Court Won’t Alter Order Against Alitalia Bailout

(CN) - Ryanair cannot defend the illegal bailout of Italy's biggest airline, Alitalia, the General Court of the European Union ruled Wednesday.

Bargain carrier Ryanair asked the Luxembourg court to annul two European Commission decisions regarding the financially beleaguered Italian airline, which received nearly $400 million in loans from Italy in 2006 and entered federal receivership. Compagnia Aerea Italiana (CAI) bought Alitalia and its assets for approximately $1.3 billion in 2008.

That year, Ryanair and other economy air carriers brought objections to the commission about Italy's bailout and CAI's purchase of Alitalia. The commission soon concluded that Italy's bailout of Alitalia constituted illegal state aid. It said the government money conferred an economic advantage that a prudent private investor would not have granted.

The commission ordered the Italian government to recover its loan from Alitalia. It later found that the sale of Alitalia's assets did not necessarily mean that CAI received government money, provided that Alitalia was purchased by CAI at fair market price. The sale of the airline did not erase the Italian government's obligation to recover the bailout from Alitalia, it also found.

Ryanair argued that Alitalia's bailout and sale to CAI have harmed its business and market position. Annulling the commission's decision would force a formal investigation into the matter, something the commission negligently failed to do in the first place, according to the Irish airline.

After CAI's low-fare carrier Air One overtook Easyjet, it became the second-largest airline for flights between Italy and other EU countries.

The General Court, however, said it "rejects Ryanair's arguments that the commission had carried out an insufficient or incomplete examination at the preliminary examination phase." The commission was satisfied that Alitalia's sale would be for market price, the court found.

Ryanair also failed to show that implied conditions required Alitalia's buyer to be Italian, a factor that it claims reduced the sale price below market value and discouraged competing bids.

"In this case, it should be noted that the commission verified that the call for declarations of interest did not contain any discriminatory clause based on the nationality of the bidders," the decision states. "It concluded, moreover, that the latter had been widely publicized both nationally and internationally."

Italian and international entities submitted more than 60 bids for Alitalia, the court added, emphasizing the commission's verification that CAI's bid was independently assessed to ensure the proposed price was not below market value.

Ryanair was instrumental in the finding that Italy's bailout of Alitalia constituted illegal state aid, filing the initial objection to the loan, according to the court.

"However, it must be held that the applicant has not demonstrated that the fact of ordering immediate recovery of the aid from Alitalia and not CAI has the effect of substantially affecting its competitive position," the decision states. "Similarly, the applicant has not demonstrated that the time granted by the Commission to the Italian Republic, which had allegedly allowed the obligation of the beneficiary to recover the aid to be circumvented, affected its interests.

"Finally, the applicant has also failed to demonstrate to what extent the fact of not having ordered the suspension of the aid, having the effect of allowing Alitalia to convert it into own capital, affected the applicant."

Ryanair has two months to file an appeal, limited to questions of law only, with the Court of Justice.

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