Competition: Aid to Air France approved, finally

United Kingdom
Aid to Air France approved, finally

In an almost farcical manner, the controversy over the Commission decision authorising state aid to Air France appears to have been finally settled. Originally, the Commission allowed the French government to invest FF 20,000 million in Air France, finding that, since the aid was linked to a restructuring plan, the aid could be considered to be compatible with the Treaty. Several airlines applied to the European Court of First Instance to have this decision annulled due to the lack of detailed reasoning given by the Commission.

The Court found that the Commission had failed to make a proper technical assessment of Air France's competitive position on the network of EEA and non-EEA routes. Equally, it had failed to reconcile Air France's future expansion plans, and particularly the purchase of 17 new aircraft for a value of FF 11.5 billion, with the need for additional state aid. The Court decided that these two points were of crucial importance within the general scheme of the contested decision and that it must consequently be annulled.

The Commission response was to immediately reformulate the decision to comply with the judgement. It supplied detailed reasons confirming why Air France does not have to repay the state aid. In particular, the Commission said that the state aid complied with EU law because it was accompanied by a restructuring plan. Also, the purchase of new aircraft by Air France replaced old planes and did not increase the number of seats that were available. Finally, the conditions imposed prohibit the French authorities from giving preferential treatment to Air France on traffic rights to third countries.