German flag-carrier Lufthansa is facing an in-depth investigation by the European Commission over its €6 billion ($6.5 billion) recapitalisation during the Covid-19 pandemic, following court annulment of the original approval.

The state aid measure comprised a €5.7 billion silent participation, made up of two financial instruments, plus a €306 million equity component.

Although the Commission found the measure compatible with state-aid rules in June 2020, the European Union’s General Court ruled last year that the recapitalisation did not meet a number of conditions laid out in a temporary framework drawn up to support economies affected by the pandemic.

This ruling, which followed a complaint by budget carrier Ryanair, is still subject to appeal.

Lufthansa Airbus-c-Lufthansa Group

Source: Lufthansa Group

Initial approval of Lufthansa’s aid was overturned in 2023 after a court case brought by Ryanair

But the Commission nevertheless says it will carry out a “more in-depth” examination of the recapitalisation as a result of the judgement.

It will concentrate on such aspects as Lufthansa’s eligibility for the aid – last year’s ruling stated that the Commission did not assess whether Lufthansa could have raised necessary financing on the markets.

The investigation will also look at market power at Lufthansa Group airports other than its Frankfurt and Munich hubs, as well as financial details and the need for a mechanism to incentivise exit of the government from the company’s capital.

Lufthansa had to comply with several commitments as a condition of receiving the aid, including restrictions on management and shareholder payments, and divestment of slots at its hubs.