Sabena has stepped up the defence of its Brussels base by taking an option to buy up to 25 per cent of City Bird, the low-cost Belgian long-haul start-up.
However, the deal threatens to send out confusing signals to Sabena's alliance partners and passengers who are already struggling with the conflicting branding of its franchised services operated by Virgin Express.
Sabena plans to codeshare on City Bird's routes to New York/Newark, Montreal and Sao Paulo from 1 May using two of the latter's aircraft - one McDonnell Douglas MD-11 and a Boeing 767-300ER. The aircraft will be repainted in Sabena colours and reconfigured to include business and economy cabins for Sabena passengers and a separate City Bird cabin.
Sabena will provide the flight crew - a measure necessary to secure approval from its own unions - but will have to train pilots as it lacks MD-11s in its own fleet. Cabin crew will be provided by each airline in their own cabins.
Both carriers acknowledge that the deal's fine details have yet to be mapped out; the deal was pushed through ahead of City Bird's initial public offering on 30 October.
Sabena already operates a daily New York/JFK service plus a codeshare flight with alliance partner Delta. The carrier insists there are no plans to spin off further services to City Bird or Virgin Express, though the former's rapid expansion envisages its two MD-11s being joined by two B767-300s next year and an MD-11 freighter in 1999.
Sabena has an initial option to acquire 16.8 per cent in parent City Bird Holdings for BFr68 million (US$1.9 million) by the end of the year, plus the option of a further 8.4 per cent by November 1999.
Michèle Delvaux, City Bird's chief financial officer, says talks with Sabena started over cargo cooperation in Sept-ember and quickly mushroomed. She says the codeshare is forecast to represent BFr2.4 billion in 1999 revenues out of total City Bird sales of BFr8 billion.
The deal delayed City Bird's IPO which finally raised $33.8 million at the end of October from the sale of a 24 per cent stake on the Easdaq stock exchange. City Hotels' chairman Victor Hasson, founder of Virgin Express predecessor EBA, retains 52 per cent with Flight Invest holding a further 24 per cent.
The IPO's two-week delay threw City Bird into the middle of the global stock market crash, though it maintained its planned $8 a share pricing.
City Bird will be followed to market by Virgin Express which plans to raise $83.5-96.4 million with a dual listing on the Brussels and Nasdaq exchanges before the end of the year. Virgin's strong brand and profitability - net income reached BFr364 million in the nine months to 30 September - are expected to lead to heavy demand for its shares.
Doug Cameron
Source: Airline Business
