France blames XL Airways collapse on Oslo aid, appeals to EU

PARIS (Reuters) - France believes state aid to budget carrier Norwegian Air NWC.OL was partly to blame for the bankruptcy of Paris-based XL Airways and will seek EU intervention, Finance Minister Bruno Le Maire said on Sunday.

Slideshow ( 2 images )

A spokesman for Norwegian Air denied that the company had ever received any government aid.

While Norway is outside the European Union, its membership of the larger European Economic Area requires Oslo to abide by EU rules on state aid and the single market.

“Norwegian Air is undercutting prices while in debt and receiving public funding from Norway,” Le Maire said on LCI television, adding that support “partly explains” the difficulties that drove XL Airways into bankruptcy.

“That’s something I cannot accept because the rules of competition should be the same for everyone,” Le Maire said.

“I will therefore be writing to the European Commission this coming week to tell them to put these things in order.”

XL Airways is the second small French airline to enter bankruptcy protection in September, after the collapse of Aigle Azur, which stranded 19,000 passengers and was formally liquidated on Friday.

Norwegian Air, Europe’s third-largest budget carrier, has been forced to raise new capital and postpone debt repayments as it struggles with mounting losses.

Earlier in the year, the low-cost airline raised 3 billion Norwegian crowns (£269.37 million) in a rights issue partly underwritten by DNB Bank, in which Norway owns a 34% stake.

Asked about the French minister’s comments, a Norwegian Air spokesman said: “Norwegian has never received any form of government aid but has successfully built a global airline that carries 40 million passengers a year.

Norwegian industry ministry officials did not immediately return calls and messages seeking comment.

Reporting by Laurence Frost; additional reporting by Terje Solsvik and Gwladys Fouche in Oslo; editing by Jason Neely and Gareth Jones