Wizz Air lost its challenge against a capital increase for Romanian rival TAROM funded by Romania during Pandemic.

In a Judgement, released on 06 Novemeber 2024, the GENERAL COURT (Seventh Chamber), Composed of K. Kowalik-Bańczyk, President, G. Hesse (Rapporteur) and B. Ricziová, Judges, has dismissed the suit that challenged the Covid-19 aid to TAROM.

The General Court Judgment in the Case T-827/22 Wizz Air Hungary v Commission (TAROM II; Covid-19 / Competition – State aid), concluded that the Commission had correctly assessed the proportionality of the aid granted to TAROM.

The open court in Luxembourg noted that TAROM is a Romanian airline operating mainly from Henri-Coandă International Airport in Bucharest, 97.22% of which is owned by the Romanian State.

On February 3, 2022, Romania notified individual aid of €1,908,872 in the form of a capital increase for the Romanian airline TAROM. This aid is financed from Romania’s general budget.

The purpose of the measure is to compensate TAROM for damage suffered on fourteen specific international routes during the period from July 1 to December 31, 2020 as a result of travel restrictions linked to the pandemic.

On April 29, 2022, the European Commission deemed the aid to be compatible with the internal market without opening a formal investigation procedure.

On this State Aid by Romania, Wizz Air seeks the annulment of that decision and an order that the Commission pay the costs, on the grounds of incorrect application of Article 107(2)(b) TFEU, errors of assessment as to the proportionality of the measure, breach of the principles of non- discrimination, freedom to provide services and freedom of establishment, failure to initiate a formal investigation procedure, and breach of the obligation to give reasons.

Background to the dispute

• Compania Nationala de Transporturi Aeriene Romane ‘TAROM SA’ (‘TAROM’) is a Romanian airline operating from a single airport hub, located at OTP Bucharest Henri Coandă International Airport (Romania), in which the Romanian State has a holding of 97.22%.
• On 24 February 2020, by Decision C(2020) 1160 final on State aid SA.56244 (2020/N) – Romania – Rescue aid to TAROM (‘the decision on rescue aid to TAROM’), the European Commission authorised rescue aid to TAROM consisting of a loan repayable after six months.
• On 2 October 2020, by Decision C(2020) 6910 final on State aid SA.56810 (2020/N) – Romania – COVID-19: Aid to TAROM, the Commission authorised aid to TAROM, based on Article 107(2)(b) TFEU, intended to compensate it for the damage directly suffered, during the period from 16 March to 30 June 2020, on account of the travel restrictions and other lockdown measures aimed at containing the COVID-19 pandemic.
• On 5 July 2021, after being notified by the Romanian authorities of a restructuring plan, the Commission decided to initiate a formal procedure concerning State aid SA.59344 (2021/C) (ex 2021/N) – Romania – Restructuring aid to TAROM.
• On 3 February 2022, Romania notified to the Commission, pursuant to Article 108(3) TFEU, an individual aid measure in favour of TAROM, of EUR 1 908 872, granted in the form of a capital injection and financed from the general budget of Romania (‘the measure at issue’).
• The measure at issue is based on Article 107(2)(b) TFEU and is intended to compensate TAROM for the damage directly caused on 14 specifically defined international routes (‘the eligible routes’) during specific periods (‘the compensation periods’) during the relevant period, namely the period between 1 July and 31 December 2020, owing to the travel restrictions linked to the COVID-19 pandemic.
• On 29 April 2022, the Commission, without initiating the formal investigation procedure provided for in Article 108(2) TFEU, adopted the contested decision, by which it found that the measure at issue constituted State aid within the meaning of Article 107(1) TFEU and that it was compatible with the internal market pursuant to Article 107(2)(b) TFEU.

Carriers across Europe received billions of euros in state aid during the Covid-19 pandemic, triggering lawsuits from competitors like Wizz Air and Ryanair. In some cases, carriers like Ryanair won the challenge.

Wizz Air Arguement 

For this suit, in its challenge, Wizz Air argued that before the outbreak of the COVID-19 pandemic and the granting of the measure at issue, it had embarked on a considerable expansion on the Romanian market.

Wizz Air also said that it operated 159 routes to or from Romania in 2019 and that it currently operates 224. In addition, its growth has been constant over the last 10 years and significantly higher than TAROM’s.

Between 2010 and 2019, the volume of TAROM’s traffic in Romania increased by an average of 4.5 million additional arriving and departing seats, whereas the increase in the number of seats for the applicant was, on average, 5.6 million arriving and departing seats, or 1.24 times more than the volume of TAROM.

Wizz Air submitted to the court that it has a fleet of 175 Airbus aircraft of the A320 family and had expected to take delivery of a significant number of aircraft until late 2029 in order to increase its fleet, which would allow it to open new routes and new bases, particularly in Romania.

As a result of the grant of the measure at issue, the applicant is in a disadvantageous situation by comparison with TAROM, since, unlike that airline, it did not benefit from aid that would have contributed to enabling it to attenuate the impact of the COVID-19 pandemic and to resume its activities in Romania.

In the Wizz Air’s submission, the measure at issue enabled TAROM to remain on the market as a subsidised competitor by avoiding the negative consequences of the COVID-19 pandemic.

However, after the Wizz Air arguments and European Commission counter-arguements were heard, Judges said the Commission had correctly assessed the proportionality of the aid granted to TAROM.

Court also said that as regards the arguments relating to the counterfactual scenario and damage mitigation, the applicant confuses the merits of the matters of fact and of law on which the contested decision is based with the absence or inadequacy of the reasons stated for that measure, so that such arguments must be regarded as ineffective.

Passing the Judgement, the Judges ordered that GENERAL COURT (Seventh Chamber) hereby:

• Dismisses the action;
• Orders Wizz Air Hungary Légiközlekedési Zrt. (Wizz Air Hungary Zrt.) to pay the costs.

However, Wizz Air can now appeal to the Court of Justice of the European Union, Europe's top court, on matters of law. 

You may like to read....