Commission cracks down on aid to airlines

The European Commission has taken a number of decisions lately that show it is cracking down on state aid to airlines.

In December last year the Commission launched a formal investigation into possible illegal state aid granted to Ryanair and also ordered Greece's Olympic airlines to pay back almost €200m (~£128m) in illegal aid. Just one month later, in January 2003, the Commission launched another formal investigation into aid for airlines, this time concerning aid granted by the French authorities to Air Lib.

In the Ryanair case, the Commission has decided to open a formal investigation into the advantages granted to the airline by the Walloon Region and the airport management company (Brussels South Charleroi Airport), when it set up its first base in mainland Europe at Charleroi in 2001. The advantages include a reduced landing fee, a substantial contribution towards the promotion and advertising of Ryanair's services and concessions in the costs of recruitment, training and subsistence of Ryanair staff and ground-handling prices. If the Commission finds that the support to Ryanair is not compatible with the common market, Ryanair could be ordered to repay all the aid it has had to date.

In the Olympic Airlines case, the European Commission had previously approved aid from the Greek authorities to the firm. However, as a result of its latest investigation, the Commission found that airline had not met all its obligations in order to keep the aid and had  also recently received new unlawful aid which was not notified and approved by the Commission. The Commission's investigation revealed that the aid could not be considered compatible with the Common Market and ordered the Greek authorities to recover €194m aid.

Interestingly, the Greek authorities are claiming that the Commission has over-estimated the amount of unfair aid paid to Olympic airlines and that they will only seek to recover €41 million from the state-owned carrier. However, the European Commission has subsequently stated that it will bring the case to the European Court of Justice as soon as possible if Greece continues to refuse to recover the full €194 million of state aid.

All of the above illustrates that the European Commission is taking an increasingly firm stance on aid granted to airlines. It is always wise to take state aid into account before granting aid, particularly in this sector. Please contact us, or our transport colleagues, should you have a proposal you would like to discuss.