By Olivia Bugault
The General Court of the European Union issued a ruling on Wednesday that annuls a decision from the European Commission to approve Netherlands financial aid of 3.4 billion euros ($4.16 billion) for its flag carrier KLM, a subsidiary of Air France-KLM.
The court said that the aid that was granted to KLM last year in order to strengthen the airline's liquidity and mitigate the effects of the coronavirus pandemic on the airline's balance sheet was based on "inadequate reasoning."
The European Commission failed to demonstrate that previous aid of EUR7 billion granted to Air France-KLM's other subsidiary Air France by the French state didn't also benefit KLM, the court said.
The Dutch carrier, however, won't have to repay the aid for the moment.
"Due to the particularly damaging impact of the pandemic on the Netherlands economy, the General Court suspends the effects of the annulment pending the adoption of a new decision by the Commission," the court said.
KLM said that the decision from the European General Court doesn't affect the airline or the aid it has received for the moment as the effects of the ruling are suspended.
London-listed low-cost airline Ryanair Holdings PLC, which launched the legal action against the European Commission's decision late last year, welcomed the decision.
"While the Covid-19 crisis has caused damage to all airlines that contribute to the economies and the connectivity of the Netherlands and Portugal, the governments of these countries decided to support only their national flag carriers," Ryanair said following the ruling.
In another ruling on Wednesday, the General Court of the European Union backed another Ryanair's claim by annulling the EU Commission's approval of state aid for Portuguese carrier TAP Air Portugal. The consequences of the judgment are also suspended.
Write to Olivia Bugault at email@example.com
(END) Dow Jones Newswires
May 19, 2021 07:07 ET (11:07 GMT)Copyright (c) 2021 Dow Jones & Company, Inc.