ECJ Confirms Legality of AUA Rescue Against RyanAir and Laudamotion
In a significant ruling, the European Court of Justice (ECJ) has confirmed the legality of €150 million in state aid to Austrian Airlines (AUA) during the COVID-19 pandemic. This ruling marks the conclusion of a legal dispute brought by the low-cost airlines Ryanair and Laudamotion against the approval of this aid by the EU Commission.
Ryanair and Laudamotion's lawsuit against AUA's state bailout has been defeated, as the European Court of Justice ruled that Austria's €150 million 2020 aid was lawful. / Picture: © Austrian Airlines / Flickr Attribution-NonCommercial-ShareAlike 2.0 Generic (CC BY-NC-SA 2.0)
In the course of the first wave of the COVID-19 pandemic in 2020, AUA, a subsidiary of the German Lufthansa, was confronted with massive financial challenges. The Austrian government reacted quickly and adopted a comprehensive rescue package totaling EUR 600 million. In addition to direct aid of 150 million euros, this package also included a loan of 300 million euros, for which the Austrian state assumed liability. This loan has since been repaid by AUA. Lufthansa, as the parent company, also contributed 150 million euros.
The lawsuit by Ryanair and Laudamotion
Ryanair and Laudamotion, which are also active in the Austrian market, saw the state support for AUA as a distortion of competition and brought an action before the General Court of the European Union (EGC). They argued that the aid restricted the freedom of establishment and the free movement of services within the EU, as it only benefited AUA. However, this claim was dismissed at first instance. The plaintiffs then appealed to the ECJ.
Decision of the ECJ
The ECJ has now confirmed the judgment of the General Court and definitively dismissed the action brought by Ryanair and Laudamotion. In its reasoning, the Court emphasized that in exceptional situations, such as those caused by the COVID-19 pandemic, a Member State is entitled to provide targeted support to specific companies to compensate for damage caused. The ECJ emphasized that AUA has a significantly higher market share in Austria compared to other airlines and was much more affected by the pandemic-related restrictions.
The court also clarified that the aid did not constitute overcompensation and therefore did not distort competition in favor of the Lufthansa Group. The plaintiffs were unable to prove that the state support caused restrictions on competition beyond the inherent effects of such aid. The ECJ thus confirmed the legality of the EU Commission's decision to approve the aid.
Significance of the ruling
This ruling has far-reaching consequences for the interpretation of EU state aid law in crises. It underlines the flexibility granted to Member States to support their economies in exceptional times. It also sets a precedent for similar cases where state support for certain companies is necessary to ensure their survival.
Not only Austria but also other European countries, including France and the Netherlands, have supported their national airlines during the pandemic. The EU Commission had also examined this aid and ultimately classified it as lawful, although there were legal disputes in some cases.
While AUA and its parent company Lufthansa benefit from the decision, the EU Commission's review of other state aid is still ongoing. For example, the approval of aid for other companies in the Lufthansa Group is still pending. However, the ECJ's decision could serve as a guideline for future assessments.
Overall, the ruling illustrates the importance of a balanced and flexible legal framework that enables quick and effective action to be taken in times of crisis to limit economic damage and ensure the continued existence of essential companies. The decision thus strengthens the role of the EU Commission in monitoring and approving state aid and at the same time sets clear limits on the possibilities for competitors to take action against such measures.