Court annuls EU approval of $140 million of COVID-19 aid for Italian airlines

A top European Union court ruled Wednesday that the European Commission was wrong to approve millions of euros (dollars) in aid to help Italian airlines cope with the impact of COVID-19 restrictions.

The EU general court said the European Commission — the bloc's executive arm — failed to provide “a statement of reasons for its finding that the measure at issue was not contrary to EU law provisions other than those governing state aid.”

The 27 EU member countries must seek approval from the bloc’s executive branch when granting financial support to companies. Many countries across Europe did so in 2020 to help keep their airlines afloat during the pandemic.

In October 2020, Italian authorities informed the European Commission of their plans to provide 130 million euros ($140 million) to airlines holding an Italian license under certain conditions, and the commission did not raise objections.

To benefit from the aid, airlines were required to pay their Italy-based employees — as well as employees of third-party companies involved in their activities — a remuneration at least equal to the minimum set by the national collective agreement applicable to the air transport sector. Air Dolomiti, Neos and Blue Panorama, now known as Luke Air, fulfilled the requirements.

The case was brought by low-cost airline Ryanair, which also was struggling to survive at the time.

It was the second judicial win in a month for the Irish carrier after the court annulled decisions by the commission approving massive bailouts designed to help Lufthansa and SAS.

It was not immediately clear what impact the ruling, which can be appealed, might have, and if the airlines would have to pay the money back. The European Commission said it “will carefully study the judgment and reflect on possible next steps.”

The commission is the EU’s anti-trust watchdog. As pandemic restrictions in 2020 brought travel to a halt and threatened the existence of airlines, the commission eased its policies, approving billions of euros in support for national flag-carriers.

Under a fast-track system set up during what the commission described as “an unprecedented crisis,” Brussels approved around 3 trillion euros in state support across all sectors in the 27 member nations. Ryanair believes that 40 billion euros was granted to Europe’s airline sector alone.