European Commission opens investigation into German government aid to Lufthansa

The European Commission (EC) announced on Monday the opening of an in-depth investigation into Lufthansa’s €6 billion airline recapitalization plan that the German government adopted in the wake of the coronavirus pandemic and that the General Court of the European Union (EUCG) annulled last year.

The aim of the investigation is to analyze whether the German aid complies with the EU club’s rules on state aid, the EC said in a statement.

In June 2020, Brussels gave the green light to the recapitalization plan, concluding that it complied with EU rules on state aid, including the temporary framework on state aid adopted in the wake of the pandemic. That temporary framework relaxed the rules on public support to give member states more leeway to support companies in the aftermath of the health crisis.

However, the EUAT annulled the aid of 6 billion euros in May 2023, although the EU judiciary has yet to rule on the appeal filed by Lufthansa.

Capitalization plan

The recapitalization plan was divided into three parts: an equity stake of approximately EUR 300 million, a non-voting non-convertible equity stake of EUR 4.7 billion and a non-voting stake of EUR 1 billion with the characteristics of a convertible bond.

To benefit from the aid, Lufthansa had to comply with a number of commitments, such as a ban on dividends and “strict” limitations on executive compensation, including a ban on bonus payments.

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In addition, Lufthansa had to give up to 24 landing or take-off permits a day at Frankfurt and Munich airports to allow competing airlines to establish a base there.

In the EUAT judgment annulling the Commission’s approval of the recapitalization, the court found that German support for Lufthansa breached “several of the conditions” set out in the temporary state aid framework adopted in the wake of the coronavirus.

The investigation

Following that ruling, Brussels will carry out a “more in-depth” investigation to assess the recapitalization measure, which will focus on Lufthansa’s eligibility for aid or the need for a mechanism to incentivize the state’s exit from the company’s capital.

Attention will also be paid to the existence of “significant market power” at airports other than Frankfurt and Munich, at least at Düsseldorf and Vienna, as well as “certain aspects of the structural commitments imposed on Lufthansa,” among other issues, the European Commission said.

The opening of an in-depth investigation gives Germany and interested third parties the opportunity to comment on the matter.

In any case, the launching of the investigation does not prejudge its outcome.

With information from EFE