Anger over clearance of Air France state aid

Date: 25/07/1996

PRIVATE European airlines have reacted angrily to the Commission's decision to clear a final 770-million-ecu instalment of subsidies to Air France, albeit with strings attached.

“We are very disappointed,” said Marjolein Gelderman of the Dutch carrier KLM. “In our opinion, Air France violated the conditions they were set at the time the aid was first granted.”

David Wilson of British Airways, whose complaint against the granting of the 3-billion-ecu overall aid package in 1994 is due to be heard at the Court of First Instance this autumn, was equally disappointed.

“We feel that airlines should stand on their own two feet and manage their affairs without recourse to taxpayers,” he said.

Aware that his proposal to allow payment of the aid would cause a furore, Transport Commissioner Neil Kinnock yesterday (24 July) gave a more detailed explanation for his ruling than was offered when the original decision was taken by his predecessor, Marcelino Oreja, in 1994.

At that time, the Commission allowed the aid to be paid in three instalments, on condition that Air France froze purchases of new aircraft and kept its fares below those of its competitors.

Of the 26 allegations of 'price-leadership' provided by KLM, Lufthansa and SAS, Kinnock rejected all but five. But the complainants disputed his findings. “Obviously, Air France was using this money to finance price-leadership,” said Lufthansa's Karin Weber.

Even French Premier Alain Juppé's promise to freeze 155 million ecu of the instalment until the airline's 1996 restructuring targets are met has failed to pacify the private carriers.

Both KLM and Lufthansa will decide in the coming weeks whether to challenge the decision in the European Court of Justice.