The European Commission has announced a new in-depth investigation into a €321.2 million restructuring measure for Condor, a German charter airline.
This development comes after the General Court annulled the Commission’s previous approval of the aid package on May 8, 2024.
The investigation aims to determine whether the German government’s support aligns with EU State aid rules.
Background on Condor
Condor, a well-known name in the German aviation industry, specializes in leisure travel. The airline operates from various hubs across Germany, serving both individual travelers and tour operators.
Condor’s financial troubles began in September 2019 when its parent company, the Thomas Cook Group, entered liquidation.
This led Condor to file for insolvency, setting the stage for the subsequent state aid discussions.
The Original Restructuring Measure
In July 2021, the European Commission initially approved a €321.2 million restructuring package for Condor. This measure included:
- A €90 million debt write-off on a state-guaranteed €550 million loan from KfW, Germany’s development bank.
- Restructured repayment terms for the remaining loan amount used for restructuring costs.
- A €20.2 million debt write-off on interest owed by Condor related to coronavirus compensation.
The goal of this package was to help Condor regain financial stability and continue its operations in the competitive airline industry.
The General Court’s Decision
The General Court’s ruling on May 8, 2024, highlighted a crucial oversight in the Commission’s initial assessment.
The Court found that the Commission failed to adequately evaluate whether Germany received sufficient compensation for the debt write-offs granted to Condor.
Specifically, the Court emphasized the need to assess if Germany obtained enough “up-sides” to ensure that former shareholders and subordinated debt holders shared a fair portion of the restructuring burden.
The New Investigation
Following the Court’s decision, the European Commission has launched a fresh investigation into the Condor restructuring measure. This new probe will focus on several key areas:
- The extent of possible further burden sharing among stakeholders.
- Potential reduction of moral hazard in the bailout process.
- How these factors might have influenced the nature and size of the compensatory measures implemented.
Implications and Next Steps
The reopening of this investigation has significant implications for both Condor and the broader landscape of EU State aid regulations.
It highlights the balance between supporting struggling businesses and maintaining fair competition within the European market.
As part of the investigation process, the Commission has invited Germany and other interested parties to submit comments.
This step ensures a thorough and transparent examination of the case. However, it’s important to note that the initiation of this in-depth investigation does not predetermine its outcome.
The Condor case serves as a reminder of the complex interplay between national interests and EU-wide competition rules.
It highlights the ongoing challenges in crafting such state aid packages. In essence, they must meet both the immediate needs of struggling companies and the long-term goals of maintaining a level playing field in the European market.
As the investigation unfolds, it will be closely watched by industry experts, policymakers, and competitors alike.
The outcome could have implications for how future state aid cases are handled within the EU, particularly in the aviation sector, which has faced significant challenges in recent years.
Click the banner to subscribe to our weekly newsleter.
Click the photo to join our WhatsApp channel so then you can stay up to date with everything going on in the aviation industry!
