Contents
Judgment of the General Court (Eighth Chamber, Extended Composition)20 December 2023note(State aid — Aid granted by France to Air France in the context of the COVID-19 pandemic — State guarantee for a bank loan and a subordinated loan by the State — Decision declaring the aid compatible with the internal market — Action for annulment — Locus standi — Substantial adverse effect on the applicant’s position on the market — Admissibility — Determination of the beneficiary of the aid in the context of a group of companies)In Case T‑216/21,Ryanair DAC, established in Swords (Ireland),Malta Air ltd., established in Pietà (Malta),represented by F.‑C. Laprévote, E. Vahida, V. Blanc, S. Rating, I.‑G. Metaxas-Maranghidis and D. Pérez de Lamo, lawyers,vEuropean Commission, represented by L. Flynn, J. Carpi Badía and C. Georgieva, acting as Agents,supported byFederal Republic of Germany, represented by P.‑L. Krüger, acting as Agent,and byFrench Republic, represented by T. Stéhelin, P. Dodeller, T. Lechevallier and B. Fodda, acting as Agents,and byKingdom of the Netherlands, represented by M. Bulterman, J. Langer and C. Schillemans, acting as Agents, and by S. Corrijn, lawyer,and byAir France-KLM, established in Paris (France), represented by J. Derenne and D. Vallindas, lawyers,and bySociété Air France, established in Tremblay-en-France (France), represented by J. Derenne and D. Vallindas,THE GENERAL COURT (Eighth Chamber, Extended Composition),composed of M. van der Woude, President, A. Kornezov (Rapporteur), G. De Baere, D. Petrlík and S. Kingston, Judges,Registrar: S. Spyropoulos, Administrator,having regard to the written part of the procedure,further to the hearing on 22 May 2023,gives the following
Judgment
1By their action under Article 263 TFEU, the applicants, Ryanair DAC and Malta Air ltd., seek the annulment of Commission Decision C(2020) 2983 final of 4 May 2020 on State Aid SA.57082 (2020/N) – France – COVID-19 – Temporary Framework 107(3)(b) – Guarantee and shareholder loan for Air France, as corrected by Decisions C(2020) 9384 final of 17 December 2020 and C(2021) 5701 final of 26 July 2021 (‘the contested decision’).
Background to the dispute and events subsequent to the bringing of the action
2Société Air France (‘Air France’) is part of the Air France-KLM group. The group is headed by Air France-KLM (‘the Air France-KLM holding’). According to the contested decision, that group also includes Koninklijke Luchtvaart Maatschappij NV (‘KLM’), ‘Air France-KLM International Mobility (Switzerland)’, ‘Blueteam V (France)’, ‘BigBlank (France)’, ‘Air France-KLM Finance (France)’ and ‘Transavia Company (France)’.
3According to the contested decision, the French Republic and the Kingdom of the Netherlands hold 14.3% and 14% of the capital of the Air France-KLM holding respectively, and the French Republic also holds 21% of the voting rights in that company. In turn, the Air France-KLM holding holds 100% of the shares in Air France and, directly and indirectly, 93.84% of KLM’s share capital. That holding company also holds 99.7% of the economic rights, that is to say, dividend rights, and 49% of the voting rights in KLM. The same holding company holds 100% of the shares in the other subsidiaries listed in paragraph 2 above.
4On 24 April 2020, the French Republic notified the European Commission, in accordance with Article 108(3) TFEU, of a plan to grant individual aid to Air France in the form of (i) a State loan guarantee covering 90% of a loan of EUR 4 billion granted by a consortium of banks (respectively, ‘the State loan guarantee’ and ‘the State-guaranteed loan’) and (ii) a shareholder loan of up to EUR 3 billion (‘the shareholder loan’) (together, ‘the measure at issue’).
5On 4 May 2020, the Commission adopted Decision C(2020) 2983 final, in which it concluded that the measure at issue constituted State aid that was compatible with the internal market under Article 107(3)(b) TFEU and the Communication from the Commission of 19 March 2020, entitled ‘Temporary Framework for State aid measures to support the economy in the current COVID-19 outbreak’ (OJ 2020 C 91 I, p. 1), as amended on 4 April 2020 (OJ 2020 C 112 I, p. 1) (‘the Temporary Framework’).
6The Commission considered, in point 21 of Decision C(2020) 2983 final, that the beneficiaries of the measure at issue were Air France and the subsidiaries controlled by that company. On the other hand, neither the Air France-KLM holding nor its other subsidiaries, including KLM and the companies controlled by that company, were considered to be beneficiaries of that measure.
7The measure at issue forms part of a series of other State aid measures aimed at supporting the aviation sector and, more specifically, the companies forming part of the Air France-KLM group.
8In particular, by Decision C(2020) 4871 final of 13 July 2020 on State Aid SA.57116 (2020/N) – The Netherlands – COVID-19: State loan guarantee and State loan for KLM, the Commission declared that individual aid granted by the Kingdom of the Netherlands to KLM consisting of (i) a State loan guarantee covering 90% of a loan, granted to KLM by a consortium of banks, of up to EUR 2.4 billion and (ii) a State-guaranteed loan of up to EUR 1 billion, was compatible with the internal market under Article 107(3)(b) TFEU and the Temporary Framework.
9On 17 December 2020, the Commission issued an initial corrigendum to Decision C(2020) 2983 final by adopting Decision C(2020) 9384 final. In the Commission’s view, the revisions were necessary in order to correct an error in the description of the facts, in particular as regards the references to Air France rather than to the ‘Air France group’ (points 5 to 10 of the latter decision). In addition, a new point 3.3.4 was added in order to examine, ‘for the sake of completeness’, the compatibility of the cumulative effect of the two elements of the measure at issue and the balancing of their positive and negative effects on competition.
10On 5 April 2021, the Commission adopted Decision C(2021) 2488 final on State Aid SA.59913 – France – COVID-19 – Recapitalisation of Air France and the Air France–KLM holding company (‘the Air France-KLM and Air France decision’), in which it concluded that the individual aid granted by the French Republic in the form of a recapitalisation of Air France and the Air France-KLM holding totalling EUR 4 billion was compatible with the internal market under Article 107(3)(b) TFEU and the Temporary Framework. That aid includes (i) the participation by the French Republic in a planned share capital increase of up to EUR 1 billion and (ii) the conversion of the shareholder loan into a hybrid instrument equivalent to an equity participation. That shareholder loan is part of the measure at issue in this case.
11By judgment of 19 May 2021, Ryanair v Commission (KLM; Covid-19) (T‑643/20, EU:T:2021:286), the Court annulled the decision referred to in paragraph 8 above on the ground that it was vitiated by a failure to state reasons as regards the determination of the beneficiary of the aid measure at issue.
12On 26 July 2021, that is to say, after the present action was brought, the Commission issued a second corrigendum to Decision C(2020) 2983 final by adopting Decision C(2021) 5701 final. In points 3 and 4 of the latter decision, the Commission explains that it had taken note of the judgment of 19 May 2021, Ryanair v Commission (KLM; Covid-19) (T‑643/20, EU:T:2021:286), and that, following that judgment, additional evidence had to be provided to show that Air France was the sole beneficiary of the measure at issue.
Forms of order sought
13In the application of 20 April 2021, as amended on 8 October 2021, the applicants claim that the Court should:– annul the contested decision;– order the Commission to pay the costs.
14The Commission contends that the Court should:– dismiss the action;– order the applicants to pay the costs.
15The Federal Republic of Germany, the Kingdom of the Netherlands, Air France and the Air France-KLM holding contend that the action should be dismissed as unfounded and that the applicants should be ordered to pay the costs.
16The French Republic contends that the Court should dismiss the action as inadmissible, in so far as the applicants dispute the merits of the contested decision, and as unfounded, as to the remainder.
Law
Admissibility
17The applicants submit, first, that they are interested parties for the purposes of Article 108(2) TFEU and Article 1(h) of Council Regulation (EU) 2015/1589 of 13 July 2015 laying down detailed rules for the application of Article 108 TFEU (OJ 2015 L 248, p. 9), and that they therefore have standing to bring proceedings to defend their procedural rights. Secondly, they maintain that their competitive position on the market has been substantially affected by the measure at issue and that, consequently, they also have standing to challenge the contested decision on the merits.
18The Commission, the Federal Republic of Germany, the Kingdom of the Netherlands, Air France and the Air France-KLM holding do not dispute the admissibility of the action.
19By contrast, the French Republic maintains that the applicants do not have standing to challenge the contested decision on the merits.
20In the present case, it is common ground that the applicants are competitors of Air France and it is not disputed that they must therefore be regarded as ‘interested parties’ within the meaning of Article 1(h) of Regulation 2015/1589 and as having standing to bring proceedings in order to safeguard the procedural rights which they derive from Article 108(2) TFEU.
21As to the standing of the applicants to challenge the contested decision on the merits, it must be borne in mind that the admissibility of actions brought by natural or legal persons against acts which are not addressed to them, in accordance with the fourth paragraph of Article 263 TFEU, is subject to the condition that they be accorded standing to bring proceedings, which arises in two situations. First, such proceedings may be instituted if the act is of direct and individual concern to those persons. Secondly, such persons may bring proceedings against a regulatory act not entailing implementing measures if that act is of direct concern to them (judgments of 17 September 2015, Mory and Others v Commission, C‑33/14 P, EU:C:2015:609, paragraphs 59 and 91, and of 13 March 2018, Industrias Químicas del Vallés v Commission, C‑244/16 P, EU:C:2018:177, paragraph 39).
22Since the contested decision, which was addressed to the French Republic, does not constitute a regulatory act for the purposes of the fourth paragraph of Article 263 TFEU, since it is not an act of general application (see, to that effect, judgment of 3 October 2013, Inuit Tapiriit Kanatami and Others v Parliament and Council, C‑583/11 P, EU:C:2013:625, paragraph 56), it is for the Court to ascertain whether that decision is of direct and individual concern to the applicants for the purposes of that provision.
23In that regard, it is clear from settled case-law that persons other than those to whom a decision is addressed may claim to be individually concerned only if that decision affects them by reason of certain attributes which are peculiar to them, or by reason of circumstances in which they are differentiated from all other persons, and by virtue of those factors distinguishes them individually just as in the case of the person addressed (judgments of 15 July 1963, Plaumann v Commission, 25/62, EU:C:1963:17, p. 107; of 28 January 1986, Cofaz and Others v Commission, 169/84, EU:C:1986:42, paragraph 22; and of 22 November 2007, Sniace v Commission, C‑260/05 P, EU:C:2007:700, paragraph 53).
24Accordingly, where an applicant calls into question the merits of a decision appraising aid, taken on the basis of Article 108(3) TFEU or after the formal investigation procedure, the mere fact that it may be regarded as ‘concerned’ within the meaning of Article 108(2) TFEU cannot suffice to render the action admissible. It must then demonstrate that it has a particular status for the purposes of the case-law cited in paragraph 23 above. That is the case, in particular, where the applicant’s position on the market concerned is substantially affected by the aid to which the decision at issue relates (see judgment of 15 July 2021, Deutsche Lufthansa v Commission, C‑453/19 P, EU:C:2021:608, paragraph 37 and the case-law cited).
25In that regard, the demonstration by the applicant of a substantial adverse effect on its market position does not entail a definitive ruling on the competitive relationships between the applicant and the recipient undertakings, but requires only that the applicant adduce pertinent reasons to show that the Commission’s decision may harm its legitimate interests by substantially affecting its position on the market in question (see judgment of 15 July 2021, Deutsche Lufthansa v Commission, C‑453/19 P, EU:C:2021:608, paragraph 57 and the case-law cited).
26It is thus apparent from the case-law of the Court of Justice that the substantial adverse effect on the applicant’s competitive position on the market in question results not from a detailed analysis of the various competitive relationships on that market, allowing the extent of the adverse effect on its competitive position to be established specifically, but, in principle, from a prima facie finding that the grant of the measure covered by the Commission’s decision leads to a substantial adverse effect on that position (judgment of 15 July 2021, Deutsche Lufthansa v Commission, C‑453/19 P, EU:C:2021:608, paragraph 58).
27It follows that that condition may be satisfied if the applicant adduces evidence to show that the measure concerned is liable to have a substantial adverse effect on its position on the market at issue (see judgment of 15 July 2021, Deutsche Lufthansa v Commission, C‑453/19 P, EU:C:2021:608, paragraph 59 and the case-law cited).
28As regards the factors accepted by the case-law for the purpose of establishing a substantial adverse effect of that kind, it should be borne in mind that the mere fact that an act may exercise an influence on the competitive relationships existing on the relevant market and that the undertaking concerned is in a competitive relationship with the beneficiary of that act cannot suffice for that undertaking to be regarded as being individually concerned by that act. Therefore, an undertaking cannot rely solely on its status as a competitor of the recipient undertaking (see judgment of 15 July 2021, Deutsche Lufthansa v Commission, C‑453/19 P, EU:C:2021:608, paragraph 60 and the case-law cited).
29Demonstrating a substantial adverse effect on a competitor’s position on the market cannot simply be a matter of the existence of certain factors indicating a decline in the applicant’s commercial or financial performance, such as a significant decline in turnover, appreciable financial losses or a significant reduction in market share following the grant of the aid in question. The grant of State aid can also have an adverse effect on the competitive situation of an operator in other ways, in particular by causing the loss of an opportunity to make a profit or a less favourable development than would have been the case without such aid (judgment of 15 July 2021, Deutsche Lufthansa v Commission, C‑453/19 P, EU:C:2021:608, paragraph 61).
30Moreover, the case-law does not require the applicant to adduce evidence of the size or geographic extent of the markets at issue; nor does it require it to adduce evidence of its market shares or those of the beneficiary of the measure in question or of other competitors on those markets (see, to that effect, judgment of 15 July 2021, Deutsche Lufthansa v Commission, C‑453/19 P, EU:C:2021:608, paragraph 65).
31It is in the light of those principles that it is necessary to examine whether the applicants have adduced evidence to show that the measure at issue is liable to have a substantial adverse effect on their position on the market concerned.
32In that regard, in the first place, the applicants claim that, before the COVID-19 pandemic, they operated 211 air routes to or from France. In particular, they explain that Ryanair was in direct competition with Air France and its subsidiaries on 45 of those routes, which are of economic importance inasmuch as they link large cities in Europe and beyond and were generally served by very few other airlines. In addition, Ryanair carried a total of 1576991 passengers on those 45 routes in 2019.
33The French Republic contends, in essence, that Ryanair is not the closest and most direct competitor of Air France. In addition, it denies that the applicants are ‘in direct competition’ with Air France, on the basis that the air routes operated by Air France to and from Roissy-Charles-de-Gaulle Airport (‘CDG Airport’) and Paris-Orly Airport (‘ORY Airport’) and those operated by Ryanair to and from Beauvais-Tillé Airport (‘BVA Airport’) are not substitutable and are therefore irrelevant for the purpose of assessing the competitive relationship between the applicants and Air France. As regards the other air routes relied on by the applicants, it argues that, on those routes, Ryanair is not the only competitor of Air France.
34In that regard, it should be borne in mind that it is not necessary, at the stage of examining the admissibility of an action, to give a definitive ruling on the definition of the market for the products or services at issue or on the competitive relationships between the applicants and the beneficiary. It is sufficient, in principle, for the applicants to show that, prima facie, the grant of the measure concerned leads to a substantial adverse effect on their competitive position on the market (see the case-law cited in paragraphs 25 and 26 above).
35As regards the question of ascertaining whether the air routes to and from CDG Airport and ORY Airport, on the one hand, and BVA Airport, on the other, are substitutable, it is apparent from the case-law that, to that end, the Court may take account of a number of factors, such as distances and travelling times using the indicative benchmark of 100 km or one hour driving time, the views of competitors, the views of the airports concerned and of Member States’ civil aviation authorities, the estimated proportion of leisure passengers on a route, the ‘airport system’ pursuant to Annex II to Council Regulation (EEC) No 2408/92 of 23 July 1992 on access for Community air carriers to intra-Community air routes (OJ 1992 L 240, p. 8), marketing practices and whether transport services exist between the airports and certain cities (judgment of 6 July 2010, Ryanair v Commission, T‑342/07, EU:T:2010:280, paragraph 103 et seq.).
36At the hearing, the Commission stated that, in the light of those criteria, the air routes operated by Ryanair to or from BVA Airport could, for the purposes of the admissibility of the present action, be regarded, prima facie, as substitutable for those operated by Air France to or from CDG Airport and ORY Airport.
37That position is reflected in the Commission’s decision-making practice, which, while not binding the EU judicature, could nevertheless be a useful factor in the prima facie assessment of whether the grant of the measure at issue is likely adversely to affect the applicants’ competitive position on the market. Thus, in recitals 266 to 279 of Decision C(2013) 1106 final of 27 February 2013 declaring a concentration incompatible with the internal market and the EEA Agreement (Case COMP/M.6663 – Ryanair/Aer Lingus III), the Commission found that the 100 km or one hour driving time criterion was satisfied, as the respective distances and journey times by car to the centre of Paris from CDG Airport, ORY Airport and BVA Airport were 23 km (31 min), 20 km (30 min) and 80 km (60 min). On that basis, it concluded that ORY Airport was substitutable with CDG Airport and BVA Airport for flights to and from Dublin (Ireland).
38In those circumstances, and in the absence of concrete evidence to the contrary in the documents before the Court, it must be held that the air routes operated by Ryanair to and from BVA Airport, to which the applicants refer in order to demonstrate their standing to bring proceedings, may be regarded as prima facie substitutable for those operated by Air France to and from CDG Airport and ORY Airport. Therefore, for the purpose of examining Ryanair’s standing to bring proceedings, account must be taken of all the air routes referred to by the applicants. The French Republic does not dispute the substitutability of the other air routes operated by Ryanair and Air France respectively to and from other airports in France.
39Accordingly, it must be held that Ryanair was in competition with Air France and its subsidiaries on a significant number of air routes to and from France, namely 45 air routes. In addition, it is apparent from the documents before the Court, and in particular from Annex A.3.4 to the application, the probative value of which is not disputed by the Commission or by the interveners, that the number of seats offered by Ryanair on those routes was often comparable to, and in some cases even exceeded, the number offered by Air France and its subsidiaries. Competition between them was therefore also significant in terms of the number of seats offered.
40In the second place, the applicants submit that they were planning to expand their business on the French market, as evidenced by the fact that they had launched 67 new air routes to and from France in 2019. The Commission and the interveners do not dispute that fact. Furthermore, the applicants add that they had ordered 210 Boeing 737 Max aircraft which joined their fleet in June 2021 and which enabled them to continue their expansion plans.
41In the third place, it is apparent from point 4 of the contested decision that, in the absence of the measure at issue, the continuity of Air France’s business would have been jeopardised. In addition, according to a report by the Foundation for Political Innovation, produced by the applicants, entitled ‘Before COVID-19 Air Transportation in Europe: An Already Fragile Sector’, dated May 2020, the content of which is not disputed by the parties, ‘it [was] likely that Ryanair … [would] emerge from the COVID-19 crisis without too much damage and [would] even have enough financial resources, especially through indebtedness and the purchase of bankrupt companies, to take part in the probable restructuring of air transport in Europe’. It follows that Ryanair was in a relatively strong position in relation to traditional airlines, such as Air France, which faced a risk of insolvency or even exit from the market.
42In the fourth place, it is apparent from the documents before the Court that, in 2019, the managing director of the Air France-KLM holding announced an action plan to intensify competition with ‘low-cost’ airlines, such as Ryanair, through the low-cost subsidiary ‘Transavia France’.
43The factors set out in paragraphs 38 to 42 above, taken together, permit the inference that the applicants have demonstrated that the grant of the measure at issue was likely to strengthen Air France’s competitive position to the detriment of Ryanair and to lead prima facie to a substantial adverse effect on Ryanair’s competitive position on the market, by causing, in particular, the loss of an opportunity to make a profit or a less favourable development than would have been the case without such a measure (see the case-law cited in paragraph 29 above).
44That finding is not called into question by the French Republic’s objection that Ryanair is not Air France’s main competitor on the French market.
45The case-law does not require the applicant to be the main competitor of the beneficiary of an aid measure in order for its competitive position to be regarded as substantially affected by that measure.
46Nor can the French Republic’s objection that the applicants have not shown that the contested decision adversely affects them by reason of factual circumstances which distinguish them from all of Air France’s other competitors succeed.
47The condition that there be a substantial effect on the applicant’s competitive position is a factor that is particular to that applicant, which must be assessed solely in relation to its market position prior to the grant of the measure in question or in the absence of that measure. It is therefore not a matter of comparing the situation of all the competitors operating on the market concerned (see, to that effect, Opinion of Advocate General Szpunar in Deutsche Lufthansa v Commission, C‑453/19 P, EU:C:2020:862, point 58). Moreover, as has been observed in paragraph 30 above, the Court of Justice has explained that it is not necessary for the applicant to provide information concerning its market shares or those of the beneficiary or of other competitors on that market. It thus follows that, in order to show that there has been a substantial effect on its competitive position, the applicant cannot be required to establish, with supporting evidence, what the competitive situation of all its competitors is and to differentiate itself therefrom.
48Moreover, it is important to observe that the case-law cited in paragraph 23 above foresees two different criteria for showing that persons other than those to whom a decision is addressed are individually concerned by that decision, namely that the decision being contested affects them by reason of ‘certain attributes which are peculiar to them’ or ‘circumstances in which they are differentiated from all other persons.’ That case-law does not therefore require an applicant to show that, in every case, its factual circumstances are different from those of any other person. It is sufficient that the decision being contested affects the applicant by reason of certain attributes which are peculiar to it.
49That is the case here. All the factors referred to in paragraphs 38 to 42 above indicate, in a sufficiently plausible manner, that Ryanair’s position on the relevant markets was characterised by certain attributes which are peculiar to it, namely the fact that Ryanair is in direct competition with Air France on a large number of air routes, on which, moreover, it operates a large number of seats, that it had begun a commercial expansion on the French market by launching a large number of new air routes before the COVID-19 pandemic emerged, that Air France was planning to intensify competition in the low-cost market segment, on which Ryanair operates, through its ‘Transavia France’ airline and that, in the absence of the measure at issue, there was a risk that Air France would become insolvent or at least significantly weakened, whereas Ryanair’s financial situation appeared to be relatively strong in comparison with that of the beneficiary, thus placing it in a position which would enable it, in the absence of aid, to gain market shares to the detriment of Air France.
50In the light of all of the foregoing, it must be held that the applicants have shown to the requisite legal standard that the measure at issue was liable to have a substantial effect on Ryanair’s competitive position on the market concerned.
51Ryanair is also directly concerned by the contested decision, since there is no doubt that the French Republic intended to pay aid to Air France and that such a payment is liable to place Ryanair in an unfavourable competitive position and thus affect its right not to be subject to competition distorted by that aid (see, to that effect, judgment of 6 November 2018, Scuola Elementare Maria Montessori v Commission, Commission v Scuola Elementare Maria Montessori and Commission v Ferracci, C‑622/16 P to C‑624/16 P, EU:C:2018:873, paragraph 43 and the case-law cited).
52Ryanair is therefore entitled to challenge the contested decision on the merits.
53As regards Malta Air’s standing, it has been held that, where one of the applicants is entitled to bring proceedings and the action is a single action, there is no need to examine the standing of the other applicants (see judgment of 12 December 2014, Crown Equipment (Suzhou) and Crown Gabelstapler v Council, T‑643/11, EU:T:2014:1076, paragraph 33 (not published) and the case-law cited).
Substance
54In support of their action, the applicants put forward five pleas in law, concerning, in essence, (i) the exclusion of the Air France-KLM holding and KLM from the scope of the beneficiaries of the measure at issue; (ii) a misuse of powers, as well as an incorrect application of Article 107(3)(b) TFEU and the Temporary Framework; (iii) breach of the principles of non-discrimination, freedom to provide services and freedom of establishment; (iv) infringement of the applicants’ procedural rights; and (v) a breach of the duty to state reasons.
The first plea, relating to the exclusion of the Air France-KLM holding and KLM from the scope of the beneficiaries of the measure at issue
55The applicants submit that the Commission erred in law and made a manifest error of assessment in finding that the beneficiary of the measure at issue was Air France, to the exclusion of the Air France-KLM holding and KLM. They put forward several factors to show that that holding company and KLM are potential or indirect beneficiaries of that measure. They present arguments concerning, in essence, the capital, organic, functional and economic links between the Air France-KLM holding, Air France and KLM, the contractual framework on the basis of which that measure was granted and the context in which it was granted.
56The Commission disputes the applicants’ arguments, pointing out, on the basis of the evidence highlighted in the contested decision, that Air France and KLM enjoy de facto considerable functional, economic and organic autonomy, both in relation to each other and vis-à-vis the Air France-KLM holding. In addition, the corporate and governance structure of the Air France-KLM group also avoids any risk of an indirect transfer of aid between Air France and KLM. Furthermore, the measure at issue includes contractual mechanisms equivalent to an allocation clause, which gives Air France exclusively the actual financial and economic benefit of that measure.
57The French Republic, the Kingdom of the Netherlands, Air France and the Air France-KLM holding endorse the Commission’s observations.
58In the contested decision, the Commission considered that the beneficiary of the measure at issue was Air France, including the subsidiaries controlled by that company. By contrast, although Air France is part of the Air France-KLM group, neither its parent company, namely the Air France-KLM holding, nor its sister companies, including KLM and the subsidiaries controlled by KLM, are beneficiaries of that measure.
59The present plea thus raises, in essence, the question of the determination of the beneficiary of an aid measure in the context of a group of companies.
60In that regard, it is apparent from the case-law that several separate legal entities may be considered to form one economic unit for the purposes of the application of the rules on State aid. In that field, the question whether several legally separate entities form an economic unit arises, in particular, where the beneficiary of the aid needs to be identified (see, to that effect, judgments of 14 November 1984, Intermills v Commission, 323/82, EU:C:1984:345, paragraphs 11 and 12, and of 19 May 2021, Ryanair v Commission (KLM; Covid-19), T‑643/20, EU:T:2021:286, paragraph 46 and the case-law cited).
61Among the factors taken into account by the case-law in order to determine the presence or absence of an economic unit in the field of State aid are, inter alia: the undertaking concerned being part of a group of companies which is directly or indirectly controlled by one of those companies, the pursuit of identical or parallel economic activities, and the companies concerned having no economic autonomy (see, to that effect, judgment of 14 October 2004, Pollmeier Malchow v Commission, T‑137/02, EU:T:2004:304, paragraphs 68 to 70); the formation of a single group controlled by one entity, despite the constitution of new companies each having a separate legal personality (see, to that effect, judgment of 14 November 1984, Intermills v Commission, 323/82, EU:C:1984:345, paragraph 11); the possibility, for an entity having a controlling shareholding in another company, to exercise functions relating to control, direction and financial support in relation to that company which go beyond the simple placing of capital by an investor, and the existence of organic, functional and economic links between that entity and that company (see, to that effect, judgments of 16 December 2010, AceaElectrabel Produzione v Commission, C‑480/09 P, EU:C:2010:787, paragraph 51, and of 19 May 2021, Ryanair v Commission (KLM; Covid-19), T‑643/20, EU:T:2021:286, paragraph 47); and the existence of relevant contractual clauses (see, to that effect, judgment of 16 December 2010, AceaElectrabel Produzione v Commission, C‑480/09 P, EU:C:2010:787, paragraph 57).
62Furthermore, the type of aid measure granted and the context in which that measure was granted may, depending on the case, also constitute relevant factors for determining the presence or absence of an economic unit in the field of State aid.
63Furthermore, the Commission clarified its interpretation of the concept of ‘undertaking’ in its Notice on the notion of State aid as referred to in Article 107(1) TFEU (OJ 2016 C 262, p. 1) (‘the Notice on the notion of State aid’). That notice, while not binding on the Court, may nevertheless serve as a useful source of inspiration (see judgment of 6 April 2022, Mead Johnson Nutrition (Asia Pacific) and Others v Commission, T‑508/19, EU:T:2022:217, paragraph 93 and the case-law cited).
64The Commission recognised in paragraph 11 of the Notice on the notion of State aid that several separate legal entities may be considered to form one economic unit for the purposes of the application of State aid rules. To that end, according to that paragraph, it is necessary to take into consideration the existence of a controlling share and the existence of other functional, economic and organic links.
65In that context, it has been held that the Commission has a broad discretion in determining whether companies which form part of a group should be regarded as an economic unit or rather as being legally and financially independent units for the purpose of applying the rules governing State aid. That discretion on the part of the Commission entails the consideration and appraisal of complex economic facts and conditions. Since the EU judicature cannot substitute its own assessment of the facts, especially in the economic field, for that of the originator of the decision, the Court must confine itself to checking that the rules on procedure and the statement of reasons have been complied with, that the facts are materially correct and that there has been no manifest error of assessment or misuse of powers (see judgment of 8 September 2009, AceaElectrabel v Commission, T‑303/05, not published, EU:T:2009:312, paragraphs 101 and 102 and the case-law cited).
66However, the EU judicature must, inter alia, establish not only whether the evidence relied on is factually accurate, reliable and consistent but also whether that evidence contains all the relevant information which must be taken into account in order to assess a complex situation and whether it is capable of substantiating the conclusions drawn from it (judgment of 20 September 2018, Spain v Commission, C‑114/17 P, EU:C:2018:753, paragraph 104).
67In addition, the onus is on the Commission to exercise particular vigilance in examining the links between companies belonging to the same group where there are grounds to fear the effects on competition of an accumulation of State aid within the same group (see judgment of 19 May 2021, Ryanair v Commission (KLM; Covid-19), T‑643/20, EU:T:2021:286, paragraph 48 and the case-law cited).
68In the light of the criteria identified in the case-law and the arguments of the parties, it is appropriate to examine consecutively the capital, organic, functional and economic links between the Air France-KLM holding, Air France and KLM and their respective subsidiaries, the agreements on the basis of which the measure at issue was granted, as well as the type of aid measure granted and the context of that measure.
–The capital and organic links between the Air France-KLM holding, Air France and KLM
69In the first place, as regards the capital links between the various entities belonging to the Air France-KLM group, it should be noted, as has been observed in paragraph 3 above, that Air France is 100% owned by the Air France-KLM holding and that the latter holds 93.84% of the share capital, 99.7% of the economic rights and 49% of the voting rights in KLM.
70In point 29 of the contested decision, the Commission noted that, although Air France and KLM were separate legal entities, each with their own shareholding structure, the Air France-KLM holding held ‘controlling rights’ over both Air France and KLM.
71Although that fact is an initial relevant factor in the examination of whether those entities form an economic unit, the case-law on State aid also requires the Court to verify whether the parent company actually exercises control by involving itself directly or indirectly in the management of its subsidiaries and thus takes part in the economic activity carried on by the controlled undertaking (see, to that effect, judgment of 16 December 2010, AceaElectrabel Produzione v Commission, C‑480/09 P, EU:C:2010:787, paragraph 49 and the case-law cited).
72In the absence of such an analysis, the simple separation of an undertaking into two different entities, the first of which pursues directly the economic activity at issue and the second of which controls the first, being fully involved in its management, would be sufficient to deprive the rules of EU law relating to State aid of their practical effect. It would enable the second entity to benefit from subsidies or other advantages granted by the State or by means of State resources and to use them in whole or in part for the benefit of the first, in the interest, also, of the economic unit formed by the two entities (see judgment of 16 December 2010, AceaElectrabel Produzione v Commission, C‑480/09 P, EU:C:2010:787, paragraph 50 and the case-law cited).
73In the present case, it is apparent from points 27 and 91 of the contested decision that the Air France-KLM holding has a power of control over Air France and KLM by virtue of the veto rights which it enjoys over their business plans and budgets, on the one hand, and over the remuneration, appointment and dismissal of their managers, including the appointment and dismissal of the members of their boards of directors, on the other. Thus, that holding company must approve decisions concerning, inter alia, the strategic options, budget and investment plan of the ‘Air France-KLM group, including KLM’ before they are adopted or implemented.
74It is also apparent from the contested decision that the Air France-KLM holding has the right to approve any financing transactions in excess of EUR 150 million carried out by its subsidiaries. That right was relevant in the present case, given that, as the Commission acknowledges in the contested decision, the financing granted by the French Republic exceeded the threshold of EUR 150 million. Thus, the Air France-KLM holding had to approve it before it could be granted.
75In the second place, as regards the organic links between the Air France-KLM holding, Air France and KLM, the applicants refer in particular to the 2019 Universal Registration Document for that holding company filed with the Autorité des marchés financiers (Financial Markets Authority, France) pursuant to Regulation (EU) 2017/1129 of the European Parliament and of the Council of 14 June 2017 on the prospectus to be published when securities are offered to the public or admitted to trading on a regulated market, and repealing Directive 2003/71/EC (OJ 2017 L 168, p. 12) (‘the 2019 Universal Registration Document’), an extract of which was submitted to the Court and was the subject of discussion at the hearing. In accordance with Articles 9 and 21 of Regulation 2017/1129, the universal registration document is a document made available to the public describing the organisation, business, financial position, earnings and prospects, governance and shareholding structure of the issuer in question.
76It is apparent from the 2019 Universal Registration Document that there are, at the Air France-KLM group level, a number of mixed bodies, composed of high-level representatives of the Air France-KLM holding, Air France and KLM, responsible for monitoring and coordinating certain important decisions to be taken within that group.
77For example, within the Air France-KLM group, all investments of more than EUR 5 million, together with operations relating to the fleet, as well as shareholding and divestment operations, are subject to approval by a ‘Group Executive Committee’, composed, inter alia, of the managing directors of the Air France-KLM holding, Air France and KLM, as that holding company confirmed at the hearing.
78In addition, according to the 2019 Universal Registration Document, while investments are managed at the level of each company in the Air France-KLM group, the decision-making process is coordinated by a ‘Group Investment Committee (GIC)’, composed of the executive vice president of the Air France-KLM holding with responsibility for economic and financial affairs, the executive vice president of Air France with responsibility for economic and financial affairs, and the Chief Financial Officer of KLM.
79Similarly, it is apparent from the 2019 Universal Registration Document that the management of market risk within the Air France-KLM group is overseen by a Risk Management Committee, which is also made up of senior managers from the Air France-KLM holding, Air France and KLM, and decides on and monitors the group’s financial risks and determines which safeguards need to be put in place.
80It is also apparent that the decisions taken by those mixed bodies at the level of the Air France-KLM group are then implemented by each entity in the group.
81It follows that the capital and organic links within the Air France-KLM group indicate that the Air France-KLM holding actually exercises control by involving itself directly or indirectly in the management of Air France and KLM and thus takes part in the economic activity carried on by them. It also follows that there is, at the level of that group, a centralised decision-making procedure and a certain degree of coordination, carried out through joint bodies bringing together high-level representatives of the Air France-KLM holding, Air France and KLM, at least as regards the way in which certain important decisions are taken.
82The capital and organic links within the Air France-KLM group are thus, as the applicants claim, an initial factor indicating that the separate legal entities within that group form a single economic unit for the purposes of the application of the rules on State aid.
–The functional links between the Air France-KLM holding, Air France and KLM
83In the first place, the Commission noted in point 30 of the contested decision that the Air France-KLM holding employed its own employees and ‘[relied] on’ employees seconded to it by Air France and KLM. In addition, it stated in points 27 and 91 of that decision, as has been recalled in paragraph 73 above, that the Air France-KLM holding had veto rights over the remuneration, appointment and dismissal of KLM’s and Air France’s managers. It follows that there is some degree of integration between the employees of that holding company and its subsidiaries and that the same holding company is involved in the most important decisions concerning the managers of its subsidiaries.
84In the second place, in point 31 of the contested decision, the Commission explained that the Air France-KLM holding was not ‘directly’ active in the air transport markets on which Air France and KLM were active, finding that the role of that holding company was to provide support to its subsidiaries ‘in the fields of information technology, human resources, marketing, digital matters, communication and innovation’.
85However, in point 38 of the contested decision, the Commission found that Air France and KLM, under the aegis of the Air France-KLM holding, coordinated their activities in the ‘area of sales and price and revenue management on the basis of the strategy determined at the level of [the Air France-KLM holding]’, with the assistance of Air France and KLM employees seconded to that holding company for that purpose. Such a finding is also apparent from point 91 of that decision.
86It follows that, while it is true that the Air France-KLM holding does not itself provide air transport services, the fact remains that it plays a strategic role in the provision of those services, in particular in the area of sales and price and revenue management, and that it is also involved in decisions taken regarding operations relating to the fleet (see paragraph 77 above), which confirms that there is a degree of integration between the Air France-KLM holding, Air France and KLM.
87The existence of a degree of functional coordination within the Air France-KLM group is, moreover, illustrated by the example of ‘Transavia’, raised by the applicants. As is apparent from the Commission’s responses to the questions put in the context of a measure of organisation of procedure, within that group there are several companies containing the name ‘Transavia’, some of which are active on the market for passenger air transport services. This includes Transavia France SAS and Transavia Airlines CV, referred to in the contested decision as ‘Transavia France’ and ‘Transavia Netherlands’ respectively. ‘Transavia France’ and ‘Transavia Netherlands’ are subsidiaries of Air France and KLM respectively. The Commission has stated in that regard that, although those two companies have their own licences, certificates, traffic rights, slots, assets, staff and management, they appear on the market under the same Transavia brand and share the same website, which the Air France-KLM holding confirmed at the hearing. In addition, as the applicants claim, ‘Transavia’ is often mentioned as a single undertaking in the 2019 Universal Registration Document where the latter refers to the ‘low-cost’ segment of the Air France-KLM group’s commercial activity. That example thus demonstrates a degree of functional and commercial cooperation between two subsidiaries of Air France and KLM.
88In the third place, it is apparent from points 32 to 34 and 91 of the contested decision that the Air France-KLM holding also performs financial functions as required by Air France and KLM. First, it provides, inter alia, budgetary instructions to its subsidiaries. Secondly, it may, ‘occasionally’ in the words of the contested decision, raise capital on the financial (debt or equity) markets for the benefit of its subsidiaries depending on their individual requirements. As regards the issuing of shares or instruments giving access to capital, those operations are also carried out at the level of that holding company, whereas debts within the Air France-KLM group are ‘mainly’ incurred directly by Air France and KLM.
89It should be added, as the applicants have done and as is apparent from paragraphs 75 to 80 above, that the Air France-KLM holding is involved in the coordination and approval of significant investments by its subsidiaries, in shareholding and divestment operations, and in the management of financial risks and the safeguards that need to be put in place, which are subject to continuous and ongoing monitoring at the level of the Air France-KLM group.
90The financial role assumed by the Air France-KLM holding is illustrated, in the present case, by the fact, noted in point 36 of the contested decision, that it has a right of approval in respect of financing transactions of its subsidiaries which exceed EUR 150 million and that, consequently, it had to approve the measure at issue.
91In the contested decision and at the hearing, the Commission, while acknowledging the financial role played by the Air France-KLM holding for the benefit of its subsidiaries, put the importance of that role into perspective, describing it as ‘limited’ (point 32 of the contested decision).
92However, it is apparent from paragraphs 73 and 77 above that significant or strategic decisions on financing, investment and fleet are coordinated, or even approved, by the Air France-KLM holding.
93That finding is supported by the information in the 2019 Universal Registration Document, from which it is apparent that the Air France-KLM holding carried out a series of bond issues for significant amounts, that ‘financial strategy is decided by the [Air France-KLM group] in coordination with [Air France] and [KLM]’, that that holding company was the ‘main’ issuer of the bonds, and that that group envisaged ‘systematic use of financing on the markets [through] Air France-KLM’.
94Nevertheless, in the contested decision, the Commission considered that Air France and KLM were ‘functionally autonomous’, on the basis of the following factors (point 37 of the contested decision).
95First, Air France and KLM had ‘separate management teams’ (first indent of point 37 of the contested decision). However, that statement needs to be considerably qualified by the evidence set out in paragraphs 73, 75 to 80 and 83 above, from which it is apparent that the Air France-KLM holding has a right of veto over the remuneration, appointment and dismissal of the managers of its subsidiaries, that mixed bodies within the Air France-KLM group are responsible for the control and coordination of certain important decisions concerning its subsidiaries, and that that holding company relies on employees of Air France and KLM seconded to it.
96Secondly, Air France is ‘independent and fully responsible’ for ‘most’ of the main aspects of its commercial activities, in particular human resources, fleet, network development, customer experience, passenger and freight management, maintenance activities, air operations, on-board services and marketing (first indent of point 37 of the contested decision). However, those statements disregard the role played by the Air France-KLM holding both as regards operations relating to the fleet (see paragraphs 73 and 77 above), and as regards the provision of air transport services, in particular in the area of sales and price and revenue management, the strategy for which is determined at the level of that holding company (see paragraphs 85 to 87 above).
97Thirdly, Air France and KLM have an ‘independent finance organisation’, in particular with regard to the financing and control of internal and external reporting, treasury, auditing and taxation (second indent of point 37 of the contested decision). In point 34 of the contested decision, the Commission also stated that ‘day-to-day’ financial activities would be carried out independently by Air France and KLM. However, those statements are at odds with the fact that any financing above the EUR 150 million threshold or any investment above EUR 5 million must be approved by the Air France-KLM holding. Furthermore, the fact that ‘day-to-day’ financial activities are managed by Air France and KLM does not contradict the foregoing.
98Fourthly, Air France manages its liquidity needs ‘independently without the intervention of KLM.’ For example, decisions on the financing of its fleet are taken at the level of Air France’s board of directors and not at the level of the Air France-KLM holding. Nor is there any ‘profit- and loss-sharing mechanism or cash-pooling agreement between Air France and KLM’ (points 35 and 36 of the contested decision, as well as the third indent of point 37 thereof).
99However, first, the fact that Air France and KLM manage their liquidity independently must also be qualified, since the Air France-KLM holding raises capital on the market for the benefit of its subsidiaries (see paragraph 88 above), approves financing transactions above EUR 150 million, and gives budgetary instructions to its subsidiaries. Similarly, the statement that ‘decisions on the financing of its fleet are taken at the level of Air France’s board of directors and not at the level of the Air France-KLM holding’ is contradicted by the circumstances referred to in paragraph 77 above.
100Secondly, although the Commission stated that there was no profit- and loss-sharing mechanism or cash-pooling agreement between Air France and KLM, it nevertheless noted, in point 43 of the contested decision, that there were ‘cost-sharing agreements’ between Air France and KLM and their subsidiaries. It is apparent from the same point of the contested decision that there are ‘joint activities carried out collectively by Air France and KLM or their subsidiaries’. That evidence confirms that there is a certain degree of functional integration and cooperation between them within the Air France-KLM group.
101Thus, the conclusion reached by the Commission, namely that Air France and KLM enjoy functional autonomy, is called into question by all the considerations set out in paragraphs 83 to 100 above.
102Accordingly, the functional links between the Air France-KLM holding, Air France and KLM constitute a further factor indicating that those entities form a single economic unit for the purposes of the application of the rules on State aid.
–The economic links between the Air France-KLM holding, Air France and KLM
103In points 39 to 41 and 92 of the contested decision, the Commission found that the Air France-KLM holding, KLM and Air France enjoyed de facto economic autonomy, for the following reasons.
104First of all, the Air France-KLM holding does not have any activity generating external revenue. Thus, it cannot support Air France and KLM autonomously. The holding company’s revenue is generated entirely internally by its subsidiaries through a management fee, which covers the holding company’s management costs, trade mark royalties and certain cost redistribution mechanisms (points 39 and 40 of the contested decision). Next, although the Air France-KLM holding may raise funds on the financial markets to meet the needs of its subsidiaries, from an economic point of view, its role is that of an ‘intermediary’ between its subsidiaries and investors, which in reality invest in those subsidiaries (point 41 of that decision). Lastly, commercial relations between Air France and KLM are conducted under normal market conditions and negotiated by autonomous management teams. The cost-sharing agreements between those two companies provide for an allocation key based on ‘market standards’ (points 42 and 43 of that decision).
105In that regard, first, as the applicants submit, the fact that the Air France-KLM holding generates its revenue solely from its subsidiaries demonstrates that there is a degree of economic interdependence between that holding company and its subsidiaries. This is supported in particular by the fact that Air France and KLM are trying to achieve synergies by coordinating their respective activities under the aegis of the Air France-KLM holding, in particular in the area of sales and price and revenue management (see paragraph 85 above), and that that holding company is involved in the financing of its subsidiaries in a coordinated manner (see paragraphs 88 to 92 above).
106Secondly, even assuming that the Air France-KLM holding acts on the financial markets solely as an ‘intermediary’ between its subsidiaries and investors, that confirms the fact that the Air France-KLM holding acts in the interests of those subsidiaries by raising funds on the financial markets to meet the needs of those subsidiaries. That fact shows that the holding company negotiates the terms of financing on the financial markets on the basis of the financial position of the Air France-KLM group as a whole. It is therefore by virtue of the Air France-KLM holding that synergies are achieved within that group.
107Thirdly, as has been pointed out in paragraph 100 above, the fact, acknowledged by the Commission, that there are cost-sharing agreements between Air France and KLM and activities carried out collectively by Air France and KLM and their subsidiaries, confirms that there is a degree of economic integration and cooperation between them.
108Fourthly, the Commission argues, in points 40 and 42 of the contested decision, that the financial and commercial relations between the Air France-KLM holding and its subsidiaries Air France and KLM, as well as between those subsidiaries themselves, are conducted under ‘normal market conditions.’ In particular, as regards the relationship between Air France and KLM, it refers, in that context, to the fact that they remain taxable in France and the Netherlands respectively, that French and Netherlands tax legislation provide that all intra-group transactions must be carried out as if they had been concluded between independent parties, and that, consequently, no advantage can pass from one to the other by that means (point 42 of the contested decision). While those factors certainly appear to be relevant for the purpose of taxing those companies at Member State level, they are not, however, sufficient to demonstrate that the Air France-KLM holding, Air France and KLM have economic autonomy within the Air France-KLM group, having regard to the factors set out in paragraphs 104 to 107 above.
109Moreover, it should be borne in mind that the grant of the measure at issue was justified in particular by the fact that it was impossible for Air France to obtain financing on the debt and capital markets under acceptable financial conditions and at sufficient volumes, and that the objective of that measure was to avoid an immediate threat to the continuity of Air France’s business (points 4 and 10 of the contested decision). In those circumstances, the advantage of that measure is precisely the provision of significant amounts of liquidity which would not have been available under market conditions. Thus, such a measure would have the effect of strengthening the financial position of the Air France-KLM group as a whole, inasmuch as it avoids the risk of default by one of its main subsidiaries, namely Air France, and thus reassures investors and the creditors of the companies in that group, it being specified, moreover, that the shareholder loan was subordinate to unsecured and non-subordinated bank or bond debt (point 69 of that decision). In addition, in view of the financial role of the Air France-KLM holding within that group, that holding company could – where appropriate and in the interest of and to meet the needs of its subsidiaries – obtain financing on the market which, in the absence of the aid, would have been inaccessible to it or would have been accessible only on less favourable terms.
110Moreover, in the absence of the measure at issue, Air France would not have been able to continue its activities and, therefore, would also have jeopardised the continuation of the activities carried out collectively with KLM (see paragraphs 85, 87, 100 and 107 above). Therefore, by allowing Air France’s activities to continue, that measure also implicitly but necessarily allows the activities carried out collectively by Air France and KLM to continue.
111Accordingly, the economic links between the Air France-KLM holding, Air France and KLM constitute a third factor indicating that those entities form a single economic unit for the purposes of the application of the rules on State aid.
–The agreements on the basis of which the measure at issue was granted
112In points 44 to 47, 93 and 94 of the contested decision, the Commission found, in essence, that the contractual mechanisms on the basis of which the measure at issue had been granted ensured that Air France and its subsidiaries were the sole beneficiaries of the measure.
113The applicants submit, in essence, with reference to the wording of certain clauses in the agreements at issue, that those agreements are not capable of guaranteeing that Air France is the sole beneficiary of the measure at issue.
114The Commission contends that the contractual mechanisms at issue are equivalent to an allocation clause, which gives Air France exclusively the actual financial and economic benefit of the measure at issue.
115As a preliminary point, it should be noted that the measure at issue was to be granted on the basis of three groups of agreements: (i) an agreement regarding the State-guaranteed loan concluded between a banking pool and the Air France-KLM holding (points 15, 16, 45 and 46 of the contested decision); (ii) an agreement concluded between the State and that holding company concerning the State loan guarantee and setting out the terms and conditions thereof, as was specified by the French Republic at the hearing, the legal basis for that guarantee being, moreover, Amending Finance Law No 2020-289 of 23 March 2020 for 2020 and a decree of the Ministry of the Economy; and (iii) a shareholder loan agreement concluded between the Air France-KLM holding and the Agence des participations de l’État (APE) (the French Government shareholding agency).
116In the first place, it should be noted, as the applicants have done, that the measure at issue is granted on the basis of agreements concluded between, on the one hand, a banking pool and the State respectively and, on the other hand, the Air France-KLM holding. Thus, only that holding company – and not Air France – assumed rights and obligations vis-à-vis its contractual partners.
117In the second place, as has been stated in paragraph 90 above, the financing under the measure at issue was subject to approval by the Air France-KLM holding.
118In the third place, as the applicants claim, the Air France-KLM holding has significant contractual rights in respect of certain conditions for the granting of the measure at issue.
119The Commission’s objection that the applicants’ arguments concerning the contractual rights assumed by the Air France-KLM holding are inadmissible on the ground that they were raised for the first time at the reply stage must be dismissed at the outset.
120According to the case-law, in order to be regarded as amplifying a plea or complaint previously put forward, a new argument must display a sufficiently close connection with the pleas or complaints initially set out in the application to be regarded as forming part of the normal evolution of debate in proceedings before the Court (judgment of 14 June 2023, Instituto Cervantes v Commission, T‑376/21, EU:T:2023:331, paragraph 114). That is the case here. In the application, the applicants claimed, inter alia, referring to point 66 of the contested decision, that the provisions of the shareholder loan agreement showed that the Air France-KLM holding and KLM were potential beneficiaries of the measure at issue, inasmuch as those provisions linked the remuneration of that loan to a future capital increase or to the future composition of the capital of the Air France-KLM holding. That argument was merely amplified in the reply, in which the applicants cited certain provisions of that agreement, referred to in that point of the contested decision, in response to the Commission’s argument in the defence that the applicants had not substantiated their argument concerning the provisions of that agreement. That amplification was therefore the result of the normal evolution of debate in proceedings before the Court, so that the objection of inadmissibility raised by the Commission must be dismissed.
121As regards the substance, it is important to note, first, as the applicants have done, that, according to the terms of the agreements at issue, the ‘Air France-KLM group’ had the option of extending the term of the State-guaranteed loan, initially set at one year, by one or two years to reach a maximum duration of three years (point 53 of the contested decision). Similarly, the expiry date of the State loan guarantee may be extended at the option of that group (point 58 of the contested decision).
122Secondly, as the applicants rightly observe, the Air France-KLM holding could also decide to extend the term of the shareholder loan, initially set at four years, for a period of one year, renewable once (point 64 of the contested decision).
123Thirdly, the applicants maintain, without being challenged by the Commission, that the Air France-KLM holding may decide that payments in respect of the annual interest rates on the shareholder loan could be capitalised, that is to say cumulated, instead of being paid annually.
124Fourthly, the remuneration of the shareholder loan depends on the decision of the general meeting of the Air France-KLM holding relating to a proposed increase in the capital of that holding company. Thus, it is provided that the interest rate applicable to that loan would be increased by 550 basis points in the event that the general meeting of the Air France-KLM holding did not approve a proposal to increase the capital of that holding company in order to allow the incorporation of all or part of the amount of that loan, or in the event that there was a capital increase which did not give the State the right to participate to the extent of its share of capital in the same holding company (third indent of point 66 of the contested decision).
125It follows that several conditions for the granting of the measure at issue, relating in particular to its term and remuneration, are expressly subject to the decision of the Air France-KLM holding.
126In the fourth place, the foregoing considerations are not called into question by the fact that the Air France-KLM holding and Air France concluded ‘mirror’ agreements aimed at channelling the financing in question to Air France (‘the mirror agreements’).
127According to the Commission, those mirror agreements ensured, in essence, that the actual enjoyment of the financing in question would accrue exclusively to Air France and its subsidiaries and ‘[would] prohibit [the] transfer or use [of that financing] for the benefit of KLM’ (point 46 of the contested decision). In support of that statement, it cited, in footnote 7 to the contested decision, Article 2.2 of the shareholder loan agreement, which provides that the loan is intended to finance the provision by the Air France-KLM holding to Air France of a shareholder current account intended to finance the liquidity needs of Air France and, where appropriate, its subsidiaries. The Commission also referred to Article 3.1 of the agreement relating to the State-guaranteed loan, which provides that the purpose of that loan is ‘to provide the group with the necessary financing to meet its needs resulting from the COVID-19 crisis with a view to maintaining its commercial activities and its employees in France’. Furthermore, again according to the Commission, the definition of the ‘Group’ contained in that agreement expressly excludes KLM. Lastly, the two agreements contain clauses, namely Article 7.1(a) and Article 18.3(a) respectively, according to which any use which is not in accordance with the purpose defined in Article 2.2 and Article 3.1 respectively constitutes a ‘default’.
128In that regard, it should be noted, first, as the applicants have done, that the State loan guarantee is not the subject matter of those mirror agreements. In contractual terms, it is therefore not ‘transferred’ to Air France, but remains at the level of the Air France-KLM holding, as indeed the French Republic confirmed at the hearing. It follows that that guarantee, which forms an integral part of the measure at issue, is contractually to the benefit only of the Air France-KLM holding.
129Secondly, under Article 3.1 of the agreement relating to the State-guaranteed loan, as reproduced in the contested decision, the measure at issue is intended to provide the ‘group’ with the necessary financing to meet its needs resulting from the COVID-19 crisis. The Commission explains, in footnote 7 to the contested decision, that, in accordance with that article, that financing is intended to ‘[maintain] commercial activities and … employees in France’, which, according to the Commission, can concern only the requirements of Air France and its subsidiaries, given that the Air France-KLM holding has no commercial activity and ‘very few employees of its own in France’.
130However, that explanation is not convincing. It is apparent from footnote 7 to the contested decision that the definition of a ‘group’, within the meaning of that agreement, excludes only KLM and not the Air France-KLM holding. That fact is supported, moreover, by the statement in point 46 of that decision that the agreements at issue prohibit the transfer or use of funds ‘for the benefit of KLM’, without mentioning that such a prohibition also applies to the Air France-KLM holding.
131Similarly, as has been noted in paragraph 83 above, it is common ground that the Air France-KLM holding has its own employees in France. Thus, the Commission’s explanation in footnote 7 to the contested decision that the fact that Article 3.1 of the agreement relating to the State-guaranteed loan refers to the objective of maintaining ‘employees in France’ means that that article refers only to Air France is not convincing either.
132Thirdly, it is common ground that the Air France-KLM holding retains part of the funds deriving from the measure at issue. It is apparent from the third indent of point 46 of the contested decision, in essence, that the mirror agreement relating to the State-guaranteed loan provides for that holding company to retain an ‘additional margin’ intended to cover the costs it incurs in managing that measure.
133In that regard, the Commission explains, in the same point of the contested decision, that the amount of that margin is ‘small’ and that that margin is ‘in accordance with the principle of French law requiring a corporate interest’. However, it must be stated that the Commission did not examine in that decision the nature and extent of the services allegedly provided by the Air France-KLM holding when the funds were transferred to Air France, or the costs allegedly incurred by that holding company in that context, or whether that ‘additional margin’ corresponds to those costs. It follows, as the applicants essentially claim, that that holding company retains part of the actual enjoyment of the financing in question. Similarly, the fact, assuming that it is established, that that margin is consistent with national law does not in itself mean that the remuneration thus received cannot be regarded as an advantage accruing to the same holding company for the purpose of applying Article 107(1) TFEU.
134In its statement in intervention, Air France relies on other contractual clauses not mentioned in the contested decision. It is settled case-law that the reasons for a decision which is being contested before the Court cannot be explained for the first time ex post facto before the Court, save in exceptional circumstances (see judgment of 20 September 2011, Evropaïki Dynamiki v EIB, T‑461/08, EU:T:2011:494, paragraph 109 and the case-law cited). Accordingly, those aspects of the contractual framework of the measure at issue, which were or could have been available to the Commission at the time of the adoption of the contested decision, but which were not referred to in that decision, cannot be taken into account by the Court in order to supplement the reasoning of the contested decision.
135In the fifth place and in any event, the existence of mirror agreements does not alter the fact that only the Air France-KLM holding assumed contractual rights and obligations towards the pool of banks and the State, that several conditions concerning the grant of the measure at issue, such as its term and remuneration, are decided by the Air France-KLM group, and that the State loan guarantee remains, contractually, with that holding company.
136In the light of the foregoing, it must be concluded that the contractual clauses cited in the contested decision do not support the conclusion that the sole beneficiaries of the measure at issue are Air France and its subsidiaries, to the exclusion of the Air France-KLM holding and KLM and the subsidiaries controlled by them.
137That conclusion is not called into question by the Commission’s argument that the case-law has accepted that the beneficiary of State aid may be only one of the companies forming part of a group, where there are, inter alia, allocation clauses which give one of the companies in that group the benefit of that aid, to the exclusion of the other companies in that group.
138In that regard, as has been noted in paragraphs 61 and 62 above, a number of factors must, depending on the case, be examined in order to determine whether separate legal entities may be regarded as forming a single economic unit for the purposes of the application of the rules on State aid, such as the capital, organic, functional and economic links between those entities, and the contracts on the basis of which the aid measure was granted, as well as the type of aid measure granted and the context in which it was granted. It is therefore a global assessment of several factors specific to each individual case. As regards, in particular, the agreements on the basis of which the aid measure was granted, the assessment of those agreements clearly depends on their actual content. Thus, the fact that the Courts of the European Union have – or have not – concluded in a given case, on the basis of concrete evidence specific to that case, that the beneficiary of a given aid measure was a single entity belonging to a group of companies, to the exclusion of the other entities in that group, cannot support a general conclusion one way or the other.
139In any event, the particular circumstances of the cases which gave rise to the judgments cited by the Commission are not comparable to those giving rise to the present case.
140First, in the judgment of 3 July 2003, Belgium v Commission (C‑457/00, EU:C:2003:387), the Court of Justice stated, in paragraphs 56 and 57, that, in order to determine the beneficiary of an aid measure, it was necessary to take into account, inter alia, the existence and wording of allocation clauses and that it was possible that such an analysis would lead to the conclusion that the beneficiary of the aid was someone other than the borrower of the loan at issue. Thus, in accordance with that judgment, the outcome of that analysis depends on the existence and precise content of the relevant contractual clauses. In this instance, as is apparent from paragraphs 115 to 136 above, it is precisely on the basis of the content of the various contractual clauses applicable in the present case that the General Court considers that those clauses do not support a finding that the sole beneficiaries of the measure at issue are Air France and its subsidiaries, to the exclusion of the Air France-KLM holding and KLM and the subsidiaries controlled by them. In addition, the Air France-KLM holding has, in the present case, significant contractual rights and obligations in the administration of that measure, enabling it to tailor it to its own interests and to those of the Air France-KLM group as a whole.
141Secondly, there are several important factual differences between the present case and the cases which gave rise to the judgment of 25 June 1998, British Airways and Others v Commission (T‑371/94 and T‑394/94, EU:T:1998:140). The organic, functional and economic links between the entities in the Air France-KLM group identified in the present case are not comparable to those between the companies concerned in the abovementioned judgment. For example, the measure at issue is granted through the Air France-KLM holding, and not directly to Air France, as was the situation in those cases. Moreover, in the present case, the Air France-KLM holding has maintained all its strategic prerogatives with regard to financing, investment and fleet operations, which was not true for the holding company in the abovementioned cases. Lastly, the holding company in those cases did not have any rights or prerogatives comparable to those which the Air France-KLM holding has concerning several conditions for the granting of the aid measure, relating in particular to its remuneration and its duration.
142Thirdly, the cases that gave rise to the judgment of 11 May 2005, Saxonia Edelmetalle and ZEMAG v Commission (T‑111/01 and T‑133/01, EU:T:2005:166), concerned a very different situation from that at issue in the present case. They concerned the obligation to recover aid from certain subsidiaries of a group of companies which had been designated as the initial beneficiaries of that aid. In that regard, it was held, in paragraphs 125 and 126 of that judgment, that, having regard to the circumstances of those cases, the Commission was not entitled to impose automatically the obligation to repay the disputed aid on those subsidiaries, in the absence of proof that they had actually received it, on the sole ground that they were designated as the initial beneficiaries of that aid. That situation is not relevant to the present case. Thus, no useful conclusion can be drawn from it for the resolution of the present dispute.
143Accordingly, the contractual framework on the basis of which the measure at issue was granted constitutes a fourth factor indicating that the Air France-KLM holding, Air France and KLM form a single economic unit for the purposes of the application of the rules on State aid.
–The type of aid measure granted and the context in which it was granted
144As regards the type of aid measure granted and the context in which it was granted, it should be noted, as the applicants have done, that, in point 11 of the contested decision, the Commission stated that the shareholder loan could, in the long term, be incorporated into the capital of the ‘Air France-KLM group’ in a separate transaction decided on by the ‘Air France-KLM group’ at a later date.
145That prospect, of which the Commission was therefore aware when it adopted Decision C(2020) 2983 final, materialised a few months later in the Air France-KLM and Air France decision (see paragraph 10 above), in which the Commission considered that the beneficiaries of the conversion of the shareholder loan into a hybrid instrument equivalent to an equity participation were both Air France and the subsidiaries controlled by that company and the Air France-KLM holding and the subsidiaries controlled by that holding company, except for KLM and its subsidiaries.
146In that regard, it should be noted that the second corrigendum to Decision C(2020) 2983 final, referred to in paragraphs 5 and 12 above, was issued on 26 July 2021, that is to say, after the adoption of the Air France-KLM and Air France decision on 5 April 2021. Thus, that decision is not an event which occurred after the contested decision, in the version resulting from that second corrigendum.
147In those particular circumstances, there was a chronological, structural and economic link between the measure at issue and the measure forming the subject matter of the Air France-KLM and Air France decision, of which the Commission was fully aware. Thus, that decision constituted a relevant contextual factor which the Commission had to take into account for the purpose of determining the beneficiary of that measure. In spite of this, the Commission did not take it into account in the contested decision.
148Nor did the Commission explain, in the contested decision, why the beneficiaries were determined differently in the contested decision and the Air France-KLM and Air France decision, even though the financing in question came, in both cases, from the shareholder loan, albeit in different forms.
149Accordingly, in the particular circumstances of the present case, and in the light of the case-law cited in paragraph 67 above, it was for the Commission to take into account, for the purpose of determining the beneficiary of the measure at issue, the type of aid measure granted and the context in which it was granted.
–The difference between a direct or indirect advantage, on the one hand, and mere secondary economic effects, on the other
150The Commission argues that the measure at issue has, at most, only ‘mere secondary economic effects’ in respect of the Air France-KLM holding and KLM and their subsidiaries (with the exception of Air France and its subsidiaries), which are inherent in any State aid but which cannot be classified as a direct or indirect advantage for them.
151The applicants counter that the Commission has not demonstrated to the requisite legal standard that the measure at issue could not benefit the other companies in the Air France-KLM group, for example by strengthening the financial position of the Air France-KLM holding and, indirectly, that of KLM. Such an effect would go beyond the mere secondary effect inherent in any aid measure.
152In that regard, it is necessary to distinguish the concept of an ‘indirect advantage’ from that of ‘secondary effects inherent in any aid measure’.
153According to the case-law, an undertaking receiving an indirect advantage must be regarded as a beneficiary of the aid. An advantage directly granted to certain natural or legal persons may constitute an indirect advantage and, therefore, State aid for other legal persons that are undertakings (see, to that effect, judgments of 19 September 2000, Germany v Commission, C‑156/98, EU:C:2000:467, paragraph 26, and of 13 June 2002, Netherlands v Commission, C‑382/99, EU:C:2002:363, paragraphs 60 to 66).
154Moreover, according to paragraph 115 of the Notice on the notion of State aid, a ‘measure can also constitute both a direct advantage to the recipient undertaking and an indirect advantage to other undertakings, for instance, undertakings operating at subsequent levels of activity’. Footnote 179 to that notice states that, in case an intermediary undertaking is a mere vehicle for transferring the advantage to the beneficiary and it does not retain any advantage, it should not normally be considered as a recipient of State aid.
155Paragraph 116 of the Notice on the notion of State aid further states that indirect advantages should be distinguished from mere secondary economic effects that are inherent in almost all State aid measures. For that purpose, according to that paragraph, the foreseeable effects of the measure should be examined from an ex ante point of view. Thus, an indirect advantage is present if the measure is designed in such a way as to channel its secondary effects ‘towards identifiable undertakings or groups of undertakings.’ Footnote 181 to that notice explains that, by contrast, a mere secondary economic effect in the form of increased output, which does not amount to indirect aid, can be found where the aid is simply channelled through an undertaking, for example a financial intermediary, which passes it on in full to the aid beneficiary.
156In the present case, it is apparent from the analysis set out in paragraphs 112 to 143 above that the role of the Air France-KLM holding is not limited to that of a ‘mere vehicle for transferring the advantage to the beneficiary’ or to a ‘financial intermediary’ for the purposes of paragraphs 115 and 116 of the Notice on the notion of State aid. That holding company itself retains, in legal terms, the State guarantee and controls several conditions of the measure at issue, enabling it to tailor it to its own interests and to those of the Air France-KLM group as a whole. Thus, the Commission’s argument that that holding company and KLM benefit only from mere secondary economic effects that are inherent in any State aid must be rejected.
157Similarly, the foreseeable effects of the measure at issue from an ex ante perspective suggest, in view of the type of aid measure granted and the context in which it was granted, consisting, in essence, of a financing solution, that that financing solution was likely to benefit the Air France-KLM group as a whole, by improving its overall financial position, which indicates the existence, at the very least, of an indirect advantage in favour of ‘[an] identifiable [group] of undertakings’ for the purposes of paragraph 116 of the Notice on the notion of State aid.
158It is apparent in particular from point 4 of the contested decision that, in view of the significant and immediate financial impact of the COVID-19 pandemic, the French Republic decided to assist Air France in implementing transitional financing solutions to meet its urgent liquidity needs, in order to avoid an immediate threat to the continuity of its activities. Thus, since the objective of the measure at issue is to find a financing solution in order to meet Air France’s liquidity needs and since it is apparent from the documents before the Court that the Air France-KLM holding plays a certain role in financing the Air France-KLM group, that measure would have the foreseeable ex ante effects of (i) improving the financial situation of that holding company – which is a party to the agreements at issue and has significant contractual rights and obligations in that capacity – and thus of the group as a whole, and (ii) ensuring the financial stability – including in the eyes of the financial markets – of that group as a whole, including KLM.
159Furthermore, as has been pointed out in paragraphs 109 and 110 above, in the absence of the measure at issue, the immediate threat to the continuity of Air France’s activities, identified in the contested decision, could have spread to the Air France-KLM group as a whole, given that Air France is one of the main subsidiaries of that group, generating a significant portion of its revenue.
160That finding is not called into question by the order of 21 January 2016, Alcoa Trasformazioni v Commission (C‑604/14 P, not published, EU:C:2016:54), cited by the Commission in support of its argument that, when calculating the amount of aid, it does not examine the secondary effects of the aid on consumers, suppliers, investors or employees of the beneficiary. First, as the applicants submit, the case which gave rise to that order did not concern an intra-group situation. Secondly, as has been pointed out in paragraphs 156 to 159 above, the present case does not concern the secondary economic effects of an aid measure on consumers, suppliers, investors or employees.
161The Commission and the French Republic also refer to the judgment of 21 December 2016, Commission v Aer Lingus and Ryanair Designated Activity (C‑164/15 P and C‑165/15 P, EU:C:2016:990), arguing, in essence, that, according to that judgment, the secondary effects of an aid measure should not be taken into consideration when assessing the compatibility of aid with the internal market. The cases that gave rise to that judgment concerned an aid scheme in the form of a reduced rate of a national tax on air transport which was declared incompatible with the internal market. The question that arose was, inter alia, how much of the advantage should be recovered from the beneficiaries of the aid, which were airlines. The airlines maintained, in essence, that the advantage in question had been passed on to passengers, in the form of reduced air ticket prices. It was in that context that the Court of Justice held that the recovery of the disputed aid entailed the restitution of the advantage conferred on the airlines, and not of any economic benefit which they might have enjoyed by exploiting that advantage (paragraphs 100 and 102). Unlike those cases, the present case does not concern the determination of the amount of the advantage to be recovered in the context of aid declared incompatible with the internal market, but the ex ante identification of the beneficiaries of an aid measure in order to examine the compatibility of that measure with the internal market. Moreover, and in any event, the present case does not involve the economic repercussions of the measure at issue on the price of airline tickets.
162Accordingly, the Commission’s argument that the measure at issue has, at most, merely secondary economic effects vis-à-vis the Air France-KLM holding and its other subsidiaries, including KLM and KLM’s subsidiaries, must be rejected.
Conclusion
163In the light of all of the foregoing, it must be held that the Commission committed a manifest error of assessment by considering that the beneficiaries of the measure at issue were Air France and its subsidiaries, to the exclusion of the Air France-KLM holding and its other subsidiaries, including KLM and KLM’s subsidiaries, and, consequently, the first plea in law must be upheld.
164Article 107(3)(b) TFEU requires not only that the Member State concerned is indeed faced with a serious disturbance in its economy, but also that the aid measures adopted to remedy that disturbance are, first, necessary for that purpose and, secondly, appropriate and proportionate for achieving that objective. That same requirement is also apparent from paragraph 19 of the Temporary Framework (judgment of 19 May 2021, Ryanair v Commission (KLM; Covid-19), T‑643/20, EU:T:2021:286, paragraph 74).
165In addition, and more specifically, the application of several conditions arising from the Temporary Framework depends on the definition of the beneficiary of the measure at issue, such as those laid down in paragraph 25(d)(i) of the Temporary Framework, according to which State aid in the form of new public guarantees on loans is considered to be compatible with the internal market on the basis of Article 107(3)(b) TFEU provided that, for loans with a maturity beyond 31 December 2020, their total amount per beneficiary is not more than double the annual wage bill of the beneficiary for 2019, or for the last year available. The same threshold applies to State aid in the form of subsidies to public loans, in accordance with paragraph 27(d)(i) of that framework (judgment of 19 May 2021, Ryanair v Commission (KLM; Covid-19), T‑643/20, EU:T:2021:286, paragraph 75).
166Thus, the examination of the necessity and proportionality of the aid, in general, and of compliance with the conditions cited by way of example in paragraph 165 above, in particular, presupposes that the beneficiary of the aid has been identified beforehand. The incorrect or incomplete identification of the beneficiary of an aid measure is likely to have an impact on the entire analysis of the compatibility of that measure with the internal market.
167The contested decision must therefore be annulled, without there being any need to examine the other pleas raised in the action.
168Lastly, as regards the possibility for Member States to grant State aid to companies belonging to a group of companies active in a number of Member States, it should be noted, for all practical purposes, that the Member States and the EU institutions are bound by reciprocal duties of sincere cooperation, in accordance with Article 4(3) TEU. The Commission and the Member States must therefore work together in good faith with a view to ensuring full compliance with the provisions of the FEU Treaty, in particular the provisions on State aid (see, to that effect, judgment of 22 December 2010, Commission v Slovakia, C‑507/08, EU:C:2010:802, paragraph 44 and the case-law cited). That duty of sincere cooperation and of coordination is all the more necessary where different Member States intend to grant aid simultaneously to entities belonging to the same group of companies which operates in a coordinated manner in the internal market in order to derive full benefit therefrom.
Costs
169Under Article 134(1) of the Rules of Procedure of the General Court, the unsuccessful party is to be ordered to pay the costs if they have been applied for in the successful party’s pleadings. Since the Commission has been unsuccessful, it must be ordered to bear its own costs and to pay those incurred by the applicants, in accordance with the form of order sought by the latter.
170Under Article 138(1) and (3) of the Rules of Procedure, the interveners must bear their own costs.
Operative part
On those grounds,THE GENERAL COURT (Eighth Chamber, Extended Composition)hereby:
1.Annuls Commission Decision C(2020) 2983 final of 4 May 2020 on State Aid SA.57082 (2020/N) – France – COVID-19 – Temporary Framework 107(3)(b) – Guarantee and shareholder loan for Air France, as corrected by Decisions C(2020) 9384 final of 17 December 2020 and C(2021) 5701 final of 26 July 2021;
2.Orders the European Commission to bear its own costs and to pay those of Ryanair DAC and Malta Air ltd.;
3.Orders the Federal Republic of Germany, the French Republic, the Kingdom of the Netherlands, Air France-KLM and Société Air France to bear their own costs.
Delivered in open court in Luxembourg on 20 December 2023.
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