EU Court Thwacks at German Bailout for Thomas Cook Airline

The complaint was one of several brought by Ireland’s Ryanair over Covid-19 financial support packages for rival airlines. 

A Condor aircraft stand at the international airoport in Frankfurt, Germany, in early 2020. (AP Photo/Michael Probst)

LUXEMBOURG (CN) — Ryanair persuaded the EU’s second-highest court Wednesday that a Covid-19 bailout package for a German charter flight operator ran afoul of the bloc’s rules. 

The Luxembourg-based General Court held on Wednesday that the European Commission should not have approved two loans totaling 550 million euros ($670 million) from the German state to Condor Flugdienst GmbH.

“Since the contested decision is vitiated by an inadequate statement of reasons, this therefore requires the annulment of that decision,” the court’s 10th Chamber wrote. 

EU regulations typically prevent governments from supporting private companies on the grounds that it creates market distortions across the bloc, but Berlin argued that Condor had faced financial difficulty due to flight cancellations and rescheduling as a result of Covid-19 travel restrictions.

In opposing the aid, however, Irish budget airline Ryanair argued that Condor was not in financial straits because of the pandemic but rather because its parent company, Thomas Cook Group plc., had filed for bankruptcy. 

Founded in 1841, Thomas Cook began as a travel agency that focused on taking temperance supporters to anti-alcohol rallies across England. It became a global travel conglomerate, with 21,000 staff worldwide, before going under in 2019. 

The five-judge panel found that the EU failed to sufficiently investigate whether Condor’s financial troubles were a direct result of the pandemic, or because of its parent company’s ongoing insolvency. “It was incumbent on the Commission to examine with particular care whether the cancellation and rescheduling of Condor’s flights as a result of the travel restrictions imposed in the context of the Covid‑19 pandemic were in fact the decisive cause of the additional costs incurred by Condor as a result of the extension of the insolvency proceedings,” the court wrote. 

Condor’s bailout was one of a series that the commission approved for airlines in April 2020, including for some of the continent’s largest flag carriers — AirFrance, Dutch KLM and Germany’s Lufthansa — that were badly hit by the grounding of flights to halt the spread of the virus. Ryanair has so far brought legal challenges against 16 airline bailout packages, arguing they constitute illegal state aid. 

Despite ruling in Ryanair’s favor Wednesday, the General Court has suspended the impact of its decision to allow time for the commission to issue a new justification, citing the challenging society and economic situation created by the pandemic. This, in effect, means Condor is not obliged to repay the money. 

Ryanair nonetheless celebrated the win. “The German government aid to Condor — both in 2019 and 2020 — went against the fundamental principles of EU law and has distorted the market to the detriment of consumers,” a spokesperson for the airline said in a statement. “Today’s ruling is an important victory for consumers and competition.”

Ryanair’s long-standing crusade against airline bailouts, despite a $825 million loan from the Bank of England, has had mixed success in Luxembourg. Last month, it won in a similar case over billions in aid for Dutch flag carrier KLM and Portuguese flag carrier TAP, but the court then rejected a complaint about Spain’s bailout of companies, including local airlines. The court rejected similar complaints from Ryanair about Finland and Denmark’s bailouts of Scandinavian Airlines, Sweden’s support for Scandinavian Air, and France’s bailout of Air France.

It is likely all of these decisions will be appealed. 

Also on Wednesday, the Competition and Markets Authority, the United Kingdom’s competition regulator, announced it is investigating whether Ryanair and British Airways refused to offer refunds for flights canceled by Covid-19, against British consumer protection law. 

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