Brussels (The Brussels Morning newspaper) – The European Commission has extended an in-depth investigation to evaluate whether a German €321.2 million restructuring effort in turn of Condor is in line with EU State aid rules.
What Are the Details of Condor’s Restructuring Effort?
Condor is known as a German charter airline, which supplies air transport services to individual clients and tour operators from its seats in Germany, with a priority on the leisure travel market. In July 2021, the EU Commission agreed to a €321.2 million restructuring effort to enable Condor’s return to viability.
The restructuring measure included (i) €90 million debt write-off on a state-guaranteed €550 million public loan raised by the German development bank KfW, (ii) a restructuring of the repayment requirements of the remainder of that loan, to the time it was used for financing restructuring charges, and (iii) a €20.2 million debt write-off on interest due by Condor in the context of coronavirus compensation it had acquired.
How Did the General Court Influence the EU Commission’s Decision?
In its decision of 8 May 2024, the General Court annulled the EU Commission‘s 2021 decision. The General Court contemplated that the EU Commission had not assessed whether Germany received adequate remuneration for the debt write-offs granted to Condor.
In certain, the Court held that the EU Commission should have considered whether Germany received sufficient up-sides, which would assure that former shareholders and subordinated debt holders adequately shared the limitation of restructuring, to reduce the aid amount.
What Are the Next Steps for the EU Commission’s Investigation?
Following the General Court’s decision, the EU Commission will now further explore the restructuring measure. In separate, the EU Commission will assess whether, and if so, to what extent, additional burden sharing, and reduction of moral danger was possible and required and whether this would have had an impact on the nature and size of the compensatory efforts put in place.
In the background, In April 2020, the EU Commission consented to a €550 million State-guaranteed loan to Condor to partly reimburse the airline for the damages mourned between March and December 2020 due to the coronavirus attack. The 2020 EU Commission decision was rejected by the General Court in June 2021.
The EU Commission re-adopted its decision in July 2021 established on an ex-post analysis of the actual harm incurred and taking into account the judgment, at the same time that it backed the airline’s restructuring aid. EU State aid rules, more precisely the Rescue and Restructuring Guidelines, allow Member States to support companies in hardship, under certain conditions. Rescue and restructuring assistance are among the most distortive shapes of aid because it interfere in favour of companies that would otherwise leave the market.
