According to the Opinion of the Advocate General at the European Court of Justice (ECJ) in the preliminary ruling procedure C-379/18, individual agreements on airport charges between airport operators and single users (airlines) are incompatible with the German implementation of the Airport Charges Directive 2009/12/EC. Such individual agreements are concluded in numerous European countries, including Germany. By means of individual agreements, the airport operator grants an airline discounts on the airport charges or pays a premium to the airline if, for example, the airline increases its traffic volume at the airport or improves its connectivity by opening new routes. By prohibiting individual agreements, airport operators lose the ability to react flexibly, quickly and individually to actual competitive pressure in order to increase the profitability of the airport. Such a prohibition is not covered by the objectives of the Directive and would have a significant impact on the competition between airports. The ECJ should therefore not follow the Advocate General on this point.
Deutsche Lufthansa and the Land of Berlin, as the legal body behind the competent authority responsible for approving the airport charges of Berlin Airports, are in dispute before the German administrative courts as to whether an airport user is entitled to challenge the charge approval. In this legal dispute, the Federal Administrative Court (Bundesverwaltungsgericht – BVerwG) referred two legal questions on the interpretation of the Airport Charges Directive 2009/12/EC to the European Court of Justice for a preliminary ruling in accordance with Art. 267 TFEU (Case C-379/18). On 27 June 2019, Advocate General at the ECJ Manuel Campos Sánchez-Bordona delivered his Opinion. In his Opinion, the Advocate General takes the view that a charging system of the airport operator to be approved by the authorities under national law, irrespective of whether it regulates fixed or maximum charges (maximum prices), is “general in character” and must, in principle, apply to all users. It therefore excludes “private agreements” between the operator and individual users on different charges. Even in the case of a mere maximum price approval, downward deviations from the approved maximum prices are only possible if they are negotiated collectively with all users, benefit all, and are subject to subsequent review by the authority. This follows – according to the Advocate General – from the Airport Charges Directive 2009/12/EC, in particular from the prohibition of discrimination in Article 3 of that Directive, and its implementation in Section 19b LuftVG (Luftverkehrsgesetz, German Aviation Act).
The Advocate General thus departs from the principle which permeates all regulatory and antitrust law, namely that an exclusion of the right to freely agree on charges is only justified where an operator has a dominant market position. Unlike telecommunications and route network operators, however, airport operators are not natural monopolists and, in particular, do not dominate the market across the board vis-à-vis all user groups. Rather, even the operators of large commercial airports are increasingly exposed to competitive pressure. In particular, hub airlines that use an airport as a hub can switch to other hubs over a wide geographical area, usually at least nationally, if not throughout Europe or beyond. Low-cost carriers (LCCs) are hardly restricted in their choice of location because, unlike traditional airlines, they predominantly generate traffic demand themselves; they therefore have considerable bargaining power. They also consider smaller airports within the catchment area of a major airport as alternatives, as shown by typical LCC airports in Germany such as Weeze (NRN), Hahn (HHN) or Friedrichshafen (FDH). Ryanair’s own designations “Düsseldorf Weeze” and “Frankfurt Hahn” prove that LCC advertise such airports to its customers as an alternative to the city’s major airport, even though they are actually 60 or more than 100 km away from the city. For LCC, they are indeed alternatives with usually significantly lower airport charges and thus lower costs. In an earlier decision (judgment of 12 May 2011, Case C-176/09, Luxembourg, recital 49), the European Court of Justice has already expressly acknowledged that the LCC have special negotiating power as a result.
The Airport Charges Directive, the interpretation of which the Advocate General refers to, does not assume that all airports within its scope of application (more than 5 million passenger movements per year or the largest airport in a Member State, Article 1(5) of the Directive) actually hold a dominant market position. The legislator has only attributed a “certain power” to these airports (1). It deliberately did not subject them to strict regulation, but merely established “common principles” for the levying of airport charges (Recital 7). The Directive leaves it up to the individual Member State to decide whether it wishes to have the charges subsequently reviewed by the supervisory authority or to require approval. Art. 6 para. 5 leaves the Member States the choice between an ex ante authorisation obligation for all operators within the scope of the Directive (lit. a) or only for those whose dominant position has previously been determined by the authorities (lit. b). Within this framework, each Member State is free to regulate airport charges. The Directive only stipulates that the airport managing bodies must establish a procedure for the regular consultation of users and that an independent supervisory authority must exist. Precisely because this only slightly interferes with the entrepreneurial freedom of the operators and only little effort is required, the ECJ considered the Directive to be proportionate in its earlier judgment (judgment of 12 May 2011, Case C-176/09, para. 70).
In Germany, the published scale of charges (Entgeltordnung) of all commercial airports and airfields, including those with far fewer than 5 million passengers, were subject to official approval even before the Directive was issued in 2009. This is stipulated in Section 19b (1) of the LuftVG. A dominant market position on the part of the individual airport is not a prerequisite for this and cannot simply be assumed, as a reverse conclusion from Art. 6 Para. 5 lit. b) of the Directive shows. Therefore, there is no justification whatsoever to take a prohibition on deviating charges agreements from the Directive for the regulation in force in Germany. On the contrary, the German model is a general charges regulation which leaves the operator the option of concluding individual agreements with individual airlines. In the case of airports controlled by the public authorities, this is subject to the condition that the airline provides a service in return which improves the airport’s profitability. An increase in profitability has a price-dampening effect on regular airport charges and is therefore in the interest of all users. In the view of the UK Civil Aviation Authority, individual agreements should therefore be concluded “wherever possible”. (2)
The contrary view of the Advocate General disregards the fact that the Directive does not provide for strict regulation of airport charges even in the case of Art. 6 para. 5 lit. a). The Advocate General also does not correctly cover the regulatory content of the prohibition of discrimination under Article 3 of the Directive. Although the purpose of the prohibition of discrimination is to protect competition on the downstream market (paragraph 34 of the Opinion), this is only done “in accordance with Community law”. This phrase refers in particular to the general prohibition of discrimination in Art. 102 lit. c) TFEU, which applies only to undertakings in a dominant market position. Art. 3 of the Directive does not prescribe any further application of the general prohibition of discrimination under antitrust law. Only Art. 6 para. 5 last sentence, Art. 10 para. 2 subpara. 2 and Art. 11 para. 5 sentence 2 of the Directive contain specific prohibitions of discrimination which do not require a dominant market position. These provisions concern the procedure for the supervisory authority’s review of the general system of airport charges and the regulation of access in the case of capacity restrictions; they are therefore not a viable basis for the assumption that non-dominant operators are generally subject to the restrictions which, according to Art. 102 lit. c) TFEU, apply only to market-dominant operators.
Strict fee regulation without the possibility of deviation is only meaningful and proportionate in the case of a market-dominant supplier who, by definition, is exposed to little or no competitive pressure. Only the latter can de facto unilaterally determine its charges and is therefore subject to legal restrictions to protect its customers (as a substitute for lack of competition). If, on the other hand, a company that is in effective competition is deprived of the opportunity to determine and negotiate its prices individually, i.e. to behave in a way that is in conformity with competition, the actual competition – for individual users as customers – is eliminated. This prevents lower charges as a result of actual competition. At the same time, the (here: German) operators are hindered in acquiring international airlines, who continuously compare airport charges and can freely shift their traffic, and are structurally disadvantaged in competition with operators in other Member States that regulate less strictly in accordance with the Directive. The Advocate General’s interpretation therefore leads to a distortion of fair competition in the EU internal market. This reverses the meaning of the Directive into its opposite.
The ECJ should therefore not follow the Advocate General’s proposal to prohibit individual agreements in the Directive. It can also leave this question open. The subject of the preliminary ruling procedure is not individual agreements between the operator and individual airlines, but the question of whether an airline can enforce lower charges against the operator’s will by means of a civil court equity check in accordance with Section 315 German Civil Code (BGB). In order to clarify this question, it is not important whether the operator can conclude individual agreements.
(1) European Parliament, Report of 10 December 2007 on the proposal for a directive of the European Parliament and of the Council on airport charges
(KOM(2006)0820 – C6-0056/2007 – 2007/0013(COD)
(2 October 2019)