In a company statement, Virgin says the decision to end the merger talks was mutual after both companies decided it is not in their interests on financial and cultural grounds.
The official decision came a few days after Sir Richard Branson negotiated with Etienne Davignon, one of the Belgian bankers who raised the capital to launch SN Brussels Airlines from Sabena's ashes.
"After two months of detailed discussions, both companies have decided that it is not in their mutual interests to merge, both on financial and cultural grounds," the Virgin Express statement said.
Brussels-based Virgin Express has been successful in the low-fare end on the market while SN Brussels wants to centre its strategy on the business traveller.
The two airlines started talks in December and had said then that they wanted to finalise a deal by the end of February because they wanted the new airline to be fully operational by the summer season.
The airline emphasised that it still expects to show a breakeven operating result for the full year 2001.
It expects a profitable second quarter in 2002 following the first quarter's usual seasonal loss.
The Belgian airline has 6,000 employees and flies to 35 destinations. Virgin Express, a budget carrier, has 800 staff and flies to 14 cities. It has been a money-loser in recent years.