BA demands that Air France aid be repaid

BRITISH AIRWAYS yesterday stepped up the attack on state aid to ailing European airlines by urging Brussels to force Air France to repay Fr1.5bn ( pounds 176m) in aid on the grounds that the payment was illegal.

In a submission to the European Commission's transport directorate, BA claimed that the payment by the French government contravened competition law since it was not used to restructure the airline and could not be described as a normal commercial investment.

Air France received approval for a total of Fr5.84bn in state aid in 1991 and 1992 and the French government is set to seek approval for a further tranche in excess of Fr5bn.

Commenting on the Fr1.5bn aid package, David Holmes, head of government and industry affairs for BA, said: 'This money was not a commercial investment. It was state aid, which contravenes the Treaty of Rome. It should be given back. Air France's financial salvation should lie in its own hands - not through state hand-outs that are unfairly and illegally distorting Europe's air transport industry.'

BA's claims are based on a study of the recapitalisation of Air France carried out by legal advisers and an independent corporate finance and investment bank. The money was channelled through the state-owned CDC-Participations.

Air France has consistently maintained that the aid did not amount to a subsidy and was approved by the European Commission under its state aids regime.