Court Decides State Aid For Air France-KLM & TAP Broke Rules

The European Union (EU) General Court has determined that state aid granted to Air France-KLM and TAP violated EU rules. Europe’s second-highest court annulled approval for the aid packages, citing a lack of justification and reasoning from the European Commission. However, the annulments and cash repayments will be suspended until further rulings are made by the European Commission.

KLM A330
Air France-KLM and TAP were granted a total of 4.6 billion euros ($5.6 billion) in state aid. Photo: KLM

EU General Court annuls approval of state aid

The Luxembourg-based General Court has ruled that 3.4 billion euros ($4.15 billion) in aid for Air France-KLM and 1.2 billion euros ($1.46 billion) in aid for TAP went against EU rules on state aid. Both airlines were granted large cash injections in 2020 to help them stay afloat.

The General Court said in a statement,

“The General Court annuls the Commission’s decision to approve the Netherlands financial aid for the airline KLM amid the COVID-19 pandemic on the grounds of inadequate reasoning.”

TAP Air Portugal
The European Commission will now examine the General Court’s decision. Photo: Getty Images

A similar decision was made regarding state aid granted to Portuguese carrier TAP, with the court citing “an inadequate statement of reasons” on the part of the European Commission.

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The rulings won’t be enforced imminently

Despite the legal rulings, their application will be suspended pending further decisions by the Commission. The Commission will examine the findings of the General Court and may yet reverse the decision.

Consequently, both carriers won’t have to repay the bailouts imminently, with KLM claiming the General Court’s decision has “no consequences” until the European Commission makes further rulings.

KLM 737 parked
KLM has dismissed the decision as having “no consequences” for the airline. Photo: Getty Images

Portugal’s Prime Minister, Antonio Costa, stressed that the decision is still a preliminary one and the state aid is justifiable due to the impact of the COVID pandemic.

Costa said,

“Given the crisis that hit the aviation sector around the world, it was unthinkable for the European Commission not to lift restrictions on state aid.”

The loudest voice against EU state bailouts has been Ryanair, which filed a total of 16 cases against the European Commission for its approval of various state aid packages. The Irish carrier put up stern resistance to the bailouts, which it claimed were “at the expense of fair competition and consumers.”

Ryanair welcomed the decision in a statement today, saying,

“The European Commission’s approvals of state aid to Air France-KLM and TAP went against the fundamental principles of EU law and reversed the clock on the process of liberalization in air transport by rewarding inefficiency and encouraging unfair competition.”

Ryanair, Boeing 737 MAX, Milan
Ryanair will be pleased with today’s legal rulings. Photo: Getty Images

Today’s legal victory is in contrast to last month’s decision by the General Court, which rejected Ryanair’s cases against Scandinavian airlines SAS and Finnair. Ryanair has several active legal challenges, including the 11 billion euros ($13.4 billion) bailout for German airline Lufthansa.

Ryanair CEO Michael O’Leary famously claimed the airline’s reliance on state aid was “like the drunken uncle at the end of a wedding, drinking from all the empty glasses. They can’t help themselves.”

Lufthansa, COVID-19, Q1 Results
The airline will be hoping for a similar result in its case against Lufthansa. Photo: Getty Images

Ryanair concluded,

“Unless halted by the EU Courts in line with today’s rulings, this State aid spree will distort the market for decades to come.  If Europe is to emerge from this crisis with a functioning single market, airlines must be allowed to compete on a level playing field.”

Do you agree with the General Court’s rulings today? Do you see the European Commission upholding the decisions? Let us know your insights in the comments.