Summary
- The European Commission (EC) will investigate Lufthansa’s state aid, which amounted to €6.06 billion ($6.5 billion).
- The EC initiated its investigation after the EU General Court annulled the state aid approval gyven by the EC in June 2020.
- The Commission will investigate several aspects of its approval process, including the Lufthansa Group’s dominant positions at Dusseldorf Airport (DUS) and Vienna Airport (VIE).
The European Commission (EC) has launched an investigation to reassess Lufthansa’s state aid that the German government granted to the airline during the pandemic, with the aid totaling €6.06 billion ($6.5 billion). The General Court previously ruled that the aid was illegal.
Annulled by an EU court
While the EC had approved the €6.06 billion ($6.5 billion) state aid in June 2020, utilizing the state aid COVID-19 temporary framework regulations, the European General Court annulled the approval in May 2023. Lufthansa has appealed the decision, with Ryanair and Condor launching separate cases against the EC for its approval of the state aid given to Lufthansa.
On July 8, the EC announced that it has launched an in-depth investigation into the state aid given to the German airline. The aid measure consisted of an equity injection of €306 million ($331 million), a non-convertible equity instrument of €4.7 billion ($5 billion), and €1 billion ($1.08 billion) in the form of a convertible debt instrument.
Photo: Markus Mainka | Shutterstock
In a separate case, Ryanair has successfully argued that the General Court should annul the EC’s approval of Germany’s aid given to Condor, amounting to €321 million ($347.2 million). The General Court announced its decision in May, stating that the EC failed to properly investigate the state aid given to Condor.
Related
EU Court Upholds Ryanair’s Complaint Against Condor State Aid
Ryanair cannot challenge the decision’s contents since it failed to prove that the state aid impacted its competitive position.
Dominant position at several airports
The EC pointed out that the General Court had considered that the state aid given to Lufthansa did not meet several conditions set out in the COVID Temporary Framework, which the EC had adopted between March 2020 and June 2022 to enable governments to support their economies and its participants during the pandemic.
As a result, the Commission will now investigate Lufthansa’s eligibility for the state aid, the need for a mechanism to incentivize the German state to sell its shareholding, the price of the shares at the time of a potential conversion of €1 billion ($1.08 billion) into equity, and certain aspects of the structural commitments imposed on Lufthansa.
Photo: mal23 | Shutterstock
Furthermore, the EC will investigate Lufthansa’s dominant market position not only at Frankfurt Airport (FRA) and Munich Airport (MUC) but also at Dusseldorf Airport (DUS) and Vienna Airport (VIE). Data from the aviation analytics company Cirium showed that while Eurowings, a subsidiary of Lufthansa, and Lufthansa have jointly scheduled 741 out of 1,616 weekly departures out of DUS (45.8%), the situation is different at VIE.
Eurowings and Lufthansa have only 89 combined weekly departures scheduled from VIE in July, which is 3.4% of the total weekly departures at the airport. However, the EC and the General Court did not look at the case from the point of view of the airline Lufthansa but the Lufthansa Group as a whole, which included SunExpress, a 50% joint venture with Turkish Airlines.
As a result, the Lufthansa Group is scheduled to have a market share of 55.8% (902 weekly departures out of 1,616) at DUS and 60.6% (1,547 weekly departures out of 2,550) at VIE in July. The General Court examined the 2019 International Air Transport Association (IATA) summer season schedule in its case against Lufthansa:
|
Airport |
Total weekly departures (July 2019) |
Total weekly departures of Lufthansa Group airlines (July 2019) |
Market share of Lufthansa Group airlines (including SunExpress, a joint venture with Turkish Airlines) |
Total weekly departures (July 2024) |
Total weekly departures of Lufthansa Group airlines (July 2024) |
Market share of Lufthansa Group airlines (including SunExpress, a joint venture with Turkish Airlines) |
|
Dusseldorf Airport (DUS) |
2,239 |
1,172 |
52.3% |
1,616 |
902 |
55.8% |
|
Vienna Airport (VIE) |
2,740 |
1,730 |
63.1% |
2,550 |
1,547 |
60.6% |
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Appealing the annulment
Lufthansa appealed the General Court’s decision in July 2023, asking the Court to throw out the cases brought by Ryanair and Condor and order the two airlines to pay for the legal costs of the appeal process, as well as for Ryanair to cover the costs of its case against the EC.
Photo: Vincenzo Pace | Simple Flying
In its appeal, Lufthansa concluded that the General Court made five errors in analyzing the approval of the state aid to the German company. In addition, Lufthansa alleged that the General Court substituted its own analysis for that of the one presented by the EC when the court found that it was not appropriate to exclude competitors that were already based at FRA and MUC for Lufthansa’s slot divestiture, with the German airline arguing that the court “contradicted itself” in its findings on slot commitments.
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Lufthansa Challenges Court’s European Commission State Aid Veto
The state aid was provided during the COVID-19 pandemic.