Planes, low cost flights fly to Italy thanks to 391 million incentives per year

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Planes, low cost flights fly to Italy thanks to 391 million incentives per year

On May 28 the CEO József Váradi arrives at the Milan Malpensa airport – in full block of travel outside the region and in the darkest period for the airlines – to make an announcement that amazes many: his Hungarian low cost, the Wizz Air, on 1 July opens its first base in the Lombard airport, places five Airbus and brings the destinations served from 8 to 28. “We are not here for a hit and run, but for a long-term investment,” he says. In the same hours, it announces two other new bases: one in Larnaca (Cyprus), the other in Tirana (Albania).

The agreements

Váradi has signed multi-year agreements with the airports of Malpensa, Larnaca and Tirana – very confidential – which provide for a package of discounts, concessions and contributions in exchange for passengers and therefore revenues. It is common practice for many companies and there is nothing illegal after a few adverse judgments. But only in 2019 and only in Italy these incentives amount to at least 391 million euros considering only the seven main low cost ones. The figure emerges for the first time from an analysis of Corriere della Sera after viewing hundreds of pages of private contracts, speaking with a dozen managers of the management companies and airlines involved and analyzing the financial statements of Italian airports.

Planes, low cost flights fly to Italy thanks to 391 million incentives per year

The ranking

Ryanair, according to calculations, gets the largest share of this package: at least 260 million euros in 2019 considering all Italian airports. It is also the carrier that carries more passengers in our country: over 40 million last year, according to the National Civil Aviation Authority (ENAC). It also has 14 bases in Italy where, at the end of February, it had placed 68 Boeing 737s. It follows, at a distance, easyJet with around 74.6 million euros (and 3 bases). On the third step Volotea, a Spanish carrier very active in North-East Italy, with 16.3 million incentives per year. Just over the 15.5 million of Vueling, another Spanish low cost, which receives more than Wizz Air (15.2 million). Another 5.5 million (at least) went to Norwegian Air, a low cost airline focused in particular on intercontinental flights and 4.1 million to Romanian Blue Air.

The EU directives

These concessions – which we dealt with a few months ago by leafing through the budgets of the airports – arise from a simple basic idea: the more companies fly in a stopover and the more passengers they carry, the more the local economy benefits from it since the tourists spend money on taxi drivers, hotels, restaurants and shops. A 2009 European directive gives the green light to these “incentives to start new routes so as to promote, among other things, the development of disadvantaged and outermost regions” provided that they are provided “in accordance with Community law”.

Planes, low cost flights fly to Italy thanks to 391 million incentives per year

The lack of transparency

The European Commission has repeatedly reminded that maximum transparency is needed in this area. There is no transparency – not even in Italy – because the agreements signed between the carrier and the airport management company are armored. So armored that in the investigation of Courier service last January from the public budgets of the companies at the top of the airports it was possible to identify only 226.1 million euros of incentives to airlines, in particular low cost. “But what is on the balance sheets is only part of the iceberg,” confides the manager of an airport in Northern Italy.

Second level agreements

The other party is, in fact, in the contracts entered into. The Courier service he has seen some of them and the count presented – 391 million euros – is not even complete: the total final bill should exceed 500 million a year. In general these agreements come in a standard format, about twenty pages, the same sentences, many tables, different grids and objectives to be usually achieved in the first, second and third year. We’ll see. “If the airport is weak, the company has the upper hand, if in addition to the weakness there is another stopover at 70-80 kilometers then the carrier wins on every front,” continues the manager.

Planes, low cost flights fly to Italy thanks to 391 million incentives per year

The facilitations

The voices are the most disparate. There are not only the classic traffic / development incentives for routes (which last 3-4 years) or those for opening the base (usually five years), but also significant discounts on handling and parking which in some cases touch the 100% in the first year, subsidized rents, payment to the company of the difference in airport taxes to fly in a stopover with higher costs. In some contracts, additional discounts of 10-20% are added if you also fly during non-peak hours (generally after 5 pm in winter and after 7 pm in summer). In some cases, it is the management company that financially supports the companies if they operate flights with low filling rates – usually in the winter months – providing for further filings to be handled even by 25% if the plane is half empty. There are also tens of thousands of euros in marketing support.

The traffic bonus

In more than one contract, then, there are the tables on the volumes to be satisfied which give rise to other discounts. An example? In the document that the Courier service consulted an airport in southern Italy ranging from an incentive of € 1.3 per passenger departing beyond 110,001 passengers and up to € 150,000 (therefore € 52 thousand) to € 5.7 per user if the carrier closes the year in the range 470,001 and 510,000 passengers on board (equal to almost 228 thousand euros). The more travelers increase, the more the “premium” goes up, breaking through the million euros in some agreements. In another contract, the advantages for the carrier emerge: for each Airbus A320 that bases in the airport there is an additional benefit of 770 thousand euros per year between missed parking expenses, the hangar, cleaning, handling and light maintenance.

The replies

Wizz Air, Vueling and Blue Air did not respond to requests from the Courier service at the time of publication of the article. Those who reply premise that they do not want to comment on the figures because they are “private and confidential” agreements. “The airline occasionally has the opportunity to enter into and use agreements for incentives to generate traffic,” says Norwegian Air. “Collaboration between airports and companies is common practice and it is beneficial for all players involved to plan synergistic marketing activities, develop new routes and enhance local tourism in support of the economic fabric”, adds Volotea. “It is good to remember that the companies, even after receiving any incentives, invest on the territory thanks to the payment of taxes and contributions in favor of the airports where they fly”.

“Strategic resource for Italy”

“Ryanair has long-term commercial and confidential agreements with its airports that respect the competition rules and are in favor of the growth of Italian traffic, tourism and employment”, replies the low cost. «We are a strategic resource for local and national development and growth, creating opportunities and jobs». In the past twenty years, the Irish carrier recalls having “transformed the peripheral areas into internationally known destinations with direct access: Bergamo from a small regional airport is now the third for traffic after Rome Fiumicino and Milan Malpensa”. Ryanair believes that it is better to focus on state aid to national companies (Lufthansa, Air France-Klm, Alitalia, Sas, Norwegian Air) to overcome the health crisis and that they are considered discriminatory.

Aid to airports

“The current regulatory framework allows carriers to enter into bilateral agreements with airports aimed at providing for the payment of incentives – they reply from easyJet – against the achievement of certain objectives for the development of traffic and routes, in line with published commercial policies by the airport managers themselves “. “This possibility – they underline – is open to all carriers (low cost and non low cost) and constitutes a fundamental commercial lever for airports, allowing managers and carriers to plan long-term investments”. Agreements that for easyJet “are crucial for the development of traffic and are always entered into in compliance with state aid regulations, effectively contributing to the profitability of airports”.

The uncertain outcome of the incentives

“Low cost allows users to fly on routes that weren’t there before,” reasons Paolo Beria, associate professor of Transport Economics at the Milan Polytechnic. “But as regards the contributions they receive, it is necessary to understand if they are limited to the start-up activity or if the routes constantly need subsidies paid in a more or less transparent way”. The teacher, who considers himself a supporter of low cost, is not very sure of the benefits for the territories, also because he does not believe “that there is control by whoever pays the contribution”. “The real problem is the lack of transparency and this thing makes me think badly: I am not in favor of opportunistic behavior”. The use of these funds, then, has uncertain results: “How many are really used well and how many are actually lost?”, Asks Beria. «Those of Bergamo-Orio al Serio are certainly served, but I would not feel like saying the same for other airports».



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