Airlines told to repay €16m in travel tax row

Ryanair and Aer Lingus may have to pay back millions of euros in air travel taxes after the European Court of Justice ruled that they had benefited from unlawful aid from the government.

Ryanair, Europe’s largest budget airline, said that the ruling would require it to repay €12 million euros, but added that airlines would be able to take legal action to claim compensation from the government.

Airlines were required to pay the tax, which was levied at different rates for short and long-haul flights, for every passenger departing from an airport in Ireland, although transfer and transit passengers were exempted.

The court upheld a decision by the European Commission in 2011 that lower air tax rates for shorter flights between 2009 and 2011 were illegal subsidies.

The commission ruled that Ireland was wrong to set air tax on short-haul flights at €8 lower per passenger than on longer flights as it disproportionately benefited Irish carriers who had 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.

“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.”

Ryanair claimed airlines would be able to pursue legal action to recover as much as €88 million from the Irish government for the imposition of what it described as an illegal tax.

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

“Aer Lingus consistently opposed the air travel tax, which damaged the Irish aviation sector and which has since been abolished altogether,” the airline said.

The country modified its air travel tax in 2011 to a flat rate for all flights following the commission’s investigation.

The tax was introduced in 2009, despite opposition from airlines and the travel industry, to raise much-needed funds for the exchequer in the wake of the financial crash.

Michael Noonan, the finance minister, announced in October 2013 that it was to be scrapped from the following April. He added that he expected that airlines would increase services to and from Ireland in response.

In the aftermath of the announcement, Ryanair said that it expected to increase its traffic at Irish airports by one million passengers a year.