The European Commission has approved €321.2 million in restructuring aid from Germany to Condor under EU State aid rules, to ensure the airlines return to viability. This decision considers the General Courts ruling from 8 May 2024, which annulled a July 2021 Commission decision. Condor, a German charter airline, offers air transport services to individuals and tour operators from its German hubs, focusing on the leisure travel market. In September 2019, it filed for insolvency due to the liquidation of its parent company, the Thomas Cook Group.
The restructuring aid
In July 2021, the Commission approved a €321.2 million restructuring measure to restore Condors viability. The restructuring measure included: (i) a €90 million debt write-off on a state-guaranteed €550 million public loan by the German development bank KfW, (ii) a restructuring of the repayment conditions of the remaining loan, used for restructuring costs, and (iii) a €20.2 million interest write-off.
On 8 May 2024, the General Court annulled the Commissions decision. The Court found the Commission failed to assess if Germany received sufficient remuneration for the debt write-offs granted to Condor. Specifically, the Court required the Commission to assess whether Germany received adequate upsides, ensuring former shareholders and subordinated debt holders sufficiently shared the restructuring burden, thereby reducing aid and limiting competition distortions.
Following the General Courts ruling, the Commission launched an in-depth investigation on 29 July 2024.
The Commissions assessment
The Commission reassessed the measure under the Guidelines on State aid for rescue and restructuring. It found that Condor is implementing a comprehensive restructuring package ensuring its return to long-term viability. Additionally, Condor and its new private investor, Attestor, significantly contribute to restructuring costs, funding over 70%. The Commission noted existing shareholders lost their entire investment value, achieving full burden-sharing, with no moral hazard from the aid, and Germany received a sufficient share in future upsides. Finally, the Commission found the aid includes adequate safeguards to limit internal market competition distortions.
Based on this, the Commission concluded the German measure complies with EU State aid rules.
Background
EU State aid rules, specifically the Guidelines on State aid for rescue and restructuring, allow Member States to support distressed companies under certain conditions. Rescue and restructuring aid is highly distortive as it favors companies that would otherwise exit the market. The Guidelines allow aid only under strict conditions, requiring thorough restructuring to ensure long-term viability, significant contributions from the company, its owners, and subordinated debt holders to ensure adequate burden-sharing and prevent moral hazard, and measures to limit competition distortions caused by the aid, contributing to a common interest objective.
The non-confidential version of the decision will be made available under case number SA.63203 in the State aid register on the Commissions competition website once any confidentiality issues are resolved. New publications of State aid decisions on the internet and in the Official Journal are listed in the Competition Weekly e-News.