Turbulence in Ryanair’s battle against state aid to airlines

European Union
The CJEU confirms the legality of Danish and Swedish aid to SAS
Turbulence in Ryanair’s battle against state aid to airlines
February 22, 2024

In two judgments of September 28, 2023 (cases C-320/21 P and C-321/21 P), the Court of Justice of the European Union (“CJEU”) dismissed the appeals filed by Ryanair against two decisions of the European Commission authorizing state aid granted by Denmark and Sweden to Scandinavian Airlines (“SAS”). The CJEU thus confirmed the legality of both measures. While these were the first final judgments in Ryanair’s legal battle against state aid to airlines, the CJEU has issued two further decisions (cases C-209/21 P and C-210/21 P) along the same lines on state aid granted by Sweden and France.

Ryanair’s legal battle

These two rulings are part of the legal battle brought by Ryanair against various measures of state aid granted by Member States to the airline industry—among the most affected by the COVID-19 pandemic. To date, Ryanair has filed more than 30 actions against state aid granted to different airlines.

The General Court (“GC”) ruled on some of these actions at first instance (see here, here, and here).

Danish and Swedish aid to SAS

These two recent CJEU judgments stem from two measures adopted in April 2020 by Denmark and Sweden. In both cases, the aid granted to the airline SAS consisted of a state guarantee on a revolving credit facility to compensate the damage suffered due to the cancellation of its flights following the imposition of travel restrictions during the pandemic.

The European Commission declared the aid compatible with the internal market under article 107(2)(b) TFEU, which enables it to approve state aid measures to compensate specific companies for damage directly caused by exceptional occurrences. In line with previous decisions, the Commission considered that (i) the coronavirus outbreak qualifies as an exceptional occurrence, as it was unforeseeable and had a significant impact; (ii) the measure was directly linked to that occurrence; and (iii) it was proportionate.

Ryanair brought actions for annulment before the GC against both decisions. Among other things, it argued that article 107(2)(b) TFEU is not intended to remedy the damage suffered by a single victim (SAS), that the measure was disproportionate, and that the Commission had failed to provide sufficient reasons for its decision. However, the General Court dismissed the actions in their entirety in its judgments of April 14, 2021, thus upholding the legality of the Commission’s decision on the Danish and Swedish aid.

Appeal before the CJEU

Although Ryanair invoked multiple grounds, there is a common denominator to both appeals: the singling out and choice of SAS as the sole beneficiary of the aid. This gives rise to several claims for the damage suffered as a result of the COVID-19 pandemic and the infringement of the principles of proportionality, non-discrimination, freedom of establishment and freedom to provide services.

Moreover, Ryanair alleged procedural errors of the GC in the appealed judgments and of the European Commission in the contested decisions.

On the singling out and choice of SAS as the sole beneficiary of the aid

The CJEU considers that the state aid in question may be strictly limited to SAS, without it being necessary to grant it to all airlines that have suffered damage from the COVID-19 pandemic—and without this implying a desire to favor one company over its competitors.

The mere fact of granting aid to a single company does not necessarily mean that the decision was arbitrary or that it pursued objectives other than damage compensation. Moreover, obliging Member States to grant state aid to all market operators would deprive this exception of its effectiveness, as the costs would make them reluctant to make use of this possibility.

As regards the proportionality of the aid granted to SAS, the CJEU holds that it is irrelevant whether, or to what extent, other companies have suffered damage as a result of the same event. The authorization to grant aid was not conditional on demonstrating that the damage only affected the beneficiary. For the purposes of the proportionality assessment, the Commission must consider whether there was overcompensation of the damage suffered, but it must not take into account any indirect competitive advantage allegedly obtained through the measure.

With regard to Ryanair’s allegations of breach of the principle of non-discrimination under article 18 TFEU, the CJEU recalls that for a measure to qualify as state aid under article 107 TFEU, it must confer a selective advantage. This requirement of selectivity presupposes that the Commission will demonstrate that the measure specifically benefits one or more undertakings, so that a state aid will inherently involve a difference in treatment. This does not exclude compatibility with the internal market where aid is granted for the purposes of and in accordance with the conditions laid down in article 107 TFEU (e.g., to make good the damage caused by exceptional occurrences). Furthermore, the CJEU recalls that it is settled case law that the principle of non-discrimination is intended to apply independently only to situations for which the TFUE does not lay down a specific prohibition of discrimination. Since article 107 TFEU allows for differences in treatment between undertakings, provided that the relevant conditions are met, the principle of non-discrimination does not apply independently.

Finally, the CJEU stresses that a restrictive effect on the freedom of establishment and the freedom to provide services is inherent in the very nature of state aid—and thus dismisses Ryanair’s arguments.

The CJEU reached identical conclusions in its subsequent judgment on French state aid to airlines holding a French license, in the form of a deferral of the payment of civil aviation tax and solidarity tax on airline tickets (C-210/21 P). In particular, citing the SAS judgments, the CJEU held that the measure did not infringe the principle of non-discrimination as state aid cannot be considered incompatible with the internal market solely because the aid is selective or distorts or threatens to distort competition. Likewise, the CJEU reaffirmed that a restriction on the freedom to provide services is inherent in any state aid.

On Ryanair’s procedural allegations

On the one hand, Ryanair argued that the Commission had not sufficiently examined the state aid and that there were doubts as to its compatibility with the internal market, which should have led to the initiation of the formal investigation procedure. However, the CJEU upheld the GC’s judgment and concluded that Ryanair had not demonstrated that the European Commission’s investigation had been incomplete and insufficient.

On the other hand, the CJEU also dismissed the allegations of failure to state reasons, clarifying that it is not necessary for the reasoning to specify all the relevant facts and points of law.

The CJEU ruled similarly in its later judgment on French state aid.

The CJEU extends the same reasoning to aid granted under article 107(3)(b) TFEU

The CJEU issued a subsequent judgment on state aid granted by Sweden to several airlines holding a Swedish license, in the form of a loan guarantee scheme (C-209/21 P). The CJEU confirmed the above conclusions also for aid granted on the basis of article 107(3)(b) TFEU (i.e., to promote the execution of an important project of common European interest or to remedy a serious disturbance in the economy of a Member State).

Specifically, in relation to the principle of non-discrimination, the CJEU reiterated that paragraphs 2 and 3 of article 107 TFEU provide for certain exceptions to the principle of incompatibility of state aid with the internal market. In particular, differences in treatment between undertakings are admissible—provided that the conditions laid down in these exceptions are met. Thus, the principle of non-discrimination laid down in article 18 TFEU does not apply; rather, it is simply a matter of analyzing whether the differences in treatment induced by the measures are compatible with these exceptions.

Similarly, the CJEU stated that a restrictive effect on the freedom of establishment and the freedom to provide services is inherent in the very nature of state aid granted under article 107(3)(b) TFEU.

Ryanair’s upcoming flights to the GC and the CJEU

These two judgments of the CJEU on Danish and Swedish state aid have become the first final judgments in the legal battle initiated by Ryanair against aid granted to airlines to mitigate the effects of the COVID-19 crisis. They thus set an important precedent on the legality of state aid granted under article 107(2)(b) TFEU, confirming that granting such aid does not violate the principles of proportionality, non-discrimination, freedom of establishment and freedom to provide services.

It is expected that the GC and the CJEU will follow a similar approach in future judgments, provided that there are no procedural errors, thus rejecting Ryanair's allegations on the breach of these principles whether under article 107(2)(b) or 107(3)(b) TFEU. This has certainly been the case in the CJEU judgments on state aid granted by France and Sweden (C-209/21 P and C-2010/21 P).

To date, all of Ryanair’s successful appeals have been upheld mainly on the grounds of insufficient reasoning of the European Commission’s decisions declaring the aid compatible with the internal market. This has led the Commission to issue new decisions with additional reasoning. Therefore, despite the media buzz, Ryanair’s appeals have had limited practical effect.

February 22, 2024