Ireland ordered to recover sums from airlines over unlawful state aid

In July 2009 Ryanair requested the Commission to examine whether the “air travel tax” imposed by Ireland on airlines did not constitute unlawful state aid in favour of some of its competitors.

According to Ryanair, those competitors had inter alia derived a financial advantage from the fact that they operated a significant number of flights to destinations located less than 300 km from Dublin airport for which the tax amounted to €2 per passenger, whereas other flights departing from Ireland were subject to a rate of €10.

In July 2012 the Commission found that the application of a lower rate for short-haul flights constituted state aid incompatible with the internal market.

It therefore ordered the recovery of that aid from the beneficiaries, stipulating that the amount of the aid corresponded to the difference between the lower rate of €2 and the standard rate of €10, that being €8. Aer Lingus and Ryanair, both of which were among the beneficiaries of the aid, brought actions before the General Court against the Commission decision ordering the recovery of the aid unlawfully received. By its judgments delivered on 5 February 2015, the General Court partially annulled that decision on the ground that the Commission had failed to show that the advantage enjoyed by the airlines concerned was, in all cases, €8 per passenger.

The Commission lodged an appeal before the Court of Justice against the judgment of the General Court.

In its judgment, the court found that the airlines that were able to benefit from the reduced rate enjoyed a competitive advantage of €8 by comparison with airlines that paid the standard rate. Thus, restitution of that advantage required, just as the Commission indicated in its decision, Ireland to recover a sum of €8 per passenger for each of the flights concerned.

In that context, the court noted that the recovery of aid entails the restitution of the advantage the airlines were able to procure from the application of the reduced rate, not the restitution of the economic benefit that may have been conferred on those companies by the aid as a result of the exploitation of the advantage. The advantage in question did not consist in the fact that those airlines were able to offer more competitive prices than their competitors. It resulted quite simply from the fact that those companies had to pay a lower amount than they would have had to pay if their flights had been subject to the standard rate.

In addition, the court noted that there was nothing to prevent the beneficiaries of the aid from increasing by €8 the price of their tickets that were subject to the lower rate so as to enjoy economic benefits corresponding to the difference between the lower and standard rates. In that regard, the court rejected the argument of Aer Lingus and Ryanair that, since they were effectively no longer in a position to recover the amount of €8 from their own customers, their obligation to repay that sum would be equivalent to the imposition of an additional tax or a discriminatory penalty.

Accordingly, contrary to what the General Court decided, the Court of Justice considered that the Commission was not required to examine whether and to what extent the beneficiaries of the aid actually utilised the economic advantage arising from the application of the lower rate.

Thus, the General Court’s decision was vitiated by an error of law to the extent that it criticised the Commission for having set the amount of aid to be recovered at €8 per passenger.

In those circumstances, the Court set aside the part of the General Court’s judgment vitiated by that error and dismissed, in their entirety, the actions brought by Aer Lingus and Ryanair against the Commission’s decision.