SN has turned to the Belgian government for help to its precarious situation. Hereby the links to the articles in the Belgian newspaper 'De tijd' (only available in Dutch):

FR competition is strangling the company. This year's budget has been based >

As I expressed on a local forum, I believe that the market is fair and free, the rules are the same for FR and SN.

If SN can't compete because FR's staff is based in Ireland, let them base their staff in Ireland and let the policy makers be faced with this fact that the rules of the game they have put in place may need tweaking if they don't like the consequences.

It is definitely not to the tax payer to have to dig in his pocket to keep uncompetitive practices alive.

I personally think there is nothing wrong with allowing a tax break for the crew so that they may be paid at roughly the same levels as FR, if that does not result in lowering their net pay. You do have to level the playing field somehow, and I think this may just do it. I just hope such a tax break would not put SN in the situation of having to renegotiate labor agreements, which might end up hurting more than helping. Also, do Belgian citizens enjoy more government services than the Irish? If so, SN crew would not really be paying their "fair share" if they get a tax break and others don't, even if their pay is lowered. This is a tough situation, but I still think that a tax break should be considered.

They can ask all they want, the Belgian government has no right under the Lisbon Treaty to offer them any help- unless in form of a loan.

SN Brussels does NOT qualify for state aid under the EU regulation.

This is doomed to go nowhere (and for good reason):

1. Ryanair (and others) are alert to any preferential government support for EU competitors and will be quick to raise the issue of illegal state aid if they can (they have done so in the past vociferously).

2. The logical extension of this approach is for EU airlines competing against Middle East airlines to ask for the ability to pay tax-free salaries. We know this will not happen.

The answer is that, like almost every company in the world, SN has to compete with competitors and if that means moving their (nominal) base to Ireland or Lithuania or another EU country, then that's what they need to do. However, I suspect that this is not their only competitive issue vis a vis Ryanair.

[Edited 2012-03-21 05:13:44]

Quoting ju068 (Reply 3): the Belgian government has no right under the Lisbon Treaty to offer them any help- unless in form of a loan.

Yet they are not asking for a cash handout or even a loan in I am not mistaken, but rather seek some sort of a tax break. Taxation is a national competence in the EU and any country is free to decide on its own tax levels. If Belgium -like France for the matter- decides to give all of their airlines some sort of a tax break, than that is perfectly legal.

Quoting usdcaguy (Reply 2): I personally think there is nothing wrong with allowing a tax break for the crew so that they may be paid at roughly the same levels as FR, if that does not result in lowering their net pay.

THAT's what they are after and it seems the government is willing to give in to some extend too in order to level the playing field with other foreign airlines operating to/from Belgium.

Quoting GCT64 (Reply 4): Ryanair (and others) are alert to any preferential government support for EU competitors and will be quick to raise the issue of illegal state aid if they can (they have done so in the past vociferously).

Setting tax levels for all Belgian airlines at a much lower level than those of other companies is not illegal: taxation it isn't even a EU competence: France has done so for years for instance and it seems Belgium is finally to follow suit for its airlines (not just SN, btw).

Quoting sabenapilot (Reply 5): Yet they are not asking for a cash handout or even a loan in I am not mistaken, but rather seek some sort of a tax break. Taxation is a national competence in the EU and any country is free to decide on its own tax levels. If Belgium -like France for the matter- decides to give all of their airlines some sort of a tax break, than that is perfectly legal.

That wont be fair. Social welfare is much better in Belgium then in ireland, so then irish employees would demand more tax breaks there.

The Belgians shouldnt complain, all in all they probably get the same benefits, The Irish crews have less tax to pay, the belgian crews get better social security.

Quoting GCT64 (Reply 4): The answer is that, like almost every company in the world, SN has to compete with competitors

I fully agree. Every try might be worth but looks desperate. It's not the time for crying and begging. SN must re-manage its airline right now and not tomorrow otherwise it is simple: they go bust, exit. Tax cut might help but is not the solution.

[Edited 2012-03-21 07:23:32]

Quoting kl911 (Reply 6): That wont be fair

As said, every country in Europe can decide freely how much tax it wants from companies under its jurisdiction.

If Belgium wants to cut some taxes for certain categories of companies (in this case airlines), then no one can forbid them; besides why should it be unfair to do so? Isn't that a bit of a weird claim you make now saying countries with notoriously high taxes should be forbidden to lower them and thus become more competitive just because it may erode any competitive advantage those with the lower taxes may hold?

Lowering taxes is one of the most efficient methods to help restore the competitiveness of any economy and it seems the Belgian government has been asked (and is willing) to use this method to help its airlines suffering from the consequences of the common market, where different airlines from allover Europe can operate alongside each other from one and the same airport and operate on the very same routes, yet are taxed under very different fiscal regimes.

It seems that Etienne Davignon, chairman of SN, gave a press conference to give some information.

Etienne Davignon made it clear that SN doesn't want nor need any help from the government, SN did suffer a substantial loss of 80 million EUR past fiscal year but it doesn't compromise their operations nor their plans for the future. He also said that they are not close to bankruptcy nor that the question they asked is a question of survival.

However they did ask for the government to look into the matter that other companies operating out of Belgium are paying far less amounts of taxes since these companies have their base in other companies. (He mentioned Ireland (Ryanair), Switserland (Easyjet) and India (Jet Airways)). SN would like that the taxes for Belgian registered companies decrease so that it would create a "level playing field".

It's a legitimate question IMHO and I think the government needs to consider it.


Otherwise I think we could go to a scenary that happened in the shipping industry back in the 90's when near all Belgian registered vessels where outflagged to Luxembourg.

[Edited 2012-03-21 07:17:41]

Quoting sabenapilot (Reply 8): If Belgium wants to cut some taxes for certain categories of companies (in this case airlines), then no one can forbid them; besides why should it be unfair to do so? Isn't that a bit of a weird claim you make now saying countries with notoriously high taxes should be forbidden to lower them

What I mean is that you cant have employees of an airline paying less tax then a farmer or a teacher. As usual FR is a lot smarter then its local competitors who still think ' local' instead of European.

Why doesnt SN employ Hungarian crew if its cheaper? Or also Irish? For decades certain industries or jobs have been moved to lower wages countries, nothing new or bad with that.

Quoting kl911 (Reply 6): That wont be fair. Social welfare is much better in Belgium then in ireland, so then irish employees would demand more tax breaks there.

Just as it is unfair for Ireland to keep all its taxes very low in order to attract foreign direct investment and then turn around and ask the EU (read the other countries made a bit less competitive because of their higher taxes) for a bailout when the proverbial excrement hits the air mover.

Besides, the Ryanair employees working out of CRL surely don't go back to Ireland to benefit from government services, they stay in Belgium and get the same benefits as other employees living and paying social charges in Belgium. That's not fair either.

Fairness is never given another thought in tax matters, nothing new there.

Quoting sabenapilot (Reply 5): Yet they are not asking for a cash handout or even a loan in I am not mistaken, but rather seek some sort of a tax break. Taxation is a national competence in the EU and any country is free to decide on its own tax levels. If Belgium -like France for the matter- decides to give all of their airlines some sort of a tax break, than that is perfectly legal.

That's highly debatable (and would be a good testcase for the European Courts). Giving tax breaks to a specific sector can be considered as as providing state aid. It's not like giving tax braks to foreign companies 9someting which Blium is good at).

Giving tax breaks to a specific group of employees is making sure you don't get elected next time (or at least without giving the same benefits to all employees). Be honest, why would you give airline employees a tax break as they don't represent a large part of the potential electorate (hence why farmers do get those nice subsidies).

Quoting bralo20 (Reply 9): However they did ask for the government to look into the matter that other companies operating out of Belgium are paying far less amounts of taxes since these companies have their base in other companies. (He mentioned Ireland (Ryanair), Switserland (Easyjet) and India (Jet Airways)). SN would like that the taxes for Belgian registered companies decrease so that it would create a "level playing field".

However outside the aviation industry many foreign governments complain about the fact that Belgium is a tax haven itself.

Did I ready anything anywhere about unions? Unions would never allow to relocate jobs to Ireland or hire Hungarian pilots for conditions other than Belgian pilots have.

The times of "national carriers" are gone., Malev is gone already, LH does not want to invest further or buy additional shares of SN, name the next one to leave the market. All the smal "national carriers" will be finished by the end of the decades latest, may be even the larger ones like SK. Only those who can sustain profitable will be left. Some under the umbrella of the big three, some with a unique business modell like FR or DY. Or with 49,9% strategic foreign capital.

Quoting PanHAM (Reply 16): The times of "national carriers" are gone.

If that is the case, I say it's time to level the playing field and look at some legislation to ensure that anything proper to Belgium is not holding the carrier back from competing at the European level. Given the number of people it employs, SN deserves the best shot possible, and I would hope the government understands that taking less tax is likely cheaper than paying out social benefits for unemployment.

We have a level playing field, move the HQ of SN to Dublin or Shannon, register allaircraft in Eire, employ most of the essential staff in Dublin, especially pilots and f/as, whatever is needed at BRU is contracted out to handling partners and off you go. My best regards to the unions.

Quite. A good starting point would be the warnings given by Morgan Kelly, Professor of Economics at University College, Dublin, in an article in the Irish Times in the summer of 2006. They were ignored by the Irish Government, the Irish Financial Services Regulatory Authority, the Irish Banks, the Irish Construction Industries and the Irish Consumer. They preferred to listen to the rest of the Irish Media. They revelled in the "unstoppable" success of the "Celtic Tiger". But by then it was already a "Celtic Ostrich" with its head buried deep in the sand.

Professor Kelly pointed out that Irish real estate prices had quintupled in the 12 years to 2006. He pointed out that a fifth of all Irish workers were employed in the construction industry in its feeding frenzy on the growth in price - not value - of real estate. He predicted a fall in real estate prices of 40 to 50 per cent. He predicted the collapse of the Irish banks. However his predictions proved to be, if anything, rather optimistic.

Even after the crisis began to materialise the new and very inexperienced Irish Finance Minister, Brian Lenihan, said on 14 May 2008:

"Our public finances are sound, with one of the lowest levels of debt in the euro area. Our markets are flexible allowing us to respond efficiently to adverse developments. We have a dynamic and well-educated labour force. We have a pro-business outward looking society. The tax burden on both labour and capital is low. Not many countries anywhere in the world are facing the present global economic difficulties with such advantages."

He was right about the tax burden but little else. His full speech may be read here:

http://www.finance.gov.ie/viewdoc.asp?DocID=5286

Of course this sad story continued. It culminated in the EU-IMF bailout of November 2010.

I am no expert in taxation. But I cannot help have little sympathy in a situation where an Irish Finance Minister boasts of the low tax burden on labour in his country before the Irish government seeks a bail out of its finances from other countries with a higher labour tax burden. Presumably SN staff have paid higher taxes to help finance that bail out and restore some financial stability to the lightly taxed FR staff.

[Edited 2012-03-22 10:46:36 by SA7700]

Quoting bralo20 (Reply 9): (He mentioned Ireland (Ryanair), Switserland (Easyjet) and India (Jet Airways)).

Why would he mention 9W? They don't compete at at all and they have a code share agreement. How well do they leverage their relationship? I would think that it would be a very beneficial relationship, since SN and 9W are together able to offer one connection service to much of India from Europe.

Quoting usdcaguy (Reply 14): If that is the case, I say it's time to level the playing field and look at some legislation to ensure that anything proper to Belgium is not holding the carrier back from competing at the European level. Given the number of people it employs, SN deserves the best shot possible, and I would hope the government understands that taking less tax is likely cheaper than paying out social benefits for unemployment.

Let's face it, the idea of national carriers in Europe is the result of the artificial construct of regulation. Belgium is a country of 11 million people. It would be like Ohio having their own airline.

Update:

In today's newspaper, CEO Bernard Gustin said that if the Belgian government doesn't work on better tax conditions for Belgian labour, than they will be forced to "leave" the country. Link to the article:

http://www.standaard.be/artikel/detail.aspx?artikelid=DMF20120328_009

Two possible candidate countries named are Luxemburg and Ireland. The message from SN is that they would above all prefere to stay in Belgium but only if tax conditions improve. On the other hand, the message from the government is that it can't provide tax benefits for one company, especially after the latest difficult budget exercise.

The big "problem" is that FR is based in Ireland and all their staff is registered there. So FR is paying less for their employers while they will receive more money in the end (less taxes withhold). However, there's also the fact that the Wallonian government (you got to love the fact that we have multiple governments in our tiny country) is paying FR to use CRL. In fact the Wallonian government is paying FR 15 EUR for each passenger that is flying with FR. So we, the Belgian taxpayers (the Wallonian government is funded by taxes from the whole country), are in fact paying FR (a foreign company which doesn't contribute much to Belgium through taxes and fees like SN does as a Belgian registered company) to use CRL.

Now that times are a bit though and now that it's became unclear if LH will ever buy SN in full it seems that SN is starting to worry a little. Little enough to "shake the tree" and see if something falls out of it. If the federal government doesn't give in I'm pretty sure they'll go knocking on the Flemish government's door to see if they can get something from there. If that doesn't work either I'm pretty convinced that they'll take it to the next level. And the next level will probably be to outflag the fleet and staff to another country, most likely it will be Luxemburg, just like the Belgian merchant navy (koopvaardij?) did back in the 90's when all Belgian vessels were outflagged to Luxemburg.

SN is playing a political game at the moment. Are they right to do so? IMHO they are... I'm just not sure wetter the government will bulge for this... History tells us that the government will only act after the facts...

My opinion as stated before is that they should just go ahead with it and stop the whining. It's a single market, the member states have wanted it like that, it benefits the consumer, so let it be.

Then of course some depending on their sensibilities will discover that there are weaknesses to the model, let those bring the debate to the European arena to reform the mechanism behind this.

What is the situation with other European airlines? Surely SN can't be the only one to be suffering from this distortion?

Quoting Bralo20 (Reply 19): just like the Belgian merchant navy (koopvaardij?) did back in the 90's when all Belgian vessels were outflagged to Luxemburg

That's funny, I had no idea a vessel can sail under the flag of a country that has no seaports, or even a coastline for that matter!

I was wondering how the airline could get its pilots to "come along" to Ireland or Luxemburg in case they set up their HQ there, but a higher net on the same gross paqy could be the incentive.

Quoting klmcedric (Reply 21): That's funny, I had no idea a vessel can sail under the flag of a country that has no seaports, or even a coastline for that matter!

Flags of convenience are nothing new. You can register a ship anywhere you want without ever taking it ever near to it's adopted home port.

Quoting brightcedars (Reply 20): It's a single market, the member states have wanted it like that, it benefits the consumer, so let it be.

fully agrreed, but the political reaction is to put pressure on the Irelands and Luxemburgs to adjust their standards upwards. A company can run away from the politician, but eventually the company may run out of countries where they can go. At the end, the consumer paqys.

Quoting brightcedars (Reply 20): SN can't be the only one to be suffering from this distortion?

yes, but they are feeling it much harder than LH or AF.

Quoting klmcedric (Reply 21): That's funny, I had no idea a vessel can sail under the flag of a country that has no seaports, or even a coastline for that matter!

Yup, it can, the whole Belgian fleet was outflagged to Luxemburg somewhere in the 90's. Now most of them are back (after the government made it fiscal interesting to them) on the Belgian register. But yeah, it's quite possible to register a vessel in a country that has no seaports nor a coastline.

I know I'm getting a little bit off topic here. But the taxation problem isn't only a problem for SN, it is for a lot of companies in Belgium.

We (our family) do run an MRO company in Belgium (as well as other aviation activities outside BE), and we have come to the conclusion that doing business in Belgium has become a joke, to the point it doesn't make any sense anymore.
Aside of the taxes, there is also the regulatory bodies (CAA, labor inspection, environmental inspection and a boatload of other organisations) who just don't want to cooperate. They just want to take all your money or drag you down as soon as possible.

A lot of small to medium companies -that I know of- are considering closing or moving outside BE as well. It is certainly not only an SN problem. This problem of outrageous taxes and mentality needs to change fast, really fast.

Having some experience in the UK and Germany, it is a totally different way of doing business, a delight, really.

When you are jobless, sick, a refugee,... Belgium is probably a nice country to stay with a basically unlimited guaranteed income. But when you want work, enterprise, achieve something in your life, it is one big mess.

Quoting brightcedars (Reply 20): What is the situation with other European airlines? Surely SN can't be the only one to be suffering from this distortion?

Have a look http://www.tijd.be/dossier/loonstudie

For the higher payscale (were most pilots are in), the taxes are huge.

A belgian pilot only receives ±35% of the total his employer spent on his salary. In our neigbouring countries (D, NL, F, UK) it is close to (or over) 50%.

In France, IIRC, pilots have a special statute under which they don't have to pay so much taxes.

Quoting sf260 (Reply 24): But when you want work, enterprise, achieve something in your life, it is one big mess.

For different reasons, I have felt the same in IT and then in AT. Some suggestions for the next country to try to make business?
I am getting old and I have not many years left to work (and building a decent retirement).


Also , we should learn from to our US friends that have some centuries of experience in Federal states.
For what I heard there are still issues like that, I remember the story that Boeing wanted to move from Seattle to somewhere in Louisiana (or North Carolina) just because of taxes, labor rules and stuff like that. I admit I am not so skilled in US stuff, but the baseline seems the same.

Brussels' chairman wrote to the government stating that he does not want to relocate the company, although he acknowledges it is technically possible, but that he does want the government to address the disparity between Ryanair and Brussels whereby Brussels' own crew get a lower net pay than Ryanair's crew based in CRL even though their gross is higher because all Ryanair wages, regardless of where their crew are based, are taxed according to the lower Irish regime.

Hmmm I wonder what will happen with my tickets (BRU-JFK) in the summer
if SN will cease operations... I hope they'll rebook us on LH.

Perhaps a little too dramatic but yeah, I saw this coming. If they don't change immediately
and cut costs, we can say goodbye to another Belgian airline. When is LH helping SN?
Or are the 45% they own of SN just something they like to brag with?

Please, cut the ''three class'' product on the short haul flights, it's insane!
And what about the Korongo project? Why don't they say anything about that in the newspapers?
I'm sure it's a reason why SN is losing so much money.

Niek   

Quoting klmcedric (Reply 21): Quoting Bralo20 (Reply 19): just like the Belgian merchant navy (koopvaardij?) did back in the 90's when all Belgian vessels were outflagged to Luxemburg That's funny, I had no idea a vessel can sail under the flag of a country that has no seaports, or even a coastline for that matter!

Approximately 40 ocean-going ships fly the Swiss flag. Click the ship's name in the list below for photos.
http://www.swiss-ships.ch/listen-see-aktuell/fr_ship-aktuell.htm

Related Swiss government link (English).
http://www.eda.admin.ch/eda/en/smno/trasea/seashi.html

Quoting photoshooter (Reply 28): Hmmm I wonder what will happen with my tickets (BRU-JFK) in the summer

You'll use them as is.

Quoting photoshooter (Reply 28): Please, cut the ''three class'' product on the short haul flights, it's insane!

So you want them to offer B Light fares with the B Flex amenities or B Flex fares only and see the rest of the crowd go to CRL?

Quoting photoshooter (Reply 28): And what about the Korongo project?

It seems they are about to start operations, and it certainly did cost some money to SN, I do hope the return on investment will be worthy.

Quoting Viscount724 (Reply 29): Approximately 40 ocean-going ships fly the Swiss flag. Click the ship's name in the list below for photos. http://www.swiss-ships.ch/listen-see...l.htm

Well ships cost a lot of money, a resource that in CH is unusually abundant pro sq/m
And do not forget that Swiss people are the best sailors of the world. See Alinghi... : .

On a side note: for my flights Spain-Brussels I've tried a lot of times to book a Brussels Airlines flight, but... finally I never fly with them because Iberia is cheaper, generally speaking (not to mention FR from Charleroi). I feel there is something intrinsically wrong in their business approach and I suspect BRU (Zaventem) taxes are hurting as well. They should bring FR to BRU and see what happens then in the fight Charleroi (CRL) - Brussels (BRU).

According the latest news Brussels Airlines is 'not excluding the possibility' to move its head office from Belgium to a foreign country. Belgian minister for aviation affairs has invited Brussels Airlines to move to Brussels South (Charleroi) because it would save the airline around 29 euro per passenger. Brussels Airlines is opting to move to Luxemburg or Ireland where it can profit from tax advantages.

Ryanair-topman Michael O’Leary: "Well, move than! Nobody will miss you in Brussels. Who cares? The air travellers in Brussels do not care!"

Etienne Davignon, chairman of the council of Brussels Airlines, softened the airlines' move plans in the Belgian press. “Brussels Airlines does not consider to depart from Belgium. But when the board rings the alarm bells, than that is because the company does not want to make such a drastical decision."

I.m.o. Mr. Davignon's reaction is typically 'old school'.


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Photo © Tommy Desmet Photography


[Edited 2012-03-29 21:47:55]