LUXEMBOURG The European Court of Justice ruled on Wednesday that Ireland's leading airlines must pay back air travel taxes because the lower rates granted by the government for shorter flights between 2009 and 2011 were illegal subsidies.
The court upheld a decision by the European Commission that Ryanair (RYA.I) and Aer Lingus [AERLI.UL], which is part of International Airlines Group (ICAG.L), had benefited from unlawful state aid.
Ryanair, Europe's largest budget airline, and Aer Lingus went to the court in Luxembourg after the Commission said Ireland was wrong to waive 8 euros ($8.32) per passenger for domestic flights.
"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 has since modified its air travel tax to a flat rate for all flights, domestic and international, in 2011 following the Commission's investigation.
(Reporting by Michele Sinner, writing by Robin Emmott; editing by Philip Blenkinsop)