Ryanair loses court challenge against Croatia Airlines state aid

The European General Court has dismissed Ryanair’s case against the European Commission’s decision in 2020 to approve 11.7 million euros in state aid to Croatia Airlines aimed at compensating the carrier for losses incurred as a result of the coronavirus outbreak and travel restrictions introduced by Croatia and other countries to limit the spread of the virus in the period between March 19, 2020, and June 30, 2020. The low cost airline had argued that EU regulators should have opened an investigation before approving the state support. In the ruling issued yesterday, the judges of the Luxembourg-based General Court dismissed the case in its entirety.

Ryanair put forward four arguments against the state aid, including that it distorted the market. It argued that at the time the aid was granted, Ryanair was the fourth largest airline in Croatia with a 7% market share, whereas Croatia Airlines had a 29% share. It also claimed to have been the only real challenger of Croatia Airlines’ market position. The judgment notes, “The applicant [Ryanair] also claims that its losses in Croatia due to the Covid‑19 pandemic are ‘catastrophic’ and that, unlike Croatia Airlines, it does not benefit from any grant helping it to cushion the impact and to resume its activities in Croatia when travel restrictions are lifted. The applicant also submits that it recently ordered 210 Boeing 737 Max aircraft which joined its fleet at the beginning of 2021 and that, as a result of the 4% increase in seats and the 16% reduction in fuel consumption, it will be able to offer more routes and create new jobs in Croatia while significantly lowering its environmental footprint, assuming that it is able to compete fairly with heavily subsidised competitors like the beneficiary of the aid at issue. The applicant maintains that the direct corollary of closeness of competition vis-à-vis Croatia Airlines is that its competitive situation has been significantly affected by the aid measure at issue”.

The judgment further notes, “The documents before the Court do not support the applicant’s claim that it is the main competitor of the beneficiary of the aid at issue. In particular, the file shows that the applicant held the fourth place on the Croatian market in terms of market shares in 2019. Furthermore, it is apparent from that the beneficiary of the aid at issue serves 38 destinations in 24 European countries. It is apparent from the documents before the Court that the applicant was in competition with that beneficiary only on two routes, that is to say between Pula and Frankfurt and between Zadar and Frankfurt. Competition between those two airlines thus appears to be limited”. It added, “The applicant’s other arguments are inadequately substantiated, with the result that it is not in a position to demonstrate that the aid at issue is liable to have a substantial adverse effect on its market position. Its line of argument is based, in reality, on the mere fact that it is a competitor of Croatia Airlines and that, unlike Croatia Airlines, it does not benefit from aid granted by the Croatian State, which constitutes a competitive disadvantage for the applicant. Such a general line of argument is not sufficient to demonstrate that the applicant’s market position was substantially affected”.

The ruling revealed that in addition to the 11.7 million euros Croatia Airlines received for the March to June period in 2020, it was also granted a further 79.7 million euros in aid linked to the pandemic that same year, however, the court noted that Ryanair was not contesting that sum, focusing instead on the 11.7 million euros. The court also rejected the argument by the Croatian State, which tried to prove that Ryanair is not Croatia Airlines’ direct competitor. “In the present case, it is apparent from the documents before the Court that the applicant is active on the Croatian air transport market and that it is a competitor of the beneficiary of the aid at issue”, the Court said. All sides in the case, including Ryanair, the European Commission and the Croatian government conceded that Croatia Airlines has been facing significant financial issues for years. 

Ryanair and the Croatian government have been ordered to pay their own court costs. The budget airline is also obligated to cover the court costs incurred by the European Commission.