Grounded Sabena files for bankruptcy. BA reports collapse in pre-tax profits.
Sabena last night became the first European flag carrier to file for bankruptcy, threatening the loss of thousands of jobs and marking the biggest step to date in the long-awaited restructuring of the European airline industry.
Sabena flights were grounded yesterday amid chaotic scenes at Brussels airport and remain suspended today.
Sabena’s failure came as British Airways, the leading European airline, reported a collapse in pre-tax profits from Pounds 200m to Pounds 5m in its second quarter to the end of September and warned of a “significant” operating loss for the full year. Financial analysts forecast that BA could make combined pre-tax losses of more than Pounds 1bn in the two years to March 2003.
SAS, the Scandinavian airline, also announced a further 2,500 redundancies. It said it was seeking to save SKr3.5bn (Pounds 227m) a year and warned it was facing a loss of up to SKr2bn this year.
The Belgian government was still hoping last night that at least part of the state-controlled carrier’s operations could be salvaged through a restructuring of DAT, Sabena’s regional airline subsidiary.
Virgin Express, the small Brussels-based carrier controlled by Sir Richard Branson, said yesterday it was continuing talks with Sabena but that a proposal for it to “pool interests” with DAT was “unworkable”.
Fred Chaffart, Sabena chairman, said last night: “This is a bad day for Brussels and a bad day for Belgium.”
The latest traffic data published by the Association of European Airlines yesterday showed little sign of a recovery in demand. North Atlantic traffic carried by European airlines in the last week of October was 32.6 per cent down on last year. Asia-Pacific traffic was 20.1 per cent down and within Europe traffic was 14.8 per cent down and still falling.
BA is expected to make a formal approach to the UK government soon to seek a compensation payment of about Pounds 60m to cover losses it suffered in the four days after September 11, when US airspace was closed, cutting off all transatlantic flights.
BA said it had raised close to an extra Pounds 1bn of liquidity in the past seven weeks, giving it total liquidity of around Pounds 3.4bn to help it withstand the crisis. It had also arranged unused bank facilities of more than Pounds 800m, mainly secured against unencumbered aircraft, and had substantial assets that could be sold, or against which the group could raise finance, valued at about Pounds 1.5bn. These included property assets as well as the group’s 22 per cent equity holding in Qantas, the Australian airline, and a 9 per cent equity stake in Iberia, the Spanish carrier. It raised Pounds 23m last week from the sale of shares in France Telecom.
In the immediate aftermath of the terrorist attacks on the US, BA was suffering a Pounds 100m a month cash outflow, but Mr Rishton said this had been reduced to around Pounds 2m a day, after making interest payments of Pounds 75m a month.
BA, which is one of the most heavily indebted of the leading European airlines, has gross debt of around Pounds 7.5bn. Lex, Page 22 BA’s leading role, Page 25 Belgians press Virgin, Page 28 Airlines feel the pinch, www.ft.com/aviationcrisis
Copyright: The Financial Times Limited
