A top European Union court ruled Wednesday that EU competition authorities were wrong to approve massive bailouts designed to help German flag-carrier Lufthansa and Scandinavian airline SAS deal with the impact of COVID-19 restrictions.
The 27 EU member countries must seek approval from the bloc’s executive branch, the European Commission, when granting financial support to companies. Many countries across Europe did so in 2020 to help keep their airlines afloat during the pandemic.
In June 2020, Germany notified the commission of its intent to provide EUR6 billion (US$6.6 billion) in aid to Lufthansa.
That August, Denmark and Sweden also indicated they would be providing EUR1.07 billion, US$1.17 billion in support to SAS.
Low-cost Irish carrier Ryanair, which also was struggling to survive at the time, appealed to the EU’s General Court, which ruled that the commission “committed several errors” in making its positive assessment of the German plan.
Among the errors, a statement from the court said, was thinking “that Lufthansa was unable to obtain financing on the markets for the entirety of its needs” and “failing to require a mechanism incentivising Lufthansa to buy back Germany’s shareholding as quickly as possible.”
The Luxembourg-based tribunal said the commission 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”.
Concerning Ryanair’s challenge of the state aid to SAS, the court ruled that “the contested decision must be annulled in its entirety”.
It was not immediately clear what impact the rulings might have in the situations the court considered or on other such decisions in the airline sector.
The European Commission said only 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.
“SAS will now, together with the states, review the content of the ruling as well as possible ways to proceed, and will revert on these issues when there is information to share,” the airline said Wednesday.
Ryanair welcomed both rulings, describing them as “a triumph for fair competition and consumers across the EU”.
An airline spokesperson said in a statement the decisions “confirm that the commission must act as a guardian of the level playing field in air transport and cannot sign-off discriminatory state aid under political pressure by national governments”.
The commission is the EU’s antitrust watchdog. As pandemic restrictions in 2020 brought travel to a halt and threatened the very existence of airlines, it eased its policies, approving billions of euros in support for national flag-carriers.
Under a fast-track system set up during what the commission describes as “an unprecedented crisis”, Brussels approved around EUR3 trillion in state support across all sectors in the 27 member nations. Ryanair believes that EUR40 billion was granted to Europe’s airline sector alone.