The Guvnor
15th Jul 2001, 07:25
From today's Sunday Times:
British Airways chief urges EU to deny Sabena state aid
Rory Godson, Business Editor
BRITISH AIRWAYS believes that Sabena, the stricken Belgian national carrier, should be allowed to collapse rather than receive substantial financial aid from its government.
Rod Eddington, chief executive of BA, has written to Mario Monti, the European Union's competition commissioner, setting out in trenchant terms his opposition to a rescue.
According to sources close to BA, the letter stated: "We are concerned that any special Belgian government aid to Sabena might amount to state aid, breaking the spirit of the commission's rulings."
The Belgian airline, 51% owned by its government, is close to bankruptcy. It is in dispute with its unions and with Swissair,
which owns the other 49%.
Sabena and the Belgian government claim that Swissair gave a commitment to increase its shareholding to 85% and to underwrite this year's huge losses. Swissair, which is also in a parlous state, wants to walk away from Sabena and is prepared to pay off the Belgians.
The problem for the Brussels government is that EU rules decree that it cannot invest in Sabena unless it can show that a private shareholder would have done the same thing.
This is manifestly not the case. The Belgians want to sue Swissair for more than Ģ600m in damages.
Eddington hopes to link BA with KLM, the Dutch airline. He is in discussions with the Dutch, but is prevented from completing a
merger by European regulation.
If the regulatory hurdles are cleared, Eddington wants to lead a round of consolidation in the industry. That may mean a merger with KLM, Aer Lingus, the troubled Irish state carrier, and Iberia of Spain. BA owns 9% of Iberia.
In America, United Airlines and US Airways, two of the country's largest carriers, are wrestling with a $4 billion (Ģ2.8 billion) merger. Eddington is worried that BA will be left behind.
The letter to Monti, written in March, makes it clear that the British see the possible collapse of Sabena as an opportunity to
lead consolidation.
Eddington wrote: "As airline consolidation makes progress outside the EU, we note that state support for Sabena would prevent the emergence of market-based solutions for airline consolidation in the EU, thus preserving fragmentation and frustrating EU airlines, which plan to be global leaders."
He said that aid to the Belgian airline "would unfairly affect competition in markets in which we compete with Sabena".
BA is in discussions with the government, the Americans and the EU about its plans for transatlantic flights.
It wants to form a profit-sharing partnership between America and Britain with American Airlines and is keen to agree with the
authorities what, if any, curbs they would put on such a joint venture.
British Airways chief urges EU to deny Sabena state aid
Rory Godson, Business Editor
BRITISH AIRWAYS believes that Sabena, the stricken Belgian national carrier, should be allowed to collapse rather than receive substantial financial aid from its government.
Rod Eddington, chief executive of BA, has written to Mario Monti, the European Union's competition commissioner, setting out in trenchant terms his opposition to a rescue.
According to sources close to BA, the letter stated: "We are concerned that any special Belgian government aid to Sabena might amount to state aid, breaking the spirit of the commission's rulings."
The Belgian airline, 51% owned by its government, is close to bankruptcy. It is in dispute with its unions and with Swissair,
which owns the other 49%.
Sabena and the Belgian government claim that Swissair gave a commitment to increase its shareholding to 85% and to underwrite this year's huge losses. Swissair, which is also in a parlous state, wants to walk away from Sabena and is prepared to pay off the Belgians.
The problem for the Brussels government is that EU rules decree that it cannot invest in Sabena unless it can show that a private shareholder would have done the same thing.
This is manifestly not the case. The Belgians want to sue Swissair for more than Ģ600m in damages.
Eddington hopes to link BA with KLM, the Dutch airline. He is in discussions with the Dutch, but is prevented from completing a
merger by European regulation.
If the regulatory hurdles are cleared, Eddington wants to lead a round of consolidation in the industry. That may mean a merger with KLM, Aer Lingus, the troubled Irish state carrier, and Iberia of Spain. BA owns 9% of Iberia.
In America, United Airlines and US Airways, two of the country's largest carriers, are wrestling with a $4 billion (Ģ2.8 billion) merger. Eddington is worried that BA will be left behind.
The letter to Monti, written in March, makes it clear that the British see the possible collapse of Sabena as an opportunity to
lead consolidation.
Eddington wrote: "As airline consolidation makes progress outside the EU, we note that state support for Sabena would prevent the emergence of market-based solutions for airline consolidation in the EU, thus preserving fragmentation and frustrating EU airlines, which plan to be global leaders."
He said that aid to the Belgian airline "would unfairly affect competition in markets in which we compete with Sabena".
BA is in discussions with the government, the Americans and the EU about its plans for transatlantic flights.
It wants to form a profit-sharing partnership between America and Britain with American Airlines and is keen to agree with the
authorities what, if any, curbs they would put on such a joint venture.