Outlook: Pyrrhic victory over Air France

ONE OF the most infuriating things about the European Union is its tendency to slam the door after the horse has long since bolted. The wheels of justice grind exceeding slow in anything to do with Brussels, but the Luxembourg-based Court of First Instance finally got round to ruling yesterday that the European Commission had been wrong to sanction a $3.3bn package of rescue aid for Air France, originally granted more than four years ago. However, having eventually come to the "right" judgment, it is not immediately apparent the Brussels machine can or will do anything about it.

The Commission's original decision was always an outrageous one, notwithstanding the fact that, since airlines don't operate in properly competitive markets, it may not be appropriate to expect them and the governments who sponsor them to act as if they do. Even the mighty British Airways was sped into the private sector on the back of a huge write-off of government debt. Its extraordinary monopoly of slots at Heathrow might be viewed as another form of state aid altogether.

Even so, it is plainly unfair that now highly efficient private sector airlines like BA be forced to operate against ones kept alive on a constant diet of state handouts. In any other business, many of these airlines would long since have gone to the wall. In the case of Air France, moreover, some of the aid was immediately splashed out on 17 new aircraft, which helped give the airline a competitive edge on long haul transatlantic routes. No amount of fancy language could dress this up as a "restructuring" expense, the only sort of state aid allowed under European rules.

So can Air France now be forced to hand the money back? Er, probably not. For a start, it is not obvious the judgment requires any action, and if it doesn't that would allow the Commission to adopt a "point taken" stance and then move on to other business. Nor is it obvious that Air France could in practice pay back all or even some of the money without becoming insolvent. We're all in favour of a rigid adherence to the rules of fair competition but to knock a competitor out of the market altogether in their name might seem just a little counter-productive.

British Airways and others who complained to the Commission about the aid may have scored a victory, but it is all too likely to prove a pyrrhic one. The chances of anything coming of it look remote. All the same, an important marker has been laid down. This is the single European market now. Woe betide anyone who tries that state aid stuff again.