Europe approves pounds 7m aid for Swan Hunter

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THE EUROPEAN Commission has authorised a maximum of pounds 7m in aid to help convert Swan Hunter on Tyneside back into a merchant shipyard.

It said the approval was a one-off and would not set a precedent for any of the remaining military shipyards.

The aid, which the British government has pledged will be provided under European Union rules and subject to periodic monitoring, is designed to help the receivers find a buyer.

Under Commission policy, it is common for yards in member states to receive a 9 per cent subsidy on contracts to build merchant ships.

Stephen Byers, Labour MP for Wallsend, said: 'Obviously it is good news. But it is unfortunate that Swan was not treated like other UK yards that have access to the 9 per cent subsidy on all merchant orders available on intervention funding.'

A spokesman for Swan Hunter said it was not clear whether it could use the pounds 7m aid approved yesterday in one go or would have to stagger it over a number of contracts. He said the typical cost of a merchant ship was pounds 30m.

In a separate announcement, the Commission said it had cleared Ir pounds 175m (pounds 167m) of Irish government aid to the state-owned flag carrier, Aer Lingus. It said the money would come as an equity injection in three tranches to allow Aer Lingus to implement a full restructuring plan over two years. It ruled that the aid could not be used to allow the airline to compete unfairly within the EU.

Bernie Cahill, the chairman of Aer Lingus, said the injection had paved the way for the company to return to profit in 1994. Cost reductions of pounds 50m have already been agreed by the company, and Mr Cahill said the aim was to become one of Europe's most efficient operators.

However, British Midland said more protection against cross-subsidy was needed, particularly to stop Aer Lingus using the equity to provide uneconomic fares on its services between Dublin and London.