EU Court Upholds Ryanair’s Complaint Against Condor State Aid

The European Union (EU) General Court has annulled the European Commission’s (EC) decision to approve the restructuring aid given to Condor, the German airline, in a case that was brought forward by the Irish low-cost carrier Ryanair. The court announced the decision on May 8.

Failing to initiate a formal procedure

According to the General Court’s statement, the EC failed to initiate a formal investigation procedure and approved the €321 million ($344.4 million) restructuring aid given to Condor. The court noted that the aid had supported the restructuring and continuation of the airline’s operators after its parent company, Thomas Cook, went bankrupt in 2019.

The aid was approved on July 26, 2021. Nevertheless, the General Court annulled the decision, arguing that the EC should have initiated a formal procedure. As such, Ryanair, the party that brought forward the case to the court, showed that the EC should have had doubts about justifying its decision.

The General Court’s statement explained that the Commission should have questioned whether the aid satisfied its own rules, namely burden sharing. The EC’s document explaining the rule read that,

“Adequate burden sharing will normally mean that incumbent shareholders and, where necessary, subordinated creditors must absorb losses in full. Subordinated creditors should contribute to the absorption of losses either via conversion into equity or write-down of the principal of the relevant instruments.”

Condor’s €525 Million Aid Package Gets Green Light From The EU

Portion of future gains

Furthermore, a State should only intervene and provide aid after losses have been attributed to existing shareholders and debt holders, while a State should also gain “a reasonable share of future gains.” As such, the court determined that there was nothing to suggest that the EC even looked into whether the aid would provide Germany with a reasonable share of future gains in the value of Condor.

“Furthermore, those doubts that the Commission should have had necessarily affect its assessment of the scope of the measures to limit distortions of competition foreseen in its decision and that are applicable to Condor.”

Photo: Markus Mainka | Shutterstock

However, the court ruled that while Ryanair was allowed to annul the EC’s decision, the Irish low-cost carrier could not challenge the contents of the decision since it had not demonstrated that the aid had a substantial effect on its competitive position.

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The EU ultimately deemed the financial support to have been legitimate.

Billions in illegal state aid

Still, the Irish low-cost carrier issued a statement following the ruling, saying that it welcomed the General Court’s decision, saying that the German government granted Condor over €525 million ($563.4 million) in illegal aid in 2021, split between pandemic-related and restructuring aid.

“Over €40bn [$42.9 billion – ed. note] in discriminatory State subsidies were handed out to EU flag carriers during the Covid-19 pandemic. The EU General Court has ruled that the billions of euros in State aid received by SAS, Lufthansa, Air France-KLM, and certain Italian airlines were unlawful.”

Photo: MC MEDIASTUDIO | Shutterstock

A Ryanair spokesperson added that while one of the greatest achievements of the EU was the creation of a single market for air transport, the EC’s decision went against the fundamental laws of the union. As a result, the court’s ruling has confirmed that the Commission must act as a guardian of a level playing field within the EU, adding that the EC cannot sign off discriminatory state aid given out by national governments.

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Ryanair alleged that in total, flag carriers received over €40 billion ($43 billion) of illegal state aid in the EU.