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Lufthansa Faces Setback as Court Overturns EU Approval of State Bailout

 |  March 14, 2024

In a blow to Lufthansa, the second-highest court in Europe ruled in favor of Ryanair, annulling a decision by the European Union competition regulator to clear Lufthansa’s state bailout. The ruling, announced on Wednesday, highlighted errors in the EU competition regulators’ decision-making process and underscored the absence of incentives for prompt repayment.

Lufthansa, Germany’s flagship carrier, had already repaid the full 6-billion-euro ($6.60 billion) rescue package provided by the German government, potentially mitigating immediate repercussions. However, the ruling could have broader implications for future state aid in the aviation sector.

Following the court’s decision, Lufthansa stated it would determine its next steps after thoroughly analyzing the ruling. Meanwhile, Germany’s economy ministry expressed uncertainty about the judgment’s impact, indicating plans to scrutinize it further.

Margrethe Vestager, the EU’s top competition official, acknowledged the ruling, asserting that “all options” were being considered but refrained from specifying the next course of action.

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This legal battle between Lufthansa and Ryanair is part of a broader campaign by the low-cost carrier against state aid provided to its competitors during the pandemic. Ryanair has consistently argued that such aid distorts competition, alleging that the European Commission cleared these bailouts under lenient rules designed to aid pandemic-hit companies.

In addition to Lufthansa, the court also ruled against pandemic state aid measures for Scandinavian Airlines (SAS), siding with Ryanair’s contention that the rescue package lacked sufficient incentives for the Swedish and Danish governments to exit quickly.

Reacting to the verdict, a Ryanair spokesperson emphasized the need for the Commission to safeguard fair competition in the aviation industry and criticized what it deemed as succumbing to political pressure from national governments.

However, SAS remains unfazed by the ruling’s implications on its operations. The airline assured customers that flight schedules and bookings would remain unaffected. Furthermore, SAS reiterated its ongoing Chapter 11 bankruptcy protection status, initiated last year.

In response to the ruling, SAS clarified that while the court identified a flaw in the EU Commission’s decision, it did not automatically render the state’s participation in SAS’s recapitalization as illegal state aid. The airline anticipated a reassessment by the EU Commission and reiterated confidence in gaining approval for measures taken since 2020, including the involvement of the United States in the bankruptcy process.

Lufthansa and several other European airlines resorted to state aid amid the prolonged downturn in travel caused by the COVID-19 pandemic.

Source: UK Movies Yahoo