State Aid: Unlawful COVID-19 Aid for KLM

Mar 1, 2024 Benn-Ibler Rechtsanwälte

In the legal battle over State support during the COVID-19 pandemic, Ryanair has won a victory. During the pandemic, many airlines received payments in the form of State aid. Now, once again, the European courts have had to deal with the legality of these payments. According to the European General Court (EGC), the EU Commission should not have approved billions in Dutch aid to KLM.

In 2020, the European Commission approved State aid worth billions of euros to be granted by the Netherlands to KLM. The airline would receive a State guarantee for a bank loan and a state loan during the COVID-19 pandemic. The aim was to provide temporary liquidity to the airline.

The European Commission’s decision to approve this State aid was annulled by the ECJ in 2021. In the court’s view, there was insufficient justification for the identification of the beneficiary or group of beneficiaries of the aid. In response, the Commission adopted a new decision. This has now been annulled once again by the EGC in a current judgment.

The Court held: The prior identification of the beneficiary is a prerequisite for assessing the necessity and proportionality of the aid in general and compliance with the conditions in particular. The overall assessment of the compatibility of an aid measure with the common market may be affected by incorrect or incomplete identification of the beneficiary of the aid.

According to the Court, the Commission had wrongly identified the beneficiaries of the aid. It considered that the holding company Air France-KLM and Air France, both companies belonging to the Air France-KLM Group, failed to qualify as beneficiaries.

After examining the capital links between the companies the Court concluded that both the holding company and Air France had received or benefited, at least indirectly, from the State aid granted by the Netherlands to KLM.

ECLI T-146/22 (7 February 2024)