Italy: Air Transport: A New Economic Regulation Agreement For Developing The Italian Airport System

The global economic crisis has affected Italian industry more than that of any other major European country. In October 2011, the National Statistics Institute (ISTAT) recorded the worst-ever drop in Italian domestic demand, which continues to plague the manufacturing sector: in the first 11 months of 2012, the cumulative drop was 9.3 %, compared to the same period two years ago.

It was only inevitable that the crisis would affect an important sector of the national economy such as air transportation, which, due to its transnational character, suffered from the economic crisis that affected all European countries, and in particular, because of the negative effects of the fuel price increases occurring at the international level.

These factors have finally come home to roost, causing major problems for airline companies that had already been showing signs of imbalance, characterized by financial weakness and economic vulnerability.

The difficulties faced by the Italian carriers have been felt in the Italian airport sector also. Not only have the national airports found themselves in the unenviable position of having to cope with slackness in air traffic, but also deal with changes in the passenger segments due to the increase in services offered by low-cost carriers. The inability of the airports to stand up to the shifting fortunes of the air transport sector using its own financial resources led the Ministry of Infrastructure and Transport to approve a national plan for the reorganization of Italian airports, in the absence of which they face the real risk of permanently closing down operations. The plan, which has been on the cards for 26 years now, sets the framework for an organic reorganization of the airport sector with special focus on infrastructure, administration and quality of services.

The first goal would be to identify airports of national interest. In Italy there are 112 operational airports, 90 of which are exclusively used for civilian traffic, 11 are military airports open to civil traffic as well, the remaining 11 being exclusive military facilities.

With a view to reducing the existing fragmentation in the market, and initiating a process aimed at improving reorganization and efficiency, the bill formulates a proposal for the identification of airports of national interest, which will constitute the strategic structure on which the development of the sector will take place in the upcoming years. The number of airports of national interest, based on traffic volumes and relevance, is 31:

- 10 airports are of strategic relevance ("Core Network") at the UE level ( Bergamo-Orio al Serio, Bologna, Genoa, Milan-Linate, Milan-Malpensa, Naples, Palermo, Rome-Fiumicino, Turin, Venice);

- 13 airports have traffic volumes of over 1,000,000 passengers per year ("Comprehensive Network"): Alghero, Bari, Brindisi, Cagliari, Catania, Florence, Lamezia Terme, Olbia, Pisa, Rome-Ciampino, Trapani, Treviso, Verona;

- 6 airports have traffic volumes of over 500,000 passengers per year and have specific regional characteristics (Ancona, Pescara, Reggio Calabria, Trieste, Lampedusa and Pantelleria);

- 2 airports that are not part of the European networks, but have traffic volumes of close to 1,000,000 passengers per year and either exhibit a growing trend (Rimini) or are destined to delocalize the traffic of big airports (Salerno).

The upkeep of the national concession is provided for these airports. The airports that do not fall under the national interest category will have to be transferred to the respective regions and other possibilities will be explored for these, such as a different utilization and/or closure.

Moreover, the reorganization plan provides for the adoption of measures aimed at the economic and financial restructuring of the country's airports with a view to setting in motion a gradual and progressive disposal of shares by public bodies, thus allowing for the entrance of private investors.

Further measures are planned for the rationalization of air navigation services and general services offered to customers, and the promotion of the constitution of "Airport networks" managed by a single entity in order to derive maximum advantages from the separation and specialization of roles to serve the same territory with dedicated infrastructures for different traffic segments.

Under the above circumstances, on December 27, 2012 the final act of the planning agreement was signed by the Italian Civil Aviation Authority (ENAC) and the company ADR (Società Aeroporti di Roma S.p.A.), incorporating the additional information required by the Decree which approved the planning agreement signed on December 21, 2012.

The signing of this agreement is the culmination of the Economic Regulation Agreement, which, according to Law 102/2009, governs the new tariff system for the largest national airports.

Thanks to this agreement, the conditions necessary for modernization and expansion of the most important Italian airport system have now been created. Moreover, the planning agreement ensures the certainty of revenue necessary for the realization of the investment plan, and allows ENAC to use more incisive tools in carrying out its role of supervising and monitoring the implementation of the plan, which also includes the achievement of environmental quality objectives.

The agreement defines the principles governing the determination of tariffs for the entire period of the concession, based on the principle of community and national adjustment of tariffs to a cost-efficient manager.

In light of the developments foreseeable in the short term, during the period 2013-2016, infrastructures of essential importance will be available, involving a financial commitment of over 1,200 billion euros, a significant increase with respect to the initial planned forecast of approximately 900 million euros.

The planned investments, which will be entirely funded by private capital, will allow an increase in the capacity of Fiumicino of up to 100 million passengers. The start of the investment plan will also create 30,000 new jobs in the short/ medium term, finally reaching 230,000 new jobs in the long term. These new jobs will be in addition to the 170,000 currently employed in Rome's airport system, of which 41,000 are in the airports themselves.

In spite of the development prospects mentioned above, the new agreement hasn't received widespread positive consensus among operators of the sector. On February 27, 2013, the major associations of carriers and aviation operators (Assohandlers, Assaereo anche Codacons) challenged the agreement before the Administrative Regional Court (TAR), arguing that the implementation of the planning agreement between ENAC and ADR would lead to an unacceptable increase in airport charges, in contrast to the Directive 2009/12/EC.

In particular, the associations argue that under the guise of allowing ADR to garner the resources necessary for the modernization of Fiumicino airport, the program contract, through legal artifices, provides advantages exclusively to the Airport Operator, while effecting significant increases in costs for airlines and passengers, thus generating revenues for ADR far in excess of what is necessary to realize the planned investments.

The agreement paves the way for an immediate increase of tariffs without taking into account the airlines' needs and the principles outlined in Directive 2009/12/EC, which provided for a balanced approach between the needs of the carriers and airport operators.

In addition to aggravating the difficult economic situation that the airline companies find themselves in, (particularly, for the national carriers for which Fiumicino airport plays a significant role in terms of total traffic volumes) the agreement causes serious competitive distortions in favor of carriers operating out of Ciampino airport, like such as Ryanair, which is the major carrier in that airport.

Associations argue that airlines are keen to operate out of efficient airports, but they do not want to incur extra charges imposed on them that are not compliant and comparable with the European standards, particularly in these times of economic difficulty.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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