European Gov'ts, Airlines Adapting To World Crisis

Low-cost airlines hope to gain footholds at London's Heathrow and Gatwick airports after the European Commission today granted only a limited waiver on "use it or lose it" slot rules. The Commission said it would allow airlines to retain their airport slots for the summer 2002 season even if they had failed to meet rules dictating that they must be used 80 percent of the time this summer. However, the EC said it would only "examine whether measures should be introduced for the corresponding winter 2002-2003 season" based on slot usage during the winter 2001-2002 season, which starts on October 26.

Ryanair, easyJet and other low-cost carriers hope to persuade the Commission not to waive the rules for the winter season. British Airways, which holds 65 percent of the slots at Gatwick, is planning to operate 190 fewer flights per week from the airport, following a huge cutback program announced in the last two weeks. In contrast, the low-cost airlines have seen business soar, with easyJet reporting September 2001 passenger figures up 27 percent, compared with September 2000.

The European Commission also ruled that member governments can only compensate struggling airlines for losses relating to the closure of U.S. airspace on Sept. 11 through 14. It further permitted governments to meet airlines' additional insurance costs to the end of the year and recommended they foot the bill for enhanced security measures.

The limited scope of the announcement suggests it will uphold complaints from Lufthansa, SAS, Ryanair and easyJet about a E125 million emergency bridging loan granted to Sabena by the Belgian government. The Irish government is expected to announce a similarly controversial bail-out for Aer Lingus, which has lost 80 percent of its transatlantic business and is shedding 2,500 of its 7,000-strong workforce. It would be virtually unprecedented for a national government to overrule a Commission verdict if it did rule such loans illegal.

The financial rescue of Swissair is not affected because Switzerland is not in the European Union. Swissair, once a byword for premium travel, and Sabena both have announced plans to relaunch themselves as low-cost carriers, indicating both the extent of the crisis in European aviation and the speed with which intra-European travel is moving to a low-cost model.