PARIS—The European Commission (EC) has approved a French scheme allowing airlines to defer the payment of some taxes to help them weather the COVID-19 crisis by reducing pressure on their cash flows. 

The EC said the French scheme is in line with European Union state aid rules. The plan will allow for the deferral of some taxes for the aviation sector, with the aim of compensating airlines for the damage the coronavirus outbreak has caused them and reducing pressure on their cash flows.  

The scheme will be accessible to airlines with an operating license in France, and will offer them the possibility to defer the payment of certain taxes that would in principle be due between March and December 2020 to after Jan. 1 2021, and to pay the taxes over a period of up to 24 months. 

EC EVP Margrethe Vestager, in charge of competition policy, said March 31: “The French scheme will partly compensate airlines for damages suffered due to the coronavirus outbreak. This is the first State aid measure notified to us by a Member State aiming to mitigate damages to the airline sector.”

Vestager said that, together with member states, the EC was working to ensure that possible national support measures to tackle the outbreak of the virus can be put in place as quickly and effectively as possible, in line with EU rules.

The EC considers that the coronavirus outbreak qualifies as an exceptional occurrence, as it is an extraordinary, unforeseeable event having a significant economic impact and as a result, exceptional interventions by member states to compensate for the damages linked to the outbreak are justified, the EC said. 

“The Commission found that the French aid scheme will compensate damages that are directly linked to the coronavirus outbreak,” it said. “In this respect, the scheme will contribute to address the economic damage caused by the coronavirus in France. It also found that the measure is proportionate as the foreseen compensation does not exceed what is necessary to make good the damage.”

French airlines’ association FNAM said March 31 that the government measures unveiled so far are insufficient, stressing that commercial aviation is facing the worst crisis in its history.

“FNAM emphasizes that the situation of French airlines is simply catastrophic: the whole sector is living through an unprecedented shock,” the association said. “In the face of this situation, the measures taken by the government are necessary but will not be enough to ensure the survival of the French airline industry.”

France’s economic minister Bruno Le Maire has said several times in recent weeks that the government is ready to do whatever it takes to support French companies, including recapitalization, taking a stake or even nationalization if necessary. France owns 14.3% of Air France-KLM. 

France has pledged state-guaranteed loans for crisis-hit businesses as well as launching a €45 billion ($49.5 billion) financial aid package to help businesses across all sectors hit by the crisis, including deferred taxes and social charges and reimbursing companies for reduced staff working hours.