The European Commission (EC) has effectively laid to rest the issue over its four-year-old Air France state aid package, brushing off legal questions raised by last month's decision in the European courts. Air France should now be free to press ahead with its planned share flotation.

The European Court of First Instance had upheld two of the 110 complaints raised by British Airways, British Midland and SAS in their legal challenge against approval of the Fr20 billion ($3.5 billion) state aid to Air France, passed by the EC in the middle of 1994. The issues centred on Air France's purchase of 17 new aircraft to replace older types and the carrier's failure to analyse the competition implications of the aid on its routes beyond Europe.

The ruling, however, stopped short of overruling the original approval, requiring the EC to "clarify its position" regarding the two points. Sources say, however, that at least four out of the 13 EC commissioners, including the ex-competition commissioner Leon Brittan, wanted to appeal directly against the Court's ruling. They were overruled after transport commissioner Neil Kinnock insisted that such action would slow the privatisation of Air France, seen as vital for the survival of the carrier. The airline was due to begin gearing up for its proposed share flotation this month, but the issue was put on hold following the pilots' strike in June and the court ruling.

On the purchase of new aircraft, the EC notes that the state aid package was authorised only because it went along with a "thorough restructuring plan", of which the fleet renewal was integral. It adds that the overall fleet limit of 146 aircraft imposed by the EC led to a slight decrease in capacity.

Source: Flight International