Austria's Association for Consumer Information (VKI) filed the complaint against Lufthansa subsidiary Austrian Airlines a year ago over a campaign that advertised flights between Vienna and Venice as carbon neutral, using sustainable aviation fuels (SAF).
The consumer rights group argued it was technically impossible to have carbon neutral flights.
A regional court in Korneuburg, just outside Vienna, agreed with the claim that the airlines gave an "incorrect impression".
In its ruling the court said the flights were "actually operated entirely with kerosene or using kerosene, to which sustainable aviation fuel is only added".
The ruling was made in June but Austrian Airlines posted the verdict on its social media channels on Monday, as ordered by the court.
"Austrian Airlines takes the ruling into account in current and future advertising statements," the airline said in a statement emailed to AFP, adding it should have "communicated more clearly" on its use of sustainable aviation fuels.
VKI legal expert Barbara Bauer told AFP it marked "the first 'greenwashing' verdict against an airline in Austria".
Greenwashing is when companies use deceptive claims to convince the public that its products or operations are environmentally friendly.
Austrian Airlines is also among 17 European airlines hit by a consumer complaint filed with the European Commission which accuses them of misleading climate claims.
The European Consumer Organisation, or BEUC, said in June the claims made by the airlines breach EU rules on unfair commercial practices.
The BEUC called for a Europe-wide investigation and for airlines to "stop making claims that give consumers the impression that flying is sustainable."
The group also said airlines are misleading consumers by charging them more to contribute to the development of SAF, which are "not market-ready" and will only represent a minor share of a plane's fuel mix once they finally become widely available.
jza/kym/rox
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