Air France may get pounds 2.5bn aid in return for access: BA will appeal against clearance of package

THE French government is expected to lift restrictions on access to Orly airport near Paris in return for approval of Fr20bn (pounds 2.5bn) in state aid for Air France. The European Commission is believed to be ready to clear the aid at a meeting next Wednesday.

British Airways and British Midland are certain to appeal against any clearance for the package. BA is unlikely to be appeased by the prospect of open access to Orly, in spite of a complaint lodged this week with the European Commission over restrictive rules governing flights to and from the airport.

The Government will also consider action should the deal get the go-ahead.

The Commission is understood to have linked the state aid to about 20 conditions, including a guarantee that Air France reduce its fleet of aircraft and relinquish some of its routes. The airline would receive the funds in phases depending on the progress of its restructuring plans.

BA argues that the restructuring proposals put forward by Air France are not enough to return the airline to profitability.

Other conditions may include the sale of the Meridien hotel chain, a move already the subject of speculation. Air France also owns stakes in about 20 airlines and BA argued in its submission to the Commission that those could be sold to help solve Air France's financial problems.

Air France expects that it could receive about Fr10bn of the aid almost immediately, once the package is agreed. The final approval will depend on nine out of 17 commissioners backing the French government at next week's meeting.

Condemning the proposed subsidies for Air France, a Department of Transport spokesman said: 'We are not happy about it at all. State aid is against the Treaty of Rome and distorts the aviation industry.'