Board fails to accept Sabena rescue plan

The plan to rescue Sabena calls for cash injections from Swissair Group, which holds a 49.5 per cent stake in the Belgian carrier Keystone Archive

The board of Sabena, Belgium's loss-making national carrier, remains undecided about the merits of a business plan, put forward by the company's CEO, Christoph Müller, to rescue the troubled airline.

The strategic plan, put forward by Müller, aims to bring the troubled airline into the black by 2005. Last year, it chalked up losses of more than SFr500 million ($310 million).

A four-hour meeting in Brussels with the company’s two main shareholders, the Belgian government, which holds a 50.5 per cent stake, and the Swissair Group, which holds the remaining 49.5 per cent, failed to reach any definitive decision on the matter.

In a quick announcement after the meeting, Fred Chaffart, Sabena’s president, said the salvage plan could only succeed if the airline received a major cash injection and reduced its operating costs.

Sabena will now hold further talks with the Swissair Group and the Belgian government in a bid to secure more funding. So far Swissair has declined to comment on the matter but acknowledged the outcome of the meeting.

As far as Sabena’s links with Swissair are concerned, Patrik Schwendimann from Zurich Cantonal Bank, said it was likely that Swissair – which is itself struggling to recover from record losses – would, in the long run, decide to pull out of Sabena.

“Their goal is certainly to get rid of it – to go to zero per cent in the long run,” said Schwendimann. “All Swissair investors are hoping that Swissair Group would one day be without Sabena.”

Schwendimann said Swissair’s first goal would be to untangle itself from an agreement struck with the Belgian government last year to increase its stake in Sabena to 85 per cent.

“If they can stay at this level [49.5 per cent], I think they would agree to inject some more money into Sabena,” he said, adding that a profitable Sabena would allow Swissair Group to get a better price for its Sabena stake.

Analysts hold out little hope of Sabena being able to save itself in its current form and say its days as a big international carrier are numbered.

They recommend that Sabena surrender all ambitions to be a global flight carrier alongside British Airways, Lufthansa and Air France, and look instead at a drastic reduction in the scope of its routes flown.

One analyst told swissinfo that Sabena only had a future as a “satellite carrier within the context of a global alliance”.

There are signs that Sabena’s management are thinking along the same lines. An analyst at SG Securities, Ian Wild, noted that the Belgian airline had already scaled back its long-haul network.

Sabena also announced last May that it had suspended the delivery of 19 leased Airbus A320 aircraft while it reviewed its flight network under the new business plan.

Trade unions now hold the key to deciding about the future of a streamlined Sabena, which currently has about 12,000 employees. A scaled back company would mean crucial cost savings from job losses and lower wages.

“It’s about accepting reality, really. Accept a smaller airline, or no airline at all,” Wild said.

“It’s clear there is no one that is willing to provide continued cash injections in order to allow the company to carry on losing money, which has been the case for the past ten years.”

swissinfo with agencies