(Reuters) - Budget airline Wizz Air on Wednesday lost its challenge against a capital increase for Romanian rival TAROM funded by Romania and approved by EU competition regulators, as Europe's second-top court dismissed its arguments.

Wizz Air took its case to the Luxembourg-based General Court after the European Commission said the 2 million euros ($2.15 million) in aid to offset the impact of travel restrictions linked to the COVID pandemic complied with EU state aid rules.

The EU watchdog had declined to open a formal investigation into the case.

"That aid, amounting to almost 2 million euros, is compatible with the internal market," the Luxembourg-based General Court said.

Judges said the Commission had correctly assessed the proportionality of the aid granted to TAROM.

Wizz Air can appeal to the Court of Justice of the European Union, Europe's top court, on matters of law.

Airlines across Europe received billions of euros in state aid during the pandemic, triggering lawsuits from rivals such as Wizz Air and Ryanair.

The case is T-827/22 Wizz Air Hungary v Commission (TAROM II; Covid-19).

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