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UPDATE 2-Ryanair gets rare wins in EU court over state aid for KLM, TAP

(Adds Lufthansa win in Frankfurt Hahn case, KLM and Portugal PM comments)

BRUSSELS, May 19 (Reuters) - Ryanair won two victories in its fight against billions of euros extended in state aid to rivals as Europe’s second-highest court annulled the support given to KLM and Portugal’s TAP on the grounds that regulators failed to justify the huge cash injections.

The Luxembourg-based General Court, however, said the annulments - and the recovery of the money - would be suspended pending new decisions by the Commission.

Ryanair can challenge those new decisions at the same court if it is not satisfied with them.

“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 on Wednesday.

Judges also rejected the EU executive’s clearance of state aid for Portuguese carrier TAP, citing “an inadequate statement of reasons” by the Commission.

The EU competition enforcer last year cleared a 3.4-billion-euro ($4.15 billion) Dutch bailout for airline KLM and a 1.2 billion euro rescue loan for Transportes Aereos Portugueses (TAP).

“The European Commission’s approvals of state aid to Air France-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,” Ryanair said after the ruling.

But KLM, the Dutch arm of Air France, said the judgment was of no consequence as the state aid will not have to be repaid until the Commission has a chance to review the decision.

TAP declined to comment when contacted by Reuters.

Portugal’s Prime Minister Antonio Costa told reporters the decision was preliminary and the aid was justified in view of the impact of the pandemic.

“Given the crisis that hit the aviation sector around the world, it was unthinkable for the European Commission not to lift restrictions on state aid,” he said. “There is no reason to believe their legal experts did not study the matter well.”

On Wednesday, the Court rejected Ryanair’s challenge to a 10 billion euro Spanish fund for virus-hit companies approved by the European Commission, saying the measure complied with EU law.

Ryanair also suffered a setback when the Court backed Lufthansa’s challenge to the Commission’s 2017 decision allowing state aid to Frankfurt Hahn airport, where the Irish carrier was the main beneficiary.

The Commission said it would study the rulings before deciding on its next steps.

Governments around the world have pumped billions of euros into the airline industry, which has been hit hard by virus-related restrictions and lockdowns.

Last month, the same court backed EU competition regulators’ approval of support for SAS and Finnair while in February judges also upheld state aid granted to rivals including Air France and SAS.

Europe’s biggest budget airline has filed 16 lawsuits against the Commission for allowing state aid to individual airlines such as Lufthansa, KLM, Austrian Airlines and TAP, as well as national schemes that mainly benefit flag carriers.

The cases are T-465/20 Ryanair v Commission, T-643/20 Ryanair v Commission, T-628/20 Ryanair v Commission and T-218/18 Deutsche Lufthansa v Commission. ($1 = 0.8187 euros) (Additional reporting by Sabine Siebold in Brussels, Conor Humphries in Dublin, Toby Sterling in Amsterdam, Laurence Frost in Paris and Catarina Demony and Sergio Goncalves in Lisbon; editing by Louise Heavens and Hugh Lawson)

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