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In the last decade, the European air transport industry has undergone a process in several stages of transition towards a single market. Liberalization has been closely linked to the effective application of the state aid rules of the EC Treaty. / In principle, direct aid to undertakings within the common market is not prohibited by the state aid rules in the Treaty. However, aid granted by Member States that distorts or threatens to distort competition by giving one airline an unfair advantage over its competitors, and in so far as it affects trade between Member States, is incompatible with the Treaty. Certain mandatory or discretionary exemptions may apply to aid to airlines providing that the measure fulfills the conditions and requirements as stated by the Treaty. The European Commission and the EFTA Surveillance Authority have a wide discretion in deciding whether or not certain aid measures fall within the stated exemptions. Where the market forces alone are not able to achieve the desired results or if they are only able to do so in a limited capacity, such exemptions may be warranted to the extent not contrary to the common interest. / A special mechanism is in place to ensure that state aid is properly scrutinized in the light of the demands of the Treaty and the EEA Agreement. The EC Commission or the EFTA Surveillance Authority must be notified of all aid measures in order to assess their compatibility with state aid rules.

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