Ryanair/Aer Lingus

In August 2013, the UK Competition Commission (CC) ordered Ryanair to reduce its shareholding in AER Lingus to five per cent from almost 30 per cent. The UK competition authorities had jurisdiction over the acquisition as it conferred upon Ryanair a ‘material influence’ on the running of AER Lingus. It should be noted that the European Commission did not have jurisdiction over the acquisition of this minority stake in AER Lingus as it failed to meet the requisite control test ‘decisive influence’ under the EU merger regulation, although earlier in 2013 the European Commission rejected a revised bid by Ryanair for the whole of AER Lingus. As a result of this case the European Commission is reviewing the merger regulation so as to fill the ‘enforcement gap’ caused by this type of case. An appeal by Ryanair against the CC decision is being heard by the Competition Appeal Tribunal in February 2014.

Alitalia State aid – Ryanair appeal dismissed by European Court but not the end of the saga

In June 2013 the Court of Justice of the European Union (CJEU), dismissing an appeal by Ryanair, upheld a decision of the General Court upholding Commission decisions relating to state aid granted by the Italian Government to Alitalia by way of a loan, followed by administration and subsequent assets sale to a new company comprising a consortium of shareholders. If successful, Ryanair’s challenge would have resulted in the new owners having to repay the EUR 300 million loan from the Italian government.

This new company’s shareholders approved in November 2013 a new rescue plan to address further financial difficulties, involving the issue of shares which may be purchased by shareholders. If all shareholders do not agree to purchase the new shares resulting in a shortfall, the Italian state owned Poste Italiene has stated it will purchase up to a value of EUR 75 million in unexercised stock options. The European Commission stated that if this happens it will investigate the further state involvement under the state aid rules.


In early 2008, with Alitalia threatened with bankruptcy, the Italian Government put together a rescue package comprising a EUR 300 million loan, which legislation subsequently subordinated so that, in the event of Alitalia being liquidated, the loan would only be repaid after all other creditors of Alitalia had been paid off. The value of the loan could therefore count as capital so avoiding insolvency and keeping open the possibility of privatisation. Alitalia was later placed in “extraordinary administration” under Italian law (a procedure designed to protect the company’s assets, goodwill and employees) and the administrator sought potential purchasers. There were complaints by various airlines including Ryanair.

The Italian Government then notified the Commission  of the procedure for the sale of the Alitalia group’s assets seeking confirmation that the extraordinary administration procedure did not involve the grant of state aid to the purchasers of the assets and that Alitalia’s liabilities, in particular its liability to repay unlawful state aid, would  not transfer to any third party purchasers of assets of the Alitalia group.

A bid for certain assets of Alitalia (69% of the capacity of Alitalia in terms of passengers transported by kilometre) was submitted by Compagnia Aerea Italiana S.p.A. (CAI), a consortium of Italian entrepreneurs and financial institutions, Alitalia keeping the unsold assets and its liabilities (including liability to repay state aid). CAI would also pursue its own strategy and there would be no automatic transfer of employment contracts of Alitalia employees.

In November 2008 the Commission issued two separate decisions. The first found that the loan conferred on Alitalia an economic advantage through state resources that it would not have received in normal market conditions. Also the loan did not fall within any exceptions to the prohibition on state aid, notably the “one time, last time” rule for receiving rescue or restructuring aid, Alitalia having received such aid in 2001. It therefore constituted unlawful state aid it and the Commission ordered its recovery from the beneficiary, Alitalia, within four months (Decision 2009/155/EC).

In the second decision on the asset sale, the Commission decided that there would be no economic continuity between Alitalia and the purchasers of its assets so CAI would have no obligation to repay aid, and that the sale of the assets would not constitute State aid to CAI, provided Alitalia’s assets were sold at market price (Aid N510/2008).

Ryanair challenged the part of the Commission’s loan decision ordering recovery from Alitalia, and within a period during which Alitalia’s assets would be sold, as this jeopardised any prospect of recovery of the loan. The General Court held that Ryanair’s challenge was inadmissible, as it had had not demonstrated it would be ‘directly and individually concerned’ by the decision to order recovery of the loan from Alitalia and not CAI (a requirement for locus standi to challenge a decision). There was, therefore, no assessment of the substantive issues by the Court raised by Ryanair in respect of the loan decision.

The General Court also dismissed Ryanair’s application for annulment of the asset sale decision on the basis that Ryanair had not demonstrated the existence of “serious difficulties” in assessing the asset sale measures and the Commission had provided sufficient reasons in its decision.

Ryanair further appealed to the CJEU – which is only competent on points of law as opposed to assessment of fact – and it upheld the General Court’s decision that the loan decision had not significantly affected Ryanair’s competitive position, and that the decisions were compatible with the ‘market economy investor principle’, which provides that no state aid is involved where an investment is made by the state on terms that would be acceptable to a private investor. It also did not overturn the General Court’s conclusion that CAI was not the economic successor of Alitalia.


Whilst the Commission’s loan decision recognised that the loan constituted unlawful state aid, the fact that it was recoverable from Alitalia and not CAI, and within a period of four months, when the Commission was aware that the asset sale would take place imminently, meant that there was little prospect of recovery. The Commission stated however and the Courts agreed, that if the asset purchase by CAI gave rise to ‘economic continuity’ between Alitalia and CAI, the Italian state would be obliged to recover unlawful state aid received by Alitalia from CAI. There are detailed reasons why this was found not to be the case.

This case suggests that a sequence of events, involving a loan (even if later found to be unlawful state aid) followed by a partial asset sale allowing a new company to continue much of the original entity’s business but ensuring discontinuity, and hence no liability to repay any ‘aid’, could result in EU state aid rules being avoided. Given the unusual facts in this case, however, this possibility may be more theoretical than real in other circumstances.