EU General Court dismisses Ryanair's actions against French and Swedish aid schemes in favour of their airlines

On 17 February 2021, the General Court confirmed the legality of the European Commission's decisions approving the French and Swedish aid schemes in favour of their airlines. These two schemes, introduced in the spring of 2020 in the context of the COVID-19 crisis, had been validated under separate European legal bases.

The deferral of French airport taxes and the Swedish public guarantee are only available to airlines licensed by these states, thus excluding all other EU airlines also serving airports located in these countries.

In May 2020, Ryanair brought actions before the General Court of the EU to annul the Commission's decisions approving these schemes. It requested the application of the accelerated procedure, which allowed these cases to be concluded within ten months.

Ryanair, not being eligible for this aid, invoked in its two actions similar grounds of infringement of the principle of non-discrimination, freedom to provide services and failure to motivate the decisions.

Judgment of the General Court concerning France's moratorium on aeronautical taxes

The French moratorium on aeronautical taxes

In the context of the COVID-19 pandemic, France notified the European Commission in March 2020 of an aid measure to support the French aviation sector. This was the first aid measure in favour of air transport in the context of the pandemic.

The measure consisted of a moratorium on the payment of the civil aviation tax and the solidarity tax on airline tickets due on a monthly basis for the period March to December 2020. As a result, airlines holding a French license could defer the payment of these taxes until 1 January 2021 and then spread the payments over a period of 24 months (i.e. until December 31, 2022).

On 31 March 2020, the Commission decided that the moratorium on the payment of state aid taxes was compatible with European law, in particular Article 107(2)(b) TFEU, according to which aid to compensate the damage caused by natural disasters or exceptional occurrences is compatible with the internal market.

In May 2020, Ryanair brought an action before the General Court seeking the annulment of this decision, in particular for violation of the principle of non-discrimination, freedom to provide services and failure to state reasons.

France and Sweden intervened in the proceedings in support of the European Commission.

For the first time, the General Court examined the legality of an aid scheme adopted in the context of the COVID-19 pandemic under Article 107(2)(b) TFEU.

Assessment of the General Court

Firstly, regarding the plea relating to the infringement of the principle of non-discrimination, the General Court examined the Commission's decision in the light of Article 18(1) TFEU, which prohibits any discrimination on grounds of nationality within the scope of application of the Treaties, without prejudice to the special provisions laid down therein.

In doing so, the General Court verified whether the moratorium on the payment of fees could be declared compatible with the internal market under Article 107(2)(b) TFEU.

In this respect, the General Court confirmed that:

• the coronavirus health crisis, and the measures adopted by France and the other member states as a result thereof, constitute an exceptional occurrence within the meaning of Article 107(2)(b) TFEU, which caused economic damage to airlines operating in France;
• the purpose of the moratorium on the payment of taxes is indeed to remedy this damage;
• the fact that the measure only targets airlines holding a French license is appropriate to achieve the objective of remedying the damage caused by the COVID-19 crisis;
• the objective of the moratorium on the payment of taxes meets the requirements of Article 107(2)(b) TFEU;
• the arrangements for granting the aid do not go beyond what is necessary to achieve this objective;
• the French scheme does not constitute discrimination prohibited under the first paragraph of Article 18 TFEU.

In addition, the Court points out that the freedom of establishment provided for in Article 56 TFEU does not apply as such to the field of transport. It is Regulation No. 1008/2008, which governs the conditions of application in the air transport sector for the principle of freedom to provide services.

The Court then supported the Commission in the assessment of the value of the advantage attributed to the airlines benefiting from the moratorium on the payment of taxes. According to the General Court, the amount of damage suffered by the airlines benefiting from the aid is, in all probability, higher than the total amount of the moratorium. The Court therefore dismissed the argument of possible overcompensation of the beneficiary airlines.

Finally, the Court rejected the plea alleging infringement of the Commission's duty to state reasons.

Judgment of the General Court concerning the Swedish guarantee scheme

The Swedish government guarantee scheme for airlines

In April 2020, Sweden notified the European Commission of an aid measure in the form of a loan guarantee scheme to support airlines licensed to operate in Sweden in connection with the COVID-19 pandemic.

The maximum amount of loans guaranteed under the scheme was SEK 5 billion, with the guarantee to be granted until 31 December 2020 for a maximum duration of six years.

On 11 April 2020, the Commission declared the notified scheme compatible with the internal market pursuant to Article 107(3)(b) TFEU. According to this provision, aid to remedy a serious disturbance in the economy of a member state may be considered compatible with the internal market.

The airline Ryanair brought an action for annulment of that decision, which was rejected by the General Court of the EU. For the first time, the latter examined the legality of a state aid scheme adopted to respond to the consequences of the COVID-19 pandemic under Article 107(3)(b) TFEU. In addition, the Court also clarified the relationship between the rules on state aid. It also clarified the principle of non-discrimination on grounds of nationality enshrined in Article 18(1) TFEU on the one hand, and the principle of freedom to provide services on the other.

Assessment of the General Court

Regarding the plea relating to the infringement of the principle of non-discrimination, the General Court proceeded to an examination similar to its analysis of the Commission's decision in the French case.

To confirm that the loan guarantee scheme could be declared compatible with the internal market under Article 107(3)(b) TFEU, it noted that:

• the objective of the loan guarantee scheme satisfies the conditions laid down in Article 107(3)(b) TFEU, insofar as it is effectively aimed at remedying a serious disturbance in the Swedish economy caused by the COVID-19 pandemic;
• the limitation of the loan guarantee scheme to airlines licensed in Sweden is appropriate to achieve the objective of remedying a serious disturbance in the Swedish economy;
• the airlines eligible for the aid scheme make a major contribution to the regular service to Sweden in terms of both freight and passenger transport, which is in line with the objective of ensuring Sweden's connectivity;
• the aid scheme in question did not go beyond what was necessary to achieve the objective pursued by the Swedish authorities;
• the objective of the loan guarantee scheme met the requirements of the derogation provided for in Article 107(3)(b) TFEU;
• the scheme does not constitute discrimination prohibited under the first paragraph of Article 18 TFEU.

The Court then recalled that it is Regulation No. 1008/2008, which governs the conditions of application in the air transport sector of the principle of freedom to provide services, and is not Article 56 TFEU.

Moreover, the Court rejected the plea that the Commission violated its obligation to balance the beneficial effects of the aid against its negative effects on trade and on the maintenance of undistorted competition. In this respect, the General Court maintains that such balancing is not required by Article 107(3)(b) TFEU in so far as aid measures adopted to remedy a serious disturbance in the economy of a member state, such as the loan guarantee scheme at issue, are therefore presumed to be adopted in the Union interest where they are necessary, appropriate and proportionate.

Finally, the Court rejected as unfounded the plea alleging a breach of the Commission's duty to state reasons.

Conclusion

The 17 February rulings confirm the European Commission's great leeway in approving aid schemes and even more so in the context of exceptional events, such as the pandemic we are currently experiencing. Notwithstanding this defeat, Ryanair has already announced that it wants to appeal to the EU Court of Justice.

It should be noted that the Court has yet to rule on several Ryanair appeals against Commission decisions authorising individual aid to airBaltic, Finnair, KLM, TAP and Air Portugal.

These cases thus reveal the wide range of legal bases available for the creation of support measures by states in favour of air transport. This sector is among those most affected by the current crisis. Numerous aid measures in favour of the airline sector have already been authorised by the European Commission; on the basis of the Temporary Framework and in the form of recapitalisation for Deutsche Lufthansa, Brussels Airlines, airBaltic and Finnair; as compensation for the damage caused by COVID-19 to Swedish airlines, French airlines and Condor; in the form of rescue aid for TAP and SATA Airlines and on the basis of Article 107.2 b) of the TFEU for SAS and Blue Air.

Other players in this sector, low-cost airlines, airports and ground handlers, do not seem to benefit from this preferential treatment.