European Commission is being asked to rule on the legality of the loan but finds itself in a "lose-lose" situation
Several European airlines have complained to the European Commission after the Belgian Government granted a bridging loan to bankrupt Sabena. At the same time local rival Virgin Express has registered an interest in acquiring part of the airline's operations.
EasyJet, Lufthansa and Ryanair are among the carriers lodging complaints with the EC's competition watchdog, saying Sabena's problems pre-date 11 September, and that bailing out the airline with a BFr 5 billion ($114 million) loan will distort competition.
The development follows representations to the EC by British Airways, KLM, Lufthansa and SAS in February, revealed only this week, over a €100 million ($90 million) state contribution to an earlier recapitalisation plan for the the Belgian flag carrier. Lufthansa says the EU is "examining" the February complaint.
The EC will rule on 17 October whether to authorise the loan, says EU transport commissioner Loyola de Palacio. She says the decision will be guided by the general rule that there could not be "state aid for some and not for others".
Sources at the commission say it is in a "lose-lose situation" in that the expected approval of the loan will be challenged by the airlines, while refusal could lead to court action by the Belgian Government. Belgium, which holds the EU presidency, is said to be lobbying at the highest levels to get what it terms a "temporary loan" approved. Sabena has also sought Chapter 11 bankruptcy protection in the USA.
A ruling against Sabena would also challenge the bankruptcy protection the airline won from a Belgian court on 5 October. The Brussels Trade Court decision restrains creditors until at least 30 November, allowing the company to continue operating while it works on a restructuring plan, which must be approved by creditors in a vote on 15 November. The rejig envisages Sabena re-inventing itself as a low-cost carrier along the lines of its DAT subsidiary to focus on the European market.
The process has been complicated by an offer from Virgin Express to acquire "certain assets of the company and its operation".
Virgin chairman Richard Branson held talks with the Belgian Government in early October. Virgin Express says if negotiations are successful a large number of jobs could be saved at Sabena and dependent companies. It is believed Virgin is interested in DAT.
Virgin Express is heavily exposed to Sabena's fate, as the flag carrier buys 40% of the airline's capacity on flights to Barcelona, London Heathrow and Rome. However, Sabena's problems have boosted the airline's performance after years of financial troubles.
Source: Flight International
