COLIN BAKER LONDON
The European Commission (EC) has agreed to rubber stamp a much-needed bridging loan for troubled Belgian flag carrier Sabena, but has made it clear that it will not allow a flood of state aid.
The EC insists that similar loans will only be eligible for carriers which, like Sabena, have filed for bankruptcy protection. Brussels has stated that the Belgian carrier's c125 million ($113 million) bridging loan complies with 1999 European Union (EU) guidelines for "rescue aid" for companies which are under threat of collapse.
Despite reassurances, low-cost carrier Ryanair is planning a legal challenge, although Brussels insiders say that this will be a lengthy process, possibly taking until the end of the year.
The EC insists the bridging loan meets strict criteria, which ensure that there is no danger of state aid by the back door. "The money must be used to pay wages, salaries and to reimburse suppliers," says Gilles Gantelet, spokesman for Transport Commissioner Loyola de Palacio. The loan must be paid back in full within six months and at market-level interest rates, though Sabena insists the loan is needed for only one month.
Other stipulations are that there should be no adverse effects on other member states, and that within the six-month period Sabena must either go into liquidation or present a restructuring plan, which, Gantelet says, "must be viable". Other carriers will have to meet the same conditions to qualify for similar loans, which means they will first have to file for bankruptcy protection. Ireland's minister for public enterprise Mary O'Rourke has already acknowledged that flag carrier Aer Lingus may be heading for financial difficulties.
If carriers are to receive money from the public purse, the cash will have to be matched by similar investment from the private sector to meet EC regulations designed to ensure that investments are made on a rational commercial basis.
De Palacio, meanwhile, is making it quite clear that the industry must consolidate. "The events of 11 September cannot be used as a pretext to delay or avoid this," she said. "The EC notes that the moves to restructure and consolidate Community airlines, already necessary before the attacks, must be continued and even stepped up in some cases," it said in its statement on emergency measures for the air transport industry.
Sabena, which has made a loss in 39 of its 40 years of operation, was in deep trouble long before 11 September. A promised capital injection from Swissair was a casualty of the Swiss carrier's collapse in October.
Source: Airline Business
