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German Aid Measures Approved by European Commission

Posted on Aug. 13, 2020

The European Commission has approved a German aid scheme that will provide airlines that have been damaged by the coronavirus pandemic with support through grants, loans, subsidized interest rates, and deferrals of taxes and fees.

All operators of German airports will be entitled to compensation in the form of direct grants for revenue losses between March 4 and June 30 that were directly caused by the outbreak, according to an August 11 commission release. Any funds paid in excess of damages incurred must be returned to Germany with interest.

Grants, guarantees on loans, subsidized interest rates, and deferrals of some taxes and fees are meant to provide liquidity to airlines struggling with cash flow, the release says. The commission previously approved German aid schemes that disbursed direct grants, guaranteed subsidized loans, and extended the loan scheme.

Deferral of taxes and fees was not covered by the previous commission assessments, according to the release, and the commission determined that the measure aligns with the conditions of the state aid temporary framework.

The commission concluded that the damage compensation measures are allowed under the Treaty of the Functioning of the European Union because the damages were caused by exceptional occurrences — in this case, the COVID-19 pandemic. “With respect to the compensation measure, the German aid scheme will compensate damage that is directly linked to the coronavirus outbreak and will provide liquidity to airports in need,” the commission said.

“Airport operations must be secured to ensure connectivity, mobility and air transport,” said Margrethe Vestager, the commission's executive vice president of competition policy, in the release. “This scheme will enable German authorities at different levels to compensate German airports for the damage suffered as a result of the coronavirus outbreak. At the same time, it will help them address their liquidity shortages and weather the crisis.”

On June 3, the German government passed a €130 billion legislative package that includes VAT cuts and corporate tax relief to stimulate the economy in the wake of the COVID-19 pandemic. On June 8 German airline carrier Lufthansa, its Austrian subsidiary Austrian Airlnes, and the Austrian government agreed on a framework for a €600 million aid package to re-energize the Austrian airline. On June 25 the commission approved Germany's contribution of €6 billion to recapitalize Lufthansa.

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