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UPDATE 2-Ryanair, Aer Lingus face tax bill after EU court ruling on state aid
December 21, 2016 / 11:44 AM / a year ago

UPDATE 2-Ryanair, Aer Lingus face tax bill after EU court ruling on state aid

* EU court says lower Irish air tax on short routes illegal

* Irish carriers benefited as they fly most on such routes

* Ryanair says ruling will require it to pay 12 mln euros

* Ryanair says airlines could seek compensation from govt (Adds comment from Ryanair, Aer Lingus)

LUXEMBOURG, Dec 21 (Reuters) - Ryanair and Aer Lingus face paying back millions of euros in air travel taxes after the European Court of Justice ruled on Wednesday that they had benefited from unlawful aid from the Irish government.

Ryanair, Europe’s largest budget airline, said the ruling would require it to repay 12 million euros ($12.5 million) to the Irish government, but also said airlines would be able to take legal action to claim compensation from the government over the tax.

Aer Lingus, which is part of International Airlines Group , said Ireland was seeking 4 million euros, but that this figure was being contested.

The European Court of Justice upheld a decision by the European Commission in 2011 that lower air tax rates in Ireland for shorter flights, including on some services to Britain, between 2009 and 2011 were illegal subsidies.

Ryanair and Aer Lingus went to the court in Luxembourg after the Commission said Ireland was wrong to set air tax on short-haul flights at 8 euros ($8.32) lower per passenger than on longer flights as it disproportionately benefited Irish carriers who flew more short routes.

“The advantage in question did not consist in the fact that those airlines were able to offer more competitive prices than their competitors,” the Court said in a statement.

“It resulted quite simply from the fact that those companies had to pay a lower amount than they would have had to pay if their flights had been subject to the standard rate.”

Ireland modified its air travel tax in 2011 to a flat rate for all flights, domestic and international, following the Commission’s investigation.

Ryanair in an emailed statement said Wednesday’s ruling cleared the way for legal action by airlines to recover 88 million euros from the Irish government for the imposition of what it described as an illegal tax. ($1 = 0.9618 euros) (Reporting by Michele Sinner and Conor Humphries; writing by Robin Emmott; Editing by Philip Blenkinsop and Susan Fenton)

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