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Sabena deal heads for a bumpy ride

The European Commission must decide if the cash injection for Sabena is legal Keystone Archive

Four European airlines are reportedly set to challenge a re-capitalisation programme intended to keep the Belgian carrier, Sabena, in the air, according to newspaper reports.

This content was published on February 27, 2001 - 11:35

Tuesday's Financial Times says that Lufthansa, British Airways, SAS and KLM are planning a joint complaint to the European Commission about the cash injection by the company's two shareholders, Switzerland's SAirGroup and the Belgian government.

The four companies are expected to argue that the Belgian government's plans to pump around SFr150 million into Sabena may break the law. The European Commission has declared illegal any further state support for airlines unless governments can demonstrate that a private investor would have acted the same way.

Under the deal approved last Friday, the SAirGroup is also investing a further SFr230 million in Sabena. The re-capitalisation plan is dependent on a range of cost-cutting measures agreed with the trade unions.

Reports of the complaint come a day after Brussels confirmed that it had initiated an inquiry into whether the plan breaks EU rules. But the Belgian government says the matter is routine and clearly expects a positive response.

"There is a private investor here so there is no question of this being state aid," said a government official.

But the challenge will not make Sabena's turnaround any easier and is likely to fuel suspicions that the SAirGroup will eventually pull out of the airline.

In a letter to staff last week, SAirGroup chairman and acting chief executive, Eric Honegger, admitted the company was considering such an option.

It's part of a wider review that's seen the company abandon the strategy of the former chairman, Philippe Bruggisser, who resigned last month.

It will see the SAirGroup stop trying to build alliances with other medium-sized European airlines. And in a further bid to return to competitiveness, the company is also considering the sale of its hotel chain, Swissotel, its IT arm, Atraxis and its aircraft leasing business, Flightlease.

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