94/666/EC: Commission Decision of 6 July 1994 concerning compensation in respect of the deficit incurred by TAP on the routes to the Autonomous Regions of the Azores and Madeira (Text with EEA relevance)

• Articles: 5

Article 1

The aid, notified by Portugal, to compensate the deficit incurred by TAP in fulfilling public service requirements on the routes to the Autonomous Regions of the Azores and Madeira is compatible with the common market and the EEA Agreement until 1 January 1996, as aid to promote the development of areas where the standard of living is abnormally low or where there is serious underemployment, provided that the aid granted does not exceed the deficit incurred on those routes.

Article 2

Portugal shall submit to the Commission an annual report on the implementation of the aid scheme.

Article 3

This Decision is addressed to the Portuguese Republic.

Done at Brussels, 6 July 1994.

For the Commission

Marcelino OREJA

Member of the Commission

(1) OJ No C 178, 30. 6. 1993, p. 2.

(2) OJ No L 240, 24. 8. 1992, p. 8.

(3) OJ No C 212, 12. 8. 1988, p. 2.

(4) OJ No C 163, 4. 7. 1990, p. 6.

Article 92

(3) (a) and (c) of the Treaty and Article 61 (3) (a) and (c) of the Agreement provide for exemption in respect of aid to promote or facilitate the development of certain regions.

Article 92

(3) (a) of the Treaty and 61 (3) (a) of the Agreement provide an exemption for aid for the benefit of regions suffering from problems of serious underdevelopment.

In Communication No 88/C 212/02 (3), as amended by Communication No 90/C 163/05 (4), the Commission explained the method of application of Article 92 (3) (a) and (c) to regional aid. In applying Article 92 (3) (a) of the Treaty and Article 61 (3) (a) of the Agreement, the Commission assesses the relative level of development of different zones compared with the Community average. For the purposes of those provisions, the socio-economic situation is assessed by reference to per capita GDP (gross domestic product)/PPS (purchasing power standard) using the Community index for the region. In a second stage the relative level of regional development is compared with the Community average. Therefore, regions to be classified as falling within the scope of Article 92 (3) (a) of the Treaty and Article 61 (3) (a) of the Agreement are the level II regions (on the basis of NUTS) which have a GDP/PPS threshold of 75 % or lower, thus indicating an abnormally low standard of living and serious underemployment. By applying these indicators the whole Portuguese territory (Autonomous Regions included) is deemed a region falling within Article 92 (3) (a) of the Treaty and Article 61 (3) (a) of the Agreement. On the basis of the available data, none of the Portuguese regions has a GDP/PPS higher than 75 % (the Portuguese GDP/PPS in the 1986 to 1990 period was 54 % of the Community average).

In principle, the Commission is opposed to exempt operating aid in the air transport sector. However, until the liberalization measures provided for by Regulation (EEC) No 2408/92 (and in particular in Article 4 concerning public service obligations) are fully applicable, compensation for public service obligations may be accepted under Article 92 (3) (a) of the Treaty and Article 61 (3) (a) of the Agreement.

Therefore compensation for the deficit incurred by TAP on the routes to the Autonomous Regions may benefit from the exemption laid down in Article 92 (3) (a) of the Treaty and Article 61 (3) (a) of the Agreement. The Commission has in fact expressly envisaged the possibility of granting an exemption pursuant to Article 92 (3) (a) to compensation for public service obligations, as promoting regional development (see Memorandum No 2, cited above). Given the degree of access to the market, the compensation of TAP's deficit is the only way to maintain life-line connections with the Autonomous Regions.

The compensation of TAP's deficit is an operating aid of regional character, being designed to overcome a permanent and structural disadvantage caused by the remote location of the Autonomous Regions.

In view of this situation it appears that, as long as the access to such routes is not entirely liberalized, the only way for the Portuguese Government to deal with the serious economic and social problems linked to the remoteness of the Autonomous Regions is to impose a public service obligation in respect of them, and to compensate the deficit incurred by TAP on those routes.

In the present case the Commission considers, on the basis of the elements provided by the Portuguese authorities, that the new method should not, in principle, lead to overcompensation of the deficit incurred by TAP on the routes to the Autonomous Regions. Therefore, the compensation may be considered as regional aid compatible with the common market and the Agreement, under Article 92 (3) (a) of the Treaty and Article 61 (3) (a) of the Agreement, subject to the condition that the compensation paid is not higher than the deficit incurred.

To that end, the Commission requires the Portuguese authorities to submit an annual report on the implementation of the aid scheme.

The Commission notes the Portuguese authorities' undertaking to apply Regulation (EEC) No 2408/92 to the routes in question as from 1 January 1996,

HAS ADOPTED THIS DECISION: