Germany's Covid-19 state aid for Lufthansa under EU investigation

The European Commission launched an investigation on Monday to find out if German government state aid for Lufthansa during the Covid-19 pandemic breached EU rules.

The investigation comes after a judgement from the EU General Court in May 2023 to annul the state aid awarded to the German airline worth €6 billion ($6.5 billion).

In June 2020, the German government granted state aid to Lufthansa worth billions when usually strict subsidy rules were loosened to help support governments impacted by the Covid-19 pandemic.

Travel restrictions during Covid-19 brought Lufthansa's business to a virtual standstill. Tens of thousands of jobs were on the line at the group, which employs around 138,000 people.

In the ruling last year, the court found the EU's executive arm should not have approved the state aid and made errors in the assessment process. In particular, it said the commission should have checked closer whether Lufthansa had the collateral to obtain loans for itself.

The commission, which is the EU's top competition regulator, is now re-examining its own earlier decision, in order to assess whether Lufthansa was eligible for the German state subsidies or could have secured new financing on private markets.

The commission is also assessing the condition of market competition at airports in Germany and Austria and taking into account the presence of Lufthansa's operations in Vienna and Dusseldorf.

Germany, Austria, Switzerland and Belgium together pledged a total of €9 billion in aid to the Lufthansa Group, but this was not used in full.

Germany provided the majority of the fund, the €6 billion, taking on 20% of equity in Lufthansa with financing provided by the German Economic Stabilisation Fund, while the state-owned KfW Bank contributed a loan of €1 billion.

The other European partners only joined the state aid pact at a later date.

Lufthansa repaid the aid in full by the end of 2022 and partly replaced it with its own debt.

The German state did not lose any money and actually made a profit of around €760 million from interest and share sales.

The opening of the investigation does not prejudice the outcome, the commission said. The German state and Lufthansa may not submit comments to investigations.