On 5 February 2015, the General Court of the European Union handed down two judgments in which it partially upheld Aer Lingus' and Ryanair's appeal against a Commission decision in relation to an air travel tax imposed by the Irish authorities on all flights departing from an Irish airport.
The air travel tax is an excise duty which airline companies operating in Ireland must pay in respect of every passenger departing on an aircraft from an airport situated in Ireland. In July 2009, Ryanair filed a complaint with the Commission arguing that several aspects of the tax constituted unlawful state aid. One of its claims related to the exemption of transfer and transit passengers from payment of the tax. Whilst the Commission considered that this exemption did not constitute state aid, the General Court disagreed and partially annulled the Commission decision in a judgment issued on 25 November 2014 (see VBB on Competition Law, Volume 2014, No. 12, available at www.vbb.com).
The more recent judgments of the General Court relate to another aspect of the air travel tax, namely the difference in the tax rate depending on the distance travelled. Between 30 March 2009 and 1 March 2011, a rate of € 2 applied to all flights departing from an airport to a destination within 300km from Dublin airport, while a rate of € 10 applied in all other cases. In a decision issued on 25 July 2012, the Commission considered that the application of the lower rate for short-distance flights constituted state aid incompatible with the internal market. It therefore ordered the recovery of that aid from the beneficiaries, including Aer Lingus and Ryanair. The Commission decided that the amount of the aid corresponded to the difference between the lower rate of the air travel tax (€ 2) and the standard rate (€ 10), i.e., € 8, levied on each passenger.
The General Court confirmed the decision of the Commission insofar as it decided that the higher rate was the reference rate and that the application of the lower rate constituted state aid in favour of airlines whose flights were subject to that lower rate. However, the General Court found that the Commission was not entitled to consider that the advantage enjoyed by the airlines amounted automatically, in all cases, to € 8 per passenger. The Commission should have taken into account the extent to which the advantage resulting from the application of that reduced rate could have been – even only partially – passed on to the passenger. Only if the airline companies had systematically increased the price of their tickets excluding tax by € 8 per ticket, the advantage would not be passed on and the Commission could order the recovery from the airlines of € 8 per passenger. The Commission should have accurately assessed the advantage actually enjoyed by the airlines or, if this proved impossible, conferred that task to the national authorities, providing them with the necessary information in that respect.
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