The Minister for Finance, Mr McCreevy, has promised to ensure that the future of Aer Lingus is not threatened by the terrorist attacks in the United States. But he said that any action would have to comply with the European Union's strict rules on state aid to companies.
Mr McCreevy was speaking in the Belgian city of LiΦge where EU finance ministers agreed guidelines for government action to deal with the threat to airlines from hugely increased insurance premiums. Insurance companies have said they will only offer third party war-risk cover to airlines at a much greater premium and with lower limits on pay-outs.
Mr McCreevy did not state explicitly that he will follow the lead of other EU governments by indemnifying Irish airlines against damage caused by war and terrorism for an initial period of one month. But he made clear that the Government was prepared to act to ensure that Aer Lingus remains in business.
"Where it is necessary to keep Irish airlines in operation, the Government will take action. But anything we do must be in accordance with EU rules. The EU rules regarding state aid are very detailed and very strict," he said.
The ministers agreed that any assistance to airlines must be limited to resolving the insurance problem, which threatened to ground aircraft throughout Europe from midnight tonight. And they ruled out further state aid to struggling airlines that have already been bailed out by governments.
"Government support will be limited to address a specific short-term failure in the commercial insurance market, to ensure that third party cover for war and terrorism remains available. Governments will charge a reasonable premium, which as far as possible reflects the risks involved, for the schemes they introduce, although it's possible this will waived in the short term.
The schemes will be introduced for one month with work continuing on a sustainable solution and to encourage industry to return to the market as soon as possible," the ministers said in a joint statement.
Mr McCreevy criticised the insurance companies for acting unfairly. Luxembourg's prime minister, Mr Jean-Claude Juncker, described the insurers' behaviour as blackmail.
The Minister for Public Enterprise, Ms O'Rourke, is to meet Aer Lingus unions this morning to brief them on the outcome of the Ecofin meeting. Ms O'Rourke will report to the Cabinet tomorrow. The airline board is to meet on Thursday to consider its options.
