Lufthansa, the flag carrier of Germany, challenging the decision of a European court to annul a 6 billion euro state aid provided to the company in 2020. The legal process against Deutsche Lufthansa AG started after Ryanair, an Irish ultra-low-cost carrier, and Condor, a German leisure airline, challenged the decision of the European Commission to recapitalize Lufthansa on anti-competitive grounds.
European Commission approved state aid of 6 billion Euros in 2020
During COVID-19, the commercial aviation industry struggled with the drawback of flights in Europe due to travel restrictions. On this ground, European Commission approved 6 billion euro state aid planes of the German government for the recapitalization of Deutsche Lufthansa AG (DLH), the parent company of Lufthansa Group.
German government initiated the state aid on the ground of the State Aid Temporary Framework, the special regulation adopted by European Commission, aimed at providing more economic flexibility for European governments during the coronavirus outbreak.
The purpose of this measure was expressed by Vice-President Margrethet Vestager, in charge of competition policy in that time:
“This substantial amount of aid will help Lufthansa weather the current coronavirus crisis, which has hit the airline sector particularly hard. But it comes with strings attached, including to ensure the State is sufficiently remunerated, and further measures to limit distortions of competition. In particular, Lufthansa has committed to make available slots and additional assets at its Frankfurt and Munich hub airports, where Lufthansa has significant market power. This gives competing carriers the chance to enter those markets, ensuring fair prices and increased choice for European consumers.”
However, this decision of the German government lead to complaints from other major commercial aviation in the German market.
The European Union General Court annuals 6 billion euro state aid to Lufthansa.
After revising the case in May 2023, the General Court of the European Union concluded that the Commission committed several errors during state aid evaluation. To be eligible for recapitalization, “the beneficiary must be unable to obtain financing on the markets at affordable terms,” according to 49(c) of the Temporary Framework. According to General Court, Lufthansa could raise non-negligible financing on the markets, hence the decision to provide state aid of 6 billion euro is not justified.
The Lufthansa challenges the 6 billion euro state aid veto of the General Court.
In response to the decision of the EU General Court, the representative of Deutsche Lufthansa AG claimed that they would “analyze the ruling and decide the further action.”. According to Lufthansa, they already repaid the stabilization measures with 92 million euro in interest rates.
Recently it became known that Lufthansa is challenging the decision of the European Court on a 6 billion euro state aid veto.
Do you consider the 6 billion euro state aid to Lufthansa was justified? Let us know in the comments!