MacGregor refuses 'moral fitness' probe of BA: Secretary of State warns Ireland against giving fresh state aid to Aer Lingus

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JOHN MACGREGOR, Secretary of State for Transport, yesterday ruled out an investigation of British Airways by UK aviation authorities in the wake of the Virgin dirty tricks affair.

Mr MacGregor said there was no case for the Civil Aviation Authority to launch an inquiry into BA's 'moral fitness', as John Prescott, Labour's transport spokesman, has been demanding.

Speaking at a lunch in London organised by British Midland, Mr MacGregor also rejected calls for a new aviation watchdog body, Offair, to safeguard consumer interests and promote competition.

'I don't see the need to change the present system,' he said.

Mr MacGregor refused to be drawn on the BA affair or the request by Richard Branson, Virgin Atlantic's chairman, for Department of Trade and Industry inspectors to be sent into BA to investigate its commercial activities against rival airlines.

But ministers are known to have been dismayed by the damage the row threatens to do to the wider interests of British aviation, particularly in the United States.

Mr MacGregor also served notice that the Government would object strongly to any fresh injection of state aid into Aer Lingus, the Irish airline, unless it was on a fully commercial basis.

The ailing flag carrier, which has debts of pounds 500m and lost an estimated pounds 90m- pounds 100m in the current year, is seeking up to pounds 400m from the Irish government.

Pointing out that Britain was one of the few EC members without a state-owned flag carrier, Mr MacGregor said: 'Cash injections made to state-owned airlines on terms not available in the private sector risk placing private sector airlines at a distinct competitive disadvantage.'

His call was reinforced by Sir Michael Bishop, the British Midland chairman, who said that competition was the key to consumer choice and lower fares, but that the EC 'must not allow state aid or subsidies to pay for that competition'.

Sir Michael claimed that Aer Lingus was now losing up to pounds 15 per passenger on the London-Dublin route because competition from British Midland and Ryanair had brought the fare down to as little as pounds 58.

A rescue plan submitted by Aer Lingus to the Irish government earlier this year suggested that it inject pounds 200m in cash and pounds 200m in the form of preference shares.

In return, the airline's workforce of 5,500 would be cut by 450, saving pounds 18m a year on its pay bill.

Aer Lingus's new executive chairman, Bernie Cahill, is due to submit a modified plan in the next two weeks involving a smaller cash injection and, possibly, bigger job cuts.