Swissair reaches deal with Belgium on Sabena

Swissair Group, the heavily indebted Swiss aviation group, on Tuesday drew a line under its disastrous investment in Sabena when it reached a settlement with the Belgian government to support a further recapitalisation of the struggling flag carrier.

The deal will see Swissair, which has a 49.5 per cent stake in Sabena, inject E258m ($221.5m) into the Belgian airline with the majority shareholder, the Belgian government, funding the remainder of a E430m rescue package.

In return for its contribution to the second recapitalisation of Sabena this year, the government and Sabena have agreed to drop separate law suits against Swissair launched this month. The deal also cancels an agreement by Swissair made in January to raise its stake in Sabena to 85 per cent.

The settlement will come as a big boost to Swissair, which has been trying to limit its exposure to a number of disastrous investments in loss-making European carriers made by the pre vious management.

But the latest rescue package for Sabena is likely to come under scrutiny from the European Commission, which is already investigating a E100m injection by the Belgian government made in January as part of a E250m recapitalisation.

State support for airlines is prohibited unless a government can prove that a private shareholder would have made the same decision. The Commission said on Tuesday night the current investigation into the earlier support for Sabena would continue.

Neither Swissair nor the Belgian government will have any further funding obligations to the airline.

Swissair said on Tuesday night that the extra E258m was covered by the provisions it took earlier this year to cover its exposure to the disastrous minority investments it made in various European airlines.
Financial Times