EU General Court Declares Netherlands' €3.4 Billion Aid to Air France-KLM Illegal

The General Court of the European Union has ruled that the Dutch government's multi-billion dollar aid to KLM in 2020 was illegal. European low-cost giant Ryanair has praised the ruling, calling for the Court to recover the illegal aid.

Illegal Aid?

Airlines worldwide struggled to stay afloat during the height of the COVID-19 pandemic. With large swaths of aircraft grounded, airports empty, and borders closed, it was nearly impossible for small and large airlines to generate profits. To keep their carriers afloat, various state governments provided large aid packages to their transportation sectors, including airlines. 

An example was the CARES Act, passed by the United States government and earmarked up to $46 billion in loans to U.S. airlines. Similarly, in 2020, the Dutch government granted national carrier KLM Royal Dutch Airlines a state-guaranteed bank loan of €3.4 billion (approximately $3.6 billion at the time. The European Commission approved this loan, saying that it was compliant with state rules and that KLM and its subsidiaries (KLM Cityhopper, Martinair, and Transavia) were the sole recipients of the aid.

However, in 2021, the European Union's General Court denied the approval of this state aid to KLM. This was due to errors in defining beneficiaries and the exclusion of specific companies within the Air France-KLM Group. Ryanair has consistently opposed COVID-19 state aid to airlines, with the low-cost carrier criticizing the European Commission's approach to state aid during the pandemic.

Furthermore, it accused the Commission of undermining fair competition principles by allowing “discriminatory subsidies to inefficient flag carriers.” As such, the General Court again annulled the Dutch government's state aid to KLM on February 7. The basis for its decision was the European Commission's failure to encompass all possible assistance recipients properly.

Specifically, the Air France-KLM holding company and Air France itself were excluded from the aid. As such, the General Court concluded that other companies within the Air France-KLM Group could have benefited from the aid, not simply KLM and its Dutch subsidiaries.

Potential Recovery

Ryanair is calling for the European Commission to swiftly recover the money provided in the alleged illegal aid packages. The airline reasons that such subsidies harm consumers and harm competition within the aviation market. Ryanair also called for "adequate remedies" to repair some of the damage caused by this state aid to the free market and airline competition, specifically within the European Union.

In Court, Ryanair is represented by the law firm Oswell & Vahida. Historically, this firm has been involved in cases where it has been successfully able to overturn state aid. The firm has overturned more than the equivalent of $28.7 billion in state aid, $19.3 billion in 2023 alone.

The recent ruling by the General Court highlights the overall challenge in addressing all COVID-19 state aid across the European Union's aviation sector. Previously, the Court has ruled against aid to airlines, including Lufthansa, Scandinavian Airlines System, and certain Italian carriers.