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Ryanair Loses Bid to Overturn Pandemic Aid to Airline Rivals

The low-cost Irish airline accuses the European Union of unfairly keeping struggling national airlines in business during the pandemic with generous subsidies. So far, though, European courts disagree.

(CN) — Ireland's popular no-frills airline Ryanair lost another challenge Wednesday against generous government aid packages meant to keep its competitors in business after the coronavirus pandemic.

Ryanair accuses the European Union of unfairly helping national airlines — what it derisively dubs inefficient “zombie flag carriers” — by funneling aid to keep them from going bankrupt during the travel shutdown caused by the pandemic.

In a trio of rulings Wednesday, however, the General Court, the EU's lower court, found that the European Commission properly applied the EU's state aid rules, which allow governments to provide emergency funds to companies during a disaster.

The rulings relate to aid packages provided to Finnair, Finland's main airline, and SAS, a Stockholm-based company also known as Scandinavian Airlines. Finland provided Finnair with a loan of about $717 million from a pension fund, and Denmark and Sweden each granted SAS a loan guarantee of about $163 million.

Previously in February, the General Court rejected similar challenges Ryanair filed against subsidies granted to Air France and SAS.

Ryanair said it will appeal the rulings to the European Court of Justice, the EU's highest court.

In March 2020, as the pandemic clobbered airlines and grounded flights, the European Commission loosened state aid restrictions. The EU’s competition commissioner Margrethe Vestager said in a statement at the time that urgent action was needed to minimize permanent damage to Europe’s aviation sector.

Even as Ryanair received a $825 million loan from the Bank of England, the Irish low-cost carrier's outspoken owner, Michael O'Leary, has railed against bailouts to European airlines. He's blasted national European carriers, such as Germany's Lufthansa, as “state aid dopers.”

In a statement on Wednesday, the company accused the EU of allowing governments to “write open-ended cheques to their inefficient zombie flag carriers in the name of faded national prestige.”

Ryanair estimates that EU governments have funneled about $35 billion in state aid to airline carriers through loans, tax deferrals and recapitalization schemes.

In June 2020, it sued the European Commission for signing off on the state subsidies. It has filed about 16 legal challenges. Ryanair alleges national governments unfairly chose to help their national airlines to the detriment of other carriers.

“The European Commission’s approvals of the Finnish, Danish and Swedish state aid went against the fundamental principles of EU law,” the company said.

Ryanair charged that the court's rulings “set the process of liberalization in air transport back by 30 years” and allows countries to give “national flag carriers a leg up over more efficient competitors, based purely on nationality.”

Generally, the EU forbids national governments from subsidizing companies in order not to distort the EU's single market and to ensure there is fair competition on a so-called “level playing field.”

But the General Court said those rules also allow countries to subsidize companies whose failure puts the economy at risk and during downturns caused by disasters.

In the ruling about Finland, the court said the state aid was “intended to ensure that Finnair has sufficient liquidity to maintain its viability and air services” during the pandemic and “prevent its possible failure from further disrupting” Finland's economy.

The court noted Finnair is the country's main carrier with about 15 million passengers in 2019 and also its principal cargo operator with about 6,800 employees. The court made similar arguments in its ruling in favor of SAS.

Ryanair also failed to convince the judges that the state aid grants were so unfair as to prevent it from offering its own flights to and from Finland, Sweden and Denmark.

In February, Ryanair announced it lost about $1.2 billion in 2020 after seeing demand drop by 78% amid the pandemic. With travel expected to resume in Europe, O'Leary recently said he foresees Ryanair operating about 80% of the number of flights it had before the pandemic by the summer.

Courthouse News reporter Cain Burdeau is based in the European Union.

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