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Belgium set for legal battle with Swissair

The battle continues between Swissair and the Belgian government Keystone Archive

The Belgian government will attempt to force Swissair Group, through the courts, to honour its commitment to take a larger stake in the loss-making airline Sabena, according to a source close to the government.

The source said the government feels that Swissair has done everything possible to avoid its responsibilities to Sabena, which meant “the Belgian government had to react”.

Swissair spokesman, Patrick Jeandrain, told swissinfo that as yet the group had heard nothing from the Belgian government regarding any planned legal action.

“I cannot see on what grounds the Belgians would intend to start legal action, but so far we have heard nothing,” explained Jeandrain.

According to the source, quoted by a French news agency, the government plans to start legal action against the Swiss carrier after rejecting Swissair Group’s so called “final offer” of fresh cash for its ailing Belgian affiliate, Sabena.

Swissair saw the cash offer as a way of extricating itself from a commitment to increase its holding in the airline to 85 per cent.

Belgium’s cabinet was meeting on Tuesday to review its options. “They [the ministers] have to analyse the situation after the latest proposal from the Swiss, which is deemed totally unacceptable,” said presidential spokesman, Alain Gerlache.

Commenting on the situation, Swissair’s chairman and chief executive, Mario Corti, said: “It is with astonishment that I have received from the Belgian government… a summary rejection of the one proposal on the table which will ensure Sabena’s future without even discussing the matter with the parties concerned.”

After frenetic closed-door negotiations ended unsuccessfully on Friday, Swissair presented a written offer to Sabena’s co-owner, the Belgian government, which it said was an “improved and final offer” on what it had discussed last week.

The Swissair offer would have provided fresh cash to keep Sabena flying in exchange for getting out of its commitment to raise its minority stake of 49.5 per cent in the Belgian flag carrier to 85 per cent.

The Belgian Prime Minister, Guy Verhofstadt, has threatened to take legal action against Swissair if it fails to meet its obligations.

However, Corti said on Tuesday that the Swissair Group was not willing to finance loss-making airlines indefintely and that without the latest plan being accepted “the future of Sabena now looks increasingly in doubt”.

“Now whether negotiations continue or they end up in court is yet to be seen. Clearly it looks like it’s going to drag on for some time yet,” said ABN Amro analyst, Damien Horth.

“It is a very difficult situation for Swissair. It is a difficult situation for the Belgian government as well; it doesn’t want to take the blame for the company going bankrupt,” he added.

The offer put on the table on Monday by Swissair is a far cry from a total separation that some analysts had expected. The Swiss group only wants to reverse a commitment made by its previous management in January of this year.

Swissair agreed then to raise its stake to 85 per cent as soon as a series of bilateral agreements between Switzerland and the European Union come into force, which they are likely to do next year.

Swissair said its new offer called for it and the Belgian government, which has a 50.5 per cent stake, to provide jointly €275 million (SFr418 million) to Sabena. Swissair would also provide an extra €30 million subordinate loan to Sabena.

“The 305 million euros should allow Sabena to continue operating provided the Sabena management meets the operational objectives of their proposed business plan,” Swissair said.

It added that in return it would no longer be obliged to increase its stake and it would be discharged from any further financial engagements to Sabena or Belgium.

Swissair, which lost SFr2.9 billion last year, has pledged to sever all ties with loss-making foreign carriers unless the companies involved can be turned around quickly.

Sabena has only turned a profit once in several decades.

swissinfo with agencies

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SWI - a branch of Swiss Broadcasting Corporation SRG SSR