The General Court of the European Union has annulled the billions in aid approved by the European Commission to French airline Air France-KLM during the coronavirus health crisis. According to the court, the EC “erred” at the time.

France, the major shareholder of Air France, helped the airline in 2020 with a 4-billion-euro state guarantee plus a 3-billion shareholder loan. A year later, the government in Paris put another 4 billion euros into the airline. The concrete consequences of the destruction are still unclear.

‘Benefited indirectly’

When air traffic was grounded worldwide in 2020, several airlines received state aid to overcome the effects of the Covid-19 pandemic. Iris budget airline Ryanair, and in this case also Malta Air, then embarked on a crusade, filing a series of lawsuits against the Commission for approving coronavirus-state aid to rivals.

They have now been vindicated by the General Court of the EU, which is part of the Court of Justice of the EU. According to the General Court, the holding company Air France-KLM “was able to benefit at least indirectly from the advantage conferred by the state aid in question”.

Paris claimed the European Commission “should have examined the links between the companies belonging to that group with particular vigilance”. These benefited only the French arm of the company. The EC approved the files.

Consequences unclear

The concrete consequences of the annulment are unclear, although the victory seems symbolic for Ryanair. The aid that allowed the airline to survive the coronavirus crisis has since been repaid with interest. The airline group is considering whether to appeal to the Court of Justice.

Ryanair is welcoming the destruction. The Irish low-cost carrier speaks of “a triumph for fair competition and consumers in the EU”. It calls on the EC to claw back the aid and “repair at least part of the damage done to competition”, although the EU court gave no indication.

‘Encourage ineffectiveness’

In May, the EU General Court had already quashed two airline rescue plans, notably a German plan for Lufthansa and a Danish and Swedish rescue of SAS. Also, Ryanair and others had gone to court.

The EC’s temporary state aid framework facilitated the proviso by member states of an unprecedented 34,7 billion euros of state aid to airlines and package tour operators – Ryanair is talking about more than 40 billion euros.

“Undistorted competition eliminates inefficiency and benefits consumers through low fares and choice. On the other hand, “unjustified subsidies encourage ineffectiveness and will harm consumers for decades to come”, states Ryanair.