The European Comission made various errors in considering that lufthansa was unable to obtain financing in the markets to cover all its needs, by failing to demand a mechanism that would incentivize the German airline to buy back Germany’s share as quickly as possible, by denying that Lufthansa had significant market power in some airports and by accepting certain commitments that did not guarantee the protection of effective competition in the market.
These are the conclusions reached by the General Court of the EU in a ruling handed down this Wednesday that agrees with the airlines Ryanair and Condor and nullify the decision of the Community Executive to approve the recapitalization plan of 6,000 million of the German Government for the airline.
The case dates back three years. On June 12, 2020, the German Government notified the European Commission of individual aid to the airline in the form of a recapitalization for an amount of 6,000 million euros. This recapitalization was part of a extensive package of measures in favor of the group restore its equity position and liquidity of the group companies as a result of the situation created by the covid19 pandemic.
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The contested measure was divided into three parts: an equity interest of approximately 300 million euros, a non-voting interest not convertible into shares of approximately 4,700 million euros and a non-voting interest of 1,000 million euros with the characteristics of a convertible bond. All of this financed through the Economic Stabilization Fund created by the then Angela Merkel government to support companies hit by the crisis caused by the coronavirus, especially in sectors such as aviation, in which almost the entire European fleet was grounded after the closure of borders and strict travel restrictions to try to contain the pandemic.
According to the European court, the European competition services failed to launch the usual formal investigation and several companies –Ryanair and Condor– filed an appeal before the General Court of the EU requesting the cancellation of the aid and alleging that Brussels had not taken into account various requirements and demands established by the temporary framework on aid approved during the pandemic. The court now endorses the appeal of both airlines, although the Community Executive may still appeal the judgment in cassation.