Tough decisions ahead for SAirGroup

The SAirGroup called a halt last week to all acquisitions Keystone

SAirGroup, parent company of Swissair, faces more tough decisions in the next few weeks over its alliances with several loss-making airlines, including Belgium's Sabena. Last week, the company cancelled plans to invest in Portugal's TAP airline.

Aviation specialist Sepp Moser told swissinfo that SAirGroup’s decision not to proceed with the Portuguese deal was to be expected. “It is obvious that Swissair has to pull out of all of these sorts of alliances if it wants to survive.”

On Friday, SAirGroup also ruled out participation in a deal with Turkish Airlines, in which it was expected to take a 51 per cent stake.

The moves follow a company statement last week, in which SAirGroup ruled out any new investments in other airlines. It also said the carriers in which it held stakes had to return to profitability, without help from SAirGroup’s non-airline activities such as hotels and catering.

The Swiss airline announced on Friday that it is to maintain its partnership with South African Airways. SAirGroup will keep its 20 per cent stake in SAA, with the option of acquiring a further 10 per cent postponed to the end of the year.

The most urgent issue is the group’s alliance with cash-strapped Sabena. Last month, SAirGroup and the Belgian government agreed a re-capitalisation plan for the ailing airline, in which SAirGroup has a 49 per cent stake.

But the plan, seen as the only way of saving the airline from bankruptcy, is conditional on a massive cost cutting plan that has to be approved by Belgian’s powerful trade unions.

The Belgian government and SAirGroup will meet on February 8 to decide the fate of Sabena. SAirGroup interim chief executive, Eric Honegger, has indicated that Sabena would continue to be an integral part of SAirGroup’s strategy, provided the unions accepted the cost cuts.

But even if the package is approved, Sepp Moser says SAirGroup is still facing a no win situation. “Sabena has become important because it is linked to Swissair like a Siamese twin – the two airlines are basically one. They each have their own brands but there’s only one administration, so it’s impossible to separate them.

“If Sabena goes down the drain it will not be a strategic loss for Swissair but it will cost a lot to rebuild the administration that’s been lost. If it survives, money will continue to be lost by Sabena – it’s a lose-lose situation for SAirGroup.”

Sabena aside, SAirGroup is facing tough choices about its future in a market increasing dominated by aviation giants. Already rumours are flying that Swissair might join the British Airways dominated One World Alliance and abandon its Qualiflyer group of smaller airlines.

“Swissair will have to join one of the leading airlines alliances,” explained Moser.

In France, SAirGroup and its partner Marine Wendel are in the process of merging French airlines AOM, Air Liberte and Air Littoral. Here again a question mark over the future is now in place.

“As with Sabena, the Swissair situation in France is a lose-lose situation,” said Moser. “If they try to merge the French airlines it’ll cost them hundreds of million of francs, if they drop them it’ll also cost them hundreds of millions.”

The SAirGroup has plenty of challenges to face up to as it re-examines its business interests and strategy. One solution to its problems would be to let another company take a stake, although SAirGroup says it couldn’t be a controlling interest.

“I would not be surprised if a big investor was needed to save the company,” added Moser.

SAirGroup will publish the results of its internal review on March 12.

swissinfo