On 12 June 2020, Germany notified the European Commission of a planned individual aid measure, in the form of a recapitalisation of €6 billion, granted to Deutsche Lufthansa AG (‘Lufthansa’). The recapitalisation, which was part of a wider series of support measures for the Lufthansa Group, was intended to restore the balance sheet position and liquidity of the undertakings in that group owing to the exceptional situation caused by the COVID-19 pandemic. 

The recapitalisation consisted of three different elements, namely an equity participation of approximately €300 million, a silent participation, not convertible into shares, of approximately €4.7 billion (‘Silent Participation I’) and a silent participation of €1 billion with the features of a convertible debt instrument (‘Silent Participation II’). 

Without initiating the formal investigation procedure,  the Commission classified the recapitalisation as State aid that was compatible with the internal market. To that end, it relied on the provision of the Treaty on the Functioning of the European Union that concerns aid to remedy a serious disturbance in the economy  and on its Communication on the Temporary Framework for State aid measures to support the economy in the current COVID-19 outbreak (‘the Temporary Framework’). 

The airlines Ryanair and Condor brought two actions for annulment of that decision. 

By judgment of 10 May 2023,  the General Court upheld those actions and annulled the Commission’s decision. 

Lufthansa subsequently lodged an appeal with the Court of Justice against the judgment of the General Court. 

By its judgment today, the Court of Justice dismisses Lufthansa’s appeal and thus upholds the General Court’s ruling to annul the decision by which the Commission had approved the recapitalisation of Lufthansa. 

The Court of Justice finds that the General Court was correct to hold that the Commission had infringed the Temporary Framework by accepting methods for determining the price of the shares at the time of the conversion of Silent Participation II into equity. Since each of the errors found by the General Court is capable, if established, of justifying, in itself, the annulment of the Commission’s decision, the Court of Justice upholds the annulment. 

Nevertheless, the Court of Justice also finds that the General Court was wrong to hold that the Commission had committed several errors, (i) by ruling that Lufthansa was not able to find financing on the markets at affordable terms; (ii) by failing to require a mechanism to incentivise Lufthansa to buy back Germany’s shareholding as quickly as possible; (iii) by denying that Lufthansa held significant market power at certain airports; (iv) by accepting various commitments that did not ensure the maintenance of effective competition; and (v) by failing to fulfil its obligation to provide reasons. 

The Court of Justice states, in particular, that the General Court, in several respects, carried out an overly strict examination of the Commission’s decision, thus encroaching on the broad discretion that the Commission must of necessity enjoy in Communications Directorate Press and Information Unit curia.europa.eu complex economic contexts. In such situations, the General Court must confine itself to reviewing whether the Commission has committed a manifest error of assessment and it cannot substitute its own assessment for that of the Commission.