DISADVANTAGED HOMES

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01 August 2005

Home countries airlines, denied access to export credit for new aircraft, are now pushing for a regulatory review. Victoria Pennington reports.

Lufthansa gives a lot to Germany. It is not just the Eu133 million ($161 million) in taxes it paid in 2004; the fact that it employees 90,000 people, or the 70% of its costs that are in Germany. Lufthansa also acts as a flag carrier for the country. Some 65% of its passengers are foreign and the airline advertises abroad encouraging tourists to visit its home country and also aiding business deals.

So why is the German government subsidizing foreign airlines that compete with Lufthansa?

It is not just Germany. France, Spain and the UK all provide cheap finance, through export credit guarantees, to foreign carriers buying Airbus aircraft even though many compete with their own airlines. The Export-Import Bank of the US does the same for Boeing aircraft.

"It is particularly annoying to see your government support profitable airlines that compete directly with you," says an airline manager.

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