The European Union (EU) Commission has launched an investigation into the 6 billion euro state aid provided by Germany to Lufthansa during the Covid-19 pandemic.
Competition Review of State Aid
According to the EU Commission’s announcement, the investigation was initiated to determine whether this public aid, given to Lufthansa which faced the threat of bankruptcy due to global travel restrictions, complies with European competition rules. This inquiry aims to assess whether state aid leads to unfair competition.
The ruling by the General Court of the European Court of Justice, the EU’s highest court, on May 10, 2023, has played a significant role in this investigation. The General Court annulled the Commission’s approval of Germany’s 6 billion euro recapitalization aid to Lufthansa during the pandemic. The court pointed out errors in the Commission’s decision and noted that Lufthansa’s ability to secure financing from the market was incorrectly assessed.
Commission’s Reassessment
In 2020, the EU Commission had conditionally approved Germany’s financial aid to Lufthansa. However, following the General Court’s decision, the Commission decided to reassess this aid. EU countries are obliged to use public support in accordance with the rules set by the EU Commission and in a way that does not harm competition.
Lufthansa’s Situation
Lufthansa, which faced financial difficulties due to the Covid-19 pandemic, was saved from the brink of bankruptcy by a total rescue package of 9 billion euros provided by Germany and other countries. As travel increased, the company repaid part of the aid it received.
This investigation is of great importance in ensuring the protection of the EU’s competition rules and the fair distribution of state aid. The EU Commission’s review could set a precedent for other companies and countries facing similar situations.
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