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Wednesday, July 22, 1998 Published at 18:28 GMT 19:28 UK

Business: The Company File

Air France receives state aid despite ruling

Air France will receive £2bn from the French Government

The European Commission has approved state aid to Air France just weeks after the European Court declared the £2bn payment illegal.

The EU Transport Commissioner, Neil Kinnock, said the details of the agreement had been reworked to answer the court's criticisms.

Transport Commissioner Neil Kinnock: cancelling the aid was not feasible
British Airways, which led the legal challenge against the state handout, said it was "surprised and disappointed" by the turn of events.

The UK Government, which backed the challenge from BA and other airlines, said it would have to study the new ruling.

BA, together with British Midland Airways, Air UK and other carriers, had objected to the handout, claiming it gave Air France an unfair advantage over independent airlines unable to call on government financial support.

Although the European Court in Luxembourg agreed with the airlines, the Commission voted 13 to three to restore the handout.

[ image: British Midland was among airlines opposing the handout to Air France]
British Midland was among airlines opposing the handout to Air France
Mr Kinnock said the agreement had been reworked and insisted there was no justification for blocking the aid from the French Government.

Sir Leon Brittan, one of three commissioners who opposed the decision, said he was "strongly" against clearing the payment.

A British Airways spokesman said: "We are surprised and disappointed by this decision.

"Regrettably, this is a lost opportunity for the Commission to take a firm stand on airline subsidies."

The spokesman said BA would be studying the full text of the Commission's ruling before deciding whether to appeal to a higher European court.

BA is particularly upset that the ruling comes only a few days after EU Competition Commissioner Karel Van Miert laid down strict conditions for BA's proposed alliance with giant US carrier American Airlines.

A UK Department of Environment and Transport spokesman said: "We welcomed the original European court ruling and are still studying the full text of that ruling.

"Now we shall have to consider the new decision."

[ image: Sir Leon Brittan was opposed to clearing the aid]
Sir Leon Brittan was opposed to clearing the aid
At a news conference in Brussels, Mr Kinnock said the European Court had never questioned the "substance" of the original Commission decision in 1994 to approve the payment.

The judges had merely queried two specific details relating to aid for new aircraft for Air France and the carriers' competitive position on non-EU routes.

Now both facets of the deal had been "re-worked" by Commission lawyers.

Mr Kinnock said he had no doubt the whole package met the court's requirements.

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