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Thursday, 4 October, 2001, 17:26 GMT 18:26 UK
EU complains over Swissair aid
Swissair sign
Swiss air returns to the skies after being grounded for two days
The European Commission has complained to Switzerland, a non-EU member, about the emergency aid given to the crisis-hit Swissair, on the day it returned to the skies.

Airlines across Europe also condemned the state aid to Swissair and its Belgian affiliate Sabena.


Sabena and Swissair were already in serious difficulties before September 11 and we understand close vigilance is needed to ensure there is no state aid, which could disrupt competition rules

Xabier de Irala
Chairman Iberia
The bailouts come after several EU governments guaranteed airlines' war risk insurance after insurers jacked up premiums in the wake of the 11 September attacks in the US.

The Commission said on Wednesday that it considered the problems at Sabena and Swissair unrelated to the airline crisis resulting from the US attacks.

Last month the US Congress approved $15bn in subsidies to their airline industry.

Commission concerns

"The Commission is worried that the federal government should be willing to provide aid without informing or consulting the European Commission," Commission spokesman Gilles Gantelet said.


It's not a matter of state aid to a company to allow it to develop. It's a loan, limited in aim and limited in time

Swiss response
The EU is hostile to its member governments' recapitalising unviable airlines.

Officials said the Swiss move is at odds with EU-Swiss agreements covering transport reached in 1999 but not yet ratified by some member states.

"It is true that the agreement is not in force ... but there is a rule that does apply when you are in the process of ratification of a document - you don't take measures which run counter to the provisions of the agreement," Mr Gantelet said.

But Switzerland defended the bailout of saying it did not break the agreements.

"It's not a matter of state aid to a company to allow it to develop. It's a loan, limited in aim and limited in time," Swiss ambassador Dante Martinelli said after a meeting with Francois Lamoureux, head of the Commission's transport section.

State parachutes

Swissair, which is three percent state-owned, obtained a 450m Swiss francs (303m euros, $277m) government loan on Wednesday to allow flights to resume until 28 October.

Sabena check-in
The Belgian government has given Sabena a bridging loan
Loss-making Belgian national airline Sabena filed for protection from its creditors on Wednesday after the collapse of Swissair, which owns 49.5% of Sabena.

The Belgian government plans to arrange 125m euros in bridge financing for ailing airline Sabena, of which it holds 50.5%.

Mr Gantelet said the Belgian government had not yet provided details of the financing plan.

Peer pressure

A number of Europe airlines have voiced their opposition to state-aid for Sabena and Swissair.

Irish discount airline Ryanair has complained to the EU about Belgium's plans to arrange bridge financing for Sabena.

Dutch flag carrier KLM, which has announced 2,500 jobs cuts, said airlines should not turn to governments for aid.

"We certainly don't believe in governments splashing out subsidies to airlines," KLM Chief Financial Officer Rob Ruijter told the CNBC business channel.

Iberia's Chairman Xabier de Irala criticised the Swiss and Belgian governments' plans, saying it could constitute state aid.

"Sabena and Swissair were already in serious difficulties before September 11 and we understand close vigilance is needed to ensure there is no state aid, which could disrupt competition rules," Mr Irala said during an appearance in the senate.

Mr Irala is also Chairman of the International Air Transport Association (IATA).

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 ON THIS STORY
Giles Gantelet, European Commission spokesman
"We want to avoid direct state aid at any cost"
See also:

04 Oct 01 | Business
Swissair resumes 'some flights'
04 Oct 01 | Business
Dutch airline cuts 2,500 jobs
03 Oct 01 | Business
US airlines cut fares to spur travel
03 Oct 01 | England
British Midland cuts 600 jobs
03 Oct 01 | Business
Swissair shares wiped out
03 Oct 01 | Business
Sabena files for bankruptcy
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