Ryanair and Aer Lingus have been ordered this morning to pay the Government what is expected to be a total of about €16m (£13.47m) in illegal state aid the European Court of Justice said the two airlines benefited from.
The European Commission had previously argued that the way Ireland’s now suspended air travel tax was structured meant shorter air routes had effectively benefited from illegal state aid.
It wanted Ryanair to pay the Government €12m (£10.10m) in air taxes, and Aer Lingus to pay €4m (£3.37m).
But last year at the European General Court, the two airlines effectively overturned the Commission’s previous determination.
The Commission then pleaded with the European Court of Justice that its original finding should be retained and that the airlines must pay up.
In a judgment published this morning, the Court of Justice said that the airlines must pay back the money and reversed the General Court’s decision.
The Government introduced the controversial air travel tax in 2009. The urgent revenue-raising measure was pilloried by airlines that claimed it would hinder passenger growth.
The new tax levied a €2 (1.68) charge per passenger on flights up to 300km from Dublin, and €10 (£8.42) for distances over that.
But Ryanair complained to the European Commission.
The institution determined that the lower levy rate amounted to illegal state aid, because it benefited airlines that primarily operated shorter routes.
Following the Commission’s ruling, the Government scrapped the two-tier levy system and in 2011 introduced a flat €3 (£2.52) tax per passenger.
The Commission then told the Government it would have to collect from both Aer Lingus and Ryanair, the difference between the two rates – €8 (£6.73) -that had previously been in operation, in respect of each passenger that had been charged the lower €2 (1.68) levy between 2009 and 2011.
“Aer Lingus notes today’s judgement of the European Court of Justice in relation to Ireland’s Air Travel Tax,” a spokesperson for the airline said in a statement on Wednesday morning.
“This judgement overturns the ruling of the General Court which had partially annulled a decision by the European Commission under the state aid rules, relating to the period when the tax was levied at two different rates depending on the route flown. The Commission had required that Ireland recover €8 (£6.73) per passenger from a number of airlines (being the difference between the lower and the higher rate) for each passenger subject to the lower rate.
“Aer Lingus is studying the judgement in detail to understand fully its implications. Aer Lingus consistently opposed the Air Travel Tax, which damaged the Irish aviation sector and which has since been abolished altogether.
“Aer Lingus also has separate proceedings pending in the Irish High Court against the Irish Government seeking substantial damages for losses flowing from the infringement of the EU rules on free movement of services arising from the Air Travel Tax.”
“The state is seeking to recover €4m (£3.37m), however this is being contested.”
Meanwhile, Ryanair have also responded, telling independent.ie: “We have been expecting this judgment on Ireland’s illegal Air Travel Tax which now requires Ryanair to pay some €12m (£10.10m) to the Irish Government on behalf of passengers who paid the lower €2 (1.68) tax rate on shorter routes, despite the fact that we did not collect the €10 (£8.42) tax from these passengers.
“This ruling now clears the way for Ryanair (and other airlines) to pursue our High Court action against the Irish Government to recover the €88m (£74.07m) of damages we suffered as a result of being forced to pay this illegal tax.”