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Europe’s railways: On track to the future

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train_and_people1Siim Kallas, speaking at InnoTrans 2014 - Berlin, 23 September 2014

"This is my third time to speak at Innotrans - an event that has fast become known as the largest rail industry event in the world. Thank You very much for inviting me back to Berlin. In my first speech four years ago I outlined my concept of creating a Single European Railway Area. This concept is based on my belief in two things: First, Europe has always jumped ahead when it has taken down barriers. Think about the Single Market, free movement of goods, services, people and capital. Think about free travel, think about enlargement. Second, I believe in pan-European efficiency. I believe that creating a smoothly functioning cross-border transport infrastructure and supporting pan-European transport services can genuinely benefit people and business. What has happened to the idea of a Single European Railway Area during these four years between Innotrans 2010 and today?

"First – we have the biggest infrastructure investment project in the history of the European Union. The Trans-European Transport Network project, which was finally adopted at the end of 2013, took three years of heavy negotiations, sometimes like a battle, sometimes even crazy. Europe’s transport infrastructure policy has undergone a fundamental change in thinking and approach. There is a stronger focus on innovation and new technologies. We are now thinking less of individual projects, and more of a core network of strategic corridors.

"We have managed to secure dedicated infrastructure financing to make sure it becomes a reality. The Connecting Europe Facility has three times more money, 26 bn Euro, available for transport infrastructure projects during the MFF 2014-2020 compared to the period 2006-2013. With this new approach, we aim to join East and West and all corners of a vast geographical area. Railways are a key part of the network that we plan to build. In fact, we couldn’t think about a functioning Trans-European Transport Network without rail, particularly in the nine corridors that will form the backbone of the new TEN-T.

"The big challenge ahead is now the implementation of these infrastructure projects. This requires commitment, dedication, strong will from all stakeholders. We can’t build them without proper rail services in place. And efficiencies gained in rail will also have a positive effect on the rest of the transport network. Still, there is a long way to go. We don’t yet have a proper cross-continental European rail network, let alone a single European rail market – more than 20 years after the first EU rail initiative.

"When I was last at InnoTrans, two years ago almost to the day, I outlined my plans for further reform in the Fourth Railway Package. It is designed to address the main problem areas, so that rail can play its full part in the integrated European transport network of the future. Without repeating all the details, I’m sure you know that our proposals set out to remove the administrative, technical and regulatory obstacles that are holding back the rail sector in terms of market opening and interoperability. Since then, as you know, EU member states reached a political agreement on the technical pillar. This is a serious step forward. Exploratory discussions can begin with the European Parliament towards a second reading agreement.

"Negotiations are continuing on the other proposals. It would be naïve to expect them to be easy; I think a good degree of contradictory views can be expected in the debates on market opening and network governance, for example. The package goes hand in hand with our work to revitalise Europe’s railways by making more use of research and innovation. We are now in a position to move closer to those goals, with the new public-private partnership Shift2Rail that was recently endorsed by EU Member States. The development of the Single European Railway Area depends on the development of transport policy in the European Union.

"One question is: – where should the transport policy be placed? Is that a low profile challenge for Europe? Or should it be equal with other economic policy areas like energy, digital market, as an important part of single market? Considering how much our every-day life depends on the accessibility, the quality of connections and of freight and passenger transport services - increasingly cross-border - it is my view that European Union transport policy is relevant and important for all our citizens. This can be one proof that the European Union has added value for everybody. Another big dilemma is: – solutions based on the market or measures against the market? Market opening is an element in all pan-European initiatives. It is not a very radical element; it is an element among others.

"But quite often especially market opening proposals raise fierce resistance and also quite often it is these elements which are watered down in parliamentary proceedings and also in the Council. I have been often accused of being "too liberal" in my proposals. I consider these accusations completely unfounded. The current barriers to the functioning of market mechanisms are meant to protect isolated entities, obsolete industries, privileged companies, isolated segments of transport industry. They are detrimental to a functioning European transport economy as a whole.

"Market opening can bring clear benefits for the European economy, including the transport industry. Two concrete areas of benefits: Firstly, it brings more private money into transport investments. There are numerous examples for this. More investments bring more global competitiveness, bring more profits, bring innovation, and, importantly, bring more jobs. Secondly, it improves the quality of services; it offers better prices for customers, for passengers and for cargo handlers.

"The big challenge for the European transport policy is to find harmony between environmental expectations and the hopes of people and economic reality. The European Union is about dismantling barriers between European nations. There are still a lot of national, economic, nationalistic, industrial, emotional and historic, and bureaucratic barriers in pan-European transport. All of them still hamper our quality of life and our competitiveness.

"Since this will be my last appearance at this major gathering of the European rail industry, I would like to thank you for all your support over the years – and I would like to thank for the good and open debate in those cases where some of you felt you did not want to support my views. I very much applaud the efforts that the industry has made to raise its own efficiency and put passengers and freight users at the heart of its development strategy. I encourage you to persist in these efforts."

Aviation/airlines

#Aviation - Statement by Commissioner Vălean on the Commission's intention to extend the slot waiver 

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Transport Commissioner Adina Vălean has issued a statement following the adoption of the Commission report on the potential extension of the Slot Regulation amendment

Commissioner Vălean said: “The report shows that air traffic levels remain low, and more importantly, they are not likely to recover in the near future. In this context, the lack of certainty over slots makes it difficult for airlines to plan their schedules, making planning difficult for airports and passengers. To address the need for certainty and responding to traffic data, I intend to extend the slot waiver for the 2020/2021 winter season, until 27 March 2021.”

The full statement is available online.

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Commission approves €62 million Romanian loan guarantee to compensate Blue Air for damage suffered due to #Coronavirus outbreak and provide the airline with urgent liquidity support

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The European Commission has approved, under EU state aid rules, a Romanian loan guarantee of up to around €62 million (approximately RON 301m) in favour of Romanian airline Blue Air. Blue Air is a private Romanian airline with bases in Romania, Italy and Cyprus. It qualified as a company in difficulty before the coronavirus outbreak, i.e. on 31 December 2019. More specifically, the company was loss making due to the extensive investments it undertook since 2016 to improve its network of routes. The airline had returned to profitability in 2019 and early 2020, but it suffered significant losses due to the coronavirus outbreak.

The measure consists of a public guarantee of up to around €62m on a loan to the airline which will be allocated as follows: (i) around €28m public guarantee to compensate Blue Air for the damage directly caused by the coronavirus outbreak between 16 March 2020 and 30 June 2020; and (ii) around €34m rescue aid in the form of a public guarantee on a loan intended to partly cover Blue Air's acute liquidity needs as a result of the high operating losses it has been experiencing following the coronavirus outbreak. Blue Air is not eligible to receive support under the Commission's State aid Temporary Framework, aimed at companies that were not already in difficulty on 31 December 2019.

The Commission therefore has assessed the measure under other State aid rules, in line with the notification by Romania. With respect to the damage compensation, the Commission assessed the measure under Article 107(2)(b), which enables the Commission to approve state aid measures granted by member states to compensate specific companies for the damages directly caused by exceptional occurrences, such as the coronavirus outbreak.

As regards the rescue aid, the Commission assessed it under the Commission's 2014 Guidelines on state aid for rescue and restructuring, which enable member states to support companies in difficulty, provided, in particular, that the public support measures are limited in time and scope and contribute to an objective of common interest. The Commission therefore concluded that the Romanian measure is in line with EU state aid rules.

Executive Vice-President Margrethe Vestager, in charge of competition policy, said: “The aviation sector has been severely hit by the coronavirus outbreak. This €62m Romanian loan guarantee will in part enable Romania to compensate Blue Air for the damage suffered as a result of the coronavirus outbreak. At the same time, it will provide the airline with the necessary resources to address part of its urgent and immediate liquidity needs. This will avoid disruptions for passengers and ensure regional connectivity in particular for the significant number of Romanian citizens working abroad and for many small local businesses that depend on affordable tickets offered by Blue Air on a network of routes aimed at addressing their specific needs. We continue working with member states to discuss possibilities and find workable solutions to preserve this important part of the economy in line with EU rules.”

A full press release is available online.

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Commission approves €133 million Portuguese liquidity support to #SATA airline; opens investigation into other public support measures

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The European Commission has approved, under EU state aid rules, €133 million in liquidity support to SATA Air Açores (SATA). The aid will allow the company to fulfil its public service obligations, provide essential services and ensure the connectivity of the Azores outermost region. At the same time, the Commission has opened an investigation to assess whether certain public support measures by Portugal in favour of the company are in line with EU rules on State aid to companies in difficulty.

SATA is an air transport company ultimately controlled by the Portuguese Autonomous Region of Azores. Together with another company belonging to the same group (SATA Internacional – Azores Airlines), SATA provides air transport passenger and cargo services within Azores, and from and to several national and international destinations. With respect to certain routes, it has been entrusted with a public service obligation to ensure connectivity of the islands. SATA also provides other essential services, e.g. the management and operation of five small airports in different islands of Azores.

SATA has been facing financial difficulties already before the coronavirus outbreak, i.e. on 31 December 2019. Since at least 2014, the company has been experiencing operating losses and has reported negative equity in recent years, which has been aggravated by the effects of the coronavirus outbreak. The company is currently facing urgent liquidity needs.

The Portuguese liquidity support measure

Portugal notified the Commission of its intention to grant urgent support to SATA, with the aim of providing the company with sufficient resources to address its urgent and immediate liquidity needs until the end of January 2021.

SATA is not eligible to receive support under the Commission's State aid Temporary Framework, aimed at companies that were not already in difficulty on 31 December 2019. The Commission therefore has assessed the measure under other state aid rules, namely the 2014 Guidelines on State aid for rescue and restructuring. These enable member states to grant temporary liquidity aid to providers of services of general economic interest to maintain and preserve essential services such as, for example air transport connectivity and airport management. This possibility is available also in case of aid granted  by the member state to the same company in difficulty being investigated by the Commission.

The Portuguese authorities estimated that SATA's liquidity needs for the next six months in relation to SATA's public service obligations and essential services amount to approximately €133m.

The Commission found that the individual aid to the company in the form of a public guarantee of up to approximately €133m on a temporary loan strictly relates to urgent liquidity needs linked to the provision by SATA of essential services including routes subject to public service obligations and services of general economic interest at local airports. It found that the aid is necessary to allow the company to continue providing these services.

On this basis, the Commission approved the measure under EU State aid rules.

Opening of investigation into other support measures

Separately, the Commission has decided to open an investigation to assess whether certain public support measures in favour of SATA are in line with the 2014 Guidelines on state aid for rescue and restructuring.

As of 2017, the Autonomous Region of Azores, which wholly owns SATA, approved three capital increases to partly address the company's capital shortfalls. Most of the amounts appear to have already been paid. The Portuguese authorities claim that the capital increases in question do not constitute state aid under EU rules as since the Regional Government of Azores, as the sole shareholder of SATA, acted as a private investor operating under market conditions.

The Commission will now investigate further if the capital increases constituted state aid that should have been notified to the Commission, and, if so, if the past support measures satisfy the conditions of the 2014 Guidelines on State aid for rescue and restructuring. The opening of an in-depth investigation gives Portugal and other interested parties an opportunity to submit comments. It does not prejudge the outcome of the investigation.

Background

The Azores Autonomous Region is an archipelago composed of nine volcanic islands and 245,000 inhabitants. The Azores Region is considered as an outermost region of the European Union, located in the North Atlantic Ocean, about 1,400 km from mainland Portugal. The islands can be reached from the mainland in two to three days by sea or two hours by plane. The Region is dependent of air transport for passengers and cargo, especially during the winter season, when weather conditions often render maritime transport unavailable.

Under EU State aid rules, public interventions in favour of companies can be considered free of state aid when they are made on terms that a private operator would have accepted under market conditions (the market economy operator principle - MEOP). If this principle is not respected, the public interventions involve state aid within the meaning of Article 107 of the Treaty on the Functioning of the European Union, because they confer an economic advantage on the beneficiary that its competitors do not have. The assessment criteria for public interventions in companies in difficulty are set out in the 2014 Guidelines on state aid for rescue and restructuring.

Under the Commission's 2014 Guidelines on state aid for rescue and restructuring, companies in financial difficulty may receive State aid provided they meet certain conditions. Aid may be granted for a period of up to six months ("rescue aid"). Beyond this period, the aid must either be reimbursed or a restructuring plan must be notified to the Commission for the aid to be approved ("restructuring aid"). The plan must ensure that the long-term viability of the company is restored without further State support, that the company contributes to an adequate level to the costs of its restructuring and that distortions of competition created by the aid are addressed through compensatory measures.

By ensuring compliance with these conditions, the Commission maintains fair and effective competition between different companies in the air transport market, like in other sectors.

Article 349 of the Treaty on the Functioning of the European Union recognises the specific constraints of the outermost regions and provides for the adoption of specific measures in EU legislation to help these regions address the major challenges they face due to their remoteness, insularity, small size, difficult topography and climate, and economic dependence on a reduced number of products.

The non-confidential version of the decision will be made available under the case number SA.58101 in the State Aid Register on the Commission's competition website once any confidentiality issues have been resolved. State aid decisions newly published in the Official Journal and on the internet are listed in the State Aid Weekly e-News.

 

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