The European Commission should never have approved that the German government gave 6 billion euros in corona support to airline Lufthansa and its subsidiaries in 2020.
That follows from a pronunciation which the European General Court, the second highest court of the European Union, published on Tuesday.
According to the European judges, the Commission made errors of assessment when authorizing this state aid. The General Court has annulled the approval of the corona package. Lufthansa has since repaid the aid.
The Court’s ruling is a victory for the plaintiffs, Irish low-cost carrier Ryanair and German competitor Condor. Ryanair has been conducting lawsuits for several years against what it considers to be unjust billions in aid to airlines.
According to a spokesman for the General Court, Ryanair has filed thirty more cases with the General Court, including on topics other than alleged unauthorized corona support. Earlier, the European judges ruled, among other things, that the Commission had to substantiate better why the Netherlands should be allowed to give billions to KLM and why holding company Air France-KLM received support twice, from the Netherlands and France. A case is still pending regarding the recapitalization of Air France-KLM.
Touched by Covid-19
Like many other airlines that were seriously hit by Covid-19 in 2020, Lufthansa received significant financial support from the government. The group – which includes not only the German airline Lufthansa, but also Brussels Airlines, Austrian Airlines, Swiss Air and Edelweiss Air – received the 6 billion euros in three parts. The German government bought shares in the company for 300 million euros, and the state took two ‘silent participations’, of 4.7 billion and 1 billion euros.
Such support required approval from the European Commission. He had to assess whether the financial aid would not be at the expense of the free European market and fair competition. The General Court now argues that the Commission made several errors of assessment in doing so. For example, the Commission wrongly ruled that Lufthansa was unable to find ’emergency money’ on the financial markets. Moreover, the Commission has not required Germany and Lufthansa to agree to pay off the aid as quickly as possible, for example by allowing interest rates to rise over time.
The Commission also failed to appreciate that Lufthansa has significant market power at Frankfurt and other (German) airports. If that is the case and the state aid exceeds EUR 250 million as here, then additional measures are required to curb that power.
Lufthansa had to pay take-off and landing rights at some airports (slots), but they could only be transferred to newcomers at those airports. That was unfavorable for Ryanair and Condor, which already operated a modest scale at the airports involved.
The European Commission can appeal against the judgment of the General Court. Since Lufthansa will no longer receive support, the ruling is unlikely to have any direct financial consequences for the German group.