04/01/17

Judgment of the Court of Justice of EU on the Irish air travel tax

On 21 December 2016, the Court of Justice of the EU partially annulled a judgment of the Tribunal regarding the Irish air travel tax and confirmed that Ireland must recover the sum of €8 per passenger from airlines benefiting from unlawful State aid. 

Ryanair had lodged a complaint in July 2009 to request the Commission to verify whether the Irish air travel tax imposed on airlines constituted unlawful State aid in favour of competitors.

The air travel tax varied according to the distance of the flight: the tax amounted €2 per passenger for flights less than 300 km from Dublin airport and tax for other flights was €10.

Following its investigation, the Commission concluded in July 2012 that the lower rate for short-haul flights was indeed incompatible State aid. 

Therefore, Ireland must recover the aid from those airlines which benefited from this more favourable rate. It stated that the amount of aid ranged between the standard rate of €10 and the lower rate of €2 i.e. €8 per passenger.

This decision was challenged by Aer Lingus and Ryanair which were identified as beneficiaries of the aid before the General Court.

In its judgment of 5 February 2015, the General Court partially annulled the Commission decision on the grounds that the Commission had not demonstrated that the advantage granted to the airlines was in all cases at €8 per passenger.

This judgment was challenged by the Commission before the Court of Justice of the EU.
In the judgment of 21 December 2016, the Court of Justice partially annulled the judgment of the General Court as it stated that the Commission was right to impose the recovery of a sum of €8 per passenger for each of the flights concerned.

Indeed, the recovery of the aid must amount to the advantage granted and not to the economic benefit that may have been conferred on the airlines by the aid as a result of the exploitation of the advantage, for instance the fact that they could offer more competitive prices than their competitors. 

Therefore, the Court of Justice stated that the Commission was not compelled to verify whether and to what extent the beneficiaries of the aid actually used the economic advantage granted by the lower rate.

In consequence, the Court annulled that part of the General Court’s judgment that was vitiated by that error and dismissed in their entirety the annulment actions lodged by Aer Lingus and Ryanair.

It should be mentioned that on1March 2011, Ireland amended its travel tax by creating a single rate of €3 applicable to all departures regardless of the distance travelled.

Annabelle Lepièce, Partner, annabelle.lepiece@cms-db.com

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