Airport subsidies
Classification of airports
In spite of a general trend towards airport privatisation, many airports are still in full public ownership or have only been partially privatised. Consequently, losses of publicly owned airports usually have to be covered by their respective shareholder(s). However, also, privately owned airports might ask the state for financially supporting investment and even operations.
There are several ways of classifying airports with respect to their role in the air transport system. The following grouping is based on a (potential) need or justification for subsidies. Large airports with a high share of transfer passengers (‘hubs’) are usually profitable, but they are also facing fierce competition on the market for transfer passengers. This might provoke subsidies if a state aims to improve the competitive position of a domestic airport. For example, until the early 2000s, Amsterdam Airport Schiphol (one of the major European hub airports) was exempted from the Dutch corporation tax (European Commission, 2001).
Whereas airports serving large agglomerations or popular tourism destinations are not only profitable17 but usually even subject to a specific monopoly regulation in order to prevent excessive profits, airports serving medium-size cities, less densely populated regions or smaller tourism destinations are often facing financial challenges. From a regional policy perspective, basically two types of constellations can be distinguished. First, for medium-size cities (in particular those with an export-oriented industry), a regular connection to at least one hub airport facilitates business travel and is therefore considered to be an important locational factor.18 One example is the airport of Dresden (Germany), serving the capital of the state of Saxony with approximately 550,000 inhabitants. Via its state-owned airport, Dresden is connected to the hubs in Frankfurt, Munich and Zurich, providing many options for international journeys.19 The annual number of passengers in Dresden is below two million, and the losses in 2016 came to 6.4 million euros.2" Second, for many smaller tourism destinations, an airport is an indispensable prerequisite for welcoming travellers but may not be economically viable. Quite often, the traffic shows a significant
Aviation subsidies in Europe 131 seasonal pattern, with the peak months determining the infrastructure needs and causing additional challenges for an economically viable operation.
Other types of airports that are making losses can be found in many remote or peripheral regions - particularly islands but also lowly populated regions, such as in Northern Scandinavia. For those regions, air transport is often the only option to provide relatively fast travel options to the large agglomerations of the respective country. Although infrastructure requirements, such as runway length, are usually lower than for medium-size airports, because of the small number of flights, these airports typically cannot be operated without financial support.
A specific type of usually unprofitable airports emerged after the end of the Cold War in Europe. The closing of military airfields located outside larger agglomerations led to problems for the regional economy, since they provided employment opportunities also for civilian workers, and the soldiers and other employees increased the demand for consumption goods in the respective regions. One obvious option for regional policy decision makers was to transform a military airfield into a civil airport. The major reasoning was that a large part of the infrastructure already existed, and the legal approval for airport operations - which is difficult to get for a new airport - would remain valid. Several examples for such ‘conversion’ airports can be found in Germany (Altenburg-Nobitz, Hahn, Memmingen, Niederrhein-Weeze, Zweibrucken).21 However, the respective regions are quite often not a typical tourism destination (at least not for tourists from abroad), and population density is often rather low. Consequently, those airports to a large degree have to rely on attracting passengers from neighbouring agglomerations that are usually already equipped with an airport.
