Relaunched airline buffeted by Commission inquiry into loan

Date: 28/02/02

By Laurence Frost

BELGIUM'S relaunched national airline is on the defensive over public funding after the European Commission began examining a €125 million cash injection from a majority state-owned investment fund.

Shareholders in SN Brussels Airlines, the renamed subsidiary of bankrupt airline Sabena, are insisting that the new loan from Belgium's Federal Investment Company (FIM) does not break EU rules.

'It's not state aid,' said Michel van Péé, a board member of SN Airholding, the company that groups investors in the new carrier. 'The [Federal Investment] Company has public and private shareholders - it's their investment decision.'

But a spokesman for Loyola de Palacio, the transport commissioner, said officials were looking into the loan.

'We will have to check if any of the money given to the company has to be considered as state aid,' said Gilles Gantelet, who added there had already been 'some contacts' with FIM's main shareholder, the Belgian government.

A full state aid investigation would deal a heavy blow to SN Brussels Airlines, whose merger talks with Virgin Express failed to produce an agreement by this morning's deadline (28 February). SN Airholding secured the long-term loan from FIM on 8 February - the day after the deadline for repaying an emergency bridging loan of the same size granted by the government last November and approved by the Commission.

Belgium argues the new funding cannot constitute state aid, since the airline was not the immediate recipient.

'It's a loan to the holding above the airline, not to the airline itself,' said a spokeswoman for Rik Daems, the public enterprise minister. 'It is an investment at FIM's own risk.'

FIM is the modern successor to Belgium's National Investment Company, set up in 1962 to channel funds into state industries. Partial privatisation in 1994 brought the change of name and a dilution of the government's holding to around 80.

SN Brussels Airlines last week announced the resumption of flights to 11 African destinations formerly served by Sabena, including Kigali and Kinshasa.

The carrier operated as Delta Air Transport (DAT) until 15 February, when it announced the new name, allowing it to maintain the old Sabena logo and 'SN' flight codes.

• As European Voice went to press, merger talks between SN Brussels Airlines and Virgin Express, the low-cost carrier controlled by UK entrepreneur Richard Branson, broke up without an agreement after four months of negotiation.

The two airlines have agreed to maintain the commercial agreement and co-sharing arrangement already in place.

Belgium's relaunched national airline is on the defensive over public funding after the European Commission began examining a €125 million cash injection from a majority state-owned investment fund.