Lufthansa has lost its appeal in a long-running state aid dispute with rival Ryanair, as the European General Court upheld a European Commission decision that the German airline must repay millions in illegal subsidies. The ruling marks a significant victory for Ryanair, which has been challenging state aid granted to several European carriers during the COVID-19 pandemic.
Background of the Dispute
The case centers on a 6 billion euro German government bailout for Lufthansa in 2020, which Ryanair argued violated EU state aid rules. Ryanair claimed the aid gave Lufthansa an unfair competitive advantage, distorting the market. The European Commission initially approved the bailout but later imposed conditions, including a requirement for Lufthansa to repay a portion of the aid.
Court Ruling
The European General Court, the EU's second-highest court, dismissed Lufthansa's appeal on Wednesday, stating that the Commission was correct in its assessment that the aid constituted illegal state support. The court emphasized that the German government failed to demonstrate that the aid was necessary to address a serious disturbance in the economy, as required under EU rules.
In its judgment, the court noted that Lufthansa had not provided sufficient evidence to justify the scale of the bailout, and that the airline could have accessed alternative financing. The ruling also highlighted that the aid gave Lufthansa an advantage over competitors like Ryanair, which did not receive similar support from their home governments.
Reactions
Ryanair welcomed the decision, calling it a victory for fair competition in the aviation industry. A Ryanair spokesperson said, 'This ruling confirms that state aid cannot be used to prop up inefficient airlines at the expense of more efficient competitors. We urge the European Commission to continue its scrutiny of illegal subsidies.'
Lufthansa expressed disappointment with the ruling and stated that it would consider further legal options. The airline argued that the bailout was essential to prevent its collapse during the pandemic and that it had already repaid a significant portion of the aid.
Broader Implications
The decision could have far-reaching implications for other state aid cases in the aviation sector. Ryanair has filed similar complaints against bailouts for Air France-KLM, SAS, and other carriers. The ruling sets a precedent that may force governments to tighten their justification for pandemic-era subsidies.
Legal experts note that the court's strict interpretation of state aid rules could deter governments from providing large-scale bailouts to national carriers in future crises. However, the ruling may also lead to increased legal uncertainty as airlines and governments navigate the complex regulatory landscape.
Lufthansa has the option to appeal the decision to the European Court of Justice, the EU's highest court, but such appeals are limited to points of law. The airline has not yet announced whether it will pursue this route.
