The European Commission has categorically ruled out approving direct State aid for Aer Lingus but indicated that, in certain circumstances, it could approve a Government loan guarantee for the airline.
The Transport Commissioner, Ms Loyola de Palacio, said she would not entertain the idea of State aid to any national airline but she referred to a clause in EU competition guidelines governing "rescue aid" to ailing firms. "There is a section there saying one may give government loans or guarantees in exceptional circumstances. I cannot judge the current proposals until I have studied them," she said.
The Commission guidelines say that, under certain circumstances, governments may offer or guarantee loans to "firms in difficulty". The guidelines offer a complex definition of what constitutes such a firm but it must fulfil one of the following three conditions: (a) in the case of a limited company, where more than half of its registered capital has disappeared and more than a quarter of that capital has been lost in the preceding 12 months, or (b) in the case of an unlimited company where more than half of its capital as shown in the company accounts has disappeared and more than a quarter of that capital has been lost in the preceding 12 months, or (c) whatever the type of company concerned, where it fulfils the criteria under its domestic law for being the subject of collective insolvency proceedings.
Sabena, the Belgian national airline, last week sought bankruptcy protection in the courts and Commission sources suggested last night that Aer Lingus might have to take a similar step to enable the Government to step in.
"This is not something that is good for a company to do. But it's true that the number of options now are extremely limited," one official said.
The Commission will consider Belgium's decision to grant Sabena a €125 billion bridging loan when it meets next Wednesday. A day earlier, EU transport ministers meeting in Brussels will consider a proposal by the Commission that would allow Brussels to negotiate all aviation deals on behalf of the EU with the US and other countries.
This would mean scrapping all existing, bilateral "open skies" agreements such as Ireland's deal with the US that guarantees the Shannon Airport stopover.
Ms de Palacio said yesterday that the Commission needed the negotiating mandate to limit the effect on competition of the US decision to give its airlines $15 billion €16.4 billion) in emergency aid.
The Commissioner announced a package of measures aimed at helping European airlines to survive the crisis caused by last month's attacks in New York and Washington. They include compensation for losses resulting directly from the four-day closure of US airspace following the attacks and a ruling that all new security measures should be funded by member-state governments.
Ms de Palacio said falls in passenger numbers varied from 10 to 30 per cent, with transatlantic and US routes the hardest hit.
She repeated a number of times her determination to resist demands from governments to be allowed to aid their national carriers and made clear that she believes the age of national airlines is drawing to a close in Europe.
Ms de Palacio's reference to the Commission's competition guidelines appears to confirm that Belgium's loan to Sabena will be approved next week. The Commission will decide Aer Lingus's fate too and, although the guidelines are detailed, there may be room for manoeuvre.
If a loan guarantee is approved, it would be for an initial period of six months but its life can be extended with the Commission's approval. Any loan would be at commercial rates and would have to be repaid 12 months after the payment of the final instalment.
The full text of the European Commission's statement on emergency measures for the airline industry is available on The Irish Times' website at www.ireland.com
