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Eddington: NO to Belgian bailout of SN

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Eddington: NO to Belgian bailout of SN

Old 15th Jul 2001, 08:25
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The Guvnor
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Thumbs up Eddington: NO to Belgian bailout of SN

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.
Old 15th Jul 2001, 12:58
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One thing the Times obviously did not mention (intentionally?):
Swissair, after being "clean" of all failed hostile attacks against plenty of European Airlines, leading them even deeper into desaster and bankruptcy, is in a very close deal with BA to safe itīs own a...!
Monti should really be made aware that the highflying SR attitude of the past has cost and will cost more than 20,000 jobs in total inside the EU, a fact all EU-tax payers will have to pay for. And this, because an extra-EU player in this field wants to participate from the big cake they would be excluded to taste from otherwise.

Please get me right, I am not defending SN, I just want to highlight how vulnerable we all are in Europe at this stage. Just imagine that thousands of qualified people or all in a sudden made redundant and trying to find a job in the EU....they are certainly not taken on in SR....

And BA will be very happy to see one more big contender vanishing from the market....
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Old 15th Jul 2001, 14:27
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How refreshing to see Mr Eddington put the welfare of Sabena's employees before his own company's bottom line. (not)

I am not generally in favour of state bale outs but there are a number of occasions where it may be justified. The test for this is where the social cost is greater than the financial cost AND where the company can be made profitable AND/OR when the national interest is involved. Rolls Royce/Air France spring to mind.

Is it not also the case that BA was privatised after having all their debts written off by the government? How does one define "substantial financial aid from its government"?

I don't think Sabena is a threat to BA so why should he be so keen to see thousands of people made unemployed. Cast in the same mould as his predecesor perhaps? Lets hope that mould is destroyed before it can be used again.
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Old 15th Jul 2001, 15:34
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I hope that Brittish is not as stupid as other European airlines to work together with Swissair. Austrial bailed out just in time, SN, AOM and French partners and LTU are in very bad papers right now because of decisions taken at Swiss level. In fact, Sabena would be in profit if the Swiss didn't push SN to renew the fleet with airbusses, leased from SAir daughter Flightlease. There are a lot of examples like this, in SN and AOM (I'm not sure of LTU) where the Swiss try to transfer money from these companies to themselves.
Conserning SN and the Belgian government sueing SR: SR is trying to get an agreement, only because the Belgian and the French government are the only 2 in the European union who didn't already sign an agreement letting the Swiss economy profit from European agreements, without infact paying for those profits.. That's one of the reasons why there is so much pressure in Switserland on Mr. Corti (chairman of SR) to get to an agreement with SN (and the Belgian state).
Anyhow, screw SR, don't blame SN for their situation (you can blame the Belgian government and especially mr. Daems for selling of to the Swiss though) and just hope for your own companies not to sleep with the whore Swissair...
Old 16th Jul 2001, 14:12
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Agree with you FL310. Rod might save "his" money if the swiss get rid of SN cheaper. And without SN KLM should look even more attractive too. Nice options on the continent- at least for Rod.
However I think it is sad to lose any carrier. Wished SN could reinvent itself. Some years ago things looked so much better.
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