Scotland'S flagship subsidies for direct flights will effectively end this summer.
Senior aviation experts last night revealed that the Scottish Executive's Route Development Fund (RDF) will become "unworkable" after new European Union regulations come into force in June.
The executive will be able to continue paying existing subsidies that have helped lure more than 40 new services, including lucrative links from Glasgow to Dubai and Boston and Edinburgh to New York and Atlanta.
But the experts warned that it won't be able to offer new financial backing for anything but the most modest flights between regional airfields.
The executive, however, yesterday officially insisted it would press ahead with a scaled-down version of the RDF. A spokesman said: "This is an issue we are well aware of.
"Routes that have actually started by June 2007 will remain eligible for funding under the current arrangements. We already have plans to ensure that our very successful RDF fund can continue after that date."
The newEU rules, introducing by the European Commission despite considerable lobbying from Scotland and elsewhere, will outlaw subsidies for long-haul routes launched after the end of May and all flights to airports with 10 million ormore passengers a year.
Restrictions, sources said, will also make subsidies for flights to airports with more than five million passengers a year exceptionally difficult. That would rule out many of the 43 planned and current routes successfully delivered with help from the RDF to date.
Analysts have long blamed the crackdown on lobbying from Europe's flagcarriers, the national airlines nervous of "regional"departures and lowcost airlines luring passengers from their huge hub operations.
The Scottish Executive - along with the UK Department forTransport (DfT) and the UK's representatives to the commission tried to save the RDF in talks in Brussels. A leaked report on Scotland's relationship with the European Union, revealed in The Herald earlier this week, spells out how.
The report said: "Recently published commission guidelines on start-up aid for new air services have a direct impact on the executive's successful Route Development Fund.
"Transport officials accompanied DfT and UKRep to several meetings with the commission where both UK and Scottish specific concerns were highlighted. Whilst such direct engagement did not lead to the commission amending its new guidelines, it did lead to short-term compromise solutions which DfT, the executive and the commission found acceptable.
"The executive wishes to continue the fund and is considering options for its future structure from June 2007."
Aviation experts, meanwhile, are relatively relaxed about the end of the RDF. It has helped bring more routes than would ever have been hoped for at its outset in 2003, including key links from Edinburgh to other big financial centres, such as the recently announced services to Zurich, Munich and Madrid. There are a few more routes on the wish list, not least a direct flight to Hong Kong or another east Asian gateway.
RDF, however, was never going to fill all of Scotland's missing links. GlasgowAirport still doesn't have direct flights to Brussels, Paris and Frankfurt, three of Europe's biggest hubs.
Even the old subsidy rules meant new routes to the big three hubs couldn't be subsidised against rival routes by Ryanair from Prestwick in Ayrshire to secondary airports serving, the airline claimed, the same cities. SN Brussels, effectively Belgium's national airline, tried a Glasgow route. It flopped.
The rules did, however, let the executive use RDF to support routes from Edinburgh duplicating those that already existed from Glasgow.Greens too have criticised the RDF for promoting air travel, the fastest growing source of greenhouse gases. Several of the flights subsidised are to destinations in the UKwhere there were obvious rail or road alternatives.
Governments won't be able to offer new financial backing for anything but the most modest flights between regional airfields.
Although revenue per seat fell 6.8 percent in the second half, costs - excluding fuel - were cut by 10 percent.
The carrier canceled all flights Wednesday night after its parent company had failed to secure the extra funds it had been seeking.
BAA Scotland, which runs Glasgow and Edinburgh airports, admitted that the number of air passengers declined for the first time last year.