French airlines end up in an investor tangle
The crisis at SAirGroup, parent of Swissair, has exposed a web of financial arrangements designed to keep afloat three struggling French airlines and to navigate European rules on airline ownership.
SAirGroup, which has just reported SFr2.9bn ($1.7bn) of losses for 2000, last year persuaded Banca Commerciale Italiana, the Italian bank, to join Marine-Wendel of France in investing in the French airlines AOM, Air Liberte and Air Littoral, according to sources in France and Italy.
The Swiss group has 49 per cent of each of the airlines. It was obliged to bring in investors from European Union countries and demonstrate that they owned more than 50 per cent, because non-EU shareholders may not own more than half of an EU airline. Switzerland is outside the EU.
BCI, apparently through a company called Tasa Lux, put up more than FFr1bn (E152m, $136m) as part of a recapitalisation exercise in December, French investors say.
Marine-Wendel and its Alpha funds group had already paid a total of FFr450m for control of a 50.4 per cent stake in AOM-Air Liberte, but did not want to invest more money.
All the Italian and French investors have received guarantees from SAirGroup that they can demand repayment of their investments, with interest, in April 2004.
Those guarantees are reflected in the notes to SAirGroup’s accounts, which mention a FFr1.77bn put option.
BCI says only that its involvement was as part of a structured finance deal with a limited term, and it has “no intention of remaining a long-term investor”.
With the three airlines seeking judicial protection from creditors and 7,000 employees facing possible redundancy, Marine-Wendel, a large holding company quoted on the Paris bourse, is seeking to distance itself from the political embarrassment associated with the affair.
Jean-Claude Gayssot, the French transport minister, says it would be unacceptable for SAirGroup or Ernest-Antoine Seillie`re, head of Marine-Wendel – and head of Medef, the French employers federation – to wash their hands of the French airlines.
Marine-Wendel, which in theory controls the majority stake in AOM-Liberte and 18 per cent of Air Littoral, has been asked to explain its position by the Commission des Operations de Bourse, the French stock market regulator.
Marine-Wendel says it has invested only FFr300m of its own money, equivalent to less than 2 per cent of its net asset value, in the airlines. It insists it is playing a purely financial role while the Swiss group actually runs the companies.
The French company was able to maintain control of AOM-Air Liberte after the recapitalisation, it says, because it took up ordinary shares at no extra cost while an Italian banking group – known to be BCI – subscribed to preference shares.
Mario Corti, SAirGroup chief executive, has cut off funding for Air Littoral and said a decision would be made about the other two airlines later this month. SAirGroup was losing SFr80m a month on its French operations.
