EU Court annuls state aid to Air France, in case filed by Malta Air and Ryanair

The Court of Justice of the European Union (CJEU) has annulled two previous decisions by the European Commission, that had approved State aid by France to two French airlines during the COVID-19 pandemic.

The two decisions were handed down by the Eighth Chamber of the Court of Justice earlier today, in cases filed by Ryanair and Malta Air against the European Commission, supported by Germany, France, the Netherlands, together with airlines Air France-KLM and Société Air France.

Ryanair and Malta Air had filed an action under Article 230 of the Treaty on the Functioning of the EU, which empowers the CJEU to, amongst other things, review the legality of legislative acts of the Commission.

In both cases the court held that where there are grounds to fear the effects on competition of an accumulation of State aid within the same group, the onus is on the Commission to exercise particular vigilance when examining the links between the companies belonging to that group.

The complaint deals with France’s decision In April 2020, in the midst of the COVID-19 pandemic, to notify the European Commission of an aid measure it would be granting to Air France, which included a State loan guarantee covering 90% of a €4 billion loan granted to the airline by a consortium of banks and a shareholder loan of up to €3 billion.

According to the Commission, Air France was the sole beneficiary of that aid, to the exclusion of all the other companies in the Air France-KLM group.

Just under a year later, in March 2021, France also notified the Commission of individual aid in the form of a recapitalisation of Air France and its holding company Air France-KLM amounting to some €4 billion in total. According to the Commission, Air France and Air France-KLM were the sole beneficiaries of that aid, to the exclusion of, in particular, KLM, another airline forming part of the Air France-KLM group.

In both cases, the Commission decided not to raise objections, stating that those measures constituted aid that was compatible with the internal market.

But the Commission's decision now stands in stark contrast with the its refusal to allow the Maltese government to save Air Malta by pumping €300 million into the national airline, which is now set to shut down in 2024.

Ryanair and Malta Air contested the Commission’s decisions to allow Air France to receive State aid, arguing that the measures were contrary to EU law and  that the Commission had incorrectly defined the beneficiaries of the aid by deciding that neither the Air France-KLM holding nor KLM were beneficiaries of that aid.

The General Court found in favour of the plaintiff airlines and annulled the Commission’s decisions, saying the body had erred in excluding the French airlines from its definition of State Aid beneficiaries.

After examining the capital, organic, functional and economic links between the companies in the Air France-KLM group, together with the contractual framework on the basis of which the measures at issue were granted, as well as the type of aid measure granted and the context in which they were granted, the court concluded that the defendant airlines were capable of benefiting, at least indirectly, from the advantage granted by the State aid at issue.