COLIN BAKER LONDON
Doubts remain over the future strategy of the SAirGroup following the abrupt departure of chief executive Philippe Bruggisser, architect of the Qualiflyer alliance of European airlines and the diversified group structure. In the long term this may mean a review of alliance strategy, but the more pressing problem is the fate of merger partner Sabena.
Although it is not being disbanded just yet, it is widely assumed that the Qualiflyer alliance will not go forward as an independent entity. Indeed, SAir has been in talks with the three largest alliance groups - oneworld, Star Alliance and SkyTeam. Oneworld has long been seen as a natural fit, given Swissair's links with various of the group's partners and its tradition of high-yield traffic. However, oneworld is focusing on rebuilding internal links after the British Airways-KLM merger debacle.
SkyTeam, led by Air France and Delta Air Lines, is the most expansionist of the alliance groups. However Air France is mainly interested in access to markets, making Alitalia a more attractive option. Air France already has access to Brussels through the high-speed train network. Star, meanwhile, is concentrating on alliance depth rather than scale. Vienna is already in place through Austrian Airlines and Zurich is a close competitor to Munich.
The choice is not made any easier by the latest attempts at consolidation in the USA, which could further destabilise the alliance system. SAir is also awaiting a new chief executive making a quick decision even less likely (see page 97). Once they are in place there is a possibility that the various SAir divisions could be separately floated.
While the airline division, SAirLines, has been struggling, other divisions have been doing relatively well (see table right). The catering-orientated Sair Relations division is not now far off SAirLines in terms of revenues, but with much better profit margins. Some observers argue that a demerger would benefit shareholders and provide a clearer focus.
Meanwhile, SAir is making it abundantly clear that its partnership with Belgian flag carrier Sabena depends on a viable business plan for the beleaguered airline. A crucial hurdle was cleared when Sabena's unions agreed to a restructuring plan as part of the "Blue Sky" recovery plan which would see annual savings of c52 ($48) million. However, analysts are keeping a careful eye on the implementation of this deal.
Sabena agreement
This agreement was a must-have for Sabena, which risked running out of cash in March. SAir insisted that it would only put more money into Sabena if the unions agreed to the restructuring programme, which will see around 700 jobs go. Failure could have seen the airline forced into bankruptcy.
Before this agreement, SAir and the Belgian Government met in early February for talks on a c250 million cash injection for Sabena. The talks were held in an atmosphere of extreme tension, with 500 Sabena workers occupying a hangar and threatening to burn it down - along with all the aircraft inside.
Sabena pilots, meanwhile, held a wildcat one-day strike. The pilots are demanding a representative on the airline board with power of veto in certain areas. SAir is far from keen on this idea. However, following the agreement with the unions, SAir and the Belgian Government are expected to agree to a cash injection, although SAir warns: "Over the medium term the two shareholders will re-evaluate the conditions of their partnerships."
So Sabena is not out of the woods just yet. Various consultants have warned that Blue Sky will only keep the carrier going for another two years, and SAir warns that further restructuring will be needed. If SAir does eventually call it a day, Sabena will face a seemingly bleak future. Potential rescuers are few and far between. "I can't see anyone rushing in, or even coming in slowly," says Chris Tarry, analyst at Commerzbank. "This could be a significant moment for loss-making flag carriers."
One possible outcome if SAir does leave Sabena could be a refusal of the Belgians to ratify the accord between Switzerland and the European Union (EU) necessary for SAir to take majority stakes in EU carriers.
Meanwhile, SAir's French interests are threatening a rerun of the Sabena saga following the resignation of Paul Reutlinger, brought in by Bruggisser to bring them to profit. He has been replaced by former Aeromaritime chief executive Marc Rochet.
Source: Airline Business
