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Business

EU Rejects State Aid for German Cargo Carrier DHL

EU Comission regulators Wednesday blocked Germany from offering German express delivery giant DHL state guarantees worth up to 500 million euros ($789million) to help set up its European hub at the Leipzig-Halle airport.

DHL cargo plane taking off in Leipzig

The EU Commission says DHL enjoys an unfair advantage over rivals

The European Commission in Brussels on Wednesday, July 23 ruled that the guarantees by the government of the federal German state of Saxony violated EU state aid rules as they "allowed DHL to hedge business risks on terms which a private investor would not have accepted."

The commission opened a probe in November 2006 after German authorities informed EU regulators of plans to help build and operate the new runway at the airport, where DHL wants to set up its European express parcel hub.

Europe's top competition watchdog said the offer of up to 500 million euros of public money gave DHL an unfair advantage over its rivals. It added that DHL has already benefited from the maximum amount of investment aid permissible for regions with an especially low standard of living and high unemployment.

The Commission did however authorize 350 million euros of public investment for a new runway at Leipzig Halle airport.

DHL says unconcerned about guarantees decision

DHL, owned by Deutsche Post, said it welcomed the decision on the contribution to the new runway and said it wasn't concerned about the decision on the guarantees.

"CEO Frank Appel emphasized that Deutsche Post can live quite well with the commission's decision today," DHL said in a statement. "We have obtained in the meantime the long-term security that DHL urgently needs at the Leipzig location," the statement quoted Appel as saying.

DHL said that it expected "no consequence whatsoever on the operational day-to-day business nor on DHL's decision to operate the central European hub in Leipzig for the long term."

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