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Thursday, 28 February, 2002, 10:38 GMT
Virgin scraps Belgian deal
Sabena planes
Same colours, new name - but no Virgin branding in sight
Virgin Express has called off merger talks with the airline that emerged from the ashes of bankrupt Belgian flag carrier Sabena.

The no-frills carrier, 59%-controlled by British entrepreneur Richard Branson, started negotiations with SN Brussels Airlines in December, with the aim of expanding their existing code-sharing agreement into a full-blown marriage.

But now the wedding is off, according to Brussels-based Virgin Express.

"Both companies have decided it is not in their mutual interests to merge both on financial and cultural grounds," Virgin said in a statement.

The two have divergent business plans. While Virgin is determined to remain focused on the budget traveller on which it has built its business - the sector which has survived the aviation slump since 11 September practically unscathed - SN Brussels is keen on the business market.

They are very different in size, too. While Virgin has just 800 employees, flying to 16 cities, SN Brussels's 6,000 employees - roughly half Sabena's size - run services to 35 European destinations, with routes to several African cities due to reopen in April.

"Both companies have decided it is not in their mutual interests to merge both on financial and cultural grounds," Virgin said in a statement.

Had the talks been successful, the original plan was to finalise a deal by the end of this month so as to be ready for the lucrative summer season.

Even so, the code-sharing relationship, where passengers can easily use a second carrier for destinations the first does not cover, will continue.

Just friends

Sabena went bankrupt on 7 November, and its immediate successor, dubbed Delta Air Transport, became SN in December after investors raised 155m euros to get it off the ground.

Virgin has had its own problems, mainly the result of the resurgence of Irish no-frills carrier Ryanair.

The company has cut its fleet in half to 11 aircraft, scrapping a number of unprofitable routes. It now says that when it releases figures for last year's performance they will show it broke even in terms of operating profits not including costs like interest payments and tax.

This year, it should make a profit in the April to June quarter, it believes.

Virgin's shares were down more than 9% in thin trading on the Euronext Brussels exchange by mid-morning.

The BBC's Oliver Woods
"The two sides couldn't agree on the choice of management and there were differences over valuations."
See also:

21 Feb 02 | Business
Greece announces Olympic rescue plan
21 Jan 02 | Business
Aviation job losses reach 400,000
24 Dec 01 | Business
Virgin in Belgian airline tie-up
07 Nov 01 | Business
Belgium creates new airline
07 Nov 01 | Business
Belgian national airline bankrupt
07 Nov 01 | Business
Sabena: From pioneer to failure
01 Nov 01 | Business
Swissair rescue hopes brighten
17 Oct 01 | Business
Europe says no to airline aid
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