challenges facing regional airport operators such as HIAL. Speaking to The HUB ahead of World Routes he said: “HIAL’s airport network is perhaps the most distinctive in Europe, serving a vast geographical area which is sparsely populated, lacks adequate surface access provision and is therefore hugely reliant on air transport as a means of transporting people and goods.”

“The one size fits all approach advocated by the EC is simply unworkable and will disadvantage smaller regional airports. Limiting support to two years is short-termism at its worst and will not deliver a sustainable economic return. Regions such as the Highlands and Islands must have greater flexibility, and must be given more time to nurture new routes. We are indeed a special case,” he added.