EU expected to relax rules on aid

The European Commission is expected to approve limited state aid to airlines in a report on the impact on the industry of the US attacks to be published tomorrow. The Transport Commissioner, Ms Loyola de Palacio and the Competition Commissioner, Mr Mario Monti, are expected to conclude that last month's attacks created "exceptional circumstances" that warrant a loosening of strict EU rules on state aid. But EU sources suggest that the Commission will set out clear conditions for governments in an attempt to ensure state aid to airlines does not distort competition within the industry. The report is expected to conclude that last month's attacks will have cost EU airlines €3.6 billion (£2.84 billion) in lost revenue by the end of the year and that 30,000-40,000 people could lose their jobs.

Governments would be allowed to pay for extra security measures that have been introduced since the attacks and to guarantee war risk insurance until the end of the year. Rules demanding that airlines should lose landing slots could be relaxed. The Commission is also likely to approve deals between airlines to share out routes.