Low-cost scheme still awaiting Brussels clearance

The European Commission has still not given Malta the go ahead to proceed with its subsidy scheme for low-cost airlines even though the first flights are due to start in just over two weeks.

A Commission spokesman told The Times talks with the government were still ongoing and that "it is still hoped that a conclusion is reached shortly".

According to EU state aid rules, schemes such as the one issued by the government last July to lure low-cost airlines to start operating from Malta have to be in line with its strict guidelines on financing of airports and start-up aid to airlines departing from regional airports.

The government's scheme entails state financial aid towards start-up costs, specific route marketing and promotion of the route. However, it precludes financing connected with recurring operating costs such as aircraft rental or depreciation, fuel, ground handling expenses, crew salaries or catering service costs.

All European airlines were eligible to apply but so far only Ryanair has taken up the offer and the first flights are due on October 31.

When asked whether the Commission will reach a conclusion by then, the Commission spokesman declined to comment.

"This scheme, called Air Route Development Scheme (N640/06) was notified to the Commission on September 25. It envisages granting start-up aid to airlines coming to Malta and is not specific to Ryanair. The scheme is under examination by European Commission officials who are consulting with the Maltese authorities. We would hope to have a decision as soon as possible," he said.

Both the government and Ryanair officials told The Times last month they were confident Brussels would issue the authorisation before October 31.

Ryanair had also dismissed suggestions it had jumped the gun when it started selling flights before the official EU permission to the scheme was granted.

Commission sources explained to The Times that if Brussels does not give the green light by the end of this month, the government will not be able to grant subsidies to Ryanair as this will clearly be in breach of EU state aid rules.