# CJEU Overturns Annulment of KLM State Aid

> The CJEU overturns the annulment of Dutch State aid for KLM and refers the previously unexamined pleas back to the General Court.

Source: https://www.mtrlegal.com/en/cjeu-overturns-annulment-of-klm-state-aid/ · Language: en · Updated: 2026-11-05

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The Europäische Gerichtshof (EuGH, Court of Justice of the European Union) has overturned the annulment of the approval of EUR 3.4 billion in Dutch State aid for KLM ([EuGH, judgment of 5 November 2026](https://curia.europa.eu/site/jcms/p1_1000088921) – C-266/24 P, C-269/24 P and C-289/24 P). The Court of Justice dismissed Ryanair’s action in part. The Gericht der Europäischen Union (General Court of the European Union) must rule again on the pleas that have not yet been examined.

## Dutch State aid to address the pandemic

On 13 July 2020, the European Commission approved aid granted by the Netherlands to KLM. The airline belongs to the Air France-KLM group, whose holding company is Air France-KLM.

The support totalled EUR 3.4 billion and comprised two instruments:

- The Netherlands provided a State guarantee for a bank loan.
- In addition, it granted KLM a State loan.

These measures were intended to provide KLM with temporary liquidity to address the economic consequences of the Covid-19 pandemic. The support formed part of several measures for the aviation sector that benefited, among others, companies in the Air France-KLM group during the pandemic.

### First annulment in May 2021

Ryanair brought an action against the Commission’s approval decision. The General Court annulled the decision on 19 May 2021. In its assessment, the Commission had failed to provide adequate reasons as to why KLM alone was to be regarded as the beneficiary of the measure and why the other companies in the Air France-KLM group did not fall within the category of beneficiaries.

The Commission subsequently reassessed the aid. By decision of 16 July 2021, it once again classified the measure as compatible with the internal market. According to its assessment, only KLM and its subsidiaries benefited from the measure. It did not include the other companies in the Air France-KLM group.

## Second action against the approval of the aid

Ryanair also challenged the decision of 16 July 2021. The General Court again upheld the action and annulled the second approval on 7 February 2024.

In the General Court’s view, the Commission had wrongly excluded Air France and the holding company Air France-KLM from the category of beneficiaries. According to the General Court, the corporate, economic and functional links within the group indicated that the category of beneficiaries should be defined more broadly.

The Commission appealed against that judgment to the Court of Justice in Case C-266/24 P, KLM in Case C-269/24 P, and Air France and the holding company Air France-KLM in Case C-289/24 P. Each sought to have the General Court’s decision set aside.

## Court of Justice confirms the relevant assessment approach

### Concept of an economic unit was applicable

The Court of Justice did not object to the General Court’s reliance on the concept of an ‘economic unit’ (in translation) when identifying the beneficiary of the aid. Under certain conditions, several legally independent companies may be treated as an [economic unit](https://www.mtrlegal.com/wiki/wirtschaftliche-einheit/) and therefore as a single undertaking for the purposes of State aid law.

This approach may be necessary in particular where it must be determined which entity within a group of companies actually benefits from State aid. The General Court had therefore been correct to examine whether KLM, Air France, the holding company and other group companies formed such an economic unit.

### General Court substituted its assessment for that of the Commission

Although the chosen standard of review was not objectionable, the Court of Justice found that the General Court had erred in law when applying it. The General Court had held that the Commission had manifestly erred in concluding that only KLM and its subsidiaries were beneficiaries of the Dutch measure.

According to the Court of Justice’s decision, the General Court thereby substituted its own assessment for that of the Commission. However, it did not demonstrate that the Commission’s conclusion was implausible.

The General Court assigned different weight to the individual factors used to identify the beneficiaries than the Commission had done. It also applied a different threshold for the degree of economic integration from which an entire group of companies may be regarded as the beneficiary of aid.

## Considerable economic autonomy of KLM and Air France

According to the Court of Justice’s assessment, the General Court’s findings concerning the position of the companies within the Air France-KLM group were largely consistent with those of the Commission. In essence, the General Court examined the same circumstances and facts on which the Commission had already relied.

In some respects, its assessment differed from that set out in the approval decision. However, it did not identify any factors demonstrating that the Commission’s decision was manifestly erroneous.

In particular, the Court of Justice considered that the General Court had failed to refute the Commission’s assessment of the economic independence of Air France and KLM. The Commission had taken the view that, despite their links to the Air France-KLM group, both airlines in fact enjoyed ‘considerable economic autonomy’ (in translation). Following the judgment, that assessment remained plausible.

## Partial dismissal of the action and referral back

The Court of Justice set aside the General Court’s judgment of 7 February 2024 and dismissed Ryanair’s action in part. However, it did not issue a final decision on all the pleas in law.

The General Court had not yet ruled at first instance on several objections. These concern:

- Ryanair alleges an infringement of the principle of non-discrimination.
- The action also relies on the freedom to provide services and the freedom of establishment.
- Ryanair challenges the application of Art. 107 Abs. 3 Buchst. b AEUV (Article 107(3)(b) of the Treaty on the Functioning of the European Union).
- It also alleges an infringement of procedural rights and a breach of the duty to state reasons.

[Art. 107 Abs. 3](https://eur-lex.europa.eu/legal-content/DE/TXT/?uri=CELEX:12012E107) Buchst. b AEUV covers, among other things, aid intended to remedy a serious disturbance in the economy of a Member State. The outstanding pleas require an assessment of facts for which the Court of Justice did not have all the necessary information. It therefore referred the case back to the General Court.

The proceedings have therefore not been fully concluded. The General Court must now rule on the pleas that have not yet been examined and is bound by the Court of Justice’s judgment on appeal.

## Further aid within the Air France-KLM group

In addition to the Dutch support for KLM, France had granted further aid. On 4 May 2020, the Commission approved support totalling EUR 7 billion for Air France. This consisted of a State guarantee for a EUR 4 billion bank loan and a shareholder loan of up to EUR 3 billion.

According to the Commission’s assessment at the time, Air France and its subsidiaries were the only beneficiaries. In particular, the holding company Air France-KLM and its other subsidiaries, as well as KLM and the companies controlled by KLM, were not included.

On 5 April 2021, the Commission also approved individual aid of EUR 4 billion for the recapitalisation of Air France and the holding company Air France-KLM. In its assessment, this measure benefited Air France and its subsidiaries, as well as the holding company and the subsidiaries controlled by it. KLM and its subsidiaries were excluded.

On 20 December 2023, following actions brought by Ryanair and Malta Air, the General Court annulled both decisions. A total of four appeals were brought against the judgments concerned and, according to the status of the proceedings set out in the decision, they remain pending.

Following the judgments in Cases T-146/22 and T-261/21, the Commission adopted a further decision on 10 July 2024 approving the French and Dutch aid. Ryanair and Malta Air brought an action against that decision. Those proceedings are pending before the General Court under Case T-250/25.

## Significance of the judgment on appeal

An appeal against a decision of the General Court is limited to points of law and, as a general rule, does not have suspensory effect. If the appeal is admissible and well founded, the Court of Justice sets aside the contested decision.

If the dispute can be finally determined on the basis of the findings available, the Court of Justice gives final judgment itself. If the necessary findings of fact are lacking, it refers the case back to the General Court. The General Court is then bound by the Court of Justice’s legal assessment.

The decision also illustrates the importance of correctly identifying the actual beneficiary of aid within a group of companies. Companies, financial institutions and investors dealing with issues relating to financing, State-backed loans or the banking law implications of such measures can contact MTR Legal. Further information is available under [competition law advice](https://www.mtrlegal.com/rechtsberatung/wettbewerbsrecht/).