COVID-19: The General Court of the EU dismisses Ryanair's appeals against aid granted to Finnair and SAS

On 14 April 2021, the General Court of the EU, seized by several annulment actions brought by Ryanair, considered that the guarantees given by Finland to Finnair (Case T-388/20) and the guarantees given by Sweden (Case T-379/20) and Denmark (Case T-378/20) to SAS complied with the European rules on State aid.

After the dismissal of the actions for annulment brought by Ryanair against the decisions of the European Commission approving aid schemes in favour of French and Swedish airlines, the General Court confirmed on 14 April 2021 the legality of the Commission's decisions authorising individual support measures in favour of airlines which were founded on distinct European legal bases.

1/ the Finnair case

On 13 May 2020, Finland notified to the European Commission a project of aid in the form of a public guarantee in favour of the Finnish airline Finnair to support the company in the context of the COVID-19 crisis. The objective of the guarantee was to help Finnair obtain a EUR 600 million working capital loan to cover its liquidity needs. The guarantee had a coverage of 90% of the loan and was limited to a maximum duration of three years. In its notification, Finland demonstrated that all other potential means of obtaining liquidity from the markets had already been explored and exhausted.

On 18 May 2020, the Commission considered, on the basis of its Temporary Framework on State aid measures to support the economy in the current context of the COVID-19 outbreak, that the Finnish guarantee was compatible with EU law, in particular with Article 107.3, b) TFEU. Under this provision, aid to remedy a serious disturbance in the economy of a Member State may, under certain conditions, be considered compatible with the internal market.

On 26 June 2020, the airline Ryanair filed an action for annulment against the Commission's decision before the General Court of the EU and requested the accelerated procedure.

For the first time, the General Court is examining the legality of individual aid approved in the context of COVID-19 under Article 107.3, b) TFEU.

First, the General Court analyzed the contested decision from the perspective of Article 107.3, b) TFEU.

According to Ryanair, the Commission misapplied Article 107.3, b) TFEU. Indeed, the Commission wrongly considered that the individual aid granted to Finnair responded to a serious disturbance of the Finnish economy. Moreover, the Commission did not respect the obligation to balance the beneficial effects of the aid against its negative effects on trading conditions and the maintenance of undistorted competition.

First of all, the General Court recalls that Article 107.3, b) TFEU applies both to aid schemes and to individual aid. Individual aid may therefore be declared compatible with the internal market if it is necessary, appropriate and proportionate to remedy a serious disturbance in the economy of the Member State concerned.

Next, the General Court states that the failure of Finnair would have had serious consequences for the Finnish economy, so that the State guarantee, which was intended precisely to prevent the possible bankruptcy of Finnair, is appropriate to help remedy the serious disturbance in the Finnish economy caused by the COVID-19 pandemic. The General Court drew this conclusion in particular from the fact that Finnair is the largest carrier and the largest air cargo operator in Finland, with 6,800 employees.

As regards the complaints that the Commission failed to balance the beneficial effects of the aid against its negative effects, the General Court stated that Article 107.3, b) TFEU does not require such an analysis, unlike Article 107.3, c) TFEU. Such a balancing is not required on the basis of the Temporary Framework either.

Second, the General Court examined whether the Commission decision violated the fundamental principle of non-discrimination. According to Ryanair, Article 107.3, b) TFEU provides an exception to the prohibition of State aid laid down in Article 107.1 TFEU, but it does not provide an exception to the other rules and principles of the TFEU.

In this regard, the General Court finds that individual aid inherently entails a difference in treatment, or even discrimination, due to the individual nature of the measure. Public intervention must be selective, i.e. favour one or more undertakings to the detriment of others, in order to be classified as State aid within the meaning of Article 107.1 TFEU. To accept such a plea would simply be to exclude any possibility of granting individual aid, whereas European law explicitly allows Member States to grant such aid, provided that all the conditions laid down in Article 107.2 or 3 TFEU are met.

Moreover, the General Court notes that, if the difference in treatment granted to Finnair could be considered as discrimination, it must be examined whether it is justified by a legitimate objective and whether it is necessary, appropriate and proportionate to achieve that objective.

From that perspective, the General Court finds that the guarantee granted to Finnair is appropriate to attain the objective envisaged, namely to alleviate the major negative effects of the COVID-19 crisis on the Finnish air transport market. In addition, the measure is also necessary to meet the urgent liquidity needs of Finnair, which without the measure would have risked bankruptcy. Finally, the General Court considers that the measure did not go beyond what was necessary to achieve the objectives pursued by Finland, taking into account the importance of Finnair to the Finnish economy.

Third, as regards the alleged infringement of the freedom to provide services and the freedom of establishment, Ryanair has not established, in the General Court's view, how the exclusive nature of the grant of the State guarantee is such as to dissuade it from establishing itself in Finland or from providing services from and to Finland.

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

Consequently, the General Court dismissed the action brought by Ryanair against the Commission's decision on 14 April 2021.

2/ the SAS case

In April 2020, Denmark and Sweden notified to the European Commission various aid measures in the form of guarantees on a revolving credit line of approximately EUR 150 million in favour of the airline SAS AB. This measure based on Article 107.2, b) TFEU aims to partially compensate SAS for the damage resulting from the cancellation or rescheduling of its flights as a result of travel restrictions in the context of the COVID-19 pandemic.

By decisions of 15 April 2020 and 24 April 2020, the Commission found the aid measures to be compatible with the internal market on the basis of Article 107.2, b) TFEU. According to this provision, aid to make good the damage caused by natural disasters or exceptional occurrences is compatible with the internal market. As soon as the pandemic began, the Commission qualified the COVID-19 crisis as an exceptional occurrence within the meaning of this provision.

On 19 June 2020, the airline Ryanair brought two actions for annulment against the Commission decisions.

First, as in the Finnair judgment, the General Court rejected Ryanair's argument that the aid measures were incompatible with the State aid rules because they were intended to remedy the damage suffered by a single company. According to the General Court, aid may be intended to compensate for damage caused by an exceptional occurrence even though it benefits only one individual company without remedying all the damage caused by that occurrence.

Secondly, with regard to the plea of non-proportionality of the measure put forward by Ryanair, the General Court recalls that Article 107.2, b) TFEU only allows compensation for economic damage caused directly by natural disasters or other exceptional occurrences. In this respect, the General Court considers that the Commission had sufficiently demonstrated that the method of calculation for the assessment of such damage was capable of avoiding the risk of possible overcompensation. Moreover, the General Court also takes into account the undertaking given by Denmark and Sweden to carry out an ex post assessment of the damage actually suffered by SAS and to request, if necessary, reimbursement of the amount exceeding the damage.

Next, the General Court considers the Commission's alleged infringement of the principle of non-discrimination. In this respect, the General Court recalls, as in the Finnair judgment, that individual aid creates by its very nature a difference in treatment, or even discrimination, which is inherent in the individual nature of the measure.

Moreover, the General Court recalls that, insofar as such aid creates discrimination, it may be justified when it is necessary, appropriate and proportionate to attain a legitimate objective. From this point of view, the General Court finds that the objective of the contested measures meets the conditions laid down by Article 107.2, b) TFEU, since they are intended to mitigate the negative effects of the COVID-19 pandemic in favour of SAS. The General Court also notes that the measures at issue are necessary, appropriate and proportionate to achieve the objective pursued, given that SAS has the largest market share in Denmark and Sweden, and that this market share is significantly higher than that of its closest competitor in both countries.

Fourth, the General Court examines the Commission decisions with regard to the freedom to provide services and the freedom of establishment. In this context, the General Court notes that Ryanair has not established how the exclusive nature of the measure is such as to dissuade it from establishing itself in Denmark or Sweden or from providing services either from or to those countries.

Next, the General Court rejected Ryanair's argument that the Swedish measure could not have the objective of remedying an exceptional occurrence within the meaning of Article 107.2, b) TFEU, because the Commission had already approved a Swedish aid scheme on the basis of Article 107.3, b) TFEU in order to deal with the disruption of Sweden's economy caused by the COVID-19 pandemic. The General Court notes that the disputed measure is subsidiary to the previous Swedish aid scheme and that, moreover, the TFEU does not preclude the simultaneous application of Article 107.2, b) and Article 107.3, b) TFEU, provided that the conditions of each of these two provisions are met. Such a case may arise where the facts and circumstances giving rise to a serious disturbance of the economy result from an exceptional occurrence.

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

Consequently, the General Court dismissed the action brought by Ryanair against the Commission decision.

Conclusion

The COVID-19 pandemic has had a major impact on air transport in Europe, thereby placing the vast majority of airlines, groundhandling operators and airports in serious financial difficulty.

In order to mitigate the negative effects of the crisis, the Commission quickly approved, under favourable conditions, the numerous aids notified by the States in favour of their airlines. Indeed, since the beginning of the coronavirus crisis, the Commission has approved more than fifty aid schemes and individual aid for the airline sector on the basis of the Temporary Framework for Deutsche Lufthansa, Brussels Airlines, airBaltic and Finnair; as compensation for the damage caused by COVID-19 for 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.

All these cases reveal the wide legal arsenal available for the creation of support measures by States in favour of air transport.

This new case law of the General Court following the Ryanair appeals confirms the wide margin of manoeuvre of the European Commission in determining the conditions of compatibility of aid in the context of the pandemic, whether individual aid following the example of the Finnair and SAS cases or schemes open to national airlines following the French and Swedish aid schemes cases.

The General Court has yet to rule on a number of appeals by Ryanair against Commission decisions authorising individual aid to Air France, Lufthansa, Brussels Airlines, Nordica, Condor, Air Baltic, KLM, TAP, Air Portugal and Croatia Airlines. It should be noted that in its latest appeals, Ryanair has developed new arguments for annulment, emphasising the violation of the general principles of air transport liberalisation and the obligation for the Commission to open formal investigation procedures.