The EU’s General Court in Luxembourg has ruled that the European Commission was wrong to approve Dutch government support for KLM last year, in a case brought by budget airline Ryanair.

‘The General Court annuls the Commission’s decision to approve the Netherlands financial aid for the airline KLM amid the Covid-19 pandemic on the grounds of inadequate reasoning,’ the court said in its ruling.

The court, which which focuses mainly on competition law and business disputes, said that the annulment and the recovery of the aid would not go ahead pending a new decisions by Brussels.

This was because of the ‘particularly damaging consequences for the Netherlands economy and air transport connectivity in an economic and social context’ if this were to happen, the court said.

Last year Brussels gave the green light to a €3.4bn package of aid in the form of loans and guarantees to keep KLM afloat.

KLM said in the wake of the ruling that it had no immediate impact on the airline or the support it had received so far. Talks are still ongoing about a second package of help.

Those talks have been complicated by the European Commission demand that KLM hand back take off and landing rights at Schiphol in return for any future bail-out. Air France had to return 18 slots at Paris Orly.

Ryanair also took action against Portugal’s airline TAP.

Ryanair said after the ruling that the aid to both KLM and TAP went against the fundamental principles of EU law and ‘reversed the clock on the process of liberalisation in air transport by rewarding inefficiency and encouraging unfair competition.’