EU Court Annuls EU Approval of Billions for Lufthansa, SAS

EU Court Annuls EU Approval of Billions for Lufthansa, SAS

The European Union Court held that the European Union Competition Authorities have erred in approving massive bailouts designed to help German flag-carrier Lufthansa and Scandinavian airline SAS deal with the impact of COVID-19 restrictions.

In order to grant financial assistance to any company in the EU, the 27 member states of the bloc must seek approval from the bloc's executive branch, called the European Commission, before they can proceed. Many countries across Europe did so in 2020 to help keep their airlines afloat during the pandemic.

Subsequently, Germany had notified the commission of its intent to provide 6 billion euros ($6.6 billion) in aid to Lufthansa in June 2020.

In the following month of August, Denmark and Sweden indicated they would be providing 1.07 billion euros ($1.17 billion) in support to SAS.

During that time, the low-cost Irish carrier Ryanair, which was also struggling to survive had appealed to the EU’s General Court, which ruled that the commission has committed several errors in making its positive assessment of the German plan.

By noting the errors, the Court said, “that Lufthansa was unable to obtain financing on the markets for the entirety of its needs and failing to require a mechanism incentivizing Lufthansa to buy back Germany’s shareholding as quickly as possible.”

The Luxembourg-based Tribunal alleged that the Commission had also acted incorrectly “by denying that Lufthansa held significant market power at certain airports, and by accepting various commitments that do not ensure that effective competition on the market is preserved.”

With respect to Ryanair’s challenge regarding the state aid to SAS, the Court held that “the contested decision must be annulled in its entirety.”

The European Commission further expressed that, “we will carefully study the judgement and reflect on possible next steps.”

A commission spokesperson noted that Lufthansa had paid back the aid to Germany. SAS has not yet paid back Denmark and Sweden.

The commission is the EU’s anti-trust watchdog. During the pandemic of 2020, with travel restrictions coming to an end and airlines facing extinction, the EU eased its policies, approving billions of euros for the support of national flag carriers to emerge from the crisis.

A fast-track system was established during the midst of what the European Commission describes as an ‘unprecedented crisis,’ and as a result around three trillion euros worth of state support has been approved across all sectors in all 27 member states.

Aggrieved by the same, Ryanair alleged that 40 billion euros was granted to Europe’s airline sector alone.