Sabena Airlines Files For Protection
Troubled Belgian airline Sabena SA will seek bankruptcy protection Wednesday after Swissair failed to provide promised financial assistance, the government announced.
Sabena, in which the government has 50.5 percent of shares and Swissair 49.5 percent, is expected to seek a concordat (formal agreement) from a commercial court to keep flying over the following weeks.
"It is a concordat or bankruptcy. There are no other choices," said Employment Minister Laurette Onkelinx.
The request for a concordat is the Belgian equivalent of Chapter 11 bankruptcy protection in the United States.
In addition, the Belgian government is expected to give Sabena temporary credit so the airline can continue operations. The credit will be available for around a month.
"The government can provide some cash," said Onkelinx.
The Belgian government is in contact with the European Union Commission to determine whether the temporary credit complies with E.U. rules prohibiting governments from bailing out airlines.
"The European Commission can be flexible in such extraordinary circumstances," said Belgian Privatization Minister Rik Daems. "Nobody could ever have imagined what we are facing now," he said, referring to the sudden withdrawal of financial support of Swissair.
Sabena said early Wednesday reassured customers that its planes would not be immediately grounded.
For the immediate future, "the financial means are there to guarantee normal activities," Sabena chairman Fred Chaffart said. Swissair grounded its fleet Tuesday after it ran out of cash to pay suppliers.
Struggling to avert bankruptcy, the Swiss flag carrier said it would not be able to make a promised 132 million euro ($123 million) payment this week to Sabena.
The Belgian government is taking Swissair to court to try to force it to make the payment.
In the meantime, Prime Minister Guy Verhofstadt's Cabinet was in talks Wednesday on Sabena's request for a bridge loan, knowing it will be difficult to get approval from the European Union.
Over the decades, Sabena has been shored up by government subsidies several times but EU competition rules tightly restrict government bailouts.
"A possible bridge credit by the Belgian state has to be carefully evaluated, also in view of EU legislation," Chaffart said.
Also early Wednesday, a referendum among Sabena's 12,000-strong staff showed 57 percent backed the board's restructuring plan, which calls for the shedding of some 2,000 jobs, eliminating unprofitable routes and selling non-aviation assets.
Sabena pilots, who suspended their four-day strike on Tuesday, were also back at work on Wednesday. Chaffart said the strike, which grounded about a third of Sabena flights, cost the company some 12 million euro ($10.9 million).
"It's unacceptable that in this critical situation the representatives of the Belgian Cockpit Association stranded the passengers and the rest of the personnel," Chaffart said.
Most of his critiism however was targeted at Swissair for failing to make its payment to Sabena's recapitalization fund.
The payment was a key component of an Aug. 2 compromise reached after Swissair reneged on an earlier promise to increase its stake in the company to 85 percent.
"Swissair hasn't lived up to any of their commitments. We'll hold them accountable for the situation we're in," he said.
Swissair filed for protection from creditors Monday and said its former affiliate Crossair, a financially healthy regional airline, would take over two-thirds of its flights with the backing of two Swiss banks. The move gives Swissair time to reorganize without being carved up in a bankruptcy court.
By Raf Casert
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