EC Panel Adopts Measures to Help European Airlines

BRUSSELS —  The European Commission, in a step that is being eyed warily by U.S. airlines, adopted a variety of temporary measures Wednesday that are designed to help cushion the blow that the Persian Gulf War has dealt to European air carriers.

The measures adopted by the commission, which regulates airlines in the 12 European Community nations, will enable British Air, Air France, Lufthansa and other carriers to more easily raise and lower their fares.

In violation of usual antitrust procedures, they will also be able to make joint arrangements to reduce service on the many routes where potential travelers--fearful of terrorism--have stayed away from airplanes in droves.

The European airlines, many of which faced serious financial difficulties before the war began as a result of excessive expansion, quickly welcomed the EC’s assistance but warned that it might be too little, too late.

Roger Claes, a spokesman for Sabena, the struggling Belgian national airline, called the program “a bubble of oxygen.” Sabena expects to lose $40 million in the first three months of this year, and Claes said losses could mount even higher if the United States and its allies launch a ground war against Iraq.

U.S. airlines expressed fears that the damage-control effort in Europe could hurt them on routes, particularly across the Atlantic, where American and European airlines compete head-to-head.

American Airlines opposes anything that would “tilt the playing field in their direction,” said Lise Olson, a spokeswoman for the Dallas-based carrier. It would be several days, she said, before analysts at American could predict the effects on American of the new measures in Europe.

Jeffrey Kriendler, vice president for corporate communications at New York-based Pan American World Airways, said there was little the U.S. government could do in the current emergency that would be comparable to the European effort.

Pan Am, which is operating under federal Chapter 11 bankruptcy protection, supports a bill to allow the U.S. airlines to temporarily keep the 10% federal tax on airline tickets, but Kriendler acknowledged that such legislation had little chance in Congress. Traffic on Pan Am’s transatlantic routes plunged 30% in January from the same period last year and is down 45% so far this month.

Trans World Airlines has also seen its traffic decline drastically since the start of the Gulf War. TWA Chairman Carl C. Icahn declined to comment because airline officials had not seen specifics of the EC measures.

European Commission officials, sensitive to concerns that they were trying to rescue airlines from their own mistakes as well as their war-related problems, emphasized that the measures adopted Wednesday would expire May 31.

“This is not a general bailing-out operation,” said Leon Brittan, the EC’s commissioner for competition policy.

“You have to distinguish between the problems the airlines were already facing before Aug. 2 (when Iraq invaded Kuwait) and the exceptional circumstances resulting from the war,” Transportation Commissioner Karel Van Miert said.

Specifically, the measures provide that:

* Airlines will be allowed to decide on joint reduction of service where traffic has fallen sharply.

* The European Commission will be “favorably disposed” toward increases by EC member governments in their subsidies to their national airlines to offset the soaring costs of insurance and security during the war.

* The commission will take into account the impact of the Gulf War on airline profits and losses as it approves fares between cities.

The commission also urged member nations, whose value-added tax on airline tickets now reach as high as 19%, to reduce the tax to no higher than 9%.

“This will help,” the Assn. of European Airlines said in a statement reacting to the new measures, “but one must not jump to the conclusion that it will save the day at a time when airlines are facing what is perhaps the most critical situation ever.

“We regard it as a failure that the measures are only granted for three months, albeit with the possibility of extension,” the association said. It estimated that about one month would be needed just to implement the new steps.

According to the association, passenger miles logged by its member airlines have plummeted by nearly one-third so far in February, compared to the same month last year. Passenger miles had been about even with a year earlier before falling precipitously when the Gulf War began in mid-January.

But not all the European airlines’ problems can be traced to the war. Orders for new aircraft soared to an unsustainable figure of 1,750 in 1989, according to the British consulting firm Kleinwort Benson, more than double the rate of two years earlier, even though traffic was growing between 5% and 10%.

British Airways announced last week that it was eliminating 6,600 jobs, and the Belgian government has proposed a $1-billion bailout of Sabena.

Times staff writer Robert E. Dallos in New York contributed to this report.