EU court cancels approval of COVID-19 state aid to 3 Italian airlines

The General Court of the European Union on Wednesday ruled that the European Commission was wrong to approve a financial package the Italian government granted to domestic airlines to deal with the economic fallout of the COVID-19 pandemic.

Rome notified the EU’s executive in October 2020 that it would disburse €130 million in compensation funds to three airlines holding an Italian licence: Neos, Blue Panorama and Air Dolomiti.

The Commission, which is tasked with evaluating state aid packages member states hand out to ensure they do not weaken the level-playing field across the Single Market, raised no objection to the measure, arguing it was compatible with the internal market.

But the court ruled that the Commission was wrong not to open a formal investigation procedure into the state aid in question and therefore annulled the approval.

The EU executive, which has the possibility to appeal the decision before the EU Court of Justice, said it will carefully examine the ruling before taking any action.

Earlier this month, the General Court ruled the Commission was also wrong to approve a €6 billion financial aid package given by the German government to Lufthansa to survive the loss in revenues brought about by the global pandemic.

Both cases against Italy and Germany were brought forward by competitor Ryanair.

The low-cost airline welcomed the latest ruling in a statement, calling the financial packages EU governments dished out to former flag carriers only during the pandemic “discriminatory”. 

“Europe’s emergence from the COVID-19 crisis with a functioning single market depends on airlines being allowed to compete on a level playing field. Undistorted competition eliminates inefficiency and benefits consumers through low fares and choice. Unjustified subsidies, on the other hand, encourage ineffectiveness and will harm consumers for decades to come,” a spokesperson said.