Subsidies to Belgian airlines

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Passenger
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Re: Subsidies to Belgian airlines

Post by Passenger »

airazurxtror wrote:http://www.lecho.be/detail.art?a=9558688&n=3016&ckc=1

Short extract :

Au début du mois d’oc­tobre, Rya­nair a in­tro­duit une ac­tion en ré­féré de­vant le tri­bu­nal de com­merce de Bruxelles contre les trois prin­ci­pales com­pa­gnies aé­riennes opé­rant de­puis le tar­mac de Za­ven­tem. Dans le vi­seur de la com­pa­gnie à bas coûts, on re­trouve l’ar­rêté royal du 7 jan­vier 2014 qui oc­troie une sub­ven­tion an­nuelle de 19 mil­lions d’eu­ros à Brus­sels Air­port Com­pany, le ges­tion­naire de l’aé­ro­port na­tio­nal.

L’ar­rêté royal ga­ran­tis­sant l’aide en ques­tion a été pu­blié au Mo­ni­teur belge le 23 avril der­nier. Il oc­troyait une en­ve­loppe de 19 mil­lions d’eu­ros pour les an­nées bud­gé­taires 2014, 2015 et 2016, soit un total de 57 mil­lions d’eu­ros. La clé de ré­par­ti­tion pré­voyait une aide de 15 mil­lions pour Brus­sels Air­lines, de 3,5 mil­lions pour Je­tair­fly et de 1,5 mil­lion pour Tho­mas Cook.
-------
In early October, Ryanair brought an action for interim relief before the Commercial Court of Brussels against the three major Belgian airlines operating from Zaventem . In the viewfinder of the Ryanair is the Royal Decree of 7 January 2014, published in the Belgian Official Gazette on April 23, which granted a budget of EUR 19 million for the fiscal years 2014, 2015 and 2016 , a total of EUR 57 million - toprovide an aid of 15 million for Brussels Airlines, 3.5 million for Jetairfly and 1.5 million for Thomas Cook.
http://trends.knack.be/economie/bedrijv ... 47889.html

quote:
Nadat de Ierse maatschappij eerst klacht neerlegde bij de Europese Commissie en de Raad van State begint Ryanair nu ook een procedure bij de Brusselse handelsrechtbank tegen de regeling waarbij de regering Di Rupo 19,4 miljoen euro voorzag voor Brussels Airlines, Thomas Cook en Jetairfly. De regeling dateert van eind 2012. De regering beliste toen dat maatschappijen die jaarlijks 400.000 passagiers behandelden de kosten voor veiligheid en bewaking op de luchthaven niet meer moesten betalen. De overheid betaalde iets meer dan 19 miljoen euro aan Brussels Airport, dat het bedrag integraal doorstortte aan Brussels Airlines, Thomas Cook en Jetairfly. Ryanair, dat sinds kort ook vanuit Zaventem vliegt, komt niet in aanmerking voor de steun en spreekt van oneerlijke concurrentie. In totaal zal de overheid 59 miljoen storten omdat de steun ook in 2015 en 2016 wordt uitbetaald.(end of quote)

The world champion of secret state aid (mainly from regional authorities) now takes three competitors to court because they have legally applied for legal subsidies. Strange...

airazurxtror
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Re: Subsidies to Belgian airlines

Post by airazurxtror »

Are those subsidies legal ot not ? That is indeed the question.
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sean1982
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Re: Subsidies to Belgian airlines

Post by sean1982 »

The difference is that at the regional airports, like CRL, for example ALL AIRLINES are entitled to those same financial incentives. JAF has the same advantages at CRL than FR and indeed SN would have them as well should they want to fly from CRL.

In BRU the inequality lies in the fact that only the belgian airlines are entitled to this tax money, which is indeed unfair as other airlines who bring in the same amount of pax should be entitled to the same incentives.

cnc
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Re: Subsidies to Belgian airlines

Post by cnc »

sean1982 wrote:The difference is that at the regional airports, like CRL, for example ALL AIRLINES are entitled to those same financial incentives. JAF has the same advantages at CRL than FR and indeed SN would have them as well should they want to fly from CRL.

In BRU the inequality lies in the fact that only the belgian airlines are entitled to this tax money, which is indeed unfair as other airlines who bring in the same amount of pax should be entitled to the same incentives.
bullshit, SN and JAF have BRU as homebase and its up to BRU to decide how much clients pay for the services. money from the feds or not...
pathetic move from a carrier that get 800 million euro's in subsidies each year.

Inquirer
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Re: Subsidies to Belgian airlines

Post by Inquirer »

Not to stir the commotion here, but as far as I have understood the mechanism these rules are not 'nationality' bound, but 'volume" bound, something which in itself in not really forbidden?
Maybe airlines have volume discounts at their bases, I would think as it's a normal commercial practice.
The fact is however there were no foreign airlines having sufficient volume at BRU in 2013.
Of course, one can ask the question whether or not the list of eligible airlines should not be revised yearly, to include also new comers as from this year?
I think it should, but that however, is a matter of policy rather than law, so no court can rule on that either: it's why this case should be brought before the EC, and there alone: filing another complaint about the same problem with yet another entity as good as every month is just counter productive, IMHO.
Anyway: I think this rule will be replaced by undisputable labour cost reductions for all Belgian airlines well before any final judgement from the EC is in.
Next year, there's going to be a non-indexation of salaries in Belgium (so that's a staight 2% labour cost saving, say 3M), combined with a reduction in employer's contribitions on gross salaries from 33% to 25% in 2016, something which for an airline like Brussels Airlines makes a saving of close to €12M, easily.
Add the two together and you have pretty much the same sum, annually, so let's not waste too much of our time on discussing something technical only lawyers will get any better from, shall we?
Last edited by Inquirer on 22 Oct 2014, 15:16, edited 1 time in total.

sean1982
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Re: Subsidies to Belgian airlines

Post by sean1982 »

cnc wrote:
sean1982 wrote:The difference is that at the regional airports, like CRL, for example ALL AIRLINES are entitled to those same financial incentives. JAF has the same advantages at CRL than FR and indeed SN would have them as well should they want to fly from CRL.

In BRU the inequality lies in the fact that only the belgian airlines are entitled to this tax money, which is indeed unfair as other airlines who bring in the same amount of pax should be entitled to the same incentives.
bullshit, SN and JAF have BRU as homebase and its up to BRU to decide how much clients pay for the services. money from the feds or not...
pathetic move from a carrier that get 800 million euro's in subsidies each year.

You can call it bullshit as much as you want. The subsidies that FR received, every single euro of it, have always been available to ANY AIRLINE who wished to take advantage of it. You cant blame FR for having the balls to take such a big commercial risk at the time when others didnt.

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sn26567
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Re: Subsidies to Belgian airlines

Post by sn26567 »

sean1982 wrote:The subsidies that FR received, every single euro of it, have always been available to ANY AIRLINE who wished to take advantage of it. You cant blame FR for having the balls to take such a big commercial risk at the time when others didnt.
Are you sure? I seem to remember that Ryanair had a marketing deal with CRL airport in which the Walloon Region was granting subsidies to FR (and FR only) for each passenger brought to CRL.

http://eur-lex.europa.eu/LexUriServ/Lex ... 042:EN:PDF
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sean1982
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Re: Subsidies to Belgian airlines

Post by sean1982 »

100% sure. JAF has the same deal with CRL as FR and in fact SN has been offered the same deal by CRL airport multiple times allready.

convair
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Re: Subsidies to Belgian airlines

Post by convair »

I'm not a lawyer and hence no expert in that field, but it's strange that FR is suing the airlines though (instead of the Belgian State).
They are the recipients of the subsidy and are not the ones breaching the law, if any.
I would think FR's lawyers know that and have some other goal (?) in mind.

Inquirer
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Re: Subsidies to Belgian airlines

Post by Inquirer »

sean1982 wrote:100% sure. JAF has the same deal with CRL as FR and in fact SN has been offered the same deal by CRL airport multiple times allready.

http://www.charleroi-airport.com/b2b/re ... index.html

As you can see, CRL makes use of a volumetric discount system which gives an increasing percentage point discount in fuction of the volume a customer brings them, something which is fairly logic and common sense for a commercial business to do.

Yet interestinly enough, that's exactly what the Belgian government decided BRU should do too and in BRU they've set the minumum level of passengers needed to get a volumetric discount at 400,000, so sadly only 3 airlines qualified in 2013 as the rest were too small, just as in CRL, some smaller customers may also have missed the 15,000 target for instance.

As said: one can debate whether or not there should be an annual review of the airlines getting the discount as it is currently frozen for 2 years if I am not mistaken, but it's hard to disagree with the mechanism of a volumetric based discount for 'good customers in itself: I'd even dare to say it's the cornerstone of building customer loyalty and establishing a long term commercial relationship and it's surprising that BRU didn't use it so far: IMHO they should really go much further even, if they want to stimulate their growth, as you can better invest in helping to grow existing customers, than try to attract even new (and often far more volatile) ones and before you take offence at that, that does also include ryanair for me.

sean1982
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Re: Subsidies to Belgian airlines

Post by sean1982 »

No problem with volumetric discounts at all ... but as you pointed out, the unfairness lies in the fact that it is frozen in time and that has clearly been done on purpose to benefit the belgian companies only.

One might question also the alterior motives of the former minister of transport on this as he was clearly not happy with the fact that a walloon airport was going to lose out on BRU by FR's move.

Inquirer
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Re: Subsidies to Belgian airlines

Post by Inquirer »

sean1982 wrote:No problem with volumetric discounts at all ... but as you pointed out, the unfairness lies in the fact that it is frozen in time and that has clearly been done on purpose to benefit the belgian companies only.

One might question also the alterior motives of the former minister of transport on this as he was clearly not happy with the fact that a walloon airport was going to lose out on BRU by FR's move.
I don't know what the reasons were for the threshold nor the fact that the shortlist of beneficiaries is not reviewed yearly as both are a political decision, but as mentioned before, this is foremost a dispute about government policy rather than a legal issue in itself, so the main point of contact is the EC rather than a Belgian court of justice.

Besides, the year isn't over yet, so my personal take based on my point of view elaborated above (i.e. the justification through the volumetric discount principle) is that this is a normal market mechanism which will be okay'ed over 2013, but less so over 2014, but of course, until the money of 2014 is actually paid back in 2015 based on pax figures of 2013, there's very few to complain about currently for operators at the airport which only qualify based on more recent 2014 figures and so there certainly hasn't been any business unusual material/financial advantage attributed as of yet.

BTW- wouldn't be completely surprised if by years end, the mechanism is changed to see it being based on the most recent figures. Of course, while at it, the threshold can also be reviewed as well then so not sure if an update would benefit the plaintiff.

airazurxtror
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Re: Subsidies to Belgian airlines

Post by airazurxtror »

The problem is that those subsidies were to favour Brussels Airlines in its competition with Ryanair.
It was openly admitted (with rare candour) by Wathelet.

May I quote FlightMate » 20 Dec 2013 04:03 am
The 'disguised' state aid is approved.
It' s funny how, even in the press, Wathelet admits it is a 'disguised' state aid to Brussels Airlines.
And then says he is confident the EU will allow it.
Would have been better to keep it quiet, IMO.
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regi
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Re: Subsidies to Belgian airlines

Post by regi »

Side note about volumetric discounts: when I was a stubborn young hot shot sales rep I bluntly refused to give extra discount to large customers and/or group purchasers. Despite I didn't hold an economic Master's, I felt there was something suicidal in that system.
Now decades later I know for 100% sure that I have always been right.
I gave easely larger discounts to small companies. 10% on 10,000 € is less loss than 10% on 100,000 €. And I was always very well liked by those small companies which I served well. I even disregarded the large customers. ( read: I made myself needed )
It is a spiral. Once a company has reached a market percentage, there is very little left over for the rest of the competition. But that large company will insist to receive their extra discount. More and more.
A small customer will do its best to defend its discount and respects the viewpoint that a discount is not a right but a privilige.

Extra discount or no deal:
not true. The large customer has done its calculations. In several cases where I could stand my ground refusing a extra discount, I was treathened by a buyer, so be it. But I received the orders anyhow.
With small companies, those discounts were needed to enable those customers to get their order.

Why volumetric discounts?
I really don't see any reason why a customer should get extra discounts if they bring more passengers already. They have obtained that extra turnover with the actual cost. An extra discount weakens the supplier financially . And it gives the impression that the customer receives anything that is demanded. A weak bargaining position I would say.

Simple example:
customer insists to drop transport charges if he buys 2 pallets instead of 1. I congratulated the customer that his business had grown so he needed 2 pallets of goods. But he still had to pay for the transport cost of 2 pallets - which is higher than for 1 by the way. Yes, my customers know that I dare to ask them the simple blunt question "why?"

Back to aviation:
does an airline drop the luggage surcharge if you double the weight of your bags ;)

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sn26567
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Re: Subsidies to Belgian airlines

Post by sn26567 »

Nice course of economics, regi. Now go to Boeing and Airbus to teach them your theories: they usually give discounts higher than 50% to their very large customers (and Ryanair is of course one of the beneficiaries of such huge discounts). I wonder if they sell any planes at list prices: those list prices are the summit of hypocrisy, and nevertheless, when they conclude a sale they proudly announce: "we sold 100 planes, worth 10 billion dollars at list prices", even if they will get only half of that amount in their bank accounts.
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Flanker2
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Re: Subsidies to Belgian airlines

Post by Flanker2 »

Regi, that's a dangerous way of doing business. It may have worked in the past in an industry without competition (Bpost was it?) but it won't work forever.

airazurxtror
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Re: Subsidies to Belgian airlines

Post by airazurxtror »

The Ryanair consellors pleaded today before the Brussels Commercial Court , to denounce the financial aid granted by the Belgian Government to Thomas Cook , Jetairfly and Brussels Airlines . The proceedings will continue next Wednesday.

Ryanair question the Royal Decree of 7 January 2014 which grants an annual subsidy of nineteen million euros to Brussels Airport Company , which it then redistributes to the Belgian airline based at that airport.
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Re: Subsidies to Belgian airlines

Post by jan_olieslagers »

Have I missed something, or is the name of VLM completely missing from this slightly bizarre story?

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sn26567
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Re: Subsidies to Belgian airlines

Post by sn26567 »

jan_olieslagers wrote:Have I missed something, or is the name of VLM completely missing from this slightly bizarre story?
At the time of the decree, VLM was not flying out of Brussels, it was not even flying its own routes.
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