Swissair is not often accused of acting in haste. But the manner in which it is has approached buying a 49.5 per cent stake in Sabena smacks of desperation, brought on by its exclusion from the single European aviation market.
European Commission approval for the deal appears little more than a formality, after Brussels forced the Belgian government into a climbdown. Originally, Swissair had insisted it would not invest unless Sabena could guarantee annual savings of BFr650 million ($23 million). But the Commission hinted it would oppose the proposed social cost opt out.
The government instead exempted Sabena from 'additional' payments into the state pension fund for its aircrew, cutting social costs savings to BFr250 million. But Swissair chairman Hannes Goetz 'expects to get the savings in Sabena's cost structure up to BFr650 million over the next two to three years.'
Géry Daeninck, Sabena's deputy to the chairman, says the carrier has already identified 'a number of other areas for cost savings, including continuing productivity increases and other external costs.' A senior source at the Commission confirms that this pension change does not constitute state aid.
Swissair president Otto Loepfe says the alliance will benefit both airlines, producing synergies of BFr4 billion for Swissair and BFr2 billion for Sabena 'over a number of years.' The synergies will come from merging offices in third countries, fleet harmonisation, closer technical cooperation and joint marketing.
Most important, the deal gives Swissair access to Brussels airport. But neither airline was prepared to discuss how Swissair would benefit, although they did confirm they intend to optimise schedules and codeshare on each other's international flights.
The deal will see Swissair acquire its stake for BFr6 billion ($212 million) and invest an additional BFr500 million in special non-voting stock. The Swiss carrier will also loan a Belgium state-owned finance company, SFI, BFr4 billion to help finance the acquisition of the 37.5 per cent stake controlled by Air France through Finacta. Warrants attached to this loan give Swissair the option to take an additional 12.75 per cent in Sabena after 2000, if permissible in law.
The Belgian state and private investors will add BFr1.5 billion and BFr2 billion, respectively, to recapitalise the carrier to the tune of BFr10 billion in total. This will bring Sabena's total capitalisation to BFr26 billion - somewhat at odds with Swissair's valuation of the company. Sabena's board of 12 will include five Swissair directors, while the chairman must be an EU citizen.
The Belgian state and private investors will add BFr1.5 billion and BFr2 billion, respectively, to recapitalise the carrier to the tune of BFr10 billion in total. This will bring Sabena's total capitalisation to BFr26 billion - somewhat at odds with Swissair's valuation of the company. Sabena's board of 12 will include five Swissair directors, while the chairman must be an EU citizen.
Source: Airline Business
