Europe forced to turn back clock to bail out airlines

European governments have gone retro. After the launch of privatisation in aviation two decades ago, the coronavirus crisis has caused a sharp policy reversal as countries across the continent have stumped up billions of euros in state aid to save their national flag carriers. Paris has increased its stake in Air France-KLM to nearly 30%, Berlin has taken a 20% stake in Lufthansa, while Rome owns 100% of Alitalia as more than E20b has been invested in companies considered too strategically important to fail. But a backlash against state support is growing as rival carriers fear an uneven playing field and warped competition. While governments defend investment as necessary to save airlines facing unprecedented short-term risks to their survival, critics say public money could allow propped up airlines to avoid tough decisions needed for long-term growth. The fiercest critic has been Ryanair boss Michael O’Leary, who has filed 16 cases to test the state aid rules in European courts, arguing that support made available to flag carriers only is discriminatory and undermines the EU’s single market in air travel. The CE said companies such as Air France will never be able to pay governments back, but will be able to “subsidise and suppress competition for the next decade.” “We, easyJet, [BA owner] IAG and the others have to compete with these state-aid, crack cocaine junkies.” Ryanair has lost all five cases decided so far, but O’Leary said he thinks there is a “very strong likelihood” his low-cost airline will overturn the verdicts on appeal. The pandemic has also highlighted differences between the continental Europeans, where state-aid rules were relaxed to help companies survive the crisis, and the US and UK.<br/>