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Low cost airlines get state aid

By CHRIS GRAEME [email protected]

Low cost airlines are bagging 74% of Portuguese state aid aimed at giving struggling airline carriers operating in Portugal a boost.

According to Público newspaper, Irish low cost carrier Ryanair with 18 routes received the most financial support from the €9.4 million package already released, followed by traditional airline SATA with seven routes.

The programme, called Initiative:pt, aims to help airline companies promote themselves within the Portuguese territory in a bid to encourage tour operators to bring more tourists and travellers to Portugal.

The programme, which started in 2007, has been distributing funds through contracts to airline companies including easyJet (five routes), Tui fly (two routes), Jet2.com (one route) and Aigle Azur (one route).

More than half of these funds, totalling around €17.8 million, are already in the hands of these companies that created routes considered strategically important to the country.

The funds are being distributed by the Portuguese tourism bureau Turismo de Portugal and the airports authority company ANA, both responsible for 40% of the total funds granted.

The remaining 20% of the funds fall under the responsibility of regional tourism promotion entities and includes public and private capital.

According to the list released by Turismo de Portugal, from the 39 routes receiving grants, 29 go to low cost airlines and just 10 are traditional airlines – a move which has come under increasing criticism since low cost companies have managed to take a considerable amount of business away from traditional carriers over the years and simply used the funds to expand their

own operations.

The company that most benefitted from the grants, the Irish low cost carrier Ryanair managed to get the lion’s share of the funds because it succeeded in creating a total of 18 new routes.

In second place, the Azores-based airline SATA, a traditional carrier, received funds to support seven routes while TAP only opened up three routes.

Once selected for the applied for grants, the airline companies are given a three-year limit on taking and using

the funds, which are partly allocated in accordance with the number of passengers transported.

This cash is exclusively destined to promoting the company itself and encouraging the setting up of new strategic routes, or increasing the number of flights to existing routes.

The companies are also awarded a fixed incentive which is limited to five years and is to be specifically used in promoting and marketing the new route in partnership with Turismo de Portugal.

The Initiative:pt programme has also come under fire for not releasing the breakdowns of actual amounts in subsidies awarded to each airline company and for what.

In addition, there have been a number of failures on the part of airline carriers to meet their agreed obligations. Sky Europe, for example, had a grant-supported route paid out at the beginning of 2008 and then dropped the destination when it failed to meet commercial expectations.