DAT gets reprieve as investors move to settle Sabena debts

 - May 29, 2008, 8:15 AM

Belgian regional airline Delta Air Transport (DAT) moved closer to its goal of becoming the successor to the defunct Sabena Airlines late last month, after a commercial court in Brussels decided to postpone a bankruptcy ruling on DAT creditor Sabena Interservice Center (SIC). A former wholly owned subsidiary of Sabena, SIC must issue a recovery plan sufficient to warrant a definitive suspension of debt payments. The delay allowed a group of Belgian businessmen to continue negotiations to settle SIC’s creditor claims and acquire DAT.  Although funded for operations at least until the end of this month, a business plan aimed at establishing it as a de facto replacement for the bankrupt flag carrier hinged on winning over Sabena creditors.

Their support was necessary to obtain continued funding beyond a three-month respite gained when an emergency loan for Sabena had been transferred to DAT. A decision on more funding was expected at press time.

DAT had mounted a vigorous marketing campaign to attract passengers after Sabena’s demise in early November. To maintain a “national” airline, the government planned a smaller operation focusing on short- to medium-haul services run by DAT, whose pilot salaries averaged 34 percent less than those of Sabena.

Established in 1966, DAT had operated under partial or total state ownership within the Sabena group for 15 years, but had made money. In 2000, DAT carried 3.3 million of Sabena’s 10.9 million passengers.

Operating under an EC-approved $110 million emergency government loan, the regional subsidiary attempted last month to keep the Belgian flag flying while reorganizing operations under a European sky that is becoming increasingly competitive. Several other airlines, including VLM, British European, British Midland, Finnair and Virgin Express, increased Brussels flights immediately after Sabena failed.

In November, 12 private Belgian companies agreed to invest $135 million alongside a further $40 million in regional-government aid to ensure DAT’s future. However, last month the region of Flanders withdrew its proposed contribution of 24.7 million Euros.  

Under the reorganization plan, the DAT workforce was expected to grow from 900 (including 296 pilots) to about 2,650. DAT planned 104 flights a day to more than 30 European destinations with 12 Avro RJ100s, 14 RJ85s and six BAe 146-200s, in addition to eight ex-Sabena Airbus A319s and six A330s. It expected to carry six million passengers a year and break even next year.

With few travelers in the aftermath of Sabena’s bankruptcy, DAT reported load factors of less than 40 percent in November, while the Belgian government continued to seek buyers for the reshaped business. Investors were expected to include Sabena creditors, which early last month declined to approve an initial business plan that would use funds from Sabena’s in-house bank.

Brussels-based Virgin Express has expressed interest in assuming DAT’s operations after the government loan runs out next month. The low-fare operator was interested in taking over routes to Barcelona, Copenhagen, Milan and Nice.

Virgin Express had flown Belgian charter flights following the bankruptcy of nonscheduled operator CityBird in early October, but was financially exposed by the failure of Sabena, from which it derived 39 percent of its revenues through code shares and block space on services to London, Rome and Barcelona.