European Commission re-assesses $6.5 Billion COVID-19 State Aid granted to Lufthansa

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Global Industry News

European Commission re-assesses $6.5 Billion COVID-19 State Aid granted to Lufthansa

Policy

Tom Boon Content Manager | Simple Flying

By Sky Industry News

Jul 9, 2024

The European Commission (EC) will reassess Lufthansa's state aid, which amounted to €6.06 billion ($6.5 billion). The EC initiated its investigation after the EU General Court annulled the state aid approval given by the EC in June 2020. The Commission will investigate several aspects of its approval process, including the Lufthansa Group's dominant positions at Dusseldorf Airport (DUS) and Vienna Airport (VIE).

The European Commission has launched an investigation to reassess Lufthansa’s state aid that the German government granted to the airline during the pandemic, with the aid totaling €6.06 billion ($6.5 billion). The General Court previously ruled that the aid was illegal.

While the EC had approved the €6.06 billion ($6.5 billion) state aid in June 2020, utilizing the state aid COVID-19 temporary framework regulations, the European General Court annulled the approval in May 2023. Lufthansa has appealed the decision, with Ryanair and Condor launching separate cases against the EC for its approval of the state aid given to Lufthansa.

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On July 8, the EC announced that it has launched an in-depth investigation into the state aid given to the German airline. The aid measure consisted of an equity injection of €306 million ($331 million), a non-convertible equity instrument of €4.7 billion ($5 billion), and €1 billion ($1.08 billion) in convertible debt instruments.

In a separate case, Ryanair successfully argued that the General Court should annul Germany’s aid given to Condor, amounting to €321 million ($347.2 million). The General Court announced its decision in May, stating that the EC failed to properly investigate this state aid.

The EC pointed out that "the General Court had considered that the state aid given to Lufthansa did not meet several conditions set out in the COVID Temporary Framework," which was adopted between March 2020 and June 2022 to enable governments to support their economies during the pandemic.

As a result, "the Commission will now investigate Lufthansa’s eligibility for state aid," including mechanisms for incentivizing Germany to sell its shareholding and aspects of structural commitments imposed on Lufthansa.

Furthermore, "the EC will investigate Lufthansa’s dominant market position not only at Frankfurt Airport (FRA) and Munich Airport (MUC) but also at Dusseldorf Airport (DUS) and Vienna Airport (VIE)." Data from aviation analytics company Cirium showed Eurowings and Lufthansa jointly scheduled 741 out of 1,616 weekly departures from DUS (45.8%). At VIE, Eurowings and Lufthansa have only 89 combined weekly departures scheduled for July (3.4% of total weekly departures).

However, both entities examined these figures considering "the Lufthansa Group as a whole," which includes SunExpress—a joint venture with Turkish Airlines—resulting in market shares of 55.8% at DUS and 60.6% at VIE for July.

Lufthansa appealed against "the General Court’s decision" in July 2023, asking for dismissal of cases brought by Ryanair and Condor and requesting these airlines cover legal costs related to appeals.

In its appeal, "Lufthansa concluded that 'the General Court made five errors' in analyzing" approval of state aid provided during COVID-19 pandemic.

Organizations Included in this History

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