The General Court of the European Union has upheld a Ryanair (FR, Dublin International) challenge to billions of euros in state aid given to KLM Royal Dutch Airlines (KL, Amsterdam Schiphol) and TAP Air Portugal (TP, Lisbon), overturning European Commission decisions that allowed the Netherlands to give EUR3.4 billion euros (USD4.15 billion) to the Dutch wing of Air France-KLM and Portugal’s EUR1.2 billion (USD1.46 billion) grant to TAP.

The Luxembourg-based court ruled that regulators had failed to justify the huge cash injections. In KLM’s case, it pointed out that the French government had already handed its sister company Air France (AF, Paris CDG) EUR7 billion (USD8.55 billion) and ruled as inadmissible the commission’s argument that this would not also benefit the Dutch carrier.

As for TAP, the court agreed with Ryanair that the commission had failed to properly justify its decision to greenlight the aid. It argued that “the commission failed to state the reasons for the contested decision to the requisite legal standard and that this inadequacy of the statement of reasons requires the annulment of the decision.”

However, the annulments of the state aid, and the recovery of the funds, will be suspended until new decisions emerge from the commission in light of the rulings. If Ryanair, which brought the cases to the court, is then not satisfied with the new decisions, it can challenge them once again.

KLM said in reaction to the judgement that for now, it had no consequence as the aid would not have to be repaid until the commission had looked again at its decision.

Portugal’s prime minister, Antonio Costa, told reporters that the rulings were “preliminary” and “a precautionary measure aimed at asking the European Commission for additional information,” the business daily Jornal de Negócios reported.

“In confronting the crisis that has hit civil aviation around the world, it would have been unthinkable for the European Commission not to lift restrictions on state aid, which virtually all European airlines have resorted to, and even more significantly than TAP,” Costa said.

Ryanair welcomed the rulings, arguing that “the European Commission’s approvals of state aid to Air France-KLM and TAP went against the fundamental principles of EU law and reversed the clock on the process of liberalisation in air transport by rewarding inefficiency and encouraging unfair competition.”

It stressed that during the Covid-19 pandemic over EUR30 billion in “discriminatory state subsidies” had been “gifted” to European flag carriers. The rulings are for two of more than 20 appeals it has so far filed before the General Court, it added.

However, also on May 19, the same court rejected a Ryanair challenge against a EUR10 billion (USD12.23 billion) fund in Spain for pandemic-hit companies that the European Commission had approved, ruling that the measure complied with EU law. The court has also judged against Ryanair in a challenge from Lufthansa (LH, Frankfurt International) over a 2017 commission decision allowing state aid for Frankfurt Hahn Airport, where the Irish airline was the main beneficiary.

KLM had not responded to ch-aviation’s request for comment at the time of going to press, but TAP commented: “The General Court of the European Union effectively ordered the suspension of the effects of the annulment, giving the European Commission time to review their decision so as to repair the defective statement of reasoning. The decision [...] will have no immediate impact on the aforementioned state aid that was granted to TAP.”