The struggling carrier has unveiled a recovery plan aimed at restoring finances and returning to profit by 2005
Sabena is to purge 1,600 jobs, sell off a number of subsidiaries and dramatically reduce its fleet as the carrier's chairman admits the company is "close to bankruptcy". The restructuring follows a series of financial setbacks culminating in the unveiling of a first half loss of €138.9 million ($122.3 million).
Changes to the fleet outlined by president and chief executive Christophe Mueller include reducing the long-haul fleet to 11 Airbus A330s. Four A340s in the fleet or on order will join two of the type grounded earlier and still seeking a buyer. Seven Boeing 737s are also to be sold or returned to the lessor as the 79-strong fleet is cut back. Nine A321s are to be returned to part-owner Swissair Group and the narrowbody fleet reduced to smaller A319s. At the same time, the Belgian carrier is looking to add a small number of 50-seat regional jets by the middle of next year.
The fleet downsizing goes hand-in-hand with the decision to withdraw from a number of loss-making routes - Beirut, Belfast, Catania, Faro, Tokyo, Verona, Washington DC and one unnamed destination. The route closures start this winter and will be completed in the next few months.
In order to rescue Sabena's balance sheet, Mueller is to sell a number of subsidiary operations, including Sabena Technics, catering, cargo handling, the information technology unit Atraxis, Belgian Fuelling & Services, charter operator Sobelair, its hotel holdings and the Sabena Flight Academy. The airline's regional operator, DAT, is unaffected by the subsidiary sales. The Airline Management Partnership venture with Swissair will also continue.
The Sabena unions reckon the sale of the non-core businesses will raise about €480 million. Further funds are expected to come from a 10% productivity improvement and cost-cutting involving up to 1,600 staff.
Mueller says the c430 million rescue package from shareholders Swissair and the Belgian Government will enable the firm to implement its restructuring plan and achieve profitability "by 2005". The airline has made a meaningful profit only once in the last decade.
He says "the misery of Sabena at the moment" is due to market overcapacity. A combination of other events has also conspired to bring the airline to its knees. Rapid expansion of capacity under the guidance of Swissair, the sudden reversal in fortunes of Swissair and its decision not to invest further in the Belgian carrier, the recession, high fuel prices and unfavourable exchange rates with the US dollar have all taken their toll.
The €430 million injection, which is subject to European Union scrutiny and union agreement of the rescue plan, will solve short-term funding problems, but Mueller says a serious lack of equity is hampering the airline's ability to manage effectively.
Airline chairman Fred Chaffart warned that the cash injection was the minimum required to implement the new business plan and no new capital would be available.
Firing a warning shot at Sabena's unions, Mueller says: "There will never be an end to cost-cutting or productivity improvement." A series of strikes rocked the airline in the days leading up to the restructuring announcement as details of proposed job cuts were leaked.
The airline's relationship with Virgin Express, which operates a number of Sabena flights under a block space deal, has also come in for criticism by Mueller: "Nobody at Sabena would do the same thing with Virgin Express again. This contract has not been very beneficial for us, either on the financial or customer side."
Source: Flight International
