Industry asks de Palacio for support after US disaster

Date: 20/09/01

By Laurence Frost

Airline bosses are asking transport chief Loyola de Palacio to back measures to help the industry in the wake of last week's terrorist attacks on the US.

Executives from Lufthansa, Air France and KLM were meeting the commissioner today (20 September) to warn that billions of dollars in planned aid to US carriers could distort competition unless it is matched on this side of the Atlantic.

They also want the Commission to support a relaxation of new rules on the allocation of take-off and landing rights. "If the [US aid] proposals amount to structural support, it could mean we would need some damage compensation or tax relief," said Rene Fennes of the Association of European Airlines (AEA).

Airline executives in America are already pressing Transportation Secretary Norman Mineta for a $24 billion (€26 billion) bailout.

Fennes called for closer transatlantic cooperation on aid, warning against unilateral action by either side. "It could lead to friction on competition," he said. "That should be avoided at all costs - we have to stand together at this time."

The crisis brought on by the terrorist attacks has come at a time when many European airlines are already facing an uncertain future, amid falling demand and problems over restructuring.

Belgium's Sabena lost €one million a day last week and has warned it could face bankruptcy in a fortnight. Unless employees accept 1,400 job cuts, the extra costs of additional security measures could prove critical. "These are necessary but unsustainable costs in the long term," said spokesman Olivier Gillis.

De Palacio cancelled long-standing engagements in order to meet Fennes and the airline executives today. But ahead of the meeting, her spokesman appeared to rule out making an exception to rules banning government aid. "We don't foresee any change to state aid guidelines," said Gilles Gantelet. "At the moment the Commission is not considering reviewing the programme."

The Union executive is lukewarm about calls for a suspension of proposed new rules on take-off and landing rights, or slots, now being considered by MEPs and EU governments. Under the 'use-it-or-lose-it' principle, carriers are worried that a temporary fall in demand will do permanent damage to capacity as the assets are confiscated.

Gantelet warned airlines against taking advantage of the chaos caused by last week's attacks to win concessions on unrelated issues. "Some airlines would benefit from a redistribution of slots," he said. "We've got to take into account the interests of all the companies, as well as the passengers."

The UK's two largest carriers have both announced job cuts in the wake of last week's attacks. British Airways is to lay off 5,000 staff and drop some transatlantic routes, while Virgin Atlantic announced it is to shed 1,200 jobs and review its existing aircraft orders. The airline is among the first customers lined up to take delivery of the new Airbus A380 superjumbo, due to enter service in 2006.

Air France, Lufthansa, KLM, Iberia, Aer Lingus and SAS, which saw its entire board resign on Monday over a cartel scandal, have also announced cost cuts.

Airline bosses are asking transport chief Loyola de Palacio to back measures to help the industry in the wake of the terrorist attacks on the US.