Lufthansa is challenging a European court's decision to annul €6 billion in state aid, Bloomberg reports, arguing that it has already repaid a significant portion of the funds. This aid was initially approved by the European Commission in 2020 under the state aid rules aimed at helping companies during the COVID-19 pandemic.
However, in May 2023, the General Court of the EU declared that the Commission made an error in allowing Germany to grant state aid to Lufthansa during the global pandemic. As a result, the court legally invalidated the Commission's decision. The General Court said that the Commission made multiple errors while evaluating the state aid, specifically in terms of exploring potential alternatives to a government bailout.
The court's ruling indicated that the Commission did not adequately assess the feasibility of financing the necessary capital through private markets. Additionally, the Commission failed to properly consider using the company's aircraft as collateral for potential credit financing to secure the required amount.
Lufthansa has appealed at the EU Court of Justice against the May 10 judgment by a lower tribunal, which backed claims by Ryanair Holdings Plc that the state aid unfairly tilted competition toward Lufthansa. The airline said that it has already repaid €3.5 billion in stabilization measures approved by the Commission.
The injection of funds included an equity participation of €300 million plus two separate loans of €4.7 billion and €1 billion.
In June 2020, the Commission declared that the support package provided to Lufthansa complied with its state aid rules and was under the temporary relaxation of specific rules during the ongoing pandemic.
However, this decision led to legal action from both Ryanair and Condor, citing anti-competitive grounds, as they challenged the Commission's approval of the state aid.
During the appeal, Ryanair and Condor presented evidence to the court, demonstrating that Lufthansa's bailout negatively impacted their market shares. They competed directly with Lufthansa on numerous routes.
The court concluded that the state aid not only allowed Lufthansa to avoid exiting these routes, where it directly competed with Ryanair and Condor, but it also bolstered Lufthansa's competitive position on many of these routes at the expense of the other airlines.