During the coronavirus pandemic, Lufthansa received billions in support payments from the German state, which the European Court of Justice (ECJ) declared unlawful. The European Commission is now reviewing its approval again.
This should clarify whether the support was in accordance with European state aid rules. The reason for the investigation is a court ruling from over a year ago.
At the time, the Court of Justice ruled that the European Commission should not have approved aid worth around €6 billion to AUA’s parent company Lufthansa. The Commission is said to have made several errors in its assessment, and the EU Court of Justice (ECJ) annulled the Commission’s approval.
Market power underestimated?
The competition authorities should have checked more closely whether Lufthansa still had its own collateral to obtain loans for itself. The court also complained that Lufthansa’s market power at the airports was underestimated.
The Commission is now reviewing its decision again and wants to take into account Lufthansa’s market power at Vienna and Düsseldorf airports. However, the authority stresses that the launch of an investigation does not prejudge its outcome.
The pandemic has brought business to a standstill
Travel restrictions during the pandemic had brought Lufthansa’s operations to a virtual standstill. Tens of thousands of jobs were at risk in the group of around 138,000 employees. That’s why the German federal government supported Germany’s largest airline in the spring of 2020.
Germany, Austria, Switzerland and Belgium had pledged a total of nine billion euros in aid to the Lufthansa Group, but this was not fully used. The lion’s share of the amount came from Germany, the airline’s home country.
Six billion euros, including a 20 percent share package and silent partnerships, went to the Federal Economic Stabilization Fund (WSF), while the German state bank KfW Bank contributed a billion-euro loan. The European partners only joined the aid pact later.
The support will be repaid at the end of 2022
The rescued company had fully repaid the support by the end of 2022 and partly replaced it with its own debt. Lufthansa boss Carsten Spohr explained that he would rather owe the market than the taxpayer. The bottom line is that the German state made a nominal profit of around 760 million euros from interest and share sales.
Source: Krone
I’m Ben Stock, a journalist and author at Today Times Live. I specialize in economic news and have been working in the news industry for over five years. My experience spans from local journalism to international business reporting. In my career I’ve had the opportunity to interview some of the world’s leading economists and financial experts, giving me an insight into global trends that is unique among journalists.
