The government is free to compensate Air Malta and other airlines operating to the island for losses suffered as a result of the ash cloud crisis, under a European Commission measure announced yesterday.

However, the compensation will not be automatic and will have to be based on documented lost revenue.

Finance Minister Tonio Fenech, who is responsible for Air Malta, said last week the national airline estimated it had lost €3.5 million in revenue over seven days, when almost all flights to and from Malta had to be cancelled due to the ash cloud emanating from an Icelandic volcano.

Air Malta had to cancel 336 flights, which would have carried 32,044 passengers, during the period as the cloud forced the closure of huge tracts of European airspace.

Contacted after the announcement by EU Transport Commissioner Siim Kallas, a government spokesman said no decision had yet been taken on whether to help airlines.

The commissioner said that now that the situation was returning to normal, the Commission's focus would be to come up with a package of short-term and structural measures for the air transport industry.

Although governments would be allowed to offer compensation, in a similar way as in the aftermath of the 9/11 terrorist attacks, the aid should be in line with EU rules and should be granted on the basis of uniform criteria related to the crisis, he said.

"The Commission considers that member states can rapidly implement measures in favour of the air industry, which do not constitute state aid - notably loans and guarantees granted at market conditions."

The Commission will not allow unfair assistance to companies not directly related to the crisis.

The European commissioner insisted that airlines should shoulder their responsibilities to compensate stranded passengers for the cost of food and accommodation. "No airline company should benefit from a competitive advantage by avoiding its legal obligations," he said.