Eurocopter in France and AgustaWestland in Italy will receive government funding for development of a new helicopters.

Permission for the research and development funding was given this week by the European Commission, which ruled that the funding was compatible with EU rules on state aid.

The two companies plan to develop new, medium-weight helicopters: the Eurocopter X4 and AgustaWestland's AW 169. The aircraft will feature major technological innovations for enhanced performance, reduced operating costs and limited impact on the environment.

"These two helicopters will bring significant progress in terms of flight security and reduced environmental impact," said EC Vice President in Charge of Competition Policy Joaquin Almunia. "They will also help to increase European know how in leading-edge technologies.

"The public support for these two highly innovative projects is fully justified."

The European Commission said the scale of the Eurocopter and AgustaWestland projects are such that the investments and associated risks exceed the funding capacities of the undertakings (in a context of markets being wary of financing risky projects where there will only be a long-term investment return), so "French and Italian aid, therefore, makes up for a genuine market failure."

Government aid will be "proportionate" -- limited to what is necessary for research and development efforts, the European Commission said.

Eurocopter's X4 will receive French government support through an existing state aid scheme approved in 2010 by the EC. Funding would amount to about $188.7 million -- about 30 percent of total costs eligible for aid. Advances will be repaid when a pre-defined sales target is attained.

Each additional delivery beyond this target will trigger the payment of a royalty fee to the member state.

Italy will provide AgustaWestland with about a $359 million subsidized loan -- with zero interest - over 19 years. The aid portion of the loan is about $124 million.

The commission said that in the case of AgustaWestland it took into account that AW 169 work will be conducted in economically strapped regions of Italy and that the R&D activities would make a positive contribution to their technological development.