Virgin may step in to save Sabena

Date: 04/10/01

By Laurence Frost

The UK tycoon's low-cost carrier Virgin Express said it "stands ready to help" as Sabena confirmed it had become the second victim of the shock waves that have swept the industry since the attacks on the US.

Sabena's application comes hot on the heels of the collapse of its affiliate Swissair, which filed for bankruptcy two days earlier, declaring that it was missing a scheduled €130-million payment to Sabena.

Belgian Prime Minister Guy Verhofstadt said the government would provide €125 million in emergency aid and seek new partners to enable Sabena to "create a new, profitable airline" while continuing to operate.

Almost as he spoke, Virgin Express released unexpected new performance figures showing sharp increases in passenger loads since its restructuring earlier this year. "We've heard Verhofstadt saying what we need is a profitable Belgian airline," said Virgin Group spokesman Will Whitehorn. "That is what we are. If the government wishes us to get involved in helping the situation we stand ready to do so."

He stressed that Virgin Express, which is 60 owned by Branson, is also listed on the Belgian stock market.

Virgin Express's fortunes are already closely entwined with Sabena's. An estimated 40 of its own revenues come from its code-sharing arrangement with the Belgian carrier.

Swissair, meanwhile, announced it is to resume operating after Berne announced over €300 million in emergency aid to tide it over until the end of the month.

The move came as the European Commission demanded that Belgium notify its emergency loans to Sabena for EU approval. The executive is already examining an earlier cash injection from the Belgian state. The crisis enveloping Sabena and Swissair is part of the fallout from the attacks on the US last month.

• EU plans to help the industry have been attacked by airports and low-cost carriers. No-frills airline easyJet is spearheading the campaign against plans to freeze access to airport capacity according to the shares airlines held before 11 September. "The challenge the industry now faces should be used for good purpose, to force out inefficiencies and ensure it toughens up," said easyJet chief executive Ray Webster.

Under existing rules, airlines using less than 80 of their take-off or landing 'slots' are forced to cede some of the excess rights to rivals. But the proposals to be unveiled next Wednesday (10 October) will include suspension of the 'use-it-or-lose-it' rule.

The proposal has also met with hostility from airports, who face falling revenues. "A simple suspension of the 80 rule is clearly open to abuse," said Ronan Anderson of Airports Council International.

De Palacio's spokesman said: "We're not talking about doing this for ten years. This is a crisis - I'm sure no one would want to take advantage of such a terrible tragedy."

The proposals will also address new security measures, as well as a possible relaxation of EU competition rules to allow carriers to share out routes and schedules.

The package will be discussed by transport ministers on 15-16 October.

Richard Branson's Virgin empire emerged as a possible saviour for crisis-hit Sabena, as the Belgian airline filed for bankruptcy protection, 3 October 2001.