Brussels to unveil package of support for troubled airlines

The European Transport Commissioner, Ms Loyola de Palacio, will next week present a package of measures aimed at supporting airlines following last month's attacks in America.

However, she said in Seville yesterday that the proposals would be designed to prevent unfair competition in the industry. "They will be horizontal measures from which each company in the European Union will benefit in the same proportion," she said.

But the Competition Commissioner, Mr Mario Monti, said that the Commission would adopt a restrictive position on state aid to airlines. He warned that governments should not use the emergency caused by last month's attacks to prop up airlines already in financial difficulties.

"The Commission will take a position on this next week and it will be a restrictive position. We should give limited state aid for airlines to meet circumstances like increased insurance premiums or higher safety requirements, but not use the situation to assist, with public money, airlines with problems before September 11," he said.

The Commission has yet to decide if the Belgian government was acting within EU law when it granted a €125 million (£98.45 million) loan to its national airline, Sabena. The airline has received bankruptcy protection from a Belgian court, giving it two months to sort out its financial difficulties.

Sabena, which was already planning to lay of 2000 employees, warned that a more radical restructuring plan may be necessary to ensure its survival. Ryanair has made a formal protest to the Commission about the Belgian government's loan to Sabena. Lufthansa, KLM and British Airways complained about earlier Belgian state aid to the ailing airline in March.

Sabena's difficulties worsened this week when Swissair, which owns 49.5 per cent of the Belgian airline, itself filed for bankruptcy protection. The Belgian government, which owns the remaining stake in Sabena, approved the bridging loan when Swissair said it could not fulfil a commitment to provide €123 million euros it had promised the Belgian airline.