Sabena vs VEX - VEX files suit in BRU
Press release
Brussels, 28th August 2001
1. Virgin Express - a Belgian airline
Virgin Express is a Belgian company employing more than 650 people. As per corporate governance principles, all significant decisions are taken in Belgium by its Board of Directors, which comprises 7 members (4 Belgians, 1 Dutch and 2 British).
Virgin Express is an affiliate of Virgin Express Holdings PLC, a UK based company, that is quoted on the Euronext and on the Nasdaq. The float represents around 48% of the shares.
Being a public and quoted company, all decisions taken by Virgin Express are
aimed to safeguard the interests of all the shareholders.
2. Brief history of the contract(s) with Sabena
In 1996 and 1997, Virgin Express (Belgium) SA/NV contracted a code-share agreement with Sabena:
On three routes Barcelona ("BCN"), Rome Fiumicino ("FCO") and London Heathrow
("LHR"); Sabena bought 80 seats on BCN and FCO and 85 on LHR ; Contracts were signed for an eight year term and expire in 10/2004 for LHR, 02/2005 for BCN and 03/2005 for FCO
In January 1999, at the request of Sabena, the contracts were amended as follows:
More space for the Sabena business passengers (pitch in front cabin increased from 29 inches to 31"); Removal of six seats to give lower density and thus loss of revenue for
Virgin Express. All aircraft of Virgin Express were re-pitched and accordingly also it generated loss of revenue on non-code-share flights. Increase in number of seats taken by Sabena to 96 seats on each route. Decrease of the price per seat to Sabena of 3.1%.
From November 2000 onwards (Winter season 2000/01), Virgin Express accepted to reduce the number of daily frequencies to FCO from 7 to 6 on request of Sabena.
Further to this reduction from March 2001 onwards (Summer season 2001), Virgin Express has also reduced the number of daily frequencies to FCO and BCN from 7 to 5 a day in order to further accommodate Sabena wishes.
3. Restructuring
We know that restructuring is a difficult process. During the first quarter of 2001 we halved our fleet and reduced our manpower by 35% in order to return to profitability. We are convinced that we have already contributed more than our share to the reduction of capacity in the Brussels market.
Sabena is an important supplier of Virgin Express for key processes in the production chain: ground handling and maintenance activities. Although we know that restructuring is a painful and chaotic process, we are dependent on our passengers and must fight for their loyalty and goodwill every day. We are therefore concerned about any negative impact that industrial action
within Sabena's personnel may have on continuation and quality of these services.
4. Sabena pilots
We understand that Sabena pilots have put some conditions prior to continuing their social negotiations with Sabena Management:
Respect of existing seniority;
Respect of existing payroll package;
Termination of Virgin Express contract.
We understand that Sabena pilots require terminating contracts with third parties prior to any lay-off of in-house workforce. Further to this we are aware of the existence of a collective bargaining agreement signed with Sabena pilots in whom Sabena limits to a certain percentage the production outsourced to third parties.
The position of Virgin Express is the following:
We have a legally valid contract with the company Sabena.
We do not want to be involved in any conflict between Sabena and its pilots or other Staff member of Sabena. This is an internal problem within Sabena, which should be solved within Sabena, without disturbing the business of
third party clients. Virgin Express never participated in any way in the agreement that Sabena has with its pilots.
Our agreement with Sabena does not refer to any production limitation or any restriction associated with outsourced production. The production of Virgin Express on behalf of Sabena represents 6 aircraft and about 50 pilots. Sabena's restructuring plan includes a decrease of 220 pilots from the work force.
A termination of the contract with Virgin
Express would not save jobs in Belgium but would only transfer a part of the problem that Sabena has to another Belgian airline.
We feel it is unacceptable that Virgin Express should be considered as liable and asked to pay for the reckless expansion of Sabena over recent years.
We feel it is unacceptable that Sabena pilots may think that one job or one staff member at Virgin Express is considered less valuable than one at Sabena.
Virgin Express is a major customer of Sabena Technics and Sabena Ground Handling and is astounded that a supplier should treat a customer in this high-handed manner.
5. Termination of the contract demanded by Sabena pilots
Virgin Express regularly meets with the management of Sabena for various discussions: strategy, planning & scheduling, commercial matters, etc. The tone of these meetings is always friendly and co-operative. A potential
termination of the contract(s) has never been on the agenda. Furthermore, because the Virgin Express restructuring plan is based on the current contractual arrangement, the company would not be willing to terminate the
code-share agreements. Should the contract be terminated, the impact for Virgin Express would be:
Loss of jobs in Belgium;
Virgin Express does not have slots at LHR, so the flights between Brussels and London would stop operating.
At BCN, Virgin Express owns 3 of the 5 daily slots and at FCO 2. Therefore only 3 daily flights to BCN and 3 to daily 4 flights to FCO would be operated.
We would obviously continue (and most likely expand) our independent routes.
6. Number of seats
Sabena has asked Virgin Express to reduce the number of contracted seats from 96 to 80 on FCO and BCN and 85 on LHR. Because the Virgin Express restructuring plan is based on the current contractual arrangement, the company has notified its refusal to decrease the number of contracted seats.
The position of Virgin Express is:
We already accepted in March 2001 a decrease in the number of frequencies on FCO and BCN routes from 7 to 5 a day to accommodate Sabena's wishes and to facilitate its restructuring plan. We have always acted in good faith and in a co-operative way.
There is a valid and binding contract between both parties.
The suggested change in seat numbers would not reduce the capacity in the market but just move the risk to Virgin Express from Sabena.
Sabena has not made any proposal in exchange of a reduction of the seats.
Sabena has confirmed its intent to unilaterally reduce the number of contracted seats. Through various meetings and exchange of courier, Virgin Express has tried to explain its point of view from a business and a legal perspective. Given the persistence of Sabena, after a last meeting with Mr. Muller on August 24th in the morning and despite a warning to Sabena of its
immediate legitimate legal action, Virgin Express has been obliged to safeguard its interests and has a filed a claim in summary proceedings (kortgeding / référe) on August 24th in the afternoon.
7. Our relationship with Sabena
In view of the strength of our relationship with Sabena and the benefits both airlines can expect to derive from its continuing and further to the spirit of various meetings with management of Sabena, we still and we always will consider Sabena as an important and valuable customer. The said legal
procedure will not change that approach at all. We do our utmost in order to deliver a good and qualitative service to both Virgin Express and Sabena passengers on the code-share flights.