Case T‑494/21

Ryanair DAC
and
Malta Air ltd.

v

European Commission

Judgment of the General Court (Eighth Chamber, Extended Composition) of 20 December 2023

(State aid – Aid granted by France to Air France and Air France-KLM in the context of the COVID-19 pandemic – Recapitalisation – Decision declaring the aid compatible with the internal market – Action for annulment – Locus standi – Substantial adverse effect on the applicant’s position on the market – Admissibility – Determination of the beneficiary of the aid in the context of a group of companies)

1. Action for annulment – Natural or legal persons – Measures of direct and individual concern to them – Individual concern – Criteria – Commission decision finding aid compatible with the internal market – Action of a rival undertaking claiming that its market position is significantly affected – Admissibility – Obligation for the rival undertaking to provide a precise definition of the market at issue and to compare the situation of all the competitors present on that market in order to differentiate itself in relation to them – None

   (Art. 263, fourth para., TFEU)

   (see paragraphs 20-50)

2. Action for annulment – Admissibility criteria – Bringing of a single action by two applicants – Admissibility of the action of one of the applicants – Need to examine the admissibility of the action in relation to the second applicant – None

   (Art. 263 TFEU)

   (see paragraph 53)

3. Aid granted by a Member State – Prohibition – Exceptions – Aid capable of being regarded as compatible with the internal market – Discretion of the Commission – Identification of the beneficiary of the aid – Group of undertakings constituting a single economic unit – Criteria for assessment – Capital, organic, functional and economic links between the undertakings belonging to that group – Contractual framework and context of the aid measures at issue

   (Art. 107(3)(b) TFEU)

   (see paragraphs 59-70, 83, 84, 97, 107, 132-136)

4. Aid granted by a Member State – Prohibition – Exceptions – Aid capable of being regarded as compatible with the internal market – Discretion of the Commission – Identification of the beneficiary of the aid – Undertaking benefiting from a direct or indirect advantage – Indirect advantage – Concept – Distinction between indirect advantage and secondary economic effects inherent in an aid measure

   (Art. 107(3)(b) TFEU; Commission Notice 2016/C 262/01, paragraphs 115 and 116)

   (see paragraphs 139-146)

5. Aid granted by a Member State – Prohibition – Exceptions – Aid capable of being regarded as compatible with the internal market – Aid to remedy serious disturbance in the economy of a Member State – Aid intended to finance the immediate liquidity needs of an airline group in the context of the COVID-19 pandemic – Commission decision finding the aid compatible with the internal market – Manifest error of assessment committed by the Commission in identifying the beneficiaries – Error likely to have an impact on the analysis of the compatibility of the aid measures with the internal market

   (Art. 107(3)(b) TFEU)

   (see paragraphs 147-151)

Résumé

In April 2020, the French Republic notified the European Commission of a plan to grant aid to the airline Air France, a subsidiary of the Air France-KLM holding. The notified aid consisted of (i) a State loan guarantee covering 90% of a loan of EUR 4 billion granted by a consortium of banks and (ii) a shareholder loan of up to EUR 3 billion.

Subsequently, in March 2021, the French Republic notified the Commission of a plan to grant aid to Air France and the Air France-KLM holding for the recapitalisation of those two companies in the amount of EUR 4 billion, by means of a share capital increase and the conversion of the shareholder loan referred to above into a hybrid instrument equivalent to an equity participation in the Air France-KLM holding.

Those measures, which form part of a series of other aid measures aimed at supporting the companies forming part of the Air France-KLM group, were intended to finance the immediate liquidity needs of Air France and the Air France-KLM holding in order to help them overcome the adverse effects of the COVID-19 pandemic.

By decision of 4 May 2020 (‘the Air France decision’), ( 1 ) corrected on two separate occasions in December 2020 and July 2021, and by decision of 5 April 2021 (‘the Air France-KLM and Air France decision’), ( 2 ) the Commission concluded that the notified measures constituted State aid compatible with the internal market under (i) Article 107(3)(b) TFEU ( 3 ) and (ii) its communication of 19 March 2020 entitled ‘Temporary Framework for State aid measures to support the economy in the current COVID-19 outbreak’. ( 4 )

In the Air France decision, the Commission considered that the beneficiaries of the notified aid were Air France and its subsidiaries. Accordingly, neither the Air France-KLM holding nor its other subsidiaries, including KLM and the companies controlled by that company, were considered to be beneficiaries of that measure. In the Air France-KLM and Air France decision, the Commission identified both Air France and its subsidiaries and the Air France-KLM holding and its subsidiaries – with the sole exception of KLM and its subsidiaries – as beneficiaries of the notified aid.

The airlines Ryanair and Malta Air have brought actions seeking the annulment of the abovementioned Commission decisions. The Eighth Chamber (Extended Composition) of the General Court upholds those actions and finds that the Commission committed a manifest error of assessment in determining the beneficiaries of the notified aid and, therefore, acted in breach of Article 107(3)(b) TFEU. In that context, the Court clarifies how the beneficiaries of an aid measure should be determined in the context of a group of companies.

Findings of the Court

In support of their actions, the applicants challenged, inter alia, the exclusion of, on the one hand, the Air France-KLM holding and KLM (the Air France decision) and, on the other, KLM (the Air France-KLM and Air France decision) from the scope of the beneficiaries of the notified measures.

In that regard, the Court recalls that, although the Commission has a broad discretion when it is called upon to identify the beneficiaries of a notified aid measure, the fact remains that the EU judicature must establish not only whether the evidence relied on is factually accurate, reliable and consistent, but also whether that evidence contains all the relevant information which must be taken into account and whether it is capable of substantiating the conclusions drawn from it.

Furthermore, it is apparent from the case-law and from the Commission Notice on the notion of State aid ( 5 ) that several separate legal entities may be considered to form one economic unit for the purposes of the application of the rules on State aid. The factors taken into account in order to determine whether such an economic unit exists include, inter alia, the capital, organic, functional and economic links between the entities concerned, the agreements providing for the grant of the notified aid and the context in which that aid is granted.

In the light of those clarifications, the Court notes, first of all, that the capital and organic links within the Air France-KLM group as described in the contested decisions indicate that the separate legal entities within that group form a single economic unit for the purposes of the application of the rules on State aid. In that regard, the Court emphasises that it follows from the Commission’s findings that the Air France-KLM holding actually exercises control over Air France and KLM by involving itself directly or indirectly in their management and thus takes part in the economic activity carried out by them. Moreover, according to those findings, there is, at the level of the Air France-KLM group, a centralised decision-making procedure and a certain degree of coordination, carried out through joint bodies bringing together high-level representatives of the Air France-KLM holding, Air France and KLM, at least as regards the way in which certain important decisions are taken.

The Commission’s conclusion that the Air France-KLM holding, Air France and KLM do not constitute an economic unit for the purpose of identifying the beneficiaries of the notified aid measures is also undermined by the functional and economic links between those entities. The description of those links in the contested decisions and the various examples relied on in that regard by Ryanair and Malta Air demonstrate a degree of functional, commercial and financial integration and cooperation between those entities.

Next, the Court notes that, contrary to the Commission’s arguments, the contractual framework on the basis of which the notified measures are granted and the commitments given by the French Republic in the context of the Air France-KLM and Air France decision do not preclude the Air France-KLM holding, Air France and KLM from being classified as an economic unit. In that regard, the Court states that neither the contractual clauses cited by the Commission nor the commitments given by the French Republic allow the circle of beneficiaries of the measures notified to Air France to be restricted to the Air France-KLM holding and Air France respectively. With regard to the Air France-KLM and Air France decision, the Court also notes that the improvement of the financial position of the Air France-KLM holding following the notified measure has the effect, in any event, of excluding the risk of its default and, by extension, the default of its subsidiary KLM and the companies controlled by KLM.

Furthermore, in view of the chronological and structural link between the measures forming the subject matter of the contested decisions, and noting that the Air France-KLM and Air France decision was adopted before the second corrigendum to the Air France decision, the Court finds that the existence of each of those decisions should have been taken into account by the Commission in its examination of the notified measures. Accordingly, the Commission failed to explain why it defined the beneficiaries of the notified aid measures differently in the contested decisions.

Lastly, the Court rejects the Commission’s line of argument according to which the notified aid measures have, at most, merely secondary economic effects vis-à-vis the Air France-KLM holding and its other subsidiaries (the Air France decision) and vis-à-vis KLM and its subsidiaries (the Air France-KLM and Air France decision). In that regard, the Court recalls that the foreseeable effects of those measures from an ex ante perspective suggest that the financing solution provided for was likely to benefit the Air France-KLM group as a whole, by improving its overall financial position. In accordance with the Commission Notice on the notion of State aid, such a financing solution indicates the existence, at the very least, of an indirect advantage in favour of the Air France-KLM group, including KLM and its subsidiaries.

In the light of all of those factors, the Court concludes that the Commission committed a manifest error of assessment in excluding, on the one hand, the Air France-KLM holding and its other subsidiaries, including KLM and KLM’s subsidiaries (the Air France decision), and, on the other, KLM and its subsidiaries (the Air France-KLM and Air France decision) from the scope of the beneficiaries of the notified aid measures. Since that incorrect identification of the beneficiaries is likely to have an impact on the entire analysis of the compatibility of the notified measures with the internal market under Article 107(3)(b) TFEU and the Temporary Framework, the Court annuls the contested decisions.

( 1 ) Commission Decision C(2020) 2983 final of 4 May 2020 on State Aid SA.57082 (2020/N) – France – COVID-19 – Temporary Framework 107(3)(b) – Guarantee and shareholder loan for Air France, as corrected by Decisions C(2020) 9384 final of 17 December 2020 and C(2021) 5701 final of 26 July 2021.

( 2 ) Commission Decision C(2021) 2488 final of 5 April 2021 on State Aid SA.59913 – France – COVID‑19 – Recapitalisation of Air France and the Air France-KLM holding company, and Commission Decision C(2020) 2983 final of 4 May 2020 on State aid SA.57082 (2020/N) – France – COVID-19 – Temporary Framework 107(3)(b) – Guarantee and shareholder loan for Air France, as corrected by Decisions C(2020) 9384 final of 17 December 2020 and C(2021) 5701 final of 26 July 2021 (‘the contested decisions’).

( 3 ) Pursuant to Article 107(3)(b) TFEU, aid to remedy a serious disturbance in the economy of a Member State may, under certain conditions, be considered to be compatible with the internal market.

( 4 ) Communication from the Commission of 20 March 2020 regarding the Temporary Framework for State aid measures to support the economy in the current COVID-19 outbreak (OJ 2020 C 91 I, p. 1), amended on 4 April 2020 (OJ 2020 C 112 I, p. 1), 13 May 2020 (OJ 2020 C 164, p. 3) and 29 June 2020 (OJ 2020 C 218, p. 3) (‘the Temporary Framework’).

( 5 ) Commission Notice on the notion of State aid as referred to in Article 107(1) of the Treaty on the Functioning of the European Union (OJ 2016 C 262, p. 1).