The European Commission has initiated an in-depth investigation to evaluate whether a €321.2 million German restructuring aid measure for Condor adheres to EU State aid regulations. This measure, originally approved in July 2021 under the State Aid Rescue and Restructuring Guidelines, was annulled by the General Court’s judgment on May 8, 2024.
Condor, a German charter airline specializing in leisure travel, faced insolvency in September 2019 following the liquidation of its parent company, the Thomas Cook Group. The 2021 restructuring measure included a €90 million debt write-off on a state-guaranteed public loan by KfW, adjustments to the repayment conditions of the remaining loan, and a €20.2 million debt write-off on interest due to coronavirus compensation.
The Guidelines on State Aid for Rescuing and Restructuring Non-financial Undertakings in Difficulty outline the conditions under which EU Member States can provide financial aid to struggling businesses. Last revised in 2014, these guidelines aim to support companies in financial distress while ensuring fair competition within the internal market. They focus on rescue aid for short-term support, restructuring aid for long-term viability plans, and temporary restructuring support as a bridge to stability.
Companies must demonstrate their potential for returning to long-term viability through a restructuring plan to qualify for aid. The guidelines emphasize minimizing distortions to competition by limiting aid to the minimum necessary and ensuring it’s a one-time intervention. The “one time, last time” principle and measures to mitigate negative effects on the market are key.
The General Court’s decision to annul the Commission’s approval was based on an insufficient assessment of whether Germany received adequate remuneration for the debt write-offs. The Court emphasized the need to evaluate if former shareholders and subordinated debt holders adequately shared the restructuring burden to minimize the aid amount.
In response, the Commission’s ongoing investigation will examine potential further burden sharing and reduction of moral hazard. This process will determine the necessity and impact of additional compensatory measures. The investigation’s commencement allows Germany and interested third parties to submit comments, without prejudging the outcome.
