European court rules rescue of Spain’s Air Europa was legal

The General Court of the European Union has ruled that the EUR475 million euros (USD578.8 million) in Spanish government loans handed to Air Europa (UX, Palma de Mallorca) last year was legal, rejecting a case Ryanair (FR, Dublin Int’l) had brought against the European Commission, which approved the aid. The state funds, which Madrid approved in October 2020 and which were provided through the sovereign wealth fund (Sociedad Estatal de Participaciones Industriales – SEPI), were part of a EUR10 billion (USD12.2 billion) fund in Spain for pandemic-hit companies that the European Commission greenlit last July. In its May 19 ruling, which can still be appealed at Court of Justice of the European Union, the general court said that the measure complied with EU law and had been “proportionate and non-discriminatory”. As previously reported, in two other judgements on the same day the court agreed with Ryanair on state aid for KLM Royal Dutch Airlines (KL, Amsterdam Schiphol) and TAP Air Portugal (TP, Lisbon), annulling European Commission approvals of loans to the flag carriers of EUR3.4 billion (USD4.15 billion) and EUR1.2 billion (USD1.46 billion), respectively. In the Spanish case, the Irish low-cost carrier had requested the cancellation of the SEPI fund for Covid-struck strategic companies. It argued that the fund had been a discriminatory measure violating the right to the free provision of services in the EU by benefitting only companies based in Spain. It also claimed that the commission had erred in allowing Madrid to choose the beneficiaries at its discretion. The court dismissed these allegations, confirming that the measure respected EU law, as the objective of the fund has been to remedy the serious disturbance that the pandemic inflicted on the Spanish economy in the medium and long term. The court declared that “the restriction of the scheme at issue to non-financial undertakings which are of systemic or strategic importance for the Spanish economy, which are established in Spain and have their principal places of business in its territory, is both appropriate and necessary in order to achieve the objective of remedying the serious disturbance in the Spanish economy.” Moreover, Ryanair had not managed to prove “how being deprived of access to recapitalisation measures covered by the scheme at issue would deter it from establishing itself in Spain or from providing services to and from Spain,” the ruling said. In addition, the court rejected as unfounded Ryanair’s claim that the commission had erred in considering that the fund constituted a state aid scheme. Air Europa and Ryanair were not immediately available for comment.