EU considers aid for airlines

Security costs have added to the airlines' difficulties

The European Union may relax strict rules on state subsidies, after last week's attacks on the US caused big losses for Europe's airline industry.

After meeting with executives of Europe's leading airlines, Transport Commissioner Loyola de Palacio said EU rules barring government subsidies could be reconsidered "in the face of unforeseen and exceptional circumstances".

I think we cannot expect that (European) airlines can be put at a disadvantage compared with American airlines

Transport Commissioner Loyola de Palacio

Last week's events constitute these circumstances, she said.

Leading US airlines have announced they will cut over 65,000 workers and Continental has said it will file for bankruptcy unless it receives help following the attacks.

Europe's biggest airline, British Airways, on Thursday announced 5,200 more job losses, on top of 1,800 announced in the last two weeks, bringing the total to 12.5% of its workforce.

Bush's proposal

President Bush will propose a $5bn handout for US carriers to Congress on Thursday after they asked for $17.5bn aid to cover losses for being grounded after the attacks.

Palacio: Unforeseen and exceptional circumstances

The EU is now considering its options.

"I think we cannot expect that (European) airlines can be put at a disadvantage compared with American airlines," Commissioner de Palacio said.

But she echoed the carrier's claims that they had not come to Brussels to ask for state aid.

"We don't want subsidies for airlines in the current situation and we are not asking de Palacio for that," said Air France Chairman Jean-Cyril Spinetta.

The Commission bans airlines from receiving state aid if they have already been bailed out in the past and wants demands for subsidies backed by precise estimates of the economic loss.

EU aid

The cost of new security arrangements has been blamed as one reason for the airlines' losses.

The EU governments should pick up the bill for extra airline security measures, because the EU has no budget for this, Commissioner de Palacio said.

She also promised to raise the issue of aid with Internal Market Commissioner Frits Bolkestein before it is discussed at an emergency meeting of EU finance ministers on Friday.

The meeting is also expected to consider what to do about the sharp increase in airlines' insurance premiums in the wake of the attacks.

"We have extremely high demands for insurance. Air France has been asked to pay 10 times more. We don't want to pay 10 times more," Chairman Jean-Cyril Spinetta said on Thursday after the meeting.

Lufthansa Chief Executive Juergen Weber, Air France Chairman Jean-Cyril Spinetta, Leo Van Wijk, chief executive of Dutch airline KLM and Alitalia Chairman Fausto Cereti all attended the meeting.