The breakdown in merger negotiations between Sabena successor SN Brussels Airlines and Virgin Express leaves Brussels with two competing home carriers for the foreseeable future.

However, there is much industry scepticism about the likelihood of this situation continuing long term, especially given the presence of low-cost Ryanair at its new and fast-growing Charleroi/ Brussels South hub. According to one senior Belgian airline executive, Virgin Express and SN Brussels "had to merge" despite obvious cultural differences.

Neil Burrows, managing director at Virgin Express, says "only time will tell" whether the two can compete side by side. He points to the different products on offer, with Virgin Express concentrating on the no-frills sector, and SN Brussels, successor to the failed Sabena, offering full service.

Burrows says valuation was the crucial stumbling block in the discussions, with Virgin Express looking for roughly equal ownership, as well as a significant amount of management input. SN Brussels states: "After two months of detailed discussions, both companies have decided that it is not in their mutual interest to merge, on financial and operational grounds."

The two are, however, co-operating along similar lines to the arrangement Virgin Express had with Sabena before the latter's collapse. There are codeshares on routes to London Heathrow, Barcelona and Rome with SN Brussels continuing the old Sabena block seat arrangement. There are also codeshare agreements on other services on a request basis. The two still compete on a handful of routes, namely Zurich, Geneva and Copenhagen, although this situation is under review, and there is a possibility that codeshare agreements could be struck on these routes as well.

While Burrows says merger talks have ended as far as Virgin Express is concerned, he refuses to rule out one day returning to the table: "I don't think you can ever say the door is closed," he says.

Burrows says Brussels has become an unconstrained airport as slots have become more freely available in the post-Sabena environment - although peak time slots are still at a premium. The delay situation has also improved remarkably, he adds.

He plays down the extra costs of operating out of Brussels National rather than a low-cost airport, saying not every no-frills airline need follow exactly the same pattern. He points to the time and money saved on getting from Brussels National to the centre of Brussels compared with Charleroi.

Virgin Express expects to announce an operating profit for its last financial year despite the turmoil of Brussels. The carrier is launching new routes to Athens and Lisbon, although Burrows says the emphasis will be on consolidation for the time being.

Source: Airline Business