AN EU court yesterday overturned the European Commission’s decision to approve massive government bailouts for German airline Lufthansa and Scandinavia’s SAS during the coronavirus pandemic, after a legal challenge by rivals.

Lufthansa, one of Europe’s biggest airline groups, received a multi-billion-euro cash injection in 2020 to save it from collapse as government lockdowns to prevent the spread of Covid-19 brought air travel to a halt. 

In the same year, the European Commission approved a bailout of just over €1 (RM4.9) billion for SAS from Sweden and Denmark.

In the case of Lufthansa, the EU General Court, Europe’s second-highest court, found that the commission “committed several errors” and annulled its decision to approve €6 billion euros of bailout funds.

The ruling was made in response to a complaint lodged by Irish airline Ryanair, which has long railed against what it sees as unfair state aid paid out to rivals, as well as the German charter airline Condor.

The court said mistakes included considering Lufthansa could not obtain financing on the markets, failing to require a mechanism incentivising Lufthansa to buy back the German government’s stake, and potential impacts on market competitiveness. 

The commission said in a statement it would study the judgement and “reflect on possible next steps”.

“We are aware of the uncertainty the judgments generate for the airlines concerned and the aviation sector at large,” EU competition chief Margrethe Vestager said in a separate statement.

“The Commission is in close and constructive contact with the Danish and Swedish authorities on the state aid implications of the ongoing restructuring of SAS,” she added.

Since Lufthansa already paid back the bailout cash in 2021, it is not clear if the ruling will have any impact.

The airline said it would analyse the decision and decide on further action, while noting that the “stabilisation measures” were “already fully terminated before today’s court ruling”.

SAS also said it would examine the judgement and decide on possible courses of action.

The commission can appeal both rulings to the European Court of Justice.

Ryanair welcomed the rulings on the “discriminatory state aid”.

The bailouts “went against the fundamental principles of EU law”, and the court’s decisions were “a triumph for fair competition and consumers across the EU”, a spokesman said. 

The Irish airline said more than €40 billion was handed out in state subsidies to EU flag carriers during the pandemic.  – AFP, May 11, 2023.