Airlines slam Alitalia loan, EU voices doubts
BRUSSELS (Reuters) - European airlines denounced Italy's plan for an emergency loan to struggling airline Alitalia as illegal state aid as the European Commission said it, too, had doubts.
The Italian government decided on Tuesday to give Alitalia AZPIa.MI a 300 million-euro ($473 million) loan to keep it flying until a new buyer is found, after Air France-KLM (AIRF.PA) pulled out of a takeover deal this week.
But rival airlines said it would be unfair if Alitalia received government help while they were undergoing painful cuts to staff levels and other costs to cope with soaring fuel prices and weakening consumer spending.
Alitalia is bleeding more than a million euros a day and the loan is expected to stave off bankruptcy, but the EU allows state aid to companies only under strict conditions.
EU rules would prevent Italy from lending Alitalia any money unless Rome took the same approach a private investor would in assessing the risk and setting the interest rate.
"State aid or no state aid -- that is the question," a Commission spokesman told a regular briefing. "If state aid, then it should not be paid out before it is authorized."
A spokesman for EU Transport Commissioner Jacques Barrot said Rome would need to provide information to clear up doubts.
"We want to understand if this is a commercial operation as the Italian authorities claim," he said.
Italy's outgoing government said on Thursday it would respond to the European Commission within 10 working days.
"MOCKERY" OF EU RULES
Irish budget carrier Ryanair (RYA.I) called on the Commission to stop the loan.
"This latest bailout makes a mockery of EU state aid rules," said Ryanair's head of legal affairs, Jim Callaghan. "Propping up an inefficient national airline, which would have gone bankrupt long ago, is simply illegal."
British Airways (BAY.L) said it was "watching closely" to see if Italy sticks to the rules, while Scandinavian airline SAS (SAS.ST) said it was considering action.
"We are, indeed, seriously considering contacting the European Commission and asking it to look into this action by the Italian government," said Hans Ollongren of SAS.
But analysts said Italy was unlikely to be deterred by either the EU or legal challenges from other airlines. Continued...
