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European Court of Justice annuls approval of USD6.6 billion state aid to Lufthansa
(MENAFN) The European Court of Justice has annulled the approval of €6 billion (USD6.6 billion) state aid to German airline Lufthansa during the COVID-19 pandemic. The court's judges in Luxembourg ruled on May 11, 2023, that the EU Commission's approval of the German state aid in 2020 was "vitiated by several errors and irregularities," including the misjudgment of Lufthansa's significant market power at certain airports.
The court found that the EU Commission had committed several errors, primarily by considering that Lufthansa was unable to obtain financing on the markets for the entirety of its needs, and by failing to require a mechanism incentivizing Lufthansa to buy back Germany's shareholding as quickly as possible. The judges concluded that the Commission had not assessed the aid's proportionality and had not considered the possibility of attaching conditions to the aid to ensure fair competition.
Budget airlines Ryanair and Condor had pursued a legal campaign against the EU Commission for approving the German state aid to Lufthansa, stressing that it was unfair and not compatible with EU laws. The airlines argued that the aid gave Lufthansa an unfair competitive advantage, as it allowed the company to continue operating even as other airlines were struggling financially due to the pandemic.
The European Court of Justice's decision could have significant implications for Lufthansa and other airlines that received state aid during the pandemic. The court's ruling means that Lufthansa may have to repay the €6 billion in state aid, which could have a significant impact on the company's financial position. Moreover, the ruling could prompt other airlines that received state aid to face similar legal challenges, potentially leading to further financial uncertainty for the industry.
The European Court of Justice's decision also highlights the challenges faced by regulators in balancing the need to support struggling companies during the pandemic with ensuring fair competition and preventing market distortions. The ruling underscores the importance of assessing the proportionality of state aid and attaching appropriate conditions to ensure that aid recipients do not gain an unfair competitive advantage.
Overall, the European Court of Justice's decision to annul the approval of €6 billion state aid to Lufthansa could have significant implications for the airline and the wider aviation industry. The ruling underscores the importance of ensuring fair competition and assessing the proportionality of state aid, particularly during times of crisis.
The court found that the EU Commission had committed several errors, primarily by considering that Lufthansa was unable to obtain financing on the markets for the entirety of its needs, and by failing to require a mechanism incentivizing Lufthansa to buy back Germany's shareholding as quickly as possible. The judges concluded that the Commission had not assessed the aid's proportionality and had not considered the possibility of attaching conditions to the aid to ensure fair competition.
Budget airlines Ryanair and Condor had pursued a legal campaign against the EU Commission for approving the German state aid to Lufthansa, stressing that it was unfair and not compatible with EU laws. The airlines argued that the aid gave Lufthansa an unfair competitive advantage, as it allowed the company to continue operating even as other airlines were struggling financially due to the pandemic.
The European Court of Justice's decision could have significant implications for Lufthansa and other airlines that received state aid during the pandemic. The court's ruling means that Lufthansa may have to repay the €6 billion in state aid, which could have a significant impact on the company's financial position. Moreover, the ruling could prompt other airlines that received state aid to face similar legal challenges, potentially leading to further financial uncertainty for the industry.
The European Court of Justice's decision also highlights the challenges faced by regulators in balancing the need to support struggling companies during the pandemic with ensuring fair competition and preventing market distortions. The ruling underscores the importance of assessing the proportionality of state aid and attaching appropriate conditions to ensure that aid recipients do not gain an unfair competitive advantage.
Overall, the European Court of Justice's decision to annul the approval of €6 billion state aid to Lufthansa could have significant implications for the airline and the wider aviation industry. The ruling underscores the importance of ensuring fair competition and assessing the proportionality of state aid, particularly during times of crisis.
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