State aid: The Court of Justice of the EU annuls the judgment of the General Court in the Frankfurt-Hahn airport case

The European Commission's decision of 31 July 2017 

On 7 April 2017, Germany notified the Commission of its plan to grant operating aid to Frankfurt-Hahn airport to cover the deficit of its operator, Flughafen Frankfurt-Hahn GmbH (FFHG) for a transitional period of ten years beginning 4 April 2014.

The notified aid involved a maximum amount of EUR 25.3 million to be paid between 2018 and 2022. This amount was to be reduced if the airport's actual losses during the transitional period proved lower than the maximum amount of aid.

In its decision 31 of July 2017, the Commission decided that the notified aid was compatible with the internal market in accordance with Article 107.3, c) of the Treaty on the Functioning of the EU at the end of the preliminary procedure. The Commission referred to the conditions for the compatibility of operating aid provided for in the 2014 Guidelines on State Aid to Airports and Airlines.

EU General Court's judgment of 19 May 2021

On 29 March 2018, Deutsche Lufthansa AG (DLH) filed an action for annulment of the Commission's decision.

In the airline's view, the Commission had committed errors of assessment and failed to take account of the essential facts of the case, including other aid that had allegedly been granted to Frankfurt-Hahn airport.

The General Court followed DLH's reasoning and held that, regarding Frankfurt-Hahn airport's catchment area, the Commission had failed to take proper account of all the criteria required of it under the 2014 Guidelines, and that the "insufficient and incomplete nature" of the resulting examination had not enabled DLH to overcome any doubts on the compatibility of the aid in question with the internal market. In fact, the Guidelines provide for the need to examine the impact of operating aid to one airport on other airports located within a 100 km or one-hour travel zone (by road or rail).

For this reason, the General Court annulled the Commission's decision.

CJEU judgment of 14 September 2023

Following the judgment of the General Court, a main appeal was lodged by the Land Rheinland-Pfalz (the Rhineland-Palatinate Region), which was the public authority that had granted the operating aid to Frankfurt-Hahn airport and a cross-appeal was lodged by DLH and another by the Commission.

Firstly, DLH argued that the Land Rheinland-Pfalz no longer had an interest in bringing proceedings in view of FFHG's current economic situation, which meant that it could no longer obtain payment for the balance of the aid in question.

In this respect, the Court recalled in its judgment that it follows from the second paragraph of Article 56 of the Statute of the Court of Justice of the EU that intervening parties other than EU member states and institutions may appeal against a decision of the General Court where it directly affects them.

Following the judgment of the General Court, the Land Rheinland-Pfalz was obliged to recover the instalments of the aid in question, which it had already paid to FFHG, and was ordered to comply with the obligation not to pay new instalments of this aid. The Land demonstrated to the requisite legal standard that the judgment directly affected it, and that its appeal was admissible.

In its appeal, the Land argued that the General Court erred in law by holding that it followed from an overall analysis of the application at first instance that DLH had raised a violation of its procedural rights. The General Court failed in its duty to state reasons by limiting itself to finding that the allegation of such a violation arose from an analysis of the application as a whole.

In response to this plea, the Court held that the General Court should have explicitly referred to the points in DLH's application on which it relied in making such an assessment, in order to reveal the reasons that led to this judgment. The Court therefore failed to comply with its obligation to state its reasons.

In its cross-appeal, the Commission, supported by the Land, argued that the judgment of the General Court was vitiated by an error of law, in that the General Court referred to an allegation never made by DLH: namely that the airports of Frankfurt-Hahn and Frankfurt am Main were in competition with each other, and that aid to the former could affect the latter. Frankfurt-Hahn airport, which is mainly served by Ryanair, is located approximately 113 km from Frankfurt am Main airport where DLH operates.

The Commission criticised the General Court for failing to respond to its argument, which was of great importance to the outcome of the case.

The General Court had found that Ryanair and DLH were competitors in terms of flights offered by Ryanair from Frankfurt-Hahn airport and flights to the same destinations operated by DLH from Frankfurt am Main airport.

The Commission, however, had indicated that the flights DLH operated out of Frankfurt am Main airport involved "premium flights" and transit passengers whereas Ryanair operated low-cost "point-to-point" flights.

The Commission also argued that the evidence provided by DLH did not contain any information on the evolution of passenger numbers and prices, and that there were significant doubts about the routes and dates of flights actually served by DLH. The General Court had not responded to these arguments.

The Court found that the General Court had considered that the aid in question could affect the competitive position of Frankfurt am Main airport, without it being apparent from the application at first instance that DLH had put forward such an argument. It is up to the applicant alone, however, to demonstrate that the aid measure in question is likely to have a concrete impact on its situation.

Finally, the Court noted that the General Court had taken the evidence provided by DLH into consideration, but had not taken into account the arguments put forward by the Commission, which sought to call into question the relevance of the evidence provided by DLH for the purposes of assessing the existence of a competitive relationship between that airline and Ryanair.

In this case, the General Court should have set out the reasons why it considered that this evidence was not likely to call into question its assessment, based on the evidence provided by DLH that this airline and Ryanair were active on the same passenger air transport market and were competitors. By failing to respond to all the arguments put forward by the appellant to the requisite legal standard, the General Court erred in law and failed in its duty to state reasons.

In view of the existence of several errors of law and shortcomings in the reasoning of the General Court, the Court decided to set aside the judgment and refer the case back to the General Court.

Conclusion

The General Court must now adopt a new judgment in the light of the CJEU's considerations. It is likely that it will ultimately validate the European Commission's initial analysis.

It should be noted that airport aid has been the subject of several judgments, notably in the Gdynia and Zweibrücken airport cases, which demonstrates the difficulty of applying European state aid regulations to this type of infrastructure.

Frankfurt-Hahn airport has also been the subject of several Commission decisions concerning the financial relationship between the airport and Ryanair, following complaints from DHL. The Commission concluded that there was no aid to the Irish airline. Both the Court of First Instance and the European Court of Justice upheld the Commission's position.

It appears that this saga is coming to an end.