HERMAN DE WULF / BRUSSELS
Government will maintain 50.5% holding in troubled flag-carrier and continue subsidies as lawsuit is withdrawn
Swissair Group and the Belgian Government have reached an agreement on the future of Sabena which releases Swissair from its commitment to become majority shareholder and permits continued governmental subsidy.
The deal, concluded last week by Belgian premier Guy Verhofstadt and Swissair chief executive Mario Corti, frees the Swissair Group from its undertaking to raise its stake in Sabena to 85%, and maintains the government's holding at 50.5 % and the Swissair Group at 49.5 %.
The Swiss company decided against increasing its stake in the loss-making Belgian airline in the face of its own deteriorating financial performance. The group is selling a number of its airline holdings and subsidiary operations in a major retrenchment operation.
The Sabena deal effectively ends the dispute between the two shareholders and the Belgian Government will withdraw its lawsuit against Swissair Group for breach of contract. The sides have torn up an agreement signed in January, committing Swissair to its increased stake within three years. In its place is a new four-year plan, aimed at restoring the airline to profit by 2005. Sabena has not yet revealed details of the plan but it is expected to include route, capacity and workforce cuts.
The government has been desperate to see fresh investment poured into Sabena, but EU regulations forbid it from doing so, unless a private company matches the subsidy. Under the terms of the agreement the shareholders will inject €462 million ($395 million) into Sabena, with Swissair paying 60%, or €258 million, and the Belgian Government the rest. Payment will be in four installments over the next two years, with the first due in October.
The amount is well short of the €1 billion that the Sabena board estimates is needed to return the airline to a healthy position. Much of the extra cash is likely to be raised by divesting profitable divisions, including Sabena Catering, Sabena Technics and Sabena Hotels.
The total value of Swissair's deal to extricate itself from its Sabena commitments will also depend on the success of a deal switching nine Airbus A319s no longer required by Sabena to the Swissair Group. The aircraft, due for delivery in 2002, were ordered in 1997 as part of an Airbus order to replace and expand Sabena's short- and medium-haul fleet of Boeing 737s. The A319s will be managed as part of Swissair's Flightlease leasing portfolio.
Not part of the deal are Sabena's two Airbus A340-200s still waiting for a buyer at Châteauroux airport in France and four new A340-300s, of which International Leasing and Finance has taken one.
Corti said the deal "will reassure our lenders and shareholders concerning future funding by the Swissair Group and removes uncertainty created by various lawsuits".
Source: Flight International
