European Court’s Verdict: Aid to KLM amidst Corona Crisis Deemed Unlawful

This article was last updated on February 7, 2024

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Rejection of State Aid to KLM by the European Court

In a decisive ruling, the European Court of Justice has annulled the approval of state aid to KLM by the Dutch cabinet during the COVID-19 pandemic. The European Commission was criticized for having wrongfully authorized this aid package. The legal action was instigated by Ryanair, which asserted that the state aid cultivated an environment of unfair competition. This is not the lead story, as this is the second time that the European Commission’s approval has been repudiated by the Court. A similar situation unfolded a few years back, wherein the European Commission conceded its acceptance of the government’s support package.

Lack of Thorough Examination

Towards the early phase of the COVID-19 crisis in 2020, KLM was headed towards financial turmoil due to meager flights. To provide aid, the government issued €3.4 billion in state assistance in terms of loans and guarantees to the aviation major. Following the provision of this support, the European Commission granted its approval. However, this approval was quickly negated by the European Court in 2021 asserting improper substantiation of the sanction. The Commission amended its decision according to the Court’s directions, reauthorizing the aid. However, the recent ruling has yet again rescinded the approval. The judiciary expressed uncertainty over whether KLM was the sole beneficiary of the aid because of its close association with Air France.

In the Eye of the Storm

An European Court spokesperson alluded to this case as an ongoing saga and pointed out that the European Commission can still appeal against this decision or reanalyze the support. KLM is also considering its next steps, conducting a detailed examination of the ruling. On the other hand, KLM doesn’t have to reimburse anything at this stage due to this court’s declaration. The airline utilized the government’s guarantee, but the corresponding loan has been refunded already.

Precedents of Unlawful State Aid

KLM isn’t the only airline facing the brunt of the European Court’s disapproval over the legality of state aid. Not too long ago, the European Court considered Air France’s support from the French government, amounting to €11 billion, illegal. Lufthansa also found itself in similar water when the European Court found unlawful aid provision in their case. Notably, Ryanair lodged complaints in all three cases.