THE EUROPEAN Commission (EC) has given its final approval for state aid to Spanish flag carrier Iberia.

The UK Government described the controversial decision as "depressing", reflecting the failure of attempts to reverse the EC's preliminary decision approving the money in November 1995.

Iberia is to receive Ptas 87 billion ($700 million), adding to the Ptas 120 billion it received in 1992, which the EC said at the time had to be the final injection. The Commission has applied conditions to the aid, including continued reduction in the airline's debt, and is insisting that the money is used only for commercial ends and for paying redundancy to 3,500 employees due to be made redundant by 1997.

The airline had previously asked for Ptas 130 billion, agreeing to the EC's ruling only after an acrimonious row late in 1995. The EC says that it regards the money, which will come from state-owned Teneo, as a "capital injection" - a statement ridiculed in London. Iberia has been instructed to reduce its holdings in South America, including selling the bulk of its stake in LADECO of Chile and disposing of its interests in Aerolinas Argentinas.

EC Transport Commissioner Neil Kinnock has made it clear that airlines objecting to the ruling "...are free to go to the European Court of Justice".

Source: Flight International