Commission opens in-depth state aid investigation into €321.2 million German measure to restructure Condor

The Commission’s investigation

Condor is a German charter airline, which provides air transport services to individual clients and tour operators from its hubs in Germany, with a focus on the leisure travel market. In September 2019, it had to file for insolvency due to the entry into liquidation of its parent company, the Thomas Cook Group.

In July 2021, the Commission approved a €321.2m restructuring measure to enable Condor’s return to viability. The restructuring measure consisted of: (i) €90m debt write-off on a state-guaranteed €550m public loan extended by the German development bank KfW, (ii) a restructuring of the repayment conditions of the remainder of that loan, to the extent it was used for financing restructuring costs, and (iii) a €20.2m debt write-off on interest due by Condor in the context of coronavirus compensation it had received.

In its judgment of 8 May 2024, the General Court annulled the Commission’s 2021 decision. The General Court considered that the Commission had not assessed whether Germany received sufficient remuneration for the debt write-offs granted to Condor. In particular, the Court held that the Commission should have assessed whether Germany received sufficient up-sides, which would ensure that former shareholders and subordinated debt holders sufficiently shared the burden of restructuring, in order to reduce the aid amount.

Following the General Court’s judgment, the Commission will now further investigate the restructuring measure. In particular, the Commission will assess whether, and if so, to what extent, further burden sharing, and reduction of moral hazard was possible and required and whether this would have had an influence on the nature and size of the compensatory measures put in place.

The opening of an in-depth investigation gives Germany, as well as interested third parties, the opportunity to submit comments. It does not prejudge in any way the outcome of the investigation.

Background

In April 2020, the Commission approved a €550m state-guaranteed loan to Condor to partly compensate the airline for the damages suffered between March and December 2020 due to the coronavirus outbreak. The 2020 Commission decision was annulled by the General Court in June 2021. The Commission re-adopted its decision in July 2021 based on an ex post analysis of the actual damage incurred and taking into account the judgment, at the same time that it approved the airline’s restructuring aid.

EU state aid rules, more specifically the Rescue and Restructuring Guidelines, enable member states to support companies in difficulty, under certain conditions. Rescue and restructuring aid is among the most distortive forms of aid, because it intervenes in favour of companies that would otherwise exit the market. The Guidelines therefore allow for aid only under strict conditions. They require in particular that the company carries out an in-depth restructuring to ensure its return to long-term viability, that the company, its owners and subordinated debt holders sufficiently contribute to the cost of restructuring to ensure adequate burden sharing and prevent moral hazard, that measures are put in place to limit the possible distortions of competition triggered by the aid and that the measure contributes to an objective of common interest.

The non-confidential version of the decision will be made available under the case number SA.63203 in the state aid register on the Commission’s competition website once any confidentiality issues have been resolved. New publications of state aid decisions on the internet and in the Official Journal are listed in the Competition Weekly e-News.

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