SN Brussels chief on cloud nine as new Belgian airline starts to take off

Date: 05/02/04

PETER Davies has reason to feel optimistic.

The strapping Welshman and former pilot was brought in to salvage the wreckage of Belgian national carrier Sabena, which crashed and burned in November 2001. Branded Belgium's biggest ever corporate failure, the post-9/11 Sabena bankruptcy was a national economic and social disaster.

Enter Davies, a 14-year veteran of global express air carrier DHL, who took over the helm at Sabena's successor, SN Brussels, in Spring 2002.

Davies said he has focused ever since on three simple goals: "To connect Brussels, to try to reduce the trauma of bankruptcy as much as possible, and to try to make a profit."

SN Brussels obviously has a major advantage in serving the capital of Europe.

"Brussels is a huge strategic opportunity now and in the future, and we want to take advantage of that. . . there is a genuine desire and need for people to fly to Brussels, versus to Rome or Zürich."

And although thousands lost their jobs when Sabena went bust, 98% of the nearly 2,000 current SN Brussels staff are ex-Sabena employees, Davies proudly emphasizes.

Speaking at an event hosted by the British Chamber of Commerce in Belgium, Davies impressed upon the audience his boundless sense of optimism about the airline.

And the CEO's confidence is not unfounded: profit margins were up for the first time last year, and the latest figures promise to be even better, with "2004 looking quite positive".

Total revenues for July-September 2003 increased by 17% to €153.8 million, resulting in a net profit of €2 million compared to a loss of €19.9 million for the same period in 2002.

Figures for the rest of 2003 are due to be released in mid-March or early April.

The 38 aircraft that SN Brussels operates flew some three million passengers to European or African destinations in 2003, an increase of 11% over 2002 statistics.

Part of this positive vibe comes from an overall increase in air travel - the percentage of passengers flying in Europe increased by 0.8% last year, according to Davies.

Still, he said, "we're doing something right in clawing back business from other carriers".

Sabena was not necessarily doing everything wrong, even though it had made a profit "only twice" in its 78-year history, he said.

"Sabena's business model was in principle a good model," which entailed "either feeding European routes or other long-haul routes; the trouble was that everyone else was doing the same thing - both the big and the small."

One highly unprofitable route Davies decided to cut early on was the Brussels to Johannesburg haul. "Sabena lost €25 million flying there."

Decisions like these boil down to "basic maths" - and common sense.

"Never take an average of an average. The airline industry takes an average of an average of an average," an animated Davies adds, eliciting laughs from his bemused audience.

But SN Brussels is not trying to follow in the footsteps of low-cost carriers such as Ryanair, easyJet or Virgin Express, either (although the Belgian carrier did flirt with the latter in a brief alliance).

"I think they are great airlines; but it's wrong to compare the business model of SN Brussels to that of Ryanair."

In terms of major European carriers, such as Air France, British Airways and Lufthansa, "our strategy is not specific, although we lean more towards British Airways".

Overall, "the strategy is to make sure we don't prostitute ourselves in trying to be all things to all people".

At the same time, SN Brussels is not only about direct flights to the Belgian capital.

From 1 March, for instance, the airline will open up a Marseilles-to-Geneva route which it hopes will attract both business and leisure travellers.

"A lot of our lunchtime flights were not making a profit," Davies explained.

"The Marseilles lunchtime route [to and from Brussels] was losing €6,000 each day, which was reduced by keeping it on the ground to €2,000 a day."

But then the SN Brussels team came up with a pretty nifty idea: "They did some research and found that there were no flights to Geneva [from the French city]."

And they are "doing research now to see what other triangular flights we can operate; the idea is to keep the assets in the air".

The Marseilles-Geneva route is the "first use of fifth-freedom rights" under a 1999 agreement between the EU and Switzerland that opened up the civil aviation and other sectors between the two.

Unlike Ryanair, which flies exclusively to European destinations, SN Brussels has several African and US connections. The carrier has added a New York connection in partnership with American Airlines, which launches in the next few weeks.

Davies seemed nonplussed by all the fuss over the then impending European Commission ruling on Ryanair.

He praised Michael O'Leary's Irish airline because "they proactively think outside the box" and because "[they ensure that] we have to work harder to make sure we generate the routes".

And he refused to criticize Ryanair over "sweetheart" deals that critics claim it has unfairly negotiated at regional airports across Europe: "I can't sit back and think Ryanair has been totally unfair."

But Davies also appears confident that SN Brussels offers its customers just as much - if not even more - than Ryanair.

"We have advantages [they don't have]; do you want to spend €85 on a taxi or three hours on a bus [to get to the Ryanair hub at Charleroi. It's actually only about an hour]?"

The SN Brussels "advantage" is "fully flexible service, less hassle and less travel time" to Brussels' main airport, Zaventem.

"If you're travelling with Ryanair and something happens and you're grounded, you've got no [extra] flights left.

"It just depends on what you want; but those €5 tickets are also a bit of a myth," he added, in reference to Ryanair's rock-bottom advertised fares.

And what does Davies want from the European Union? "A level playing field."

Most companies that service airports are still "in a monopoly position", whereby they can charge airlines for their services.

"So they are locked into a good position, but that is unfair because we have to absorb all those [extra] costs and support the passengers as well."

Air traffic controllers, for example, "can charge whatever they want". So can many other suppliers of goods and services to airports.

So the real question, he added, should be: "Is that unfair?" or "Is the tail wagging the dog?"

While he realizes "you cannot suddenly have three million companies delivering packages" to airports, he would like to see "a better environment" where airlines "are more capable of negotiating" their own deals.

Meanwhile, Davies seems very pleased indeed about the direction SN Brussels is moving in.

And he likes to stress that he alone is not responsible for the airline's current upward trend.

"Our commercial director, our senior management - are very dedicated, very focused and very proud that we can manage a Belgian airline and turn it into a profitable situation."

• SN Brussels currently flies to 54 European, 14 African and 23 US cities, including a daily direct flight to Chicago.

Interview with Peter Davies, Chief Executive of the airline SN Brussels, successor to Belgian national carrier Sabena.