Lufthansa (LH, Frankfurt International) is facing an in-depth investigation into the EUR6 billion euros (USD6.5 billion) it received from Germany as part of a Covid-era rescue scheme, the European Commission announced. The move comes as the carrier awaits a decision at the European General Court in a linked case.

The aid that is re-emerging into the spotlight was initially approved by the European Commission in 2020. However, after appeals from Lufthansa competitors Condor and Ryanair, the General Court ruled that the assistance was not in line with the Covid Temporary Framework in which the bloc set out conditions that member states had to adhere to when helping businesses heavily impacted by the pandemic. According to EU rules, the European Commission must approve all state aid measures.

As a result of the General Court’s annulment last year, the European Commission said in its July 8 statement that it will assess the recapitalisation by reopening the questions of Lufthansa’s eligibility for the aid; the need for a so-called “step-up” or similar mechanism to incentivise the exit of the German state from the company’s capital; and the possible existence of “significant market power” at airports besides Frankfurt International and Munich, at least at Düsseldorf and Vienna airports.

Furthermore, Brussels will analyse some of the aspects of structural commitments imposed on the German flag carrier and the price of the shares at the time of a potential conversion of Silent Participation II into equity. The commission is also calling on all interested parties to submit comments regarding the investigation.

The aid consisted of multiple parts. The first was equity worth EUR306 million (USD331 million) and the rest was made up of two hybrid instruments, Silent Participation I, worth EUR4.7 billion (USD5.1 billion), which was a non-convertible equity instrument, and Silent Participation II, worth EUR1 billion (USD1.1 billion), which had the features of a convertible debt instrument, the statement explained.

Deutsche Lufthansa AG has since repaid the aid in full plus and around EUR92 million (USD99.5 million) in interest. The two silent participations of the Economic Stabilisation Fund (Wirtschaftsstabilisierungsfonds - WSF) were repaid in October and November 2021, and in September 2022 the fund sold its shares in the company acquired as part of the stabilisation at a profit of EUR760 million (USD822 million), a spokesperson for Lufthansa told ch-aviation, adding: "The aid was thus already fully completed before the ECJ ruling last year."

Lufthansa submitted an appeal to the General Court’s decision in July 2023. The case will be impacted by the fact that Lufthansa has repaid the state aid, while replacing the rest of it with its own debt. However, the carrier did face criticism from within the company for paying top management bonuses in 2022 as some employee representatives believed the move was not in line with state aid rules.