Ryanair Triumphs Again as EU Court Overturns KLM’s EUR 3.4 Billion Bailout
In a landmark decision, the General Court of the European Union has once again annulled the European Commission’s approval of a EUR 3.4 billion (USD 3.66 billion) bailout granted to KLM Royal Dutch Airlines during the Covid-19 pandemic. This ruling marks a significant victory for Ryanair, which has persistently challenged the legality of state aid to national carriers, arguing that such support distorts competition within the aviation sector.
The case, known as ‘Case T-146/22: Ryanair v Commission (KLM II; Covid-19)’, scrutinized the European Commission’s re-approval of the Dutch state aid to KLM, following a previous annulment in May 2021. The Luxembourg-based court identified a crucial oversight in the Commission’s decision-making process, noting that it failed to consider all potential beneficiaries of the aid within the Air France-KLM group, thereby excluding the holding company Air France-KLM and Air France itself from its analysis.
The court’s thorough examination of the intricate relationships within the Air France-KLM group, including the capital, organic, functional, and economic links between its entities, led to the conclusion that both Air France-KLM and Air France could, at least indirectly, benefit from the state aid granted to KLM. This revelation underscores the complex dynamics of financial support within airline groups and its potential impact on competition.
In response to the court’s decision, KLM has indicated its intention to closely examine the verdict and explore possible next steps. The airline also highlighted that it had already repaid the loans associated with the state aid by June 2022 and terminated the credit facility in April 2023.
Ryanair, on the other hand, has hailed the ruling as a victory against what it views as illegal state aid. The airline is now urging the European Commission to demand immediate repayment of the funds from the Netherlands and to implement measures to mitigate the competitive imbalance created by the bailout. Ryanair’s call to action extends beyond this specific case, advocating for the recovery of over EUR 40 billion (USD 43 billion) in aid provided to EU flag carriers during the pandemic.
The European Commission, facing the annulment of its decision for a second time, has expressed its intention to carefully review the judgment and contemplate any subsequent actions. This ongoing legal saga highlights the contentious nature of state aid in the aviation industry, especially in the context of the unprecedented challenges posed by the Covid-19 pandemic. It underscores the delicate balance between supporting national carriers through crises and maintaining fair competition in the European aviation market.