EU court annuls approval of French pandemic aid to Air France and Air France-KLM

Low-cost airlines Ryanair and Malta Air have won a court case against the European Union’s decision to approve billions of euros in state aid by the French government to holding company Air France-KLM during the COVID-19 pandemic

Europe Budget Airlines COVID (AP2003)

Low-cost airlines Ryanair and Malta Air won a court case Wednesday against the European Union's decision to approve billions of euros in state aid by the French government to Air France and holding company Air France-KLM during the COVID-19 pandemic.

Ryanair has filed several court challenges against measures introduced by EU countries to help some airlines weather the fallout of coronavirus restrictions.

The bloc's 27 members must seek approval from the European Commission, the EU's executive branch, when granting financial support to companies. Many countries across Europe did so to help keep their airlines afloat during the pandemic.

Back in 2020, French authorities notified the European Commission of an aid measure of 7 billion euros ($7.67 billion), which was supposed to benefit Air France solely, to the exclusion of all the other companies in the Air France-KLM group. A year later, France told the European Commission about plans for 4-billion-euro ($4.38 billion) recapitalization of Air France and the holding company.

In both cases, the European Commission didn't raise objections.

But the European General Court ruled that the Air France-KLM holding and KLM “were capable of benefiting, at least indirectly, from the advantage granted by the state aid at issue" and annulled the European Commission’s decisions.

“Where there are grounds to fear the effects on competition of an accumulation of state aid within the same group, the onus is on the Commission to exercise particular vigilance in examining the links between the companies belonging to that group,” the court said.

The ruling can be appealed.

The European Commission is also the EU’s anti-trust watchdog. As pandemic restrictions in 2020 brought travel to a halt and threatened the existence of airlines, the commission eased its policies, approving billions of euros in support for national flag carriers.

Under a fast-track system set up during what the commission described as “an unprecedented crisis,” Brussels approved around 3 trillion euros in state support across all sectors in member nations. Ryanair believes that 40 billion euros was granted to Europe’s airline sector alone.