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Swissair deal with Belgium limits its exposure to Sabena

Swissair has reached an agreement with Belgium to avoid having to increase its stake in Sabena Keystone Archive

The Swissair Group has limited its future exposure to the loss-making Belgian carrier, Sabena, by agreeing to pump nearly €260 million (SFr390 million) into the airline. The deal frees Swissair from a commitment to raise its stake in Sabena, and heads off potentially damaging lawsuits.

This content was published on July 18, 2001 - 09:22

Under the agreement, announced in Brussels on Tuesday evening, Swissair and the Belgian government are to invest a further €430 million to support the struggling carrier.

Swissair, which has a 49.5 per cent stake in Sabena, is to provide 60 per cent of the funding, with the Belgian state - the majority shareholder - making up the balance.

The deal draws a line under Swissair's problematic engagement with the carrier, and frees it from a commitment to increase its stake to 85 per cent. In return for Swissair contribution, the Belgian government and Sabena have agreed to drop separate lawsuits against Swissair, which they launched this month.

The settlement is much-needed boost to Swissair, which is struggling to disentangle itself from a string of loss-making commitments abroad. These were acquired during a disastrous expansion strategy, which has nearly driven the group into the ground.

This latest rescue plan for Sabena is likely to come under scrutiny from the European Union's competition authorities, who are already considering investigating an earlier cash injection from the Belgian government.

The deal also frees Swissair from any further funding obligations to Sabena. "This will reassure our lenders and shareholders concerning future funding... and removes the uncertainty created by the various lawsuits which have been filed against us," said Swissair's chief executive, Mario Corti.

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