(1)

On 27 January and 28 February 2006, the Italian Republic transmitted to the Commission the Decrees Nos 35 and 36 of the Ministry of Infrastructure and Transport of 29 December 2005 (published in the Gazzetta Ufficiale della Repubblica Italiana on 11 January 2006) imposing public service obligations (PSOs) on a total of 16 routes between Sardinia and the main national airports and requested the Commission to publish a notice in the Official Journal of the European Union in accordance with Article 4(1)(a) of Regulation (EEC) No 2408/92.

(2)

On 24 March 2006 the Commission published a notice concerning the public service obligations imposed by Decree No 35 (the ‘Notice of 24 March 2006’) (2) on the following six routes:

(3)

On 21 April 2006 the Commission published another notice concerning the public service obligations imposed by Decree No 36 (the ‘Notice of 21 April 2006’) (3) on the following 10 routes:

(4)

The main features of the PSOs published in the two notices are as follows:

(5)

It should be noted that prior to imposing the public service obligations referred to in this Decision, the Italian Republic had imposed public service obligations by the Decrees of 1 August 2000 and of 21 December 2000 on six routes between the Sardinian airports and Rome and Milan. Those obligations were published in the Official Journal of the European Communities on 7 October 2000 (4) (the ‘Notice of 7 October 2000’). In accordance with Article 4(1)(d) of Regulation (EEC) No 2408/92, the routes concerned were put to tender to select the carriers authorised to operate them on an exclusive basis with financial compensation (5).

(6)

The carriers authorised to operate the routes in accordance with the public service obligations imposed were:

(7)

These arrangements were replaced by the public service obligations imposed by the Italian Decree of 8 November 2004 and published in the Official Journal of the European Union of 10 December 2004 (the ‘Notice of 10 December 2004’) (6). Following a decision of the Regional Administrative Tribunal of Lazio of 17 March 2005 which annulled partially the Decree of 8 November 2004, the Italian authorities informed the Commission that they had ‘suspended’ those obligations. A notice to this effect was published in the Official Journal of the European Union on 1 July 2005 (7). On 6 December 2005 the Italian authorities informed the Commission that the Decree of 8 November 2004 had been repealed with effect from 15 November 2004.

(8)

On 28 February 2006 the Italian authorities informed the Commission of the adoption on 23 February 2006 of a decree amending Decree No 35, of 29 December 2005, whereby the Decrees of 1 August 2000 and 21 December 2000 were repealed as from 2 May 2006.

(9)

In a communication to the Commission dated 22 March 2005, the Italian authorities stated that the PSOs published in the Notice of 7 October 2000 were being applied ‘on a voluntary basis’. This was the first time that the Italian authorities informed the Commission that those PSOs were still being applied.

(10)

The rules on public service obligations are laid down in Regulation (EEC) No 2408/92 (the ‘Regulation’), which defines the conditions for applying the principle of freedom to provide services in the air transport sector.

(11)

Public service obligations are defined as an exception to the principle of the Regulation that ‘subject to this Regulation, Community air carriers shall be permitted by the Member State(s) concerned to exercise traffic rights on routes within the Community’ (8).

(12)

The conditions for imposing them are defined in Article 4. They are interpreted strictly and in accordance with the principles of non-discrimination and proportionality. They must be adequately justified on the basis of the criteria laid down in the same Article.

(13)

More precisely, the rules governing public service obligations provide that these may be imposed by a Member State in respect of scheduled air services to an airport serving a peripheral or development region in its territory or on a thin route to any regional airport, provided the route is considered vital for the economic development of the region in which the airport is located and to the extent necessary to ensure on that route the adequate provision of scheduled air services satisfying fixed standards of continuity, regularity, capacity and pricing, standards which air carriers would not meet if they were solely considering their commercial interest.

(14)

The adequacy of scheduled air services is assessed by the Member States having regard to the public interest, the possibility of having recourse to other forms of transport, the ability of such forms to meet the transport needs under consideration and the combined effect of all air carriers operating or intending to operate on the route.

(15)

Article 4 provides for a two-phase mechanism: in the first phase (Article 4(1)(a)) the Member State concerned imposes a public service obligation on one or more routes, which is open to all Community carriers, provided they meet the obligations. Where no carrier applies to operate the route on which the public service obligation has been imposed, the Member State can move on to a second phase (Article 4(1)(d)) which limits access to that route to only one carrier for a renewable period of up to three years. The carrier is selected by a Community tender procedure. The selected carrier can then receive financial compensation for operating the route in accordance with the public service obligation.

(16)

By virtue of Article 4(3) the Commission may decide, following an investigation, carried out either at the request of a Member State or on its own initiative, whether the public service obligation published should continue to apply. The Commission must communicate its decision to the Council and to the Member States. Any Member State may refer the matter to the Council which, acting by a qualified majority, may take a different decision.

(17)

Article 4(1)(a) of the Regulation lists a certain number of cumulative criteria for imposing public service obligations:

(18)

In addition, the public service obligations must comply with the basic principles of proportionality and non-discrimination (see, for example, Court of Justice decision of 20 February 2001, in case C-205/99, Asociación Profesional de Empresas Navieras de Líneas Regulares (Analir) and others v Administración General del Estado, [2001] ECR p. I-01271).

(19)

In the case in point, the notices imposing public service obligations published in the Official Journal at the request of the Italian Republic contains several provisions which raise serious doubts as to their conformity with Article 4 of the Regulation. In particular:

(20)

The requirement that interested carriers operate six of the routes to which the public service obligations apply as packages may be particularly restrictive of the freedom to provide services. It seems to have no basis in Article 4(1) of the Regulation and could be in breach of the principles of proportionality and non-discrimination; considering in particular that:

(21)

The possibility mentioned in point 1.6 of both Notices that, if several carriers accept the operation of a route subject to PSOs, ENAC shall ‘intervene’ in order to avoid ‘overcapacity’ by ‘redistributing routes and frequencies’ among the carriers concerned appears to have no basis on Article 4(1) of the Regulation and could be contrary to Article 3(1) insofar as these measures restrict the freedom of each carrier to choose which routes and frequencies it wishes to serve. Furthermore, the existence of ‘overcapacity’ seems to indicate that there is no need of regulatory intervention to ensure that transport operators meet basic demand.

(22)

The requirement, in point 4.8 of both Notices, that reduced fares must be applied to passengers solely because of their place of birth (in this case Sardinia) does not appear to have a legitimate justification and may constitute prohibited indirect discrimination for reasons of nationality (see for example case C-338/01 Commission v Italy [2003] ECR p. I-00721).

(23)

No adequate explanation has been given in order to justify why:

(24)

Despite calls from the Commission drawing the attention of the Italian authorities to these problems and expressing doubts as to the conformity of the notices imposing public service obligations with the Regulation, the Italian Republic decided to have them published.

(25)

As soon as these were published, several interested parties contacted the Commission to informally express their concerns and complaints regarding the disproportionate and discriminatory nature of the public service obligations.

(26)

In the light of the above, and by virtue of Article 4(3) of the Regulation, the Commission may carry out an investigation to determine whether the development of one or more routes is unduly restricted by the imposition of public service obligations, in order to decide whether these obligations should continue to be imposed on the routes in question.

(27)

On 9 March 2006 the Commission requested the Italian authorities, as provided in Article 12 of the Regulation, to supply certain information with respect to the public service obligations in issue. The reponse provided by the Italian authorities on 22 March 2006 was incomplete.