The European ministers were against providing the kind of funds demanded by US airlines, European Transport Commissioner Loyola de Palacio said after an EU transport ministers' session.

Verelis said the ministers supported Commission proposals which did not envisage any subsidies except in very specific cases.

European airlines warned Thursday that US rivals, already struggling in the wake of September 11 and a general economic downturn, were poised for a massive government bail-out to offset the impact of the war in Iraq.

"While European airlines prepare to measure the impact of the war, carriers in the USA appear to be successfully lobbying for a massive government bail-out," the Association of European Airlines said in a statement.

Verelis said following the EU ministers' meeting here member-states would be allowed to compensate airlines' costs incurred as a result of closure of airspace, he said.

Member-states will also be allowed to intervene to aid their airlines to cover themselves against the risk of war and terrorism if private insurers withdraw from the market, as they did during the September 2001 attacks in the United States.

Apart from these two instances, transport ministers envisage member-states financing possible additional security measures aboard aircraft on condition that such measures affected all airlines without any national discrimination.

The ministers also agreed that companies should be allowed temporarily to cancel flights without losing airport slots.

But de Palacio said she regretted that the EU states had refused to provide the European Commission with a mandate to negotiate with the United States on a "common transatlantic zone" which would provide a framework of appeal in the event of dumping by American companies.

Air transport relations between the United States and European countries are regulated by bilateral agreements, most of which have been rendered partially invalid by the European Court of Justice.

AEA Secretary General Ulrich Schulte-Strathaus warned Thursday against large-scale government bailouts, saying if competitors were trying to gain "an unfair competitive position over the European airlines, we will resist this at the highest political level."

American Airlines and United Airlines, the world's number one and two carriers, are both in major financial difficulty. United has already filed for bankruptcy protection, while American said Thursday it was weighing Chapter 11 procedures.

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