The General Court of the European Union ruled in favour of Ryanair by annulling, on Wednesday 19 May, two European Commission decisions approving the granting of State Aid to the Dutch airline KLM (case T-643/20) and the Portuguese airline TAP (case T-465/20).
However, in both cases, the effects of the annulment of the decisions, including the recovery of the aid, are suspended pending a new Commission decision. Noting the judgments, the Commission indicated that it would study them in detail before deciding how to proceed.
Case T-643/20. In response to the economic crisis resulting from the Covid-19 pandemic, the Netherlands provided 3.4 billion euros in State Aid (State guarantee, loan) to KLM, a subsidiary of the holding company Air France-KLM.
The Commission found the aid to be compatible with the internal market and in line with the temporary rules in force since April 2020 (see EUROPE 12526/8). The institution had done the same with 7 billion euros in State Aid (public guarantee, loan) from France to Air France, another subsidiary of the holding company Air France-KLM.
Brought before the General Court by the Irish company Ryanair, the Court considered that the Commission had not given sufficient reasons for its decision. In particular, it believes that the aid granted to Air France constitutes a contextual factor that has to be taken into consideration. And where an accumulation of public aid within the same group may have effects on competition, the Commission must examine the links between the companies in the same group in order to verify whether they form a single economic unit and, therefore, a single beneficiary for State Aid purposes.
However, the contested decision does not analyse the composition of the shareholding of AirFrance and KLM or provide information on the functional, economic and organic links between the holding company and its subsidiaries, even though the holding company is involved in the administration of aid to KLM and Air France. Nor does it explain whether there is a mechanism to prevent aid to Air France from benefiting KLM and vice versa.
See the Court’s judgment: https://bit.ly/2T4mWU4
Case T-465/20. Ryanair is also contesting the 1.2 billion euros in State Aid (loan) from Portugal to the parent company that wholly owns TAP Air Portugal.
The Commission considered the aid compatible with the internal market and in line with its 2014 guidelines on State Aid for rescuing and restructuring companies in difficulty.
However, the General Court again found that the EU institution had not sufficiently substantiated its decision by demonstrating the existence of the three cumulative conditions for the granting of public aid of this type: - whether the beneficiary of the aid belongs to a group; - whether the difficulties faced by the beneficiary are intrinsic and are not the result of an arbitrary allocation of costs within the group; - whether those difficulties are too serious to be dealt with by that group itself.
See the Court’s judgment: https://bit.ly/3uXIrnw
Case T-628/20. In a third case, the Irish airline is challenging the compatibility with EU rules of the Spanish fund to support the solvency of strategic Spanish companies that are experiencing temporary difficulties due to the Covid-19 pandemic. Endowed with 10 billion euros until the end of June 2021, this fund can support the recapitalisation of non-financial companies established in Spain and considered systemic or strategic for the country’s economy.
This time, the General Court rejected Ryanair’s appeal. It considers that the Spanish fund, by benefiting Spanish companies, is justified by the legitimate objective of remedying serious disturbances in the economy and does not infringe the principle of non-discrimination on grounds of nationality. Furthermore, after recalling that the freedom to provide services in the transport sector is subject to a specific legal regime (Regulation 1008/2008), the General Court is of the opinion that Ryanair has not established how the exclusion of access to the Spanish fund deters the company from establishing itself in Spain.
See the Court’s judgment: https://bit.ly/3ym3QJh
In February, the General Court validated the public aid paid by France and Sweden to save their airlines Air France and SAS (see EUROPE 12660/3). On 9 June, it will decide on German aid to Condor Flugdienst. (Original version in French by Mathieu Bion)