Lufthansa Covid aid faces rough landing after EU adviser opinion

(CN) — Lufthansa’s multibillion-euro Covid bailout is back under fire after an adviser to Europe’s top court said Thursday that Brussels broke its own rulebook when signing off the deal.

Advocate General Andrea Biondi called on the judges to stick with last year’s decision scrapping the European Commission’s 6 billion euros (about $7 billion) Lufthansa rescue, saying Brussels cannot bend the rules when things get tough and that even in a crisis, the same standards apply to everyone.

In his opinion, Biondi said the commission’s Covid-19 state aid “Temporary Framework” was never meant as a free pass. The flexibility it offered, he wrote, “cannot be equated with full discretion” and “cannot mean carte blanche for the commission, which is in principle bound by the rules it adopts.”

When Covid hit, Brussels moved fast. In March 2020, the commission rolled out an emergency rulebook allowing governments to pump cash into their economies through guarantees, cheap loans and, later, full-scale bailouts.

The goal was simple — keep businesses alive without wrecking competition across the bloc. Most of those measures expired by mid-2022, with only a few investment and solvency tools lasting a bit longer.

Lufthansa’s bailout was one of the biggest to test that system. Germany moved quickly to keep its flag carrier afloat with a 6 billion euro capital injection and another 3 billion in state-backed loans. Brussels signed off on the deal under its pandemic aid rules, but rival airlines Ryanair and Condor challenged the approval.

Three years later, Europe’s General Court agreed with them, saying the commission had misjudged Lufthansa’s market power, its incentives to repay state aid and the effectiveness of competition remedies at key airports.

The commission, backed by Germany and Lufthansa, appealed that defeat to the EU’s top court, setting the stage for Thursday’s opinion.

Biondi’s opinion zeroed in on two key questions behind the EU’s pandemic aid battles: how much leeway Brussels really had under its own rules and how far judges should go in checking its decisions.

He made it clear the EU’s emergency aid scheme was designed to keep struggling companies afloat, not scrap the bloc’s state-aid rules. The temporary regime, he wrote, “did not indeed suspend the application of state aid rules, it simply adapted them to the emergency situation.”

He also noted that once the commission set its own framework, it had to stick to it. By introducing the Covid rescue plan, he said, Brussels effectively tied its own hands and couldn’t rewrite the rules on the fly.

Biondi pushed back on the idea that Brussels deserved extra slack just because the numbers were complicated. Crises didn’t cancel accountability, he said, and judges still had to dig deep to see whether the commission had really examined all the key facts instead of taking its own word for it.

He also agreed with the lower court that Brussels had oversimplified Lufthansa’s finances. Instead of framing the question as a straight yes or no on whether the airline could raise cash on the market, he said the commission should have asked how much of its funding gap the company could realistically fill on its own.

If Lufthansa could have covered even part of that bill, pouring billions in public money into the rescue hardly looked justified.

The opinion also took aim at how Brussels tried to fix competition issues at Frankfurt and Munich airports. As part of the bailout, the commission told Lufthansa to give up some of its takeoff and landing slots so rivals could get a fair shot.

But there was a catch: Only new airlines with no existing operations at those airports could apply, leaving out major competitors like Ryanair and Condor.

Biondi agreed with the lower court’s skepticism, saying the plan did little to level the playing field. He pointed out that Brussels never explained why it required newcomers to pay for those released slots instead of letting them use them freely — a move that, in his view, made it even harder for fresh competition to take off.

Biondi left little room for doubt. After reviewing six grounds of appeal, he advised the EU’s top judges to reject the challenge altogether, leaving the lower court’s decision in place. Under his proposal, Lufthansa would cover Ryanair and Condor’s legal costs, while Germany and the commission would pay their own.

Dionysios Pelekis, a postdoctoral researcher at Utrecht University’s Centre for Regulation and Enforcement in Europe, said the opinion strikes a careful balance between oversight and flexibility.

“Biondi charts a middle path,” he said, explaining that while the commission still enjoys wide economic discretion, the opinion makes clear that courts must carry out a tough, reality-based review, even when applying so-called soft-law frameworks.

According to Pelekis, the takeaway is simple: even in times of crisis, transparency and proportionality matter. “It doesn’t strip the commission of discretion,” he added. “It channels it.”

A Lufthansa spokesperson said the company had taken note of the adviser’s opinion and “will await the court’s final decision before making any further comment.”

The European Commission also declined to comment, saying the institution does not discuss opinions from advocates general.

Ryanair and Condor did not immediately respond to requests for comment.

The next move now lies with the Court of Justice, which will issue its final ruling in the coming months. While the adviser’s opinion isn’t binding, the judges often follow it, meaning Lufthansa’s pandemic-era rescue could soon face its final verdict in Luxembourg.

Courthouse News reporter Eunseo Hong is based in the Netherlands.