EU court upholds Ryanair, Malta Air case against European Union

Low-cost airlines Ryanair and Malta Air won a court case Wednesday against the European Union’s decision to approve billions of euros in state aid by the French government to Air France and holding company Air France-KLM during the COVID-19 pandemic.

Ryanair has filed several court challenges against measures introduced by EU countries to help some airlines weather the fallout of coronavirus restrictions.

The Irish airline welcomed the decision and urged the European Commission “to order France to immediately recover this multi-billion euro illegal state aid package.”

The bloc’s 27 members must seek approval from the commission — which is the EU’s executive branch — when granting financial support to companies. Many countries across Europe did so to help keep their airlines afloat during the pandemic.

Back in 2020, French authorities notified the European Commission of an aid measure of 7 billion euros ($7.67 billion), which was supposed to solely benefit Air France, to the exclusion of all the other companies in the Air France-KLM group. A year later, France told the commission about plans for 4-billion-euro ($4.38 billion) recapitalization of Air France and the holding company.

In both cases, the European Commission didn’t raise objections.

But the European General Court ruled that the Air France-KLM holding and KLM “were capable of benefiting, at least indirectly, from the advantage granted by the state aid at issue” and annulled the European Commission’s decisions.

“Where there are grounds to fear the effects on competition of an accumulation of state aid within the same group, the onus is on the Commission to exercise particular vigilance in examining the links between the companies belonging to that group,” the court said.

Air France-KLM and Air France said they will consider whether to lodge an appeal before the Court of Justice of the EU.

“In parallel, they will contribute to any exchange between the French State and the European Commission with a view to the adoption of possible new approval decisions,” the companies said.

The European Commission is also the EU’s anti-trust watchdog. As pandemic restrictions in 2020 brought travel to a halt and threatened the existence of airlines, the commission eased its policies, approving billions of euros in support for national flag carriers.

Under a fast-track system set up during what the commission described as “an unprecedented crisis,” Brussels approved around 3 trillion euros in state support across all sectors in member nations. Ryanair believes that 40 billion euros was granted to Europe’s airline sector alone.

The EU General Court had previously ruled in other cases that the European Commission had been wrong to approve massive bailouts designed to help German flag-carrier Lufthansa and Scandinavian airline SAS deal with the impact of the pandemic restrictions. It also annulled approval of $140 million of COVID-19 aid for Italian airlines.

“The European Commission’s Directorate General for Competition has still not acted to force recovery of the unlawful aid, nor has it imposed any measures to remedy the damage to competition caused by the Swedish, Danish, German, and Italian governments favoring their local airlines over other EU airlines, in breach of EU law,” Ryanair said. “Today’s judgments underline the need for the European Commission to immediately act to recover these illegal state aid packages and order remedies to restore at least some of the damage done to competition.”