subject: state aid sa.58095 (2020/n) bulgaria covid-19
TRANSCRIPT
Екатерина ЗАХАРИЕВА
Министър на външните работи
ул.„Ал. Жендов“ No2 1113 СОФИЯ/Sofia
БЪЛГАРИЯ/BULGARIE
Commission européenne/Europese Commissie, 1049 Bruxelles/Brussel, BELGIQUE/BELGIË - Tel. +32 22991111
EUROPEAN COMMISSION
Brussels, 14.8.2020 C(2020) 5713 final
In the published version of this decision,
some information has been omitted,
pursuant to articles 30 and 31 of Council
Regulation (EU) 2015/1589 of 13 July 2015
laying down detailed rules for the
application of Article 108 of the Treaty on
the Functioning of the European Union,
concerning non-disclosure of information
covered by professional secrecy. The
omissions are shown thus […]
PUBLIC VERSION
This document is made available for information purposes only.
Subject: State Aid SA.58095 (2020/N) — Bulgaria —
Covid-19: Concession fee deferral for Burgas and Varna airports
Excellency,
1. PROCEDURE
(1) By letter of 17 July 2020, registered on 20 July 20201, the Bulgarian authorities
notified in accordance with Article 108(3) of the Treaty on the Functioning of the
European Union (TFEU), their intention to grant aid to the operator of Burgas and
Varna airports.
(2) In their notification, the Bulgarian authorities have exceptionally accepted to
waive their right under Article 342 TFEU in conjunction with Article 3 of
Regulation 1/19582 and to obtain a Commission decision on the matter in the
English language.
(3) By email of 31 July 2020, the Bulgarian authorities completed their notification
with additional information.
1 Under State aid case number SA.58095.
2 Regulation No 1 determining the languages to be used by the European Economic Community, OJ 17,
6.10.1958, p. 385.
2
2. DESCRIPTION OF THE MEASURE
(4) The aid measure notified by the Bulgarian authorities takes the form of a
moratorium allowing the operator of Burgas and Varna airports to defer
concession fee payments for 2020 towards the Republic of Bulgaria, in exchange
for the payment of interest on the sums due (“the measure”). This form of aid is
equivalent to a subsidised interest-bearing loan within the meaning of the
Temporary Framework for State aid measures to support the economy in the
current context of the coronavirus outbreak (Section 3.3)3.
(5) According to the Bulgarian authorities, Fraport Twin Star Airport Management
AD (“Fraport”)4, the concessionaire operating and managing Burgas and Varna
airports in Bulgaria, is facing significant difficulties following the COVID-19
crisis.
(6) The concessionaire of the two airports expects losses of approximately 4.3 million
passengers (-86%) and EUR (…) in revenue (-84%) through 2020 compared to
the forecast made before the pandemic. The negative economic consequences
suffered by the operator of the airports in Varna and Burgas as a result of the
pandemic amount to EUR (…) for Varna airport and to EUR (…) for Burgas
airport, as the difference between the projected revenues from March 13 to the
end of 2020 compared to the same period in 2019. Forecasts for recovery of
demand to 2019 levels vary widely, from several months to two years, and studies
show that it will depend on several factors such as the time to control the
pandemic, to restore confidence in air transport, and to return to normal economic
and social activity.
(7) For those reasons, the Council of Ministers of the Republic of Bulgaria approved
on 3 June 2020 a series of measures to support air transport. One of these
measures concerns the deferral of the payment of the concession fee for 2020 for
the Burgas and Varna airports.5
3 Communication from the Commission - Temporary framework for State aid measures to support the
economy in the current COVID-19 outbreak, OJ C 91I, 20.3.2020, p. 1, as amended by the
Communication from the Commission C(2020) 2215 final of 3 April 2020 on the Amendment of the
Temporary Framework for State aid measures to support the economy in the current COVID-19
outbreak, OJ C 112I, 4.4.2020, p. 1, by the Communication from the Commission C(2020) 3156 final of
8 May 2020 on the Amendment of the Temporary Framework for State aid measures to support the
economy in the current COVID-19 outbreak, OJ C 164, 13.5.2020, p. 3, and by the Communication from
the Commission C(2020) 4509 final of 29 June 2020 on the Amendment of the Temporary Framework
for State aid measures to support the economy in the current COVID-19 outbreak, OJ C 218, 2.7.2020, p.
3.
4 Fraport Twin Star Airport Management AD is a German-Bulgarian company that won in 2006 a
concession to manage Burgas and Varna airports for 35 years.
5 Other measures include a reduction of the airport parking fees and the postponement of air navigation
charges.
3
(8) The measure is based on Article 107(3)(b) TFEU as interpreted by section 2 of
the Temporary Framework.
2.1. Background data
(9) From 17 March to 27 April 2020, the Aviation Administration of the Republic of
Bulgaria implemented a set of measures to contain the spread of COVID-19.6
Temporary border restrictions on entry into the Bulgarian territory7, as well as
related quarantine measures8, had a negative impact on the entire transport sector.
At the peak of the crisis, regular and charter flights remained grounded, resulting
in significant losses for all undertakings in the aviation sector. Although there is
currently no ban in place for passenger and cargo flights to/from other countries,
the revenues and liquidity generated by the Bulgarian aviation sector remain
substantially impaired due to the very low demand for air transport services.
(10) Since the beginning of the COVID-19 outbreak in mid-March 2020, air traffic in
Bulgaria has dropped by as much as 89% compared to its level at the beginning of
March 2020:
(11) With regard to passenger traffic, both Burgas and Varna airports had to suspend
all commercial passenger flights due to the restrictive measures taken by the
various Member States and the decisions of their main customers to interrupt
serving routes to these airports. Furthermore, several companies announced they
would not fly to Bulgaria before the end of summer 2020.
6 Such as banning all flights to and from certain countries affected by the infection, preventing a number of
citizens from various countries from entering the country, and a ban on certain commercial activities.
7 As of 18 March 2020, the Bulgarian authorities restricted the arrival of non-Bulgarian nationals to
Bulgaria from the following countries: the People’s Republic of China, the Islamic Republic of Iran,
Bangladesh, the Republic of India, the Republic of Maldives, the Federal Democratic Republic of Nepal,
the Democratic Socialist Republic of Sri Lanka, the Kingdom of Spain, Italy, the Republic of Korea, The
People's Republic of Korea (PRK), the United Kingdom of Great Britain and Northern Ireland, France,
Germany, the Netherlands, and the Swiss Confederation. These restrictions were gradually lifted at the
beginning of the Bulgarian summer season (July 2020) with certain quarantine measures remaining in
place until now.
8 Travellers entering Bulgaria were obliged to provide personal location data and follow a strict isolation
protocol of up to 14 days.
4
(12) According to the Bulgarian authorities, it is expected that for the whole of 2020
the passenger flow will decrease by 86% compared to last year and the number of
total passengers served at both airports will reach about 690 thousand passengers.
The decrease in passenger traffic when compared to last year is for Burgas airport
-57% in March, -99% in April,–-99% in May and -99% in June, and for Varna
airport -42% in March, -98% in April, -92% in May and -91% in June.
(13) According to the Bulgarian authorities, the decrease in cargo traffic when
compared to last year is for Burgas airport -66% in March, -94% in April, -96%
in May and -100% in June, and for Varna airport -26% in March, -98% in April, -
99% in May and -90% in June.
(14) There has been a significant decrease in aircraft movements at Burgas and Varna
airports between 2019 and 2020 as follows:
Burgas - 2019 Burgas - 2020
January – 167 January – 116
February – 161 February – 131
March – 168 March – 65
April – 275 April – 27
May – 1106 May – 67
June – 3926 June – 126
Total: 5803 Total: 532
Varna - 2019 Varna - 2020
January – 513 January – 636
February – 469 February – 566
March – 513 March – 427
April – 683 April – 104
May – 1166 May – 224
June – 2220 June – 461
Total: 5564 Total: 2418
(15) By June 2020, the number of scheduled passenger services in Bulgaria had
dropped by more than 90% compared to the same month in 2019. Nevertheless,
according to the concession agreement, the airports in Burgas and Varna must
remain open and operational for maintenance, military, police and customs
flights, as well as for medical flights. They must therefore keep some of their staff
on site and bear the operating costs. In addition, there must be a minimum of staff
to maintain the infrastructure.
(16) This has created significant financial difficulties for both airports, impairing also
the airport operator’s working capital. A number of measures were taken to
reduce costs and operating expenditures to an absolute minimum. However, the
ability to mitigate revenue losses is limited, given that 80% of the airports’
operating costs are fixed costs for maintaining and operating these critical
infrastructures. The notified aid will contribute towards payment of those costs.
5
2.2. Nature and form of the aid
(17) The aid will be granted to the managing company operating Burgas and Varna
airports in the form of a suspension of the invoicing of the fees payable by the
management company to the Bulgarian authorities for 2020.9 The Bulgarian
authorities will apply an interest rate to the amount of the fees for which invoicing
is suspended.
(18) This form of aid is equivalent to a subsidised loan in favour of the managing
company operating Burgas and Varna airports.
2.3. Legal basis
(19) The measure will be implemented by the Bulgarian Ministry of Transport,
Information Technology and Communications (MTITC), on the basis of a
decision taken by the Bulgarian Government’s Council of Ministers on 3 June
2020, setting out the elements and conditions of the measure. The measure is
subject to a decision of the European Commission approving the aid.
2.4. Administration of the measure
(20) The Minister of Transport, Information Technology and Communications
(MTITC) will be responsible for administering the aid measure.
2.5. Key elements of the measure (budget, duration, remuneration)
(21) The Ministry of Transport, Information Technology and Communications
(MTITC) provides that the total amount of concession fees that may be deferred
will be EUR 4 360 000. Fees may be deferred for a maximum of 184 days from
their due date and will be paid with interest.
(22) The Bulgarian authorities commit that the amount of the concession fees that may
be deferred shall not exceed the overall maximum amount per beneficiary set out
in section 3.3 of the Temporary Framework (point 27(d)).
(23) The Bulgarian authorities confirm that the airport manager will be required to
demonstrate its liquidity difficulties according to internationally recognised
standards in order for the Bulgarian administration to grant the aid.
(24) The Bulgarian authorities confirm that the aid will be granted by 31 December
2020, at the latest.
9 The 2020 annual concession fee is comprised of two six-month instalments: the first (A) refers to the
period from 1 January to 30 June 2020, is based on airport revenues for that period and is due by 31
July 2020; the second (B) refers to the period from 1 July to 31 December 2020, is based on airport
revenues for that period and is due by 31 January of the following calendar year; the final amount (C)
of the 2020 annual concession is settled by 30 April of the following calendar year on the basis of
approved audited accounts. Payments A and C are postponed by a maximum of 184 days and will
therefore be due by 31 January 2021 for (A), at the same time as (B), and by 31 October 2021 for (C).
6
(25) An interest will be paid to MTITC for the concession fees for which payment is
deferred. The interest rates applied were established in accordance with the
Temporary Framework, which provides that the interest rate should be equal to
the Commission reference rate (0.00% at 01.01.2020 for the Republic of
Bulgaria), increased by 50 bps for the first year. The interest due amounts to EUR
(…). The following table shows the calculation of the interest for the beneficiary
undertaking:
Basic rate Margin Included margin rate Number of years
1 year 0.00 % 0.50 % 0.50 % 1
Source: Bulgarian authorities
2.6. Beneficiary
(26) The aid beneficiary is the managing company of Burgas and Varna airports,
namely Fraport.
(27) The Bulgarian authorities made the granting of the aid conditional upon the
demonstration by the beneficiary that the overall amount of the loan shall not
exceed double the annual wage bill of the beneficiary (including social
charges as well as the cost of personnel working on the undertaking’s site but
formally in the payroll of subcontractors) for 2019.10
(28) Under the Temporary Framework, aid can be granted to undertakings that were
not in difficulty (within the meaning of the General Block Exemption
Regulation11) on 31 December 2019. In this regard, the Bulgarian authorities
confirm that the managing company of Burgas and Varna airports was not a
company in difficulty (within the meaning of the General Block Exemption
Regulation) on 31 December 2019.
2.7. Sectoral and regional scope of the measure
(29) The measure was designed to support the managing company of the two airports,
which are located in Bulgaria. The aim of the measure is to alleviate the monetary
needs of both airports at a time when the spread of COVID-19 is seriously
disrupting the normal functioning of credit markets and affecting the entire
economy.
2.8. Role of Burgas and Varna airports in the Bulgarian economy
(30) The Burgas and Varna airports are essential for Bulgaria in terms of economic
development and accessibility. The two airports are the principal contributors to
the economic and regional development of the districts of Burgas and Varna as
10 In line with point 27(d) of the Temporary Framework, the Bulgarian authorities confirm this figure as
follows EUR (…)
11 The concept of ‘undertaking in difficulty’ is defined in Article 2 (18) of Commission Regulation (EU)
No 651/2014 of 17 June 2014 declaring certain categories of aid compatible with the internal market in
application of Articles 107 and 108 of the Treaty (OJ L 187, 26.6.2014, p. 1).
7
well as to tourism along the entire Black Sea coast. Furthermore, companies
operating at the airports provide jobs in various sectors such as aviation, airline
catering, ground-handling, commercial operators and other non-aeronautical
activities linked to airport operations.
(31) In 2019, Burgas and Varna airports welcomed 4.9 million passengers and more
than 35,000 flights comprised of 97 different airlines operating charter and
scheduled flights, to more than 173 destinations in Europe, the Middle East and
North Africa.
(32) In 2019, year-round destinations from Burgas airport were the cities of Moscow
and London, and from Varna Airport the cities of Vienna, Sofia, Moscow,
Istanbul, London, Dortmund, Berlin, Cologne, Hamburg, Paris, Copenhagen,
Liverpool, Eindhoven, Larnaca, Milan and Munich.
(33) Fraport currently employs more than 700 permanent and about 1,200 seasonal
employees in Burgas and Varna airports.
2.8.1. Burgas Airport
(34) 1 954 flights were performed from Burgas airport in 2019. Moreover 2.9 million
passengers and 4 748 tons of cargo were handled. Following the expansion of the
airports in Sofia, Athens and Belgrade, Burgas airport has the fourth longest
runway (3 200 m) in the Balkan Peninsula. The airport maintains convenient
connections for intermodal transport by land and sea inside Bulgaria and around
the world. Burgas airport has a 24-hour working capacity.Varna Airport
(35) 15 468 flights were performed from Varna airport in 2019. Moreover, 2 million
passengers and 123.5 tons of cargo were handled. Varna airport’s runway has a
length of 2 500 m. The airport maintains convenient connections for intermodal
transport by land inside Bulgaria. It is open 24 hours a day serving predominantly
international charter flights. Its activities have a pronounced seasonal character
related to the service of tourists.
2.9. Cumulation
(36) The Bulgarian authorities confirm that the aid will not be cumulated with a public
guarantee granted based on section 3.2 of the Temporary Framework for the same
underlying loan. They also confirm that aid granted under section 3.2 and section
3.3 of TF COVID-19 as amended for different loans will not be cumulated, if the
overall amount of loans per undertaking exceeds the ceilings set out in point 25
(d) and 27 (d) of the Temporary Framework, and that, in so far as the managing
company of the airports may benefit in parallel from multiple measures approved
by the Commission under section 3.3. of the Temporary Framework, it will be
ensured that for such measures the maximum thresholds on loans set out in points
27(d) and (e) of the Temporary Framework will be respected.
2.10. Monitoring and reporting
8
(37) The Bulgarian authorities undertake to comply with the rules contained in section
4 of the Temporary Framework concerning the monitoring of aid and the
transmission of annual reports. All information relating to the aid measure being
granted will be provided by the Bulgarian authorities to the Commission services,
and will be kept for a period of 10 years.
3. ASSESSMENT
3.1. Lawfulness of the measure
(38) By notifying the measure before putting it into effect, the Bulgarian authorities
have respected their obligations under Article 108(3) TFEU.
3.2. Existence of State aid
(39) For a measure to be categorised as aid within the meaning of Article 107(1)
TFEU, all the conditions set out in that provision must be fulfilled. First, the
measure must be imputable to the State and financed through State resources.
Second, it must confer an advantage on its recipients. Third, that advantage must
be selective in nature. Fourth, the measure must distort or threaten to distort
competition and affect trade between Member States.
3.2.1. State resources
(40) The Republic of Bulgaria is the owner of the airport infrastructures in Burgas and
Varna. As owner of the airports, the Republic of Bulgaria collects the concession
fees payable by the concessionaire for the operation and management of the
respective infrastructures. By deferring its right to collect the concession fee at
the time when it is due to be paid, the Republic of Bulgaria is effectively
foregoing State resources for the duration of the deferral of the payment of the
concession fees.
3.2.2. Imputability of the measures to the State
(41) The notified measure has been adopted by the Bulgarian Government and will be
implemented by the Bulgarian Ministry of Transport, Information Technology
and Communications (MTITC). The Bulgarian authorities do not contest that the
notified measure is imputable to the Bulgarian State.
(42) The Commission concludes from the above that the notified measure is imputable
to the State.
3.2.3. Selective advantage
(43) The notified measure is granted in the form of a deferral of the invoicing of the
fees payable by the managing company of Burgas and Varna airports for the year
2020. The measure relieves the undertaking of costs that it would have to bear
under normal market conditions.
9
(44) The advantage granted by the measure is selective in that it is granted only to a
certain undertaking. Indeed, only the managing company of Burgas and Varna
airports will benefit from this measure, to the exclusion of all other
concessionaires of transport infrastructures in Bulgaria. Therefore, the notified
measure derogates from the general rule according to which the concessionaires
for the operation and management of transport infrastructures have to pay a fee to
the owners of those infrastructures.
3.2.4. Distortion of competition and effect on trade
(45) The notified measure strengthens the competitive position of the two Bulgarian
airports in relation to other operators of transport infrastructures. The measure
therefore threatens to distort competition between those economic operators. In
addition, the notified measure affects trade between Member States, since the
beneficiary is active in the airports sector, which is exposed to intra Union trade.
3.2.5. Conclusion on the existence of State aid
(46) In the light of the above, the Commission concludes that the notified measure
constitutes State aid in favour of the management company of Burgas and Varna
airports within the meaning of Article 107(1) TFEU.
3.3. Compatibility
(47) Since the measure involves aid within the meaning of Article 107(1) TFEU, it is
necessary to consider whether that measure is compatible with the internal
market.
(48) Pursuant to Article 107(3)(b) TFEU the Commission may declare compatible
with the internal market aid “to remedy a serious disturbance in the economy of a
Member State”.
(49) Bulgarian airports, like all European airports, have been suffering from the
collapse of air traffic linked to the COVID-19 crisis and are particularly exposed
to the global economic slowdown caused by it. The decrease in traffic leads to a
proportional decrease in the airports’ revenues, while their costs vary little. In
particular, following the massive decrease in air traffic which it has experienced
since March 2020 (see recitals 12-14), the operator of the two Bulgarian airports
of Burgas and Varna is facing a particularly severe liquidity crisis that can
jeopardise its viability in the absence of support measures.
(50) According to the estimates provided by the Bulgarian authorities, Fraport could
suffer negative economic consequences for the period 13 March to end 2020 as
compared to the same period in 2019 of EUR (…) at Varna airport and EUR (…)
at Burgas airport, as a result of the COVID-19 crisis.
(51) Given the importance of Bulgarian airports to the Bulgarian economy, and thus to
the Republic of Bulgaria, the Commission considers that a failure of these airports
would have serious consequences for the Bulgarian economy in the context of the
current health and economic crisis.
10
(52) Such a failure would lead to a significant loss of direct and indirect jobs in the
Republic of Bulgaria, in particular, on tourism and the respective aviation and
logistics sectors. Finally, in view of their particular importance to the Bulgarian
economy, the role of the two airports is crucial in helping address the effects of
the COVID-19 crisis when it comes to reconnecting Bulgarian companies with
international customers and in boosting tourism once the health crisis ends.
(53) The Bulgarian authorities also made the granting of aid measures conditional on
the airport manager demonstrating its liquidity difficulties (recital 23).
(54) In the light of the above, the Commission considers that the measure put in place
to support the liquidity of Burgas and Varna airports contributes to remedying a
serious disturbance in the Bulgarian economy. This measure is also part of a
series of measures to support the economy envisaged by the Bulgarian authorities.
(55) By adopting the Temporary Framework on 19 March 2020, the Commission
acknowledged (in section 2) that “the COVID-19 outbreak affects all Member
States and that the containment measures taken by Member States impact
undertakings”. The Commission concluded that “State aid is justified and can be
declared compatible with the internal market on the basis of Article 107(3)(b)
TFEU, for a limited period, to remedy the liquidity shortage faced by
undertakings and ensure that the disruptions caused by the COVID-19 outbreak
do not undermine their viability, especially of SMEs”.
(56) The measure aims at relieving the cash flow requirements concerning Burgas and
Varna airports at a time when the COVID-19 outbreak disrupts the normal
functioning of the credit markets and affects the whole economy by giving rise to
serious consequences for the real economy of the Member States.
(57) Furthermore, the measure is designed to meet the conditions of a specific aid
category (“aid in the form of subsidised interest rates for loans”) described in
Section 3.3 of the Temporary Framework. Although the notified measure is not an
aid in the form of an interest rate loan, it can be equated with such aid from an
economic point of view. It is therefore appropriate to apply the principles and
conditions laid down in Section 3.3 of the Temporary Framework.12
(58) The Commission considers that the measure is necessary, appropriate and
proportionate to remedy a serious disturbance in the economy of a Member State
and that all the conditions set out in the Temporary Framework are fully complied
with. In particular:
12 This is in line with the Commission’s decision practice, see e.g. State aid decision in case SA.56807
(2020/N) – BE - COVID-19: Mesures de soutien en faveur des aéroports wallons – Moratoire sur les
redevances de concession, see:
https://ec.europa.eu/competition/elojade/isef/case_details.cfm?proc_code=3_SA_56807
11
The applicable interest rate provided for by the measure is equal to the base
rate (1 year IBOR or equivalent as published by the Commission)13
available on 1 January 2020 plus a credit margin of 50 basis points. Since
the measure will have a duration of up to one year (recitals 17 and 21), it
therefore complies with point 27(a) of the Temporary Framework.
The aid will be granted before 31 December 2020 (recitals 19 and 21). The
measure is therefore in line with point 27(c) of the Temporary Framework.
The amount of fees the payment of which is deferred beyond 31 December
2020 shall not exceed double the annual wage bill of the beneficiary
(including social charges as well as the cost of personnel working on the
undertaking’s site but formally in the payroll of its subcontractors) for
2019 (recitals 22 and 27). The measure is therefore in line with the limits
set out in point 27(d) of the Temporary Framework
The aid partially covers the working capital needs of the beneficiary
(recital 15-16). The measure is therefore in line with point 27(f) of the
Temporary Framework.
The aid is granted to an undertaking that was not in difficulty (within the
meaning of the General Block Exemption Regulation) on 31 December
2019 (recital 28). The measure is therefore in line with point 27(g) of the
Temporary Framework.
The Bulgarian authorities will comply with the rules contained in section 4
of the Temporary Framework, concerning the monitoring of aid and the
transmission of annual reports (recital 37).
The cumulation rules set out in point 26 bis of the Temporary Framework
are respected (recital 35).
13 Base rates calculated in accordance with Communication from the Commission on the revision of the
method for setting the reference and discount rates (OJ C 14, 19.1.2008, p. 6).
12
4. CONCLUSION
The Commission has accordingly decided not to raise objections to the aid on the
grounds that it is compatible with the internal market pursuant to Article 107(3)(b) of the
Treaty on the Functioning of the European Union.
If this letter contains confidential information which should not be disclosed to third
parties, please inform the Commission within fifteen working days of the date of receipt.
If the Commission does not receive a reasoned request by that deadline, you will be
deemed to agree to the disclosure to third parties and to the publication of the full text of
the letter in the authentic language on the Internet site:
http://ec.europa.eu/competition/elojade/isef/index.cfm.
Your request should be sent electronically to the following address:
European Commission,
Directorate-General Competition
State Aid Greffe
B-1049 Brussels
Yours faithfully,
For the Commission
Margrethe VESTAGER
Executive Vice-President