European Union (EU) competition authorities have approved a 150-million-euro emergency credit facility from the German government to the insolvent carrier Air Berlin on Monday.
The loan constituted a permissible form of state aid under European law, a commission spokesperson confirmed.
The approval is conditional on the award of credit in several tranches, with funds only transferred on a weekly basis once the previous tranche has been used up. Additionally, the German government must ensure that the loan is repaid, or present a liquidation plan for the company.
Earlier, German officials had offered emergency finance in order to ensure the continued operation of Air Berlin flights until a new buyer for Germany's second largest airline would be found. Over the weekend, the insolvent airline accepted the terms of the loan, agreeing to pay an interest rate of around 10 percent.
A green light from Brussels was still required in order for the transaction to proceed however.
The positive decision on Monday is likely to cause disappointment to rival airlines such as Ryan Air and Germania which had announced legal action against what they perceive as a governmental attempt to undermine competition in the aviation authority.
Ryan Air CEO Michael O'Leary accused Berlin of a "conspiracy" to benefit Lufthansa as the most-likely future owner of Air Berlin's business. He warned that industry leader Lufthansa's domestic market share would rise to over 95 percent if it took over Air Berlin's inland connections.
Air Berlin has already advanced talks with several interested buyers. The company's landing rights at the Berlin and Duesseldorf airports, as well as its profitable Austrian subsidiary Niki are seen as highly-prized assets by competitors. A decision could be reached as early as Sept. 21, according to some reports.
Meanwhile, the governors of North-Rhine Westphalia and Berlin reiterated their demand that potential investors save as many of Air Berlin's more than 8,000 jobs as possible. Enditem
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