BA and Virgin chase bankrupt French airline

British Airways and Richard Branson's Virgin Express both announced bids yesterday for Air Liberte, a bankrupt French airline coveted for its strong position at Paris's Orly airport.

They face stiff competition from two French companies and a Government that would prefer a "French" solution.

The French bidders for Air Liberte are tour operator Nouvelles Frontieres and Consortium de Realisation, the owner of troubled French airline AOM.

The eight-year-old airline is being sold by its administrators after running up Fr650m in losses in the first nine months of this year and accumulating Fr1.5bn in debt. The airline expanded rapidly in highly competitive markets and went into receivership on 26 September.

British Airways offered Fr25m for Air Liberte and promised to keep 1,250 of its 1,300 permanent staff if its bid was accepted.

The Fr1.5bn debt lodged by Air Liberte with the administrators would not be taken on by BA under the terms of the offer, a BA spokesman said. A spokesman for Virgin Express, Richard Branson's low-fare carrier based in Brussels, said it had "written to the administrators with a proposal''. Virgin refused to comment further.

Air Liberte's administrators had set yesterday as the deadline for bids. There was no immediate comment from the two French companies.

BA wants Air Liberte to strengthen its TAT European Airlines unit in France.

''Linking with Air Liberte represents an excellent opportunity to secure the group's presence in the French domestic market," said BA's chief executive, Bob Ayling.

Once the TAT/Air Liberte group returned to profitability, French investors would be invited to take a stake in the business, BA said. Goldman Sachs is to advise on this.

TAT and Air Liberte would initially be kept as two distinct companies, owned by a French holding company established by BA.

BA complained last week to the European Commission that a purchase by AOM's holding company would violate EU rules against state aid. BA said it would be tantamount to a state subsidised rescue for the company.

The holding company is selling assets owned by Credit Lyonnais, the debt- burdened French bank now being bailed out in the largest corporate rescue package in French history.

French press reports have said the government is seeking a "French solution'' to the sale.