Sabena joins legal battle against Swissair

The Swissair jet was forcibly grounded at Brussels airport for 24 hours AP Photo / Geert Vanden Wijngaert

Belgium's loss-making airline, Sabena, has launched its own legal action against Swissair over the aviation conglomerate's refusal to boost its minority stake in Sabena to 85 per cent.

This content was published on July 5, 2001 minutes

In a statement on Wednesday, Swissair Group said it was "disappointed that the Belgian government has chosen to focus on litigation and walk away from the negotiating table".

The comment came in response to the Belgian government's announcement late on Tuesday that it would be taking "Swissair to court for breach of contract". Belgium accuses Swissair of reneging on a promise to accept financial responsibility for Sabena.

No sooner had the Belgian government made the announcement when workers at Brussels airport decided to take matters into their own hands, and stopped a Swissair flight from taking off for Zurich.

The Sabena employees finally released the Swissair jet on Wednesday night after keeping it grounded for 24 hours, and not before the disruption had led to a suspension of all Swissair flights from Belgium.

The latest crisis stems from a commitment made by Swissair's previous management to increase its stake in Sabena from the current 49.5 per cent to 85 per cent. At present the Belgian state holds the other 50.5 per cent.

But the Swiss group, reeling from huge losses from a disastrous foreign expansion drive, has been trying to extricate itself from the agreement.

In a separate development, court-appointed administrators representing two loss-making French regional airlines, part-owned by Swissair Group, have said they can offer no guarantee of the financial future of the companies.

The administrators, Gilles Baronnie and Beaudoin Libert, were appointed on June 15 to find a buyer for the two airlines.

"As the situation stands today, none of the potential buyers who have come forward represents a viable future for the companies," the administrators announced at a press conference in Paris.

On Tuesday, Belgium's public enterprise minister, Rik Daems, told a news conference that his government would file a series of suits against Swissair in both Brussels and Zurich to try and force the Swiss company to live up to its promises.

"The reason for this decision is to get Swissair to respect their contractual obligations," Daems said, adding Swissair should be forced to provide Sabena with €529 million (SFr805 million) in the form of a loan or credit line.

If it refused it should be made to pay €354 million (SFr540 million) in damages, Daems said, adding that Swissair was effectively taking Sabena's 12,000 staff hostage.

Daems confirmed an initial court hearing has already been scheduled for August 2.

Belgium's decision to press ahead with legal action comes after it rejected a proposal from Swissair for a final cash injection for Sabena. Under Swissair's plan, the two stakeholders would inject a combined €275 million into Sabena.

Swissair, which has already pumped €150 million into Sabena this year, also planned to provide an extra €30 million through a subordinated loan.

But Daems on Tuesday rejected the offer as "totally insufficient".

Sabena's chairman, Fred Chaffart, backed the Belgian government's decision to reject the offer, saying his airline would also "take any necessary legal steps to save the company."

He said Sabena had to safeguard its rights and insisted Swissair help pay for cancelled Airbus airplane orders.

Chaffart added that Sabena was in talks with four parties who could potentially take some of Swissair's 49.5 per cent holding.

"If indeed Swissair keeps its intention of not increasing its shareholding and also of finally withdrawing, we are interested in talking to another party to replace [Swissair]," he said, declining to detail with whom Sabena was negotiating.

Chaffart dismissed talks of Sabena seeking bankruptcy protection.

swissinfo with agencies

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