The EU General Court hands down two judgments dismissing an airline company’s challenges against decisions by the Commission approving French and Swedish measures to support airlines in the context of the COVID-19 pandemic (Ryanair)

On 17 February 2021, the General Court handed down two judgments dismissing Ryanair’s challenges against decisions by the European Commission, approving French and Swedish measures to support airlines in the context of the pandemic (Cases T-238/20 and T-259/20). These judgments are the very first to consider Covid-19 aid.

What you need to know - key takeaways

  • In the wake of the Covid-19 crisis, the Commission has approved a flurry of aid measures to the aviation sector. Ryanair has lodged a torrent of actions in annulment against these decisions, essentially arguing that they contravene the principle of non-discrimination.
  • In its two first judgments, the General Court ruled that State aid may be limited to undertakings with close and stable links to the national economy. Sweden and France were therefore permitted to limit eligibility to their schemes for airlines having a national licence.
  • Ryanair announced that it would appeal these judgments before the Court of Justice.

Background

In the context of the Covid-19 pandemic, Member States notified a flurry of aid measures to the Commission to alleviate the adverse effects of the crisis, notably on the aviation industry. [1] Among its first decisions in this sector, the Commission approved in March and April 2020 respectively:

  • French aid scheme deferring the payment by airlines of certain aeronautical taxes to compensate them for part of the damage suffered due to the Covid-19 outbreak on the basis of Article 107(2)(b) TFEU; and

Both schemes are reserved to airlines holding either a French or Swedish operating licence (i.e. those which have their principal place of business in France or Sweden).

Ryanair, which – as an Irish-registered airline – is not eligible under either scheme, challenged the Commission’s decisions, essentially arguing that they are at odds with the EU principle of non-discrimination on grounds of nationality.

Given the urgency of the situation at hand, the General Court accepted Ryanair’s requests for an expedited procedure and issued its judgments less than 10 months after the application was lodged.

Judgments

The General Court acknowledged that the eligibility criterion in both schemes results in a difference in treatment, which may amount to discrimination on grounds of nationality. It then clarified that:

  • any discrimination on grounds of nationality is prohibited ’without prejudice to any special provisions’; and
  • it is therefore important to ascertain whether the difference in treatment is permitted under the legal basis used to approve the schemes, and more specifically whether (i) the objective of the aid satisfies the requirements of Article 107(3)(b) or Article 107(2)(b) TFEU and (ii) the conditions for granting the scheme are proportionate.

As regards both schemes, the General Court concluded that the difference in treatment was justified. This is because the schemes were necessary and proportionate in light of their objective, i.e. to remedy the effects of the pandemic.

The limitation to airlines with a national licence was justified as it ensures that only airlines with ’stable reciprocal links’ which tie them to national economies would be aid recipients.

The General Court notably dismissed Ryanair’s argument that it is the third largest carrier in France and fourth largest in Sweden, and should therefore also be eligible for aid. It recognised that Member States’ resources are finite and must address priorities. Sweden was therefore entitled to reserve support to airlines contributing the most to Sweden’s connectivity and France to airlines which were most severely affected by the travel restrictions (and proportionately much more affected than Ryanair).

It also confirmed that the case law does not require proof that no other less restrictive measure exists. The Commission is thus not required to examine every alternative measure possible.

Interestingly, the General Court also held:

  • in both judgments, that the context in which the decisions have been adopted (here, the pandemic and extreme urgency) is a relevant factor when assessing compliance by the Commission with the duty to state reasons; and
  • in the Swedish case, that there is no obligation under Article 107(3)(b) or the Temporary Framework to carry out a balancing test, i.e. to weigh the beneficial effects of aid against its adverse effects on trading conditions and the maintenance of undistorted competition.

Comment

These judgments provide support to the Commission’s approach to State aid in the context of the Covid-19 crisis. Their impact therefore extends well beyond the aviation sector.

However, Ryanair has surely not yet said its last words. The airline announced that it would appeal the judgments before the Court of Justice, stating that "[n]ow is the time for the Commission to stop caving in to national governments’ inefficient bail-out policies and start protecting the single market, Europe’s greatest asset for future economic recovery". Moreover, 15 of its challenges are still pending, including against individual aid to national flagship airlines such as Air France KLM, Lufthansa and SAS. The General Court may yet change tack where individual aid is concerned or where the criteria for eligibility to a scheme do not guarantee a stable and close link with the national economy.

Footnotes

[1An overview of the options available for Member States to grant financial support compatible with State aid rules during the Covid-19 outbreak can be found in our more detailed guide on Covid-19 related State aid.

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Citation

Denis Waelbroeck, The EU General Court hands down two judgments dismissing an airline company’s challenges against decisions by the Commission approving French and Swedish measures to support airlines in the context of the COVID-19 pandemic (Ryanair), 17 février 2021, e-Competitions February 2021, Art. N° 99636

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