Swissair at fault in Sabena failure
Swissair was responsible for the bankruptcy of the Belgian national airline Sabena in 2001, the appeal court in Brussels ruled last week. Swissair took over Sabena in 1995 and itself declared bankruptcy in 2002, four months after Sabena's fall.
The Swiss airline is accused of “bleeding Sabena dry”
The ruling is an important point of principle, even though the plaintiffs came away virtually empty handed. The administrators of the Sabena bankruptcy, who together with the Belgian state had brought the case, were awarded a provisional total of €18.2 million in damages. They had sued for €3 billion, which includes all of the Sabena liabilities and a portion of damages to the state. The state is awarded €282,000. A final reckoning will take place when the courts have determined the precise amount of Sabena's assets and liabilities.
The story begins in 1995, when Swissair took a stake of just under half the shares of the Belgian national carrier, with the majority remaining in the hands of the state. According to the complaint, Swissair, which had operational control of the airline, bled Sabena dry by, for example, paying top executives huge bonuses through a Bermuda- Luxembourg connection so the transactions never appeared on the books. Swissair also arranged, through a series of straw-man companies, the purchase by Sabena of 24 Airbus A-320 aircraft, twice as many as the airline needed.
In 1997, the two formed SAirGroup, enjoyed a solid reputation, while it bought up minority positions in a number of loss-making airlines across Europe and then writing off the losses instead of counting them on the red side of the balance sheet, which would have given an entirely different picture of the group's financial health. Sabena went bust in 2001 - barely two months after the airline industry suffered the shock of the attacks of 11 September - throwing thousands out of work and leaving Belgium with the embarrassing loss of its national airline.
History of a national airline
Sabena was set up in 1923 by the Belgian state, and the first flight took off from Rotterdam the following year, transiting in Brussels and landing in Strasbourg. Routes to London, Bremen and Copenhagen were added shortly after. The first Transatlantic flight was in June 1947, and Sabena put some of the first Jumbo jets onto New York and Chicago routes in 1971. The last-ever flight was from Abidjan in Ivory Coast to Brussels via Cotonou in Benin.
Christian Van Buggenhout, appointed by the courts to administer the Sabena bankruptcy, told the court that the airline had gone down not, as was presented at the time, as a result of the crisis in the airline industry, but as a result of a long-term asset-stripping strategy by Swissair.
In addition, Swissair pledged in August 2001 to provide an injection of €430 million to keep Sabena in business, but it never materialised. The reduction of damages to the state reflects the court's opinion that the state acted as a shareholder, rather than a state, and therefore bears a portion of the burden.
In 2009, 36 people were committed to trial, including the last two managing directors of Sabena, the Belgian Pierre Godfroid and the Swiss Paul Reutlinger (now deceased), as well as other senior executives. The airline's auditor, KPMG, along with Axa-Luxemburg, were also indicted.
In an initial ruling in 2003, the court in Brussels had ruled that Swissair had indeed not fulfilled the obligations it had taken on when acquiring Sabena, but had not been responsible for the bankruptcy of the company. The plaintiffs went to appeal, and eight years later, that aspect of the ruling has been overturned.
The Brussels ruling now has to be translated into action by the Swiss courts. Belgium has taken Switzerland to the International Tribunal in the Hague over the question of respecting one another's legal rulings, after a court in Switzerland said no account need be taken of Belgian court decisions.
The Brussels court's ruling now leaves it open to Sabena creditors, including shareholders and employees, to pursue their own remedies in the courts.
The remains of Swissair are now owned by Lufthansa. Delta Air Transport (DAT), a profitable subsidiary, escaped the bankruptcy, and was taken over by SN Air Holding. It was transformed into SN Brussels Airlines, which now, after a merger with Virgin, is known as Brussels Airlines.
