On Thursday, Wizz Air, a Hungarian low-cost airline, lost its legal challenge against a €36.66 million ($40.2 million) rescue aid package granted by Romania to its competitor, TAROM. The aid was approved four years ago by European Union (EU) regulators, a decision that has now been upheld by Europe's top court.
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The Legal Challenge
Wizz Air had contested the legitimacy of the rescue aid, arguing that it gave TAROM an unfair advantage. However, the Luxembourg-based Court of Justice of the European Union (CJEU) dismissed Wizz Air's appeal². The court ruled that the aid, amounting to €36.66 million, was in line with EU law.
The Backdrop
The European Commission, during the COVID-19 pandemic, approved billions of euros in state aid to European airlines. Much of this aid was subsequently challenged in court by rival airlines⁶. Romania had granted a loan to TAROM to finance its liquidity needs, which was to be repaid after six months.
The Aftermath
The court's decision has sparked a broader discussion about the role of state aid in the aviation industry and the competitive dynamics it creates. The case has also raised questions about the effectiveness of the EU's competition watchdog in ensuring fair competition. In response to the court's decision, Wizz Air expressed disappointment but affirmed its commitment to continue providing affordable air travel. On the other hand, TAROM welcomed the decision, stating that the aid was crucial for its survival during the pandemic.
Looking Ahead
The ruling sets a precedent for future disputes over state aid in the aviation industry. It underscores the delicate balance regulators must strike between supporting airlines during crises and maintaining a level playing field. This case serves as a reminder of the ongoing challenges faced by the aviation industry in the wake of the COVID-19 pandemic. As airlines navigate the path to recovery, issues of state aid and fair competition will continue to be at the forefront.