UPDATE 1-Virgin Express shows interest in Sabena assets
October 11, 2001 2:59:00 PM ET
(Recasts, adds quotes, details, combines previous stories)
By Gilles Castonguay
BRUSSELS, Oct 11 (Reuters) - Belgium said on Thursday it was talking with discount airline Virgin Express (VIRGY) and other interested parties about saving its ailing Sabena [SAB.UL] airline to which it has offered a controversial bridge loan.
"It concerns preliminary contacts (but) they are not the only contacts," Belgian Public Enterprises Minister Rik Daems said in a statement. Daems oversees the state's 50.5 percent stake in the airline.
Sabena, which went into bankruptcy protection last week, said it was talking with "several potential partners" but did not identify them.
"A new Sabena is envisaged outside the existing company structure," it said, adding that its priority was to secure operations and to manage available cash carefully.
"At least until the end of November, the company disposes of the necessary funds to support its operations," it added.
Virgin Express was the first party to acknowledge interest in Sabena in a statement released earlier in the day.
Virgin spokesman Yves Panneels said airline officials had met commissioners appointed by the court that granted Sabena protection, but had yet to meet Sabena officials. Panneels confirmed reports that British entrepreneur Richard Branson had met Daems last week about the matter.
Virgin Express shares soared 40 cents, or 30.77 percent, to $1.70 on the Nasdaq on the news. Branson indirectly owns 59 percent of the airline.
The Belgian government's offer of a 125 million euro loan to help Sabena create a new airline has drawn criticism from Lufthansa and other European airlines, which are reeling from the devastation wrought to their sector by the attacks on the United States.
The European Commission is to decide by next Wednesday whether the loan constitutes state aid, which it frowns upon. The European Union executive body has allowed government aid to airlines to cover costs related to the Sept. 11 attacks but banned aid for problems preceding the attacks.
Based in Brussels, Virgin Express underwent its own massive restructuring earlier this year to return to profitability, cutting half of its fleet, abandoning its charter operations and closing its Irish operations.
As the second-biggest operator at the Brussels airport after Sabena, it has a code-sharing agreement with Sabena.
Sabena filed for bankruptcy protection after struggling Swiss aviation group Swissair, owner of 49.5 percent of the airline, reneged on a pledge to give it more money as it struggled for its own survival amid a severe cash crunch.
The broken promise foiled Sabena's plans to undergo a major restructuring and cut jobs, fleet and routes, and sell off assets.
Sabena's unionized employees threatened to go on a 24-hour strike on Friday to press the government to pay more compensation for likely layoffs under an eventual restructuring.
(Additional reporting by Bart Crols in Brussels) REUTERS
© 2001 Reuters
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