European Union Justice Court blocks €1.2Bn of State aid to TAP

The European Union’s Court of Justice has overturned a decision from the European Commission which had given the green light to a €1.2Bn aid package to bailout Portugal’s national carrier TAP.

The decision, which was issued in a communiqué, has arisen because low-cost airline Ryanair lodged a complaint in the summer of 2020 claiming it was unfair that some airlines were being bailed out by their country’s governments because of the pandemic, while private low-cost airlines were being left to fend for themselves.
However, the decision from the European Justice Court may not put the TAP restructuring plan at risk, while a source close to the negotiations explained that negotiations are continuing to take place between the Portuguese and European authorities.
Although the European Union’s Justice Court annulled the decision by Brussels to allow Portugal to provide the €1.2Bn lifeline to TAP, the money will not have to be given back (so, it seems) and the decision will not affect the restructuring plan which had already been approved.
Last June the European Commission decided that the aid to TAP was compatible with internal market rules. That decision was contested legally by Ryanair on the grounds of unfair advantage, a decision with which the Court of Justice now agrees, decreeing the annulment of the EU Commission’s decision on the grounds that it did not produce “a statement of sufficient grounds”.
The practical effect of the legal pronouncement was suspended by the same court at the same time until a new decision can be adopted by the European Commission, providing the European authorities with some room for manoeuvre.
Alternatively to the change in the ruling, an appeal may be presented within two months and 10 days of the decision handed down by the European Justice Court.
Ryanair can challenge the new decisions at the same court if it is not satisfied with them according to the news agency Reuters.
Last year the EU competition enforcer cleared a €3.4Bn Dutch bailout for KLM and the €1.2Bn rescue loan for TAP.
“The European Commission’s approvals of state aid to Air France-KLM and TAP went against the fundamental principles of EU law and put the clock back on the process of liberalisation in air transport by rewarding inefficiency and encouraging unfair competition,” Ryanair said after the ruling.
But the judgment may be of no consequence as the state aid will not have to be repaid until the Commission has a chance to review the decision.
Portugal’s Prime Minister António Costa told reporters the decision was preliminary and the aid was justified on the grounds of the impact of the pandemic on the airline.
“Given the crisis that hit the aviation sector around the world, it was unthinkable for the European Commission not to lift restrictions on state aid,” he said, adding “there is no reason to think their legal experts did not study the matter well.”