The European General Court found no problem with bailouts of French and Swedish airlines after the EU’s executive branch loosened state aid restrictions in response to the coronavirus pandemic.
LUXEMBOURG (CN) — Budget carrier Ryanair failed Wednesday to convince the European Union’s second-highest court that government support for rivals Air France and Scandinavian Airlines broke state aid rules.
The European General Court sided with the European Commission, the EU’s executive branch, in two related cases. One focuses on a French measure to allow Air France to defer paying taxes, and the other involves a Swedish program to provide loans to airlines, including Scandinavian Airlines, or SAS. Wednesday’s rulings come in just two of 16 cases brought by the Irish budget airline.
“The specific purpose of the aid scheme at issue is not the overall preservation of the structure of the aviation sector … but rather, as the Commission rightly observes, to alleviate, by the grant of a deferral, the financial burden of airlines hit hard by the travel restrictions and lockdown measures taken by the French Republic in order to deal with the Covid-19 pandemic,” the five-judge panel wrote in the case involving France.
Ryanair has been protesting against government bailouts of its competitors since the pandemic began.
“They see this an opportunity, I think, to get one last huge quantity of state aid so they can go around and buy up everybody when this is all over,” Ryanair CEO Michael O’Leary told Bloomberg in an interview last year, referring to the rival airlines.
The EU’s largest budget carrier argued before the Luxembourg-based court that allowing member states to offer financial support to national airlines violates the guarantee of free movement of goods and services that underpins the internal market of the 27-member political and economic union. State aid rules ordinarily prevent governments from supporting private companies on the grounds that it creates market distortions.
But the General Court rejected the argument, finding the aid packages to help the airlines survive the coronavirus pandemic are allowed under EU law.
“The member state concerned is indeed confronted with a serious disturbance in its economy and that the aid measures adopted to remedy that disturbance are, first, necessary for that purpose and, secondly, appropriate and proportionate, those measures are presumed to be adopted in the interests of the European Union,” according to the decision on the Swedish loan scheme.
In response to the Covid-19 crisis, the European Commission loosened state aid restrictions in March 2020. 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.
“The Commission is ready to work with member states immediately to find workable solutions that preserve this important part of our economy, using the full flexibility under state aid rules,” Vestager said.
Both the French and Swedish aid schemes were available only to airlines registered in those countries. A spokesperson for Dublin-based Ryanair on Wednesday slammed the pair of rulings allowing the bailouts.
“One of the European Union’s greatest achievements is the creation of a true single market for air transport, underpinned by the principle of a common EU airline license – one for each airline. A nationality condition in a state aid scheme is plainly incompatible with the single market,” the spokesperson said in a statement.
The General Court, however, found that the aid was justified in a time of economic uncertainty.
“Bearing in mind that the resources which may be allocated by the member state concerned are finite and must therefore address priorities, it cannot be forgotten that that member state had to take into consideration airlines which, although smaller than the applicant, and therefore transport less passengers and have a smaller turnover, focused on domestic services in the Swedish territory, which was an even more vital issue given the specific features of the Swedish territory and the exceptional period characterized by the pandemic,” the court found.
Ryanair, which has received no government support during the pandemic, announced this month it lost 1 billion euros ($1.2 billion) in 2020 after seeing demand drop by 78% amid the pandemic.
Last month, the budget carrier said it would file another complaint with the court against the European Commission, arguing that the body also wrongly approved a German bailout of the country’s largest airline, Lufthansa.
Ryanair also plans to appeal Wednesday’s decisions to the EU’s top court, the European Court of Justice.