The European General Court has annulled decisions taken by the European Commission in 2020 and 2021 to approve French state aid for Air France (AF, Paris CDG) during the Covid-19 pandemic on the grounds that Air France-KLM and KLM Royal Dutch Airlines (KL, Amsterdam Schiphol) would also have benefitted from the advantage of the funding over the group’s competitors.
The case is one of many that Ryanair (FR, Dublin International) and its subsidiary Malta Air (MAY, Malta International) brought against aid that many governments of European Union member states handed to airlines to help them survive the impact of the pandemic, generally favouring flag carriers over low-cost carriers.
In its December 20 judgement in cases T-216/21 (Ryanair and Malta Air v Commission (Air France; Covid-19)) and T-494/21 (Ryanair and Malta Air v Commission (Air France-KLM and Air France; Covid-19)), the Luxembourg-based General Court summarised that “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.”
It said that Brussels had “erred in defining the beneficiaries of the state aid granted by excluding the Air France-KLM holding and KLM.”
After examining the economic and operational links between the companies in the holdco, the framework through which the measures were granted, the types of aid involved, and the context, it concluded that “the Air France-KLM holding (in the first case) and KLM (in the second case) were capable of benefiting, at least indirectly, from the advantage granted by the state aid at issue.”
As ch-aviation reported at the time, in late April 2020, France told the European Commission of EUR7 billion euros (USD7.6 billion) in aid it intended to give Air France, which, according to the Commission, was the sole beneficiary of that aid. It was also reported that KLM was considering splitting from Air France as the French and Dutch governments were not coordinating their respective state bailouts.
In March 2021, France notified the Commission of further aid in the form of a recapitalisation of Air France and Air France-KLM, but excluding KLM, totalling EUR4 billion (USD4.4 billion), which Brussels quickly approved.
In both cases, the Commission opted not to raise objections, saying that the measures constituted aid compatible with the EU’s internal market. Ryanair and Malta Air contested the decisions, arguing both that the measures were contrary to EU law and that the EU executive had incorrectly defined the beneficiaries of the aid by deciding that Air France-KLM (in the first decision) and KLM (in both decisions) were not beneficiaries. The court agreed. An appeal can be brought within two months and ten days of the decision.
Reacting to the ruling, Air France said that both it and Air France-KLM had complied with state aid exit regulations but that the companies “will carefully study these judgments and assess their implications. They will consider whether to lodge an appeal on points of law before the Court of Justice of the European Union.”
In its own statement, Ryanair declared that “the court’s intervention is a triumph for fair competition and consumers across the EU” and that it “now calls on the European Commission to order France to immediately recover this multi-billion euro illegal state aid package from Air France-KLM and impose adequate remedies to repair at least some of the damage to competition done by this massive state bailout.”
