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EC allows limited aid to airlines

Swissair was forced to ground its fleet for two days when it ran out of cash  

BRUSSELS, Belgium -- The European Commission is easing the rules on state subsidies to businesses to allow limited compensation to airlines following the attacks on the United States.

"The range of options presented today will permit a concerted response by all European states, precluding any discrimination between airlines," said Transport Commissioner Loyola de Palacio. "The need to unite is once again apparent. ... We have to act together."

The EC is allowing member states to give aid to airlines suffering damage as a result of the events of September 11.

The commission will permit compensation for losses incurred in the four days after the attacks, when U.S. airspace was closed. Member states can also provide financial support to cover extra insurance and security costs. The new aid rules set strict guidelines for airline subsidies. In the longer term, struggling carriers may have to look elsewhere for a route to recovery. Consolidation is one possibility.

The EC does not want countries propping up unprofitable airlines, CNN's Paula Hancocks reports from Brussels
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EC statement on emergency measures for air transport  

The commission said EU competition law allowed it to take account of changes in economic conditions.

Irish airline in trouble

Meanwhile, Ireland's national carrier may not be able to pay for the staff cuts it needs to survive. According to media reports, Aer Lingus plans to cut 2,500 jobs -- or more than 40 percent of its permanent work force.

Aer Lingus would not comment on a Financial Times report that the carrier cannot afford to carry out those cuts.

On Wednesday, Aer Lingus staff were hearing details of the survival scheme, including job cuts, agreed at a crisis boardroom meeting Tuesday night, the UK Press Association reported. Irish Prime Minister Bertie Ahern and his Cabinet had been briefed on plans to save Aer Lingus.

Mary O'Rourke, head of the government Public Enterprise Department, said the airline was cutting fares in an effort to survive.

"The fact remains that two million Irish punts a day was being lost, and airlines from all over the world were in intense difficulty, particularly in Europe," she said. "That's a huge amount of money, it's a constant haemorrhage. The people are not in the seats."

There was speculation that the Irish government was lining up a series of guaranteed loans amounting to at least 125,000 Irish pounds to finance the massive redundancy payments that would be needed under a restructuring, the PA reported.

The loans would be similar to a Belgian government loan to bail out its national airline, Sabena. Such a move would need approval by the EC, which is investigating the Belgian loan.

Any such bailout by Dublin would likely be opposed by Ireland's private Ryanair, which has already lodged a formal complain with the EC to the Sabena bailout. The German carrier Lufthansa also has appealed to the EC over the Belgian loan.

BA to scrap bonus, raise

Also Wednesday, British Airways announced plans to cut its employees' annual bonus, a move that should help save the airline $54 million.

The bonus is equal to about one week's pay. BA also said it wants to scrap a pay raise that it agreed to implement next year.

The proposed cuts would affect 36,000 non-management staff, including cabin crew, engineers and administrative staff, all based in the UK, the PA reported.

BA executives agreed last month to a 15 percent pay cut, while managers have seen their pay reduced by 10 percent in recent weeks. BA, Europe's biggest airline, also cut 7,200 jobs recently.

"These proposals are not made lightly but are an essential part of what we need to do during this very difficult period," BA CEO Rod Eddington told PA on Wednesday.

But union official Ed Blissett vowed to fight the proposal.

"Senior managers can afford to take a pay cut when they are earning hundreds of thousands of pounds a year," Blissett told PA.

"It is a different story for our members, some of whom earn as little as 8,000. They cannot afford to reduce their pay."


• Swissair
• Sabena
• Aer Lingus
• Ryanair
• European Union
• Irish government
• Belgian government

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