The General Court of the EU annuls the Commission decision on restructuring aid to Condor

On 8 May 2024, the General Court of the EU annulled the Commission decision of 26 July 2021 approving restructuring aid to German airline Condor following an annulment action lodged by Ryanair. The Commission should have opened a formal procedure because of doubts about the compatibility of the aid. The General Court rejected Ryanair’s argument relating to the impact of the aid on its competitive position.

Background

On 26 July 2021, the European Commission authorised restructuring aid in favour of the German airline Condor. Condor provides mainly charter flights via tour operators in Germany. After the group detaining the company was placed in compulsory liquidation and it had received rescue aid authorised by the European Commission, the German government notified to the Commission restructuring aid in favour of the airline. The restructuring aid modified the terms of the COVID-19 loans granted in 2020 and approved the partial or total write-off of several public loans granted in the context of the COVID-19 outbreak.

Condor had already benefited from several State aid measures of the German government. One of these public measures had also been challenged successfully by Ryanair before the General Court of the EU.

The case before the General Court of the EU

On 18 July 2022, Ryanair lodged its appeal against the Commission decision of 26 July 2021 before the General Court of the EU. The low-cost airline invoked several arguments in its annulment action.

First, it stated that the European Commission should have had doubts during the preliminary examination of the measure in question and should have opened a formal procedure to assess in more detail the compatibility of the measure with the internal market. Moreover, Ryanair invoked that such a decision substantially impacted and undermined its competitive position.

The General Court agreed in part with Ryanair’s argument. Indeed, according to the General Court, the European Commission should not have authorised the restructuring aid without opening a formal procedure. According to Ryanair, there was sufficient doubt to justify the opening of such a procedure. More specifically, the General Court determined that the European Commission should have questioned whether the aid satisfied the condition for adequate burden sharing. This compatibility condition of restructuring stipulates that any State aid that enhances the beneficiary’s equity position should be granted on terms that afford the State a reasonable share of the beneficiary’s future gains in value, in view of the amount of State equity injected in comparison with the remaining equity of the company after losses have been accounted for. However, in the contested European Commission decision, the European Commission does not seem to have verified whether the aid in question was allocated according to modalities ensuring that Germany would dispose of a reasonable share of Condor that will be recorded.

The General Court also reiterated in its judgment that, in the absence of necessary analysis of satisfying adequate burden sharing, the European Commission had failed to assess whether the specific aid impacted competition and, therefore, the Commission had not limited the distortion of competition. However, the General Court concluded that Ryanair did not demonstrate that the aid in question was likely to substantially undermine its competitive position and that Ryanair was individually concerned by the European Commission’s decision. It only determined that the procedural rights of Ryanair were impacted and, therefore, the contested decision ought to be annulled.

Therefore, on this ground, on 8 May 2024 the General Court annulled the Commission decision of 26 July 2021.

Conclusion

This annulment of the decision approving aid to an airline in the context of the pandemic is another success for Ryanair.

The Commission will now open a formal procedure by adopting a decision that will be addressed to the German State and published in the Official Journal of the EU in order to allow all interested parties to submit their observations. Considering the position of the General Court on Ryanair’s arguments on the merits, it is likely that the Commission will adopt the same decision, better motivated at the end of the formal examination procedure.

Numerous decisions approving State aid measures in the context of the preliminary procedure have already been challenged by the Court of Justice of the EU. However, as this case was concluded by the General Court, the fact that a decision is annulled due to the lack of a formal examination procedure does not mean that the decision has an impact on competition or that the State aid can be challenged for the same reason.