Competition zooms in on Sabena capacity reduction
October 10, 2001 10:53:00 AM ET
By Bart Crols
BRUSSELS, Oct 10 (Reuters) - Belgian national airline Sabena's [SAB.UL] decision to cancel several routes has drawn other carriers to fill the gaps, with Virgin Express (VIRGY) saying on Wednesday it would launch a Faro, Portugal service.
Virgin joined Lufthansa in increasing services at the troubled Belgian carrier's hub. The German airline said last week it would increase frequencies to Frankfurt and Munich in response to Sabena's problems.
Irish no-frills airline Ryanair is waiting in the wings to increase its capacity out of its Charleroi hub, situated to the south of the Belgian Brussels capital.
Loss-making Sabena, operating under a two-month bankruptcy protection period, cancelled its routes to Tokyo and Washington last week, and routes to Beirut and Verona this week, a company spokesman said.
The airline had announced earlier that it would also scrap its routes to Faro and Belfast.
Sabena was forced to seek court protection from creditors after co-parent Swissair , fighting to stave off collapse, said it would not provide a promised cash injection.
Ryanair, building up a European base at Charleroi, sometimes referred to as Brussels South, has big expansion plans.
"Ryanair will take delivery of eight new aircraft in December and January and is actively seeking up to 50 additional aircraft to exploit opportunities that will arise as airlines like Sabena pull off routes and downsize their operations," Ryanair said in a statement last week.
An industry source told Reuters Virgin Express boss Richard Branson met with Belgian Public Enterprises Minister Rik Daems in Brussels on Thursday to discuss the state of the Belgian airline industry. Virgin is already linked to Sabena in a code-sharing deal.
By Wednesday shares in Virgin Express had jumped 74.3 percent to 4.41 euros on Euronext Brussels since closing at 2.53 euros on Friday.
SABENA UNIONS PROTEST
Several hundreds of Sabena employees marched through the streets of Brussels on Wednesday over potential heavy job losses.
"Our goal is to maintain a maximum number of employees at Sabena and a respectable social plan for those who have to leave," union spokeswoman Inge Vervotte told Reuters.
The Belgian government, which holds the 50.5 percent stake of Sabena not owned by Swissair, committed itself earlier this week to devise a plan to compensate for job losses in the industry.
Belgium also decided last week to provide Sabena with a 125 million euro ($114.3 million) one-month bridging loan to help it restructure itself into a smaller airline focused on European routes.
But the loan is being investigated by the European Commission on whether it complies with an EU ban on state subsidies for their airlines. A decision is due on Wednesday next week.
The Commission said on Wednesday limited government aid was possible for airlines driven deeper into crisis by last month's hijacked plane attacks in the United States.
But it ruled out banket state aid for national carriers.
Both Lufthansa and Ryanair have already filed complaints with the Commission against the bridge loan.
© 2001 Reuters
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