View from City Road: Air France may yet regret its begging

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The Independent Online
French aviation is not flavour of the weekend around European airports. While passengers curse at delays brought about by striking air traffic controllers in Aix-en-Provence, quoted or partially state-owned airlines are seething over the prospect of massive hand- outs to Air France from its government.

Airlines such as British Airways, KLM, Lufthansa and Austrian Airlines have no reason to disbelieve reports that next Wednesday the European Commission will approve a capital injection of Fr20bn ( pounds 2.36bn) by the French into the ailing Air France.

This huge sum, equivalent to almost two-thirds of the market capitalisation of BA, is daunting enough for free market airlines. What is worse is that behind Air France there is a queue of other walking wounded. Greece's Olympic airline is seeking dollars 2bn to tide it over, and Spain's Iberia and Alitalia are probably dusting their begging bowls again.

To add insult to injury, a number of reports out of Brussels suggest that the toughest 'restriction' to be applied to the Air France state capital injection is that Orly, France's second airport, should be opened to all comers rather than remain a creature of Air France.

The European Union gives access to Orly to other operators as a matter of right. It is hardly a concession to give airlines something to which they are already entitled, but for the intransigence of the French government.

The EC may well insist that the latest hand-out represents the last chance for Air France, which has dragged its heels over the sale of its Meridien hotel chain and valuable central Paris properties. The commission may demand privatisation of the airline as soon as possible.

Nevertheless, the whole deal is unfair to the self-sufficient airlines that drastically restructured their operations in a free market framework, while Air France relied on state dole.

There may be a poetic justice: the lean and mean carriers will be in a far stronger condition than the likes of Air France. This professional beggar must begin to restructure from now onwards, or it will be unable to take advantage of the upturn in airline traffic.

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