German Court Paves Way for Foreign Airlines to Claim Short-Time Work Subsidies as Sector Reels From War and Legal Overhauls

A mid-March ruling by Germany’s Federal Social Court (BSG) has handed foreign airlines with crew bases in the country a crucial administrative victory: those bases now qualify as legally recognised operating units, making them eligible for Kurzarbeitergeld – the government’s short-time work compensation – provided all other conditions are met. The decision, handed down on 12 March 2025, centred on a Malta-based carrier that stationed personnel at German airports. The judges ruled that the home base functions as a Betriebsabteilung (operating division), regardless of where the airline’s corporate headquarters sits. The legal reasoning is anchored in EU Regulation 883/2004, which treats the home base as the relevant place of work for flight crews. Airlines can now apply for a formal recognition certificate from the Federal Employment Agency, though the ruling makes clear that this step alone does not trigger a direct payment claim; it merely establishes the organisational groundwork.

Yet the path to actually receiving short-time pay remains strewn with procedural landmines. In early June 2025, the same BSG underlined that if an employer’s notification of short-time work is interrupted for more than three consecutive months, the original notice expires. To restart benefits, a fresh notification is mandatory, and retroactive approval is granted only under narrow conditions – such as an unforeseeable event. Adding to the cautionary tale, the Social Court of Landshut ruled in autumn 2023 that no short-time pay is due when a company continues hiring despite a widely known crisis. The case involved the auto-industry chip shortage, and the court deemed the resulting work stoppage to be avoidable – firmly within the company’s entrepreneurial risk.

The employment-law landscape for airlines and other restructuring businesses is further complicated by a landmark judgment from the Federal Labour Court (BAG) on 1 April 2026. If a required mass-layoff notification is missing or filed before completing the consultation procedure with the works council, dismissals become permanently void. This defect cannot be cured, the BAG decided, aligning with a European Court of Justice ruling from October 2025. Meanwhile, the Federal Ministry of Finance (BMF) weighed in with a letter dated 18 June 2026, sharpening the definition of a permanent establishment for tax purposes. A company must maintain a business facility for at least six months and hold effective control over it – a clarification that also covers home-office arrangements and mobile workplaces, with direct implications for how ground and flight personnel administration is taxed.

These legal developments are unfolding against a backdrop of severe industry strain. The Iran conflict is battering aviation, and the International Air Transport Association (IATA) has slashed its 2026 profit forecast from an original US$41 billion to just US$23 billion. On a brighter note, major Gulf carriers had by mid-June 2026 recovered to roughly 82% of their pre-war levels. Looking ahead, the EU is preparing a comprehensive overhaul of passenger rights, slated to take effect in July 2027. Among the planned changes: return tickets will no longer be forfeited if the outbound flight was missed, and rules on carry-on luggage allowances are to be spelled out more precisely.

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