Opinion of Advocate General Ćapeta delivered on 7 April 2022.

• Jurisdiction: European Union
• Date: 07 April 2022
• Court: Court of Justice (European Union)

OPINION OF ADVOCATE GENERAL

ĆAPETA

delivered on 7 April 2022(1)

Joined Cases C‑331/20 P and C‑343/20 P

Volotea, SA (C‑331/20 P)

easyJet Airline Company Ltd (C‑343/20 P)

v

European Commission

(Appeal – Action for annulment – State aid – Imputability – Indirect beneficiaries – Applicability and application of the market economy operator test)

I. Introduction

1. ‘L’inverno aveva rinfrescato anche il colore delle rocce.’ (‘Winter had refreshed even the colour of the rocks.’) (2)

2. The present cases arise many seasons after Grazia Deledda picturesquely described the arrival of spring on the island of Sardinia, Italy. (3) However, at their core, they also relate to the undervalued beauty of Sardinia during the winter months.

3. It was precisely to encourage tourism during that season, that the Regione Autonoma della Sardegna (Autonomous Region of Sardinia, Italy) (‘the Region’) set up a scheme to attract flights to airports located on the island of Sardinia (‘the aid scheme’).

4. The European Commission found that scheme to constitute incompatible aid in favour of several airlines (‘the contested decision’). (4) Among those airlines from which aid should be recovered were Volotea SA and easyJet Airline Company Ltd (collectively, ‘the appellants’). Those parties unsuccessfully challenged the Commission’s decision before the General Court. (5) Both companies appealed against the General Court’s judgments.

5. In the present cases, the Court of Justice is invited to assess a number of findings of the General Court relating to the determination of the Region’s scheme as State aid. However, the ‘elephant in the room’ is the applicability of the market economy operator (‘MEO’) test.

II. Facts and proceedings

A. Background to the dispute

6. The facts and the legal background of the present cases are described in detail in the judgments under appeal. (6) For the purposes of the present Opinion, they can be summarised as follows.

7. By legge regionale n. 10 – Misure per lo sviluppo del trasporto aereo (Regional Law No 10 – Measures for the development of air transport) (7) (‘Law 10/2010’), the Region made funding available to airlines with a view to opening up new routes and developing existing routes to and from Sardinia, including during the winter months.

8. The funding was transferred to the airlines through three Sardinian airports. Only two of those airports are of concern for the present cases: Cagliari-Elmas and Olbia airports. They are operated by companies that are either majority-owned by the chamber of commerce of Cagliari-Elmas or by private shareholders (collectively, ‘the airport operators’).

9. By measures implementing Law 10/2010, the Region defined activities for which funding could be received. Those of interest for the present appeals are the increase in air traffic by airlines (activity 1) and the promotion of Sardinia as a tourist destination by airlines (activity 2).

10. Funding from the Region’s budget was provided in the form of grants. Those grants were awarded to the airport operators, which, in turn, distributed the funds to various airlines. The Region released funding solely after assessment and approval of detailed ‘plans of activities’, which the operators had to submit to it. The Region also monitored their implementation.

11. The appellants are airlines that concluded agreements with the airport operators to carry out activities 1 and 2. Their respective plans of activities were approved by the Region, after which the appellants received compensation from the airport operators, under the scheme described above, for increasing the number of flights and routes to and from the two airports and for promoting Sardinia as a tourist destination.

12. On 30 November 2011, in accordance with Article 108(3) TFEU, the Italian Republic notified the scheme to the Commission. After the initiation of a formal investigation procedure, the Commission adopted the contested decision on 29 July 2016.

13. That decision states that the aid scheme in question does not involve State aid, within the meaning of Article 107(1) TFEU, to the airport operators (Article 1(1) of the contested decision); that it does constitute State aid in favour of the airlines involved, including the appellants, in so far as it relates to the operations of those airlines at Cagliari-Elmas and Olbia airports (Article 1(2) of that decision); that the aid in question was put into effect by Italy in breach of Article 108(3) TFEU and that it is incompatible with the internal market (Article 1(3) and (4) of the contested decision). It, finally, requires that that aid be recovered from the airlines (Article 2(1) of that decision).

B. The actions before the General Court

14. By means of applications lodged on 6 September 2017 and 11 January 2018, the appellants brought actions for annulment of the contested decision.

15. On 13 May 2020, the General Court delivered the judgments under appeal. It dismissed the appellants’ actions and ordered them to pay the costs of the proceedings.

C. Procedure before the Court of Justice

16. In its appeal before the Court of Justice, lodged on 22 July 2020, Volotea asks the Court to set aside points 1 and 2 of the operative part of the judgment in Case T‑607/17; annul Article 1 of the contested decision and the recovery order on Italy to the extent that it concerns Volotea; and, in the alternative, set aside points 1 and 2 of the operative part of the judgment in Case T‑607/17, refer the case back to the General Court; and order the Commission to pay the costs.

17. In its appeal before the Court, lodged on 23 July 2020, easyJet asks the Court to set aside the judgment in Case T‑8/18 and/or to annul Articles 1, 2, 3 and 4 of the contested decision to the extent that it concerns easyJet; and, in the alternative, to set aside the judgment under appeal, refer the case back to the General Court; and order the Commission to pay the costs.

18. For its part, the Commission contends that the Court should dismiss the appeals and order the appellants to pay the costs.

19. By decision of the President of the Third Chamber of the Court on 22 February 2021, the two cases were joined for the purposes of the Opinion and the judgment.

20. The parties replied to written questions put to them by the Court.

III. Assessment

21. While the Treaties do not contain a definition of what constitutes State aid, the Court has insisted that that concept requires an interpretation on the basis of its objective features. (8) Interpreted in that manner, Article 107(1) TFEU comprises four (main) cumulative conditions: that the measure in question be imputable to the State or financed through State resources; that it concerns an undertaking; to which it grants an advantage; and that that measure is selective. A measure satisfying those criteria is generally considered to be capable of distorting competition and affecting trade in the internal market. (9)

22. Due to the development in how the purpose of State aid control is understood, (10) and as a consequence of Member States’ inexhaustible imagination when it comes to intervening on the market, the Court is faced with the constant need to re-explain the criteria underlying Article 107(1) TFEU and to adjust them for their application to new situations. The present cases are no exception to that rule.

23. Indeed, the scheme at issue in the present cases seems to be an imaginative effort to bring more tourists to Sardinia, including during the winter months, with a view to boosting that region’s economic development.

24. As Sardinia is an island, tourists can obviously arrive by air. Airlines do business with airports. The scheme envisaged by the Region therefore involved airports developing plans and working together with airlines in order to bring more flights to the island. If those plans were approved by the Region, the latter would provide funding to the airport operators, which would distribute those funds to the airlines concerned. The scheme therefore involved an interplay of both public (the Region) and private (the airports and the airlines) actors.

25. For the purposes of the concept of State aid, the design of that scheme raises several questions. For instance, does the channelling of funds through a private intermediary rid those funds of their public provenance? Which of the private parties involved, if not both, must be deemed the beneficiary of that scheme? Finally, does the said scheme provide an advantage which would not have been available on the market?

26. The Court has asked that I focus my analysis on providing answers to those questions. I will, therefore, restrict my opinion to the concepts of imputability (IV); secondary beneficiaries of aid (V); and the methodology for determining or ruling out the existence of an advantage (VI).

IV. Imputability

27. Financing by the State or through State resources is a constitutive element of the concept of State aid. (11) That means that the resources used in a measure must be imputable to the State. (12) In their respective appeals, the appellants challenge precisely that determination: they argue that the funds received from the airport operators could not be imputed to the Region. (13)

28. Their arguments are essentially three-fold. (14) First, they argue that, in the judgments under appeal, the General Court failed to assess appropriately the criteria arising from the judgment in France v Commission. In particular, it is argued that the General Court’s reliance on the existence of a supervisory mechanism to monitor the distribution and use of the funds at issue was insufficient to establish imputability. Second, the appellants allege that the General Court misapplied the judgment in Belgium and Magnetrol International v Commission, (15) in that it did not assess whether the airport operators had a margin of discretion to define essential elements of the aid scheme in...