European Commission Launches Investigation into German State Aid for Lufthansa

The European Commission has initiated an investigation to determine if the state aid provided by the German government to Lufthansa during the Covid-19 pandemic breached European Union regulations. This probe follows a ruling by the EU General Court in May 2023, which annulled the state aid granted to the German airline.

The investigation will scrutinize whether Lufthansa was eligible for the substantial financial support it received from the German government and will examine the competitive conditions at airports in Germany and Austria. The aid, which amounted to billions of euros, was disbursed in June 2020, a period when the EU temporarily relaxed its stringent subsidy rules to assist member states severely impacted by the pandemic.

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The European Commission’s top competition regulator is at the forefront of this inquiry. The regulator’s assessment will focus on the compliance of the aid with EU competition laws and its impact on market competition. This move is part of the Commission’s broader effort to ensure fair competition and to rectify any market distortions caused by government subsidies during the pandemic.

Lufthansa, one of the largest airlines in Europe, received the state aid as a lifeline to mitigate the severe financial losses it suffered due to the pandemic-induced travel restrictions. The airline industry, among the hardest hit by the global health crisis, saw unprecedented declines in passenger numbers and revenue.

The outcome of the investigation could have significant implications for Lufthansa and the broader aviation industry, potentially leading to a reassessment of state aid policies and their application in future crises. The findings will also be crucial in setting precedents for how the EU navigates state support and market competition in times of extraordinary economic disruption.

Source: Reuters