Virgin Express in talks on Belgian air future
Virgin Express, the low-fare airline controlled by Sir Richard Branson, is to hold talks with the Belgian government this week on its possible involvement in the restructuring of the Belgian aviation industry following the filing last week by Sabena, the national flag carrier, for protection from its creditors.
Virgin Express, which itself has shrunk to half its previous size following a heavy restructuring earlier this year to overcome previous losses, is not in a position to engage in any rescue attempt for Sabena.
However, Sir Richard met Rik Daems, the Belgian minister for state enterprises who is responsible for state-controlled Sabena, late last week to discuss what role Virgin Express could play in the development of Belgian aviation.
“We are following very closely what is happening in the market,” said Virgin Express on Sunday. “We are reacting and improvising.”
The group had already carried out some ad hoc charter flights at the weekend following the bankruptcy last week of CityBird, the Brussels-based charter airline.
The airline could be interested in picking up some scheduled services that may be vacated by Sabena, as the struggling carrier seeks to fight off bankruptcy during the next two months, in which it has been granted protection from its creditors.
Virgin Express faces threats, as well as opportunities, however, from the demise of Sabena and could be vulnerable to its collapse.
The group derives 39 per cent of its revenues from Sabena, which code shares and sells a large part of the seats on the main Virgin Express services from Brussels to London Heathrow, Rome and Barcelona.
The “block space” agreements, which expire in late 2004 and early 2005, were modified during the spring with the number of daily services to Rome and Barcelona cut, but they have provided a guaranteed source of income for Virgin Express.
The Branson-controlled airline is also dependent on Sabena for the take-off and landing slots that it uses at Heathrow for the services between Brussels and London. They are held by Sabena and not by Virgin Express.
Sir Richard’s room for manoeuvre in Brussels is also limited by the precarious condition of his other aviation interests, in particular the 51 per cent owned Virgin Atlantic, which is heavily exposed to the precipitous fall in demand for air travel across the North Atlantic.
Last month Virgin Atlantic, the UK’s second-largest long-haul airline, said it was axing 1,200 jobs or 13 per cent of its workforce and cutting 20 per cent of its capacity in response to the crisis in the airline industry.
Financial Times
