Ryanair

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On February 17, 2021 the General Court (“GC”) delivered two judgments (cases T-238/20 and T-259/20) dismissing Ryanair’s appeals against two European Commission  decisions that authorized France’s and Sweden’s aid schemes for the airlines based in those countries. The GC judgments thus confirm that the aid schemes do not breach the principle of non-discrimination and are lawful.

The GC issued the judgments under the expedited procedure, just 10 months after Ryanair’s appeals. These judgments rule on the first two appeals by Ryanair, which has brought 16 actions against Commission decisions authorizing Member States’ aid schemes for one of the sectors most damaged by the COVID-19 pandemic.

State aid resulting from the COVID-19 pandemic and Ryanair’s legal battle before EU courts

As discussed here, air transport has been one of the sectors most damaged by the COVID-19 crisis. As a result, Member States’ governments have granted various aid schemes to mitigate the impact of COVID-19 and to keep the sector afloat. All of these aid schemes have something in common: to be eligible, recipients must hold a license in the Member State granting the aid.

From the beginning of the COVID-19 crisis, Ryanair has repeatedly complained about the various aid packages granted by airlines, announcing that it would challenge these airline bailouts before the courts. To date, Ryanair has brought more than 15 appeals before the GC.

Ryanair recently challenged two decisions authorizing France’s (Decision C(2020) 2097) and Sweden’s (Decision C(2020) 2366) aid schemes. France granted a deferral of payment of airport charges between March and December 2020. Sweden’s aid measure is a loan guarantee scheme, the maximum amount being 5 billion kronor (SEK) for up to six years.

Although both aid schemes aimed to mitigate the effects of COVID-19 on the air transport sector, they had different legal bases. France’s aid relied on article 107(2)(b) TFEU, which establishes a presumption of compatibility with the internal market, since the COVID-19 pandemic could be qualified as an “exceptional occurrence.” Sweden’s aid scheme was based on article 107(3)(b) TFEU, which requires proving the compatibility of the aid with the internal market. This  aid scheme considered that the COVID-19 crisis entailed “a serious disturbance” in the Member State’s economy. This was the first time since the beginning of the pandemic that the Commission considered that two aid schemes with the same aim but with different legal bases were necessary, appropriate, proportionate and non-discriminatory.

Ryanair has provided multiple grounds to support its appeals, but they all revolve around a main plea: the infringement of the non-discrimination principle. In particular, Ryanair claims that requiring airlines to hold a license in the Member State granting the aid discriminates against other carriers operating in the EU internal market, since airlines based elsewhere are not eligible for the aid, despite the fact that Ryanair operates flights in those countries, to those countries and from those countries.

On the infringement of the principles of non-discrimination on grounds of nationality and free provision of services

Regarding the principle of non-discrimination, the GC states that treating airlines differently does not in itself entail a discrimination (article 18 TFEU).

In both judgments, the GC found that holding a Swedish or French license is an appropriate eligibility criterion. The GC argued that the criterion of holding a national license requires the airlines’ “principal place of business” to be on the relevant Member State’s territory, thus ensuring the administrative and financial stability of the presence of those airlines. This stable presence allows Member States granting the aid to control how the recipients use it. This would not have been the case if France or Sweden had adopted a different criterion.

Additionally, these aid schemes enable and require French and Swedish authorities to carry out financial checks on airlines holding a French or Swedish license. This requirement does not apply to airlines holding licenses from other EU countries.

The GC concludes that treating airlines differently is justified, since France’s deferral does not go beyond what is necessary to achieve its objective and Sweden’s aid scheme secures the connectivity of the country and ensures regular flights within Sweden, to Sweden and from Sweden, without going beyond what is necessary to fulfill the aim pursued by the aid scheme.

The judgments are relevant for the State aids granted due to the COVID-19 crisis, since they confirm for the first time that the pandemic can qualify both as an “exceptional occurrence” (article 107(2)(b) TFEU) and a “serious disturbance in the economy of a Member State” (article 107(3)(b) TFEU).

Last, as for the infringement of the freedom to provide services, the GC states that the general framework under article 56 TFEU does not apply to the transport sector. According to the GC, the free provision of services in the field of transport will be subject to a specific legal regime.

As a result, article 56 TFEU does not apply as such to the air transport sector, and EU authorities may only implement measures liberalizing air transport services under article 100(2) TFEU. Based on this provision, the EU adopted Regulation No. 1008/2008, aimed at defining the conditions for applying the principle of free provision of services to the air transport sector. The GC concludes that Ryanair does not allege an infringement of Regulation No 1008/2008, thus failing to prove that being excluded from France’s and Sweden’s aid schemes can discourage it from operating flights to and from those countries.

On the remaining pleas of Ryanair

The remaining pleas put forward by Ryanair in its appeals are not as important and partly revolve around the main non-discrimination plea. Ryanair claims that the Commission committed a manifest error in assessing the proportionality of the aid schemes regarding the damage caused by COVID-19. The GC rules out the risk of overcompensation and states that extending the disputed aid scheme to airlines based in countries other than France or Sweden would not have fulfilled the pursued objective of general interest as appropriately.

Note that the French aid scheme amounted to EUR 200.1 million, whereas according to the GC the damage was approximately EUR 680 million. Also, the GC supports France’s strategy, i.e., reserving the aid scheme for the most severely affected airlines (e.g., Air France or Transavia, which operated over 97% of their flights within France, from France and to France; while Ryanair, however, only operated 8.3% of its flights there).

By late March 2020, Sweden had recorded a 93% drop in passenger air traffic in its three main airports. The GC notes that Ryanair’s market share in Sweden had been steadily decreasing (it had dropped from 11.8% to 5%) and, at the time of the EC decision, Ryanair had been planning to reduce its physical presence on Swedish territory to a single base.

The GC also dismisses Ryanair’s claims that (i) the Commission had breached its duty to state its reasons; and (ii) there had been an infringement of procedural (due process) rights under article 108(2) TFEU.

Conclusion

Although these GC judgments are not final, they are a big win for the Commission and create a precedent on state aid in the context of COVID-19, pending a decision by the Court of Justice of the European Union (“CJEU”). The GC clarifies that granting aid to companies based in a given Member State is not in itself discriminatory, regardless of whether the legal basis is article 107(2) or 107(3) TFEU, as long as Member State authorities specify the reasons and the eligibility criteria for that aid.

On February 17, Ryanair announced that it intends to appeal against both judgments before the CJEU. The CJEU’s decision will be particularly interesting, since lately it has annulled several GC rulings on State aid and these two judgments are the first ones on aid schemes granted to airlines in the context of the COVID-19 pandemic.

The GC will soon rule on two similar cases (T-643/20, involving KLM and T-628/20, regarding Spanish state aid) after the hearings held in late February 2021. Meanwhile, Ryanair continues to appeal against the new decisions upholding aid schemes for national Member States’ airlines: on January 15, 2021, it challenged Belgium’s aid scheme granted to Brussels Airlines; and on February 19, 2021, it appealed against the Commission decision authorizing an aid package for Croatia Airlines. We will see if the GC rules differently on these appeals.

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