German leisure carrier Condor secured European Union approval of €525.3 million ($619.42 million) in aid, clearing a major hurdle in the company’s effort to remain afloat and lock in a bid from financial investment firm Attestor Capital for an initial 51 percent stake. The bailout relates to two measures to compensate Condor for damages suffered as a result of the coronavirus outbreak, worth in total €204.1 million, and €321.2 million of restructuring support to enable Condor's return to viability.
The bulk of the bailout is not new and already won authorization from the EU’s antitrust regulators last year; however, the General Court of the EU annulled the decision in June following a complaint by Ryanair. The court ordered the commission to state the direct causal link between the damage and the compensation, which it now did. “The restrictions put in place in Germany, as well as in other EU member states and third countries, in order to limit the spread of the coronavirus have heavily affected Condor's operations, in particular regarding international and intercontinental flights,” the commission remarked in a statement on Tuesday. The measures Brussels approved Tuesday “will enable Germany to compensate Condor for damages directly suffered as a result of such restrictions,” said European competition commissioner Margrethe Vestager. “At the same time, the restructuring plan for Condor, which we have also approved [Tuesday], will ensure the airline's path towards long-term viability.”
The EU approval paves the way for the planned investment in Condor by the UK’s Attestor Capital. Attestor has committed to inject €200 million of equity and to provide a further €250 million for the renewal of the Condor fleet. The commission noted that replacing Condor's aging fleet with new, efficient aircraft will lead to reductions in fossil fuel consumption and CO2 emissions and thus will contribute to reaching the targets of the European Green Deal. According to Condor’s website, the airline’s pre-Covid fleet included 16 Boeing 767-300ER's, 15 Boeing 757-300s, and 25 Airbus A320/A321-200s.
To obtain EU clearance for the restructuring aid and to limit distortions of competition, Condor committed to a capacity cap of its fleet during the restructuring period, which runs until September 2023. As part of the ongoing restructuring process, creditors have agreed to write off €630 million in claims. Germany, for instance, has agreed to write-off an additional €90 million of the existing loans and €20.2 million of interest.
Condor’s problems predate the pandemic and were triggered by the bankruptcy of its parent company, Thomas Cook Group, in September 2019. LOT Polish Airlines parent PGL surfaced as a potential investor in January 2020, but the group scrapped the plan in the wake of the pandemic. Condor managed to continue as an independent airline thanks to German government loans. Attestor initially will acquire 51 percent of Condor's shares while SG Luftfahrtgesellschaft will, for now, retain the remaining 49 percent on behalf of the German federal and regional state governments.
The approval of the public support to Condor marks the latest in a growing list of European Commission decisions to authorize state aid to different actors in the aviation industry to mitigate the economic effect of the coronavirus crisis. On Tuesday, Brussels also approved an €800 million Italian scheme to compensate airports and ground-handling operators and on July 23 it approved under EU state aid rules a €9 million Spanish measure to compensate Air Nostrum for damage it suffered due to the pandemic. On July 19 it re-approved a €3.4 billion Dutch aid measure consisting of a state guarantee on loans and a subordinated state loan to KLM.