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Small airport subsidies to take off – but long-haul plans have wings clipped

SCOTLAND's secondary airports are poised to benefit from a new multi-million pound fund to subsidise routes to Europe – but Glasgow and Edinburgh airports and all long-haul routes will be excluded under state-aid rules.

According to papers seen by the Sunday Herald, Scottish Enterprise (SE) believes it has finally devised a new funding scheme, aimed at the likes of Aberdeen, Prestwick, Dundee and Inverness, that will circumvent the European Union rules that controversially killed off the Air Route Development Fund (ARDF) in 2007.

The new fund will seek EU approval early next year and represents a substantial change of strategy for the Scottish Government, which has been publicly focused on persuading Whitehall to devolve air passenger duty for some time, but without success.

Now the Scottish authorities are proposing to offer up to 30% of the start-up costs for new short-haul routes for their first three years in operation – the period where they tend to make losses. As well as excluding Glasgow and Edinburgh, the destinations will have to be airports with fewer than five million passengers a year.

This rules out hubs such as Paris Charles de Gaulle, Amsterdam Schiphol, Frankfurt and Heathrow, but opens up the potential for subsidised routes to scores of smaller airports. Priority destinations are to include Scandinavia, Germany, France and the Benelux countries, all of which are seen as offering the greatest potential for tourism and trade. London's secondary airports will also be prioritised.

SE managers insisted that Edinburgh and Glasgow airports would not be overly disadvantaged, since the new fund is being underpinned by a push across the organisation to make other funds such as regional support assistance available to airlines and offer intangibles such as market intelligence.

This will include an agreement with other public bodies like VisitScotland and Highlands and Islands Enterprise to offer packages to airlines that might include co-ordinating spending across the organisations in areas such as marketing both destinations on the route in question. This is something that the Glasgow City Marketing Bureau, for example, has been doing on a smaller scale for some time.

The enterprise agency had also been hoping to introduce a new fund to subsidise 50% of the first three years' costs of setting up long-haul routes, in another move that would have been open to all airports. This would have helped with ambitions to increase the numbers of direct routes to priority destinations like the US east coast and the high-growth Middle East and China.

It would also have directly targeted the area in which Scotland is most deficient, according to a recent study by Avia. However lawyers are understood to have advised that such a scheme would not be acceptable within the rules, so the proposal will not now go before the EU.

Julian Taylor, executive director at SE, said: "I'm convinced that in two or three years' time, we will be a heck of a lot better connected than without this work. We would also stress that we are open for business to all airlines. We will also support long-haul flights with our package of measures.

"We can make a good argument for coming here without that dedicated fund. The financial figures aren't that different at the end of the day."

Richard Baker, Labour shadow cabinet secretary for infrastructure and capital investment, said: "We welcome this news, but it has taken ministers rather a long time. It's been over five years since ARDF ended.

"It's also regrettable that we can't focus on our two largest airports because they are crucial to our economy. But I accept that ministers have to work within the EU rules."

The ARDF was seen as a huge benefit to the Scottish economy, creating a total of 55 new routes in its five-year existence. Politicians and lobbyists of various colours have been calling for some EU-friendly version to be reinstated ever since. The number of international routes out of Scotland rose from 20 in 2002 to 45 in 2007. It has since fallen slightly to 43.

The EU is also due to publish proposals next year that will revise the current state-aid system for air travel. No-one appears to know what is coming, but there are hopes that they will be relaxed to satisfy the current need for economic growth.

A number of other countries are currently being investigated for breaching state-aid rules around airlines and airports, including Ireland, Romania and Germany.

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