The General Court of the European Union has annulled for a second time the European Commission’s approval of Covid-era Dutch state aid worth EUR3.4 billion euros (USD3.66 billion) to KLM Royal Dutch Airlines (KL, Amsterdam Schiphol) - a bailout that Ryanair (FR, Dublin International) challenged and previously won in May 2021 before the European Union’s executive body re-examined the case and cleared it again, arguing the aid was necessary and proportionate.

The Luxembourg-based court ruled in 'Case T-146/22: Ryanair v Commission (KLM II; Covid-19)' that competition regulators had not taken into account all of the beneficiaries of the aid within Air France-KLM. It “considers that the Commission erred in defining the beneficiaries of the state aid granted, by excluding from those beneficiaries the Air France-KLM holding and Air France,” it said.

“The court examines the capital, organic, functional, and economic links between the companies in the Air France-KLM group, the contractual framework on the basis of which the measure at issue was granted, as well as the type of aid measure granted and the context in which it was granted,” it explained. It thereby concluded that Air France-KLM and Air France “were capable of benefiting, at least indirectly, from the advantage granted by the state aid in question.”

KLM responded that it “will study the verdict and investigate further steps. KLM repaid the loans relating to the state aid in June 2022. The credit facility was ended in April 2023.”

Ryanair welcomed the ruling that the “Covid-19 state aid granted by the Netherlands to Air France-KLM in 2020 was illegal” and “now calls on the European Commission to order the Netherlands to immediately recover” the funds and “impose adequate remedies to repair at least some of the damage to competition done by this massive state bailout.”

It urged the EU executive body to ensure that what it claimed was over EUR40 billion (USD43 billion) in aid given to EU member state flag carriers during the pandemic be returned to the countries concerned.

Like KLM, the European Commission said it would scrutinise the judgment and consider possible further steps.