European Commission approves €321.2M German restructuring aid for Condor airline; General Court annuls earlier decision from July 2021 over compatibility concerns

The European Commission has approved, under EU State aid rules, restructuring aid of €321.2 million granted by Germany to Condor to enable its return to viability. This decision takes into account the judgment of the General Court from 8 May 2024 annulling a July 2021 decision by the Commission. Condor is a German charter airline, which provides air transport services to individual clients and tour operators from its hubs in Germany, with a focus on the leisure travel market. In September 2019, it had to file for insolvency due to the entry into liquidation of its parent company, the Thomas Cook Group.

The restructuring aid

In July 2021, the Commission approved a €321.2 million restructuring measure to enable Condor's return to viability. The restructuring measure consisted of: (i) a €90 million debt write-off on a state-guaranteed €550 million public loan extended by the German development bank KfW, (ii) a restructuring of the repayment conditions of the remainder of that loan, to the extent that it was used for financing restructuring costs, and (iii) a €20.2 million interest write-off.

On 8 May 2024PRESS RELEASE No 83/24 Luxembourg, 8 May 2024 Judgment of the General Court in Case T-28/22 | Ryanair v Commission (Condor - Restructuring aid) The General Court of the European Union annuls the decision of the Commission to approve restructuring aid for charter airline Condor Having regard to the doubts that the Commission should have had as regards the compatibility of that aid with EU law, it should have initiated a formal investigation procedure By decision of 26 July 2021, the Commission, without initiating a formal investigation procedure, approved restructuring aid of €321 million, which Germany intended to grant to the German charter airline Condor. The objective of the aid was to support the restructuring and continuation of Condor’s operations, resolving the difficulties, which it faced owing to the insolvency of its former parent company Thomas Cook 1. Ryanair contested that decision before the General Court of the European Union. By its judgment, the General Court annuls the decision of the Commission. The Commission should not have approved the restructuring aid at issue without initiating a formal investigation procedure. Thus, Ryanair has demonstrated to a sufficient degree that the Commission should have had doubts justifying the initiation of such a procedure. Accordingly, the Commission should have questioned whether the aid at issue satisfied the requirement of adequate burden sharing 2. In accordance with that requirement, in particular, any restructuring aid that enhances the beneficiary's equity position 3 should be granted on terms that afford the State a reasonable share of future gains in value of the beneficiary. However, there is nothing in the contested decision to suggest that the Commission ascertained whether the aid at issue had been granted on terms that would afford Germany a reasonable share of future gains in the value of Condor. Furthermore, those doubts that the Commission should have had necessarily affect its assessment of the scope of the measures to limit distortions of competition foreseen in its decision and that are applicable to Condor. The General Court, while allowing Ryanair’s application to annul the Commission’s decision, states that Ryanair may contest that decision before it only to the extent that Ryanair is seeking to protect its procedural rights in the framework of the formal investigation procedure. By contrast, Ryanair cannot challenge the contents of the decision on the merits. Ryanair has not demonstrated that the aid at issue was liable to have a substantial adverse effect on its competitive position and that it was therefore individually concerned by the decision of the Commission. NOTE: An action for annulment seeks the annulment of acts of the institutions of the European Union that are contrary to European Union law. The Member States, the European institutions and individuals may, under certain conditions, bring an action for annulment before the Court of Justice or the General Court. If the action is well founded, the act is annulled. The institution concerned must fill any legal vacuum created by the annulment of the Communications Directorate Press and Information Unit curia.europa.eu act. NOTE: An appeal, limited to points of law only, may be brought before the Court of Justice against the decision of the General Court within two months and ten days of notification of the decision. Unofficial document for media use, not binding on the General Court. The full text and, as the case may be, an abstract of the judgment is published on the CURIA website on the day of delivery. Press contact: Jacques René Zammit ✆ (+352) 4303 3355. Pictures of the delivery of the judgment are available from “Europe by Satellite” ✆ (+32) 2 2964106. S tay Connected! 1 In the context of that insolvency, Condor has already benefited from rescue aid which the Commission had approved by decision of 14 October 2019. The action brought by Ryanair against that decision was dismissed by the General Court by judgment of 18 May 2022, Ryanair v Commission (Condor; rescue aid), T-577/20; see also Press Release No 87/22. Ryanair has not appealed to the Court of Justice against that judgment. 2 Set out by the Commission in its Guidelines on State aid for rescuing and restructuring non-financial undertakings in difficulty. 3 According to the General Court, the restructuring aid at issue, which is in the form in particular of a partial write-off of Condor’s debt, enhances the beneficiary’s equity position. Communications Directorate Press and Information Unit curia.europa.eu, the General Court annulled the Commission's decision. The Court considered that the Commission had not assessed whether Germany received sufficient remuneration for the debt write-offs granted to Condor. In particular, the Court held that the Commission should have assessed whether Germany received sufficient upsides, which would ensure that former shareholders and subordinated debt holders sufficiently shared the burden of restructuring, to reduce the aid amount and limit competition distortions.

Following the General Court's judgment, the Commission opened an in-depth investigation on 29 July 2024.

The Commission's assessment

The Commission re-assessed the measure under the Guidelines on State aid for rescue and restructuring. The Commission found that Condor is implementing a comprehensive package of restructuring measures that will ensure its return to long-term viability. Moreover, Condor and its new private investor Attestor are making a significant own contribution to the cost of restructuring, as they fund over 70% of that cost. The Commission found that existing shareholders lost the entire value of their investment. This means full burden-sharing is achieved, no moral hazard issues arise from the aid, and Germany has received a sufficient share in future upsides. Finally, the Commission found that the aid comes with adequate safeguards to limit distortions of competition in the internal market.

On this basis, the Commission concluded that the German measure is in line with EU State aid rules.

Background

EU State aid rules, more specifically the Guidelines on State aid for rescue and restructuring, enable Member States to support companies in difficulty, under certain conditions. Rescue and restructuring aid is among the most distortive forms of aid, because it intervenes in favour of companies that would otherwise exit the market. The Guidelines therefore allow for aid only under strict conditions. They require in particular that the company carries out an in-depth restructuring to ensure its return to long-term viability, that the company, its owners and subordinated debt holders sufficiently contribute to the cost of restructuring to ensure adequate burden sharing and prevent moral hazard, that measures are put in place to limit the possible distortions of competition triggered by the aid, and that the measure contributes to an objective of common interest.

The non-confidential version of the decision will be made available under the case number SA.63203 in the State aid register on the Commission's competition website once any confidentiality issues have been resolved. New publications of State aid decisions on the internet and in the Official Journal are listed in the Competition Weekly e-News.