The European Commission has launched a detailed investigation into the €321.2 million restructuring aid granted by Germany to the German charter airline Condor to assess its compliance with EU State aid rules.
This aid was initially approved in July 2021 according to the EU’s State aid Rescue and Restructuring Guidelines. However, the approval was overturned by the General Court on May 8, 2024.
The Irish budget airline Ryanair brought the case challenging the Commission’s decision to the EU General Court. Ryanair has regularly opposed providing state aid to European competitors, claiming it contradicts free market competition rules.
Condor, an airline specializing in leisure travel, was on the brink of insolvency in September 2019 after its parent company, the Thomas Cook Group, collapsed. To aid in Condor’s recovery, the Commission authorized a restructuring aid package in July 2021.
This package involved forgiving €90 million of debt from a €550 million loan guaranteed by the German development bank KfW, adjusting the repayment terms for the remaining loan used for restructuring costs, and forgiving €20.2 million in interest accrued from coronavirus compensation.
The General Court’s decision to invalidate the Commission’s approval raised concerns about whether Germany was adequately compensated for the forgiven debt.
“Rescue and restructuring aid is among the most distortive forms of aid, because it intervenes in favour of companies that would otherwise exit the market,” the European Commission explained in a statement. “The Guidelines therefore allow for aid only under strict conditions.”
The Court stressed the importance of the Commission assessing whether former shareholders and subordinated debt holders shared the restructuring burden adequately, which could potentially result in a reduction of the aid amount.
In response, the Commission has launched a thorough investigation to reassess these issues and ensure compliance with EU State aid rules.