The European Union’s second-highest court has reversed a decision to grant state aid to KLM Royal Dutch Airlines during the height of the pandemic. This ruling comes as a result of a case brought forward by low-cost carrier Ryanair, stating that Air France and Air France-KLM may have also benefited from Dutch support.
The General Court of the European Union explained that the European Commission had made an error by excluding Air France and Air France-KLM as potential beneficiaries of state aid. Following this ruling, shares of Air France-KLM, the carrier group that includes KLM, experienced a decline of over 4%.
The court concluded that both the Air France-KLM holding and Air France could have indirectly benefited from the assistance provided by the Dutch government.
During the peak of the pandemic, governments worldwide rushed to rescue their national carriers due to travel restrictions and border closures. Consequently, many airlines received substantial financial support in the form of state-backed loans.
In 2020, the European Commission approved 3.4 billion euros ($3.66 billion) in state aid for KLM from the Dutch government. As of 2022, KLM announced that it had fully repaid the loans it received, amounting to EUR942 million, from both the Dutch government and banks. This repayment marks the final installment of the EUR3.4 billion credit facility.
The Implications of the Ruling on State Subsidies to European Airlines
Representatives for KLM and Air France-KLM have announced that they will be examining a recent ruling on state subsidies to assess its implications. The decision in question will determine whether the companies should consider appealing to the European Court of Justice, the highest court in the EU. The Dutch government has not yet provided any comments on the significance of the ruling.
This ruling signifies a significant victory for Ryanair, as it adds to their history of successfully challenging state subsidies provided to European flag carriers. The law firm Oswell & Vahida, which represented Ryanair, expressed their satisfaction with the decision. It is worth noting that last year, the General Court overturned a similar decision made by the commission regarding Germany’s recapitalization of Deutsche Lufthansa. However, Deutsche Lufthansa had already repaid the state by that time.
Ryanair’s spokesperson also commented on the court’s intervention, describing it as a triumph for fair competition and consumers across the EU. The spokesperson emphasized the need for the bloc to address the damage caused by Dutch state aid and take measures to restore fair competition.
In response to the ruling, a spokesperson for the commission stated that they would carefully study the decision and consider their next steps.