EC caves in over Air France state aid: Dispute erupts over approval for steel and aviation subsidies
Thursday 28 July 1994
Related articles
A pounds 2.3bn subsidy to Air France and a multi-million-pound aid deal for the German firm Kloeckner unleashed a wave of protest from companies including British Airways and British Steel.
The subsidies, coupled with approval for the restructuring of Olympic Airways, the Greek national airline, fuelled fears over the commission's commitment to the promotion of free and fair markets within the European Union.
The commission's approval of the Air France deal is likely to be challenged in the court by other airlines, including BA and Lufthansa. The decision has also prompted alarm in the US.
Conditions were attached to the capital injection but failed to give the tough signals on state aid that BA wanted. Two commissioners, Sir Leon Brittan and Henning Christophersen, fought for a tougher stance but were faced with stiff opposition.
The French business and political establishment lined up together in support of the stricken airline and were 'unstoppable', said commission officials.
France's transport minister, Bernard Bosson, called the deal perfectly balanced. The conditions to the aid stipulate that this must be the last such injection for Air France and must not be passed on to its domestic arm, Air Inter.
It says that Air France must sell its shareholdings in activities not directly related to air transport, in particular the hotel chain Meridien. The commission also said France must lift remaining obstacles to foreign airlines using Orly airport, something it has already committed in principle to do.
BA said the decision was deplorable and would distort the aviation market. Sir Colin Marshall, BA chairman, said: 'In the case of Air France there is no justification for a subsidy of this size, and the conditions imposed are wholly inadequate. Air France's problems are of its own making.'
His anger was echoed by Sir Michael Bishop, chief executive of British Midland. 'The sheer size of this latest package for Air France is grotesque,' he said. 'It is hard to believe that a capital injection of this size in needed only for restructuring and will not be used to cover operating losses.'
BA wanted Air France to raise its own money by disposing of its stakes in about 20 airlines round the world or to sell other assets apart from Meridien.
With the recession in the airline industry biting deep and governments under pressure to prop up the sector, it is unlikely that the present problems will be the last. But Karel Van Miert, the commissioner responsible for competition policy, has not so far been willing to confront governments in such a sensitive area.
In another controversial decision the EC approved a takeover plan for the German steel company Kloeckner that amounts to a pounds 70m state subsidy. British Steel has already appealed against aid for Italian and Spanish firms.
At British Steel's annual meeting yesterday Brian Moffat, chief executive, said he felt the commission was taking a stronger line against subsidies. Yet as he spoke to shareholders, Brussels was approving a plan under which Sidmar, of Belgium, and the city of Bremen investment bank Hibeg would take a stake in Kloeckner.
The commission, which faced tremendous pressure to approve the deal, ruled that it did not constitute illegal state aid. British Steel had already warned the commission that it would take action if the aid went through, according to sources in Brussels. Yesterday the company said: 'We will have to wait and see. But we are totally against state aid at a time of overproduction of European steel.'
As one of the most competitive producers in Europe, British Steel has been highly critical of what it sees as the commission's inability to get to grips with subsidies and overproduction in the steel sector.
View from City Road, page 35
-
Gay couple beaten in park urge MPs to moderate language on gay marriage
-
Strewth mate. Aussies wave goodbye to Britain as it becomes too pricey to stay
-
World news in pictures
-
X marks the spot: The find that could rewrite Australian history
-
At least 91 feared dead including 20 children as massive tornado rips through Oklahoma
- 1 Tottenham to smash pay scale with £150,000-a-week contract in attempt to tie Gareth Bale to club
- 2 Austerity has hardened the nation's heart
- 3 Gay couple beaten in park urge MPs to moderate language on gay marriage
- 4 Be more professional! GCHQ staff rapped as WikiLeaks founder Julian Assange reveals messages that he says point to 'fit up'
- 5 Top A&E doctors warn: 'We cannot guarantee safe care for patients anymore'
Get your summer started with British Military Fitness
BMF is the UK’s biggest and best loved outdoor fitness classes
Visit York
Find out what The Independent's resident travel expert has to say about one of the most beautiful small cities in the world
Enter the latest Independent competitions
Win anything from gadgets to five-star holidays on our competitions and offers page.
Business videos from commercial thought leaders
Watch the best in the business world give their insights into the world of business.
iJobs Money & Business
Finance Business Analyst - Banking - £500pd
£500 per day: Orgtel: A top tier banking client urgently requires Finance Busi...
Senior Finance Project Manager
£425 - £550 per day: Orgtel: Senior Finance Project Manager - £550 - Bristol -...
KYC ANALYST
£150 - £250 per day: Orgtel: KYC Analyst - London - Banking - £150-250/day C...
Finance Governance Manager - Banking - £500pd
£500 per day: Orgtel: A top tier banking client urgently requires Finance Gove...
Day In a Page
The price of pacifism
Jason Isaacs: Groupies, theatre bores and James Bond
Sealand: 'Micronation' or illegal fortress?
Legend of James Hunt has set Hollywood hearts racing
Macklemore: 'I don't have moderation'



Comments