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British Airways 'in Talks' Over Rescue For Sabena

Mon Oct 29, 2001 5:20 pm

British Airways 'in talks' over rescue for Sabena
By Peter Chapman
British Airways has emerged as the latest possible saviour for stricken Belgian flag carrier Sabena.

European Voice has learned from industry sources that BA has been holding secret talks over a possible rescue package for the airline, which could cease operating within six weeks unless it finds an investor to take over whole or part of the company.

Asked to respond to claims it was considering a bid for Sabena, BA spokeswoman Louise Evans said: "We are neither confirming it nor denying it."

Earlier this month European Voice exclusively revealed that low-cost carrier Virgin Express was in discussions with Sabena over the purchase of some of its operations. Virgin spokesman Will Whitehorn said chairman David Hoare and chief executive Neil Burrows were in Brussels from Monday to Wednesday this week for talks with Sabena management. "We are looking to see if a new business can be created out of the old one that actually works," he said.

The executives were clearly looking "most closely at short-haul European destinations" but the "team at Virgin Express are not ruling anything out", he added.

Sabena, which has won EU approval for a 125-million euro loan to keep the company airborne, was reported yesterday (24 October) to be facing an order for bankruptcy in the Brussels Commercial Court.

But Sabena spokesman Wilfried Remans insisted the company had been granted protection from creditors until 30 November. In the meantime, he said, the race was on to find partners willing to set up a new airline to replace the existing operation. "We are establishing a new airline, that is the objective, but I cannot say anything until things are confirmed," he added. Sabena was granted bankruptcy protection for two months after its part-owner Swissair failed to deliver a promised cash injection, due to its own financial woes. A condition of the protection was that Sabena should present creditors a restructuring plan by 15 November.

Since then Sabena's other part-owner, the Belgian state, has been granted EU approval for an emergency bridging loan to keep the airline in business. In a separate development, British Airways confirmed that it had resumed discussions with Dutch carrier KLM over a possible merger.

© Copyright 2001 The Economist Newspaper Limited. All rights reserved.

RE: British Airways 'in Talks' Over Rescue For Sabena

Mon Oct 29, 2001 5:59 pm

Given that BA needs to conserve every penny that it has as it's in almost as bad a shape as SN, why on earth would it be interested in acquiring SN and all the propblems attached to it? Bear in mind that it did look at SN about 10 years ago - and ran a mile! Big grin Big grin Big grin
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RE: British Airways 'in Talks' Over Rescue For Sabena

Mon Oct 29, 2001 6:36 pm

Ceilidh, there is a big difference. I think there is more then one point that makes Sabena interesting for BA :

Ten years ago Sabena thought it still could set some 'demands'. Untill a couple of weeks ago that was still the case.
Now Sabena has no choice at all. It is taking what is there for them or disappear. Sabena is very weak now. That puts BA in a very strong position. It can buy a company, but even more, a 'presence' on the European continent for a price they can set themselves. They are even in a position now that they are involved how that company will look like. 10 Years ago they had to buy a starving company with personel that was sooooo stupid it could never become a succes.
This time it is BA time now, Sabena can only hope that they can become part of it and can only listen and accept !

There are even 2 more interesting points.
By buying Sabena BA is getting Brussels away from Lufthansa and Air France ( among others ) Those are maybe not interested in taking over Sabena but are very interested in the > 10 mio passengers going via Brussels. Name one company who is not interested in those passengers ! Every company is looking for passengers to fill there planes, in Brussels there are > 10 mio and the home base carrier is going under !

Second point, maybe this is even a move to put some presure on KLM regarding those talks. Will BA still be interested know that they have hub on the continent very close to Amsterdam ? Furthermore : maybe it even is part of it, if BA buys Sabena and merge with KLM ... who will be competition on that part of Europe ? That way a very big player will be created that has a big chance of being THE leading ( if it is not already )carrier in/to/from that part of Europe.
Brussels will maybe not be that important like Amsterdam end certainly not like London, but it is much more important that they are 'the leading carrier' there and not Lufthansa or Air France or ???

They will not spent billions and billions, but if they can strike a deal there, it think they will not hesitate.

And to end yet another point, is AA not a partner of BA ? Did AA not indicate that they are still interested in Brussels ( new pier ... )
Imagine what situation they can create BA - AA, merger with KLM what has links with North West and Continental !
Turn it the way you want but Sabena has the strongest schedule between Europe and Africa ...

Maybe not that stupid after all ...

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RE: British Airways 'in Talks' Over Rescue For Sabena

Mon Oct 29, 2001 7:36 pm

Well said Beluga, clear and interesting thoughts...
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RE: British Airways 'in Talks' Over Rescue For Sabena

Mon Oct 29, 2001 7:44 pm

A fact is as well, that there is almost no possibility anymore to expand for BA at its different London bases.

By buying Sabena, they might not be that interested in
the company itself ( maybe the African network) but
especially in the Brussels airport which still has possibility for expansion. ( new terminal, still poss for
trafic increase.)

RE: British Airways 'in Talks' Over Rescue For Sabena

Mon Oct 29, 2001 9:50 pm

BA has a heavy enough exposure on its African network and does not need to increase its liabilities in tinpot third world dictatorships - especially given its present financial situation.

Next, what BelugaBoy says about BA wanting to take on BRU as its next hub doesn't make a lot of sense. It would do if LHR and LGW and STN were all at capacity - but the fact is that BA has been reducing substantially its services from LGW. It's relatively simple to get from LHR to LGW by bussing people around the M25 - how exactly would BA handle connecting traffic between LHR and BRU? It just doesn't work! There's a huge amount of spare capacity now at LGW and STN - and more importantly they still own the slots.

I can't see LH or AF trying to become the leading carrier at BRU - that mantle will fall on the shoulders of VEX.

Sorry, still can't see it! Big grin Big grin Big grin
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RE: British Airways 'in Talks' Over Rescue For Sabena

Mon Oct 29, 2001 10:46 pm

Hello guys,

I am not going ot comment on who might be interested in Sabena, because it's all speculation right now. Every name in the industry you can think of has been mentioned with all pro's and contra's, so that would really be a pointless discussion.

over the past few days I have noticed several times people saying that even if there would be someone interested in Sabena, they simply would not have the money right now to invest in it due to the global recession. THis is only partially thrue of course.
I'd like to show a scenario from the Financieel Ekonomische Tijd on how to invest in Sabena without having to spend a single euro!

First of all Sabena's flight activities would have to be transfered to a new company set up by the Belgian state, but separate of Sabena, to clear the flight operations from any depts fmade by the Sabena group in the past. (In fact this has already been partially done for Sabena's European routes, which are now all with DAT.)
The next step in this scenario is that any company interested in Sabena would be invited to MERGE (patially) with this new Sabena successor to create a new big pan European airline. That way no real cash payments would have to be made, the Belgian government simply accepts to see its share reduced in the new Sabean successor and in return it gets a bigger company to be shareholder of an also a voice in the mergeing company.
(In fact it's sort of a payment in newly issued shares.)

Another very interesting thing in all this is that the value of the merged partner could be considered as an investment in the new Sabena successor set up by the Belgian government, so under EU regulation the Belgian governement would even be allowed to invest an equal sum of money cash. I don't know, but I think there are quite a number of airlines interested in getting 10 million pax extra and on top of that some government cash (perfectly legal BTW).

It has been rumored the Belgian government is trying to sell such kind of a scenario to several airlines in Europe, including BA. (which not surprisingly responded as being interested.)
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RE: British Airways 'in Talks' Over Rescue For Sabena

Mon Oct 29, 2001 11:27 pm

It may well be that BA is interested in SN, if only to get their hands on the facilities at BRU etc. This way they could expand quicker and cheaper than waiting for T5 or new runways at LHR. I would not be surprised if this plan went through. It would eliminate some congestion at LHR, which would pave the way for US/UK openskies.
Please understand that I dont agree with this approach, just what I think might happen, given all the dynamics and egos involved.

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