pounds 650 Iberia subsidy gets EU go-ahead

Iberia, the Spanish airline company, is to be allowed by Neil Kinnock, the European Commissioner, to receive a subsidy of 87bn pesetas (pounds 650m) from its state-owned holding company, Teneo. A further pounds 200m may be allowed in 1997.

The Commission's agreement comes despite objections by other European airlines that the capital injection was an indirect form of state aid. Iberia argued that the subsidy, which follows wage cuts of 15 per cent for airline staff and 3,500 planned redundancies in the next two years, will be funded by the privatisation of other companies in the Teneo group.

An Iberia spokesman said yesterday: "We are delighted the [Commission] has concluded that the capital injection is not state aid but the sensible action of an interested shareholder."