The EU General Court sided with Ryanair and ruled against government aid to Air France-KLM and TAP Air Portugal, which were previously approved by the EU Commission. However, the court dismissed Ryanair’s claim against state aid in Spain.
On May 19, 2021, the General Court of the European Union annulled two EU Commission’s decisions to allocate state aid to Air France-KLM and TAP Air Portugal.
In the Air France-KLM case, the Court ruled that the EU Commission did not take into account the previous French government‘s support of €7 billion to Air France, the other subsidiary air carrier of the parent company Air France-KLM.
The Court also concluded that the EU Commission “failed to set out the reasons why the aid previously granted to Air France had no impact on the assessment of whether the aid adopted for KLM was compatible with the internal market, even though Air France and KLM are two subsidiaries of the same holding company,” as written in the General Court judgment.
In the case of Portugal’s national air carrier TAP Air Portugal, the Court canceled the EU Commission’s approval arguing that the authority failed to conduct analysis to specify whether the airline belonged to a group within the Commission’s state aid guidelines. The ruling says:”[…] the Commission neither found nor specified whether the beneficiary belonged to a group within the meaning of point 22 of those Guidelines.”
Meanwhile, the same day after annulling two EU Commission’s decisions, the Court also released another ruling regarding Ryanair‘s action for the annulment of the Commission’s approval for support funding for strategic Spanish companies which are experiencing financial difficulties amid the ongoing pandemic. The court dismissed Ryanair’s claim and concluded that the support was compatible with EU law.
In April 2021, the EU Commission gave the green light for the government of France to allocate Air France-KLM €3.4 billion in state aid in order to mitigate the financial damage the airline suffered amid the ongoing pandemic. In June 2020, the Commission approved the Portuguese government’s request to support its national flag carrier TAP Air Portugal with a €1.2 billion injection.
To date, the EU Commission has approved a total of €30 billion of state aid since the beginning of the COVID-19 pandemic in 2020, including €14.4 billion for Air France-KLM, €11 billion for Lufthansa Group, €3.5 billion for Alitalia, €1.3 billion for SAS, €1.6 billion for TAP Air Portugal, €1.2 billion for Finnair, as well as €0.8 billion for Norwegian, €0.65 billion for LOT, €0.6 billion for Condor and €0.5 billion for Air Europa.
Ryanair praises the court’s ruling
Meanwhile, the ruling was praised by Irish ultra-low-cost-carrier Ryanair, a harsh critic of state aid to airlines.
“One of the EU’s greatest achievements is the creation of a single market for air transport. The European Commission’s approvals of State aid to Air France-KLM and TAP went against the fundamental principles of EU law and reversed the clock on the process of liberalization in air transport by rewarding inefficiency and encouraging unfair competition,“ the airline’s spokesman was quoted in the Ryanair statement published on May 19, 2021.
Ryanair, which has hubs in both France and Portugal, also called the state subsidies a “discriminatory” move, arguing that “unless halted by the EU Courts”, the aid would “distort the market for decades to come”. The air carrier appealed the Commission’s approvals of the state subsidies to the EU General Court in 2020, claiming that in order to emerge from the pandemic-caused crisis as a single aviation market, the companies must be allowed to “compete on a level playing field”.
“Today’s rulings in 2 of more than 20 appeals filed to date before the General Court are an important victory for consumers and competition,” a spokesman added.
In June 2020, Ryanair caught the public attention after publicly slamming its rival Lufthansa (LHAB) (LHA), which received a €9 billion state aid package from the government of Germany. At the time, the Chief Executive Officer (CEO) of Ryanair Michael O’Leary stated that the financial support for the German air carrier was a “spectacular case of a rich EU Member State ignoring the EU Treaties to the benefit of its national industry and the detriment of poorer countries.”
However, the EU Commission did not reverse its decision.