Brussels Airlines in 2020

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nordikcam
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Re: Brussels Airlines in 2020

Post by nordikcam »

FkBE wrote: 02 May 2020, 17:39 I don't understand the desire of the Belgian Gov't to same Brussels Airlines.
If a company is not financially strong enough to survive, perhaps better of not having it at all?
Are we so proud that we will continue to put money in a bottomless pit?
Didn't happen to the shoe-shop around the corner when it went out of business, don't see why we need to fund an airlines just for the saking of saving jobs short term. There will be new opportunities at Brussels Airport, no? Use the money planned for BA and support the people who would be impacted.
Of course ...why not make a phone call to Chinese companies for example ... "Hello, BRU is free from any home carrier" ... interested? :roll: :roll: :roll: :roll: :roll:

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Atlantis
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Re: Brussels Airlines in 2020

Post by Atlantis »

FkBE wrote: 02 May 2020, 17:39 I don't understand the desire of the Belgian Gov't to same Brussels Airlines.
If a company is not financially strong enough to survive, perhaps better of not having it at all?
Are we so proud that we will continue to put money in a bottomless pit?
Didn't happen to the shoe-shop around the corner when it went out of business, don't see why we need to fund an airlines just for the saking of saving jobs short term. There will be new opportunities at Brussels Airport, no? Use the money planned for BA and support the people who would be impacted.
The only thing what is not understandable here is why a few people would really like to see SN failing.
To compare with a local shoe shop is completely rediculous.

SN is not only giving a job to the own employees but also a lot of jobs to the handling and cargo companies and they link Belgium to a lot of places in the world which generates a lot of money for our economy and companies.

Second. New opportunities at BRU?? No this time there will not be. The same exercise was done at AMS in case of bankruptcy of KLM. In this really severe time there will be no replacement, even not from abroad.
Airline companies has simply no money to start new bases.

In case that SN would not survive there will be a huge, really huge gap at BRU for the next 10 years.
The reason that ANA, Air Canada and many other Star Alliance companies are flying to BRU is bcs of SN

So think twice please

FkBE
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Re: Brussels Airlines in 2020

Post by FkBE »

Atlantis wrote: 02 May 2020, 19:04 The only thing what is not understandable here is why a few people would really like to see SN failing.
To compare with a local shoe shop is completely rediculous.

SN is not only giving a job to the own employees but also a lot of jobs to the handling and cargo companies and they link Belgium to a lot of places in the world which generates a lot of money for our economy and companies.

Second. New opportunities at BRU?? No this time there will not be. The same exercise was done at AMS in case of bankruptcy of KLM. In this really severe time there will be no replacement, even not from abroad.
Airline companies has simply no money to start new bases.

In case that SN would not survive there will be a huge, really huge gap at BRU for the next 10 years.
The reason that ANA, Air Canada and many other Star Alliance companies are flying to BRU is bcs of SN

So think twice please
Just to make it clear - I do not want Brussels Airlines to fail.
But I do believe in a free market, in which succesful businesses survive and others do not (unfortunately).

I fully understand that Brussels Airlines is a major employer in the area, but still - there is little point in spending tax money in order to save a company, which then provides employment and brings in taxes again.

It's obvious that there is a huge emotional link for a lot of people here, but in a free market offering guaranteed government bailouts does not necessarily leads to the best business decisions, as shown in the past.

Inquirer
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Re: Brussels Airlines in 2020

Post by Inquirer »

FkBE wrote: 02 May 2020, 17:39 Are we so proud that we will continue to put money in a bottomless pit?
FWIW, the 'bottomless pit' is actually quite lucrative for the Belgian government!

Let me explain:

Last year, they've booked a loss of some 25M on a turnover of 1,6BN euro indeed, but they:
- contributed more than 40M euro in social contributions and
- paid 170M euro in wages, thus their Belgian based staff paid some 60M in income taxes, so
this means something like 100M euro in direct annual revenues for the government from their 'loss making' operations, year after year, for no cost to them whatsoever. :o
(figures come from their latest annual account)

Add to that the social contributions and income taxes for all the people employed on their behalf by others at BRU (handlers, fuelers, cleaners, ATC, airport staff, horeca etc...) and you start to see the point...
If indeed it's at least 4 indirect employments for each direct employment as is often used by others in their calculations on the impact of their operations, then it must mean they effectively fill our country's treasury with several hundreds of millons in direct tax income, annually!!! :shock:

And that is before you even consider the economic and strategic benefit of our country being far better connected by a home based network airline than through having to rely on foreign (often non-homebased) carriers...

You want to cut all of that, in the surreal hope that somebody else will step in to fill the gap left?
If it takes just 1 year to completely replace them by 100% Belgian operations, it's already a loss to our national treasury and I think it's safe to say it will take a lot longer to fill the gap, if ever.
(for reference: it took 12 years to fill the gap left by Sabena, dixit Mr. Feist).

The business case to bail them out is simply overwhelming and if our government can get some minimum guarantees on future size, volume and network on top, then they should definitely sign this deal as it is one that will be put on the same level of strategic foresight as the deals to save KBC and Fortis more than 10 years ago: they'd be hard pressed to find a single case where 1 euro of taxpayer's money spent, brings in so much additional money to our treasury, almost instantaneously and annually. Brussels Airlines a huge financial leveraging mechanism for our government even.

If I were Mr DeCroo, I'd try to take the unique opportunity to invest more than they request for even, in return for further expansion guarantees once this crisis is over. 8-)

ticketbuyer
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Re: Brussels Airlines in 2020

Post by ticketbuyer »

Why not follow Italy's example and nationlise SN?

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RoMax
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Re: Brussels Airlines in 2020

Post by RoMax »

ticketbuyer wrote: 02 May 2020, 21:21 Why not follow Italy's example and nationlise SN?
And then what? I understand the question, but SN has absolutely no future without being part of a major airline group.
Yes there's an incredible amount of scepticism over LHG on this forum - some for good reasons, others not so much... - but it's too late now for something else (unless of course LHG goes bankrupt, or sells SN or whatever in which case there's no other choice than doing something else). Back in 2008/2009, when SN really needed a partner, nobody was interested in investing in SN, literally nobody else than LH came with a proper deal. In 2012 SN was on the brink of collapse, but it was thanks to LH that the company survived with no job losses and the company even invested in the new JFK route that year. Yes strategic mistakes have happened (failed EW integration) - but I'm really wondering which other shareholder (the former SN Airholding shareholders, Belgian state, others) would have invested over 400 million EUR in SN over that timespan - because that's what LH did and only the sum of what can be clearly and directly attributed to investments from/via LH. Not only that, SN grew almost year after year, hundreds of new jobs have been created, ...

Everyone always looks at 'the Swiss dream' - but people forget that Swiss kick-started back in 2001/2002 from Crossair in an incredibly different way than SN emerged from DAT. SN struggled from day-1 to get sufficient funds, had to figure out all kind of tricks to raise money (IATA slots transfered from Sabena allowing SN to sell the lucrative LHR slots in a good deal to BA, sell-and-leaseback of the BAe 146/Avro fleet, etc.). In Switserland Swiss struggled for long to make a profit yes, but it was from the very start very well funded by Swiss companies. By the time LH stepped in their capital, they had a much easier task. Also because ZRH wasn't taken over by LCC's in that period in the same was as happened here in BRU/CRL. And of course besides the fact that the Swiss market is by definition very lucrative with e.g. a banking sector that's non-comparable to BRU. Yes we have the EU and NATO, etc. but nationals from many of those member states fly their own national airlines to come to BRU, not SN.

Was letting Sabena bankrupt in 2001 a mistake then? No I don't think so. But SN never got a proper chance to fill the gap when it really mattered, in those early years. It's almost pathetic the lack of capital raised in SN Airholding to launch the new SN in early 2002 (considering that Sabena already lost at least 1,5 - 2 decades in taking its chance to properly compete with the leading group of European airlines).
Last edited by RoMax on 02 May 2020, 21:42, edited 2 times in total.

FkBE
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Re: Brussels Airlines in 2020

Post by FkBE »

ticketbuyer wrote: 02 May 2020, 21:21 Why not follow Italy's example and nationlise SN?
Because it makes companies and management lazy and causes too much overhead. In short, they are 'insured' against the consequences of their own inefficiencies.

Very little succesful companies are nationalised. Those companies are often protected from competition, and become increasingly inefficient.

Typically, they are often under-funded as well, at the bare minimum to keep the afloat. So no room for modernisation and innovation.

PttU
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Re: Brussels Airlines in 2020

Post by PttU »

RoMax wrote: 02 May 2020, 21:38
ticketbuyer wrote: 02 May 2020, 21:21 Why not follow Italy's example ...
Everyone always looks at 'the Swiss dream' - ...
What about comparing SN to TAP? Similar fleet, similar home-market, SN being focused on Africa compared to TAP's focus on South America,... Both member of Star Alliance. But TAP isn't member of a big group. If they can, SN can too?

JOVAN
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Re: Brussels Airlines in 2020

Post by JOVAN »

Inquirer wrote: 02 May 2020, 20:00
FkBE wrote: 02 May 2020, 17:39 Are we so proud that we will continue to put money in a bottomless pit?
FWIW, the 'bottomless pit' is actually quite lucrative for the Belgian government!

Let me explain:

Last year, they've booked a loss of some 25M on a turnover of 1,6BN euro indeed, but they:
- contributed more than 40M euro in social contributions and
- paid 170M euro in wages, thus their Belgian based staff paid some 60M in income taxes, so
this means something like 100M euro in direct annual revenues for the government from their 'loss making' operations, year after year, for no cost to them whatsoever. :o
(figures come from their latest annual account)

Add to that the social contributions and income taxes for all the people employed on their behalf by others at BRU (handlers, fuelers, cleaners, ATC, airport staff, horeca etc...) and you start to see the point...
If indeed it's at least 4 indirect employments for each direct employment as is often used by others in their calculations on the impact of their operations, then it must mean they effectively fill our country's treasury with several hundreds of millons in direct tax income, annually!!! :shock:

And that is before you even consider the economic and strategic benefit of our country being far better connected by a home based network airline than through having to rely on foreign (often non-homebased) carriers...

You want to cut all of that, in the surreal hope that somebody else will step in to fill the gap left?
If it takes just 1 year to completely replace them by 100% Belgian operations, it's already a loss to our national treasury and I think it's safe to say it will take a lot longer to fill the gap, if ever.
(for reference: it took 12 years to fill the gap left by Sabena, dixit Mr. Feist).

The business case to bail them out is simply overwhelming and if our government can get some minimum guarantees on future size, volume and network on top, then they should definitely sign this deal as it is one that will be put on the same level of strategic foresight as the deals to save KBC and Fortis more than 10 years ago: they'd be hard pressed to find a single case where 1 euro of taxpayer's money spent, brings in so much additional money to our treasury, almost instantaneously and annually. Brussels Airlines a huge financial leveraging mechanism for our government even.

If I were Mr DeCroo, I'd try to take the unique opportunity to invest more than they request for even, in return for further expansion guarantees once this crisis is over. 8-)
FkBE wrote: 02 May 2020, 21:39
ticketbuyer wrote: 02 May 2020, 21:21 Why not follow Italy's example and nationlise SN?
Because it makes companies and management lazy and causes too much overhead. In short, they are 'insured' against the consequences of their own inefficiencies.

Very little succesful companies are nationalised. Those companies are often protected from competition, and become increasingly inefficient.

Typically, they are often under-funded as well, at the bare minimum to keep the afloat. So no room for modernisation and innovation.
EXCELLENT EXPLANATION.
SN and BRU could be a goldmine, but Belgium (governement) has to keep control and enjoy the benefits.
Belgians have almost 300 billion Euro savings.
Belgians do not trust Banks and Stock Exchange. (= Casino)

Imagine Belgian state would establish a Belgian Corona Fund, which guarantees say 2,5 % return per year.
With present Bank rates of almost Zero, I am sure many people would be interested .
To save and keep control over ourinfrastructure (Energy, Port, Airport, Telecom,...)

Inquirer
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Re: Brussels Airlines in 2020

Post by Inquirer »

Ansett wrote: 02 May 2020, 20:24 Thanks for the interesting figures which we (including me) tend to forget. I don't know if your figures are 100% accurate, but I am inclined to believe they are close to reality
The social and fiscal revenues from Brussels Airlines that I quoted are based on their 2018 annual account, which is the latest consultable on the NBB's website: they show a steadily growing trend over the past 5 years (which is normal, due to inflation and a growing company), so 2019 will have brought our government even higher tax revenues.

Ball park figure to retain here is that Brussels Airlines' activities must have made around 300 to 400 million annualy for our government (and thus for us all as a taxpayer!) each of the past 5 years, all in return for no investment of ours whatsoever, while making exactly zero euro for its shareholder!

If you then read here some saying Lufthansa takes (too) great a benefit of 'our' brussels airlines... :roll:

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RoMax
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Re: Brussels Airlines in 2020

Post by RoMax »

PttU wrote: 02 May 2020, 22:51 What about comparing SN to TAP? Similar fleet, similar home-market, SN being focused on Africa compared to TAP's focus on South America,... Both member of Star Alliance. But TAP isn't member of a big group. If they can, SN can too?
TAP is quite a bit bigger in fleet, revenue (about double or so that of SN), etc.

But besides that. TAP went through an interesting privatization process (after years of losses and the government no longer able/willing to bear the cost of that alone). They found a very motived and well funded invester in the Atlantic Gateway consortium with the 2 leading men being David Neeleman (founder JetBlue, Azul, WestJet) and the Portugese Humberto Pedrosa. Both willing to invest an incredible amount of money in TAP to completely turn around its ageing fleet and expand to new markets.
All nice and well, but I have yet to see the financial return of all that. TAP returned to 'profit' in 2017 with €23 million (on almost 3 billion in revenue that's merely breakeven) and then plunged back to a 118 million EUR loss in 2018 despite a very significant revenue increase. It had good hopes for 2019, but I don't think I've seen 2019 FY results yet, however in the first half of 2019 they booked a 119 million EUR loss.
In the meantime David Neeleman has lost its interest in taking care of TAP (not in the least due to disagreements with other shareholders like the government - his consortium initially had a majority share in TAP - but a new government in Portugal took back the lead as largest shareholder) and is looking to sell his share (until the corona crisis hit, LH was considered one of the lead candidates) as he's looking to fund one of his other new airline start-ups.

So no, for me TAP is not (yet) a good example of an independent carrier that is successful.
I don't believe in long-term sustainable future for airlines like TAP, Alitalia, ... without being at least partially part of a bigger group.
If you have to name 1, it's probably Finnair. But their situation is not comparable enough with SN (in 'the heart of Europe' which sounds much nicer than it is: surrounded by Europe's largest hubs, a market full of LCC competition since basically the beginning of this century - contrary to many other continental European markets, etc.)

Jetter
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Re: Brussels Airlines in 2020

Post by Jetter »

Inquirer wrote: 02 May 2020, 20:00
FkBE wrote: 02 May 2020, 17:39 Are we so proud that we will continue to put money in a bottomless pit?
FWIW, the 'bottomless pit' is actually quite lucrative for the Belgian government!
You forget that all those employees pay income tax but use a lot of government resources as well (social benefits, healthcare, infrastructure etc.) If you include income tax payed by employees to conclude a company is lucrative for the Belgian government, almost all companies that went bankrupt would qualify and be worth saving. That wouldn’t result in an efficient economy and sustainable government finances though.

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Re: Brussels Airlines in 2020

Post by sean1982 »

Jetter wrote: 03 May 2020, 01:47
Inquirer wrote: 02 May 2020, 20:00
FkBE wrote: 02 May 2020, 17:39 Are we so proud that we will continue to put money in a bottomless pit?
FWIW, the 'bottomless pit' is actually quite lucrative for the Belgian government!
You forget that all those employees pay income tax but use a lot of government resources as well (social benefits, healthcare, infrastructure etc.) If you include income tax payed by employees to conclude a company is lucrative for the Belgian government, almost all companies that went bankrupt would qualify and be worth saving. That wouldn’t result in an efficient economy and sustainable government finances though.
Exactly, portraying the taxes paid as pure income is misleading as that same company also uses it back by all sort of social benefits, etc .... only if you would compare what the income is vs how much is paid out in various ways you would get a real picture about what SN contributes. I wouldn’t call it a goldmine.

oldblueeyes
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Re: Brussels Airlines in 2020

Post by oldblueeyes »

sean1982 wrote: 03 May 2020, 09:03
Jetter wrote: 03 May 2020, 01:47
Inquirer wrote: 02 May 2020, 20:00

FWIW, the 'bottomless pit' is actually quite lucrative for the Belgian government!
You forget that all those employees pay income tax but use a lot of government resources as well (social benefits, healthcare, infrastructure etc.) If you include income tax payed by employees to conclude a company is lucrative for the Belgian government, almost all companies that went bankrupt would qualify and be worth saving. That wouldn’t result in an efficient economy and sustainable government finances though.
Exactly, portraying the taxes paid as pure income is misleading as that same company also uses it back by all sort of social benefits, etc .... only if you would compare what the income is vs how much is paid out in various ways you would get a real picture about what SN contributes. I wouldn’t call it a goldmine.
Well, you have to differentiate.

If a hairdresser gets bankrupt, another one will take the job - so this is a neutral thing to the economy, as the demand is sorted out with resources from the proximity.

Aviation by definition is an international business. The flying jobs are lost for the local economy if the same route is flown by an external carrier just touching a local airport and not have a base. Handling jobs are lost if transfer passengers are connected somewhere else.

Having a local carrier creates additional administration or training jobs - for example Vienna got the Embraer training center as they replace the Fokker subfleets.

Inquirer
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Re: Brussels Airlines in 2020

Post by Inquirer »

Jetter wrote: 03 May 2020, 01:47 You forget that all those employees pay income tax but use a lot of government resources as well (social benefits, healthcare, infrastructure etc.)
I don't forget it, yet those are all what I'd call fixed costs for our government anyway.
Do the children of employees get expelled from school upon their parents losing their jobs?
Do parents of employees no longer get their pension? Do the employees themselves lose their health insurance? No, of course not!

Their jobs, their wages and more precisely the income taxes paid on it currently (help) cover what are fixed costs for our government: if they'd all lose their jobs, then none of these costs fall away for our government, just the revenues to cover them do, so the public budget deficit grows as a consequence.
Save 1 euro, lose 4, is what the NBB basically found out.
If you don't invest that euro because you want to save some money now, you'll end up having to cut the public budget (by a 4-fold) to lower and rebalance these fixed costs of government again, because a government cannot live above its means forever, either...
And mind you, if a government starts to live by its means, it does so to ALL not just to some, so in the end it's very much in my and your interest that it doesn't have to, or at least as little and few as possible!

As was meanwhile pointed out by oldblueeyes, covering these fixed costs for thousands of (ex) employees and their dependants is impossible with foreign airlines, because if a brussels airlines operated flight gets replaced by an indentical yet non-Belgian operated flight, there hardly is any fiscal income for our government from it. Indeed, an Iberia flight between MAD-BRU for instance brings no direct income taxes nor social security contributions to our government whatsoever; a brussels airlines flight on the same route does. So on the point-to-point market, it is important to have as much Belgium-based flights as possible for our country!
The same is valid for the connection segment of the market too: if the volume of traffic at BRU declines because the tranfer flows are redirected via other hubs (AMS, CDG, LHR), tax income on the wages of people employed for this transfer activity is lost to Belgium too, to the benefit of additional jobs and thus public finances in our neighbouring countries: I'm sure the Dutch won't mind taking over a couple of million of transfer passengers from BRU and pocket some 27 euro per passenger, which is what KLM contributes per passenger directly, with a 4-fold of that indirectly, to what they see as the company called 'The Netherlands Ltd'. This is why their government -otherwise notoriously cautious on the fiscal front to say the least- immediately pulled out all stops to refinance KLM and rightfully so. You don't have to teach the Dutch how to make money...

oldblueeyes
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Re: Brussels Airlines in 2020

Post by oldblueeyes »

There is also another point - fairly large airports are centers offering low wage employees a chance in the labor market. Security agents, catering in terminals, check in agents, rampees, drivers of various cars/trucks/buses serving the airports internal infrastructure are not the typical jobs targeted by people having a certain qualification. Let's make it clear, the same as Brussels benefits from high wage jobs of the EU infrastructure it needs also opportunities for those with less chances in life.

If you have a local player, this would look towards growth from it's home base. For Ryanair and co it would be easy to switch infrastructure between bases as they always try to discount infrastructure. But if a home carrier and an airport have fair and strong bonding this leads to a mutual benefit.

Looking into the LH group, it is clear that this combination of airport and airline leads to mutual success. Swiss is doing well because the focused nearly everything in ZRH and the airport protected their position. Munich is doign well because they are growing with Lufthana and not with sending from time to time kisses to Ryanair or Wizz.

Austrian is doing bad because the Vienna airport opened largely the doors for Wizz, Level and co (would not count here Lauda/Ryanair as they took over the Niki subsidiary of Air Berlin).

Thus airport, airline and country have to align on a strategy that makes sense for all.

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Conti764
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Re: Brussels Airlines in 2020

Post by Conti764 »

sean1982 wrote: 03 May 2020, 09:03
Jetter wrote: 03 May 2020, 01:47
Inquirer wrote: 02 May 2020, 20:00

FWIW, the 'bottomless pit' is actually quite lucrative for the Belgian government!
You forget that all those employees pay income tax but use a lot of government resources as well (social benefits, healthcare, infrastructure etc.) If you include income tax payed by employees to conclude a company is lucrative for the Belgian government, almost all companies that went bankrupt would qualify and be worth saving. That wouldn’t result in an efficient economy and sustainable government finances though.
Exactly, portraying the taxes paid as pure income is misleading as that same company also uses it back by all sort of social benefits, etc .... only if you would compare what the income is vs how much is paid out in various ways you would get a real picture about what SN contributes. I wouldn’t call it a goldmine.
No, but on the other hand the 3000+ employees of SN do create an economical value to the country whereas in a bankruptcy of SN they would get the same benefits they have today + more, without contributing to the income side and for a long time ahead since there won't be a new national airline and job opportunities will be scarce for months, maybe years to come.

Let's say SN goes bankrupt, laying off 3000 employees on an unemployment of more or less 1500 euro/month (which is rather low). It would mean an added cost of 4,5 million euro to the state per month for SN alone and up to 54 million euro a year. But since employment in Belgium is outrageously expensive you can easily double that number since there are 3000 less people contributing at the income side.

Adding the even bigger number of people losing their job at BRU due to SN going belly up makes the government reaching the requested bailout in more or less a year from now, not even taking the indirect job losses due to Belgium losing it's 'own' airline into account.

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Re: Brussels Airlines in 2020

Post by teddybAIR »

The discussion whether an airline should be bailed out or not goes far beyond the mere calculation of taxes and avoided cost of unemployment. The trade off includes far more variables than merely the direct fiscal impact. Other questions need to be answered as well: how do you want to position Brussels and by expansion Belgium in terms of connectivity, logistical center or possible decision center? How can you expect to attract key investments such as NATO HQ, European Commission, company HQ’s if you compete with cities like London, Paris, Amsterdam, Frankfurt, etc. in a world where you are not only smaller, but now also less connected?

Nevertheless, it is still use of public funds, so the fact that our government tries to negotiate a solid deal is just plain common sense. I would like to see however that the political world realises that the past decades have shown that political influence in the decision making units of airlines (or any other company for that matter) are the best guarantee for inferior management decisions. So the questions become:

- how do you protect a potentially critical asset in one of the most exceptional crisis using public funds, thereby maximising the return on investment without introducing the negative side effects of political mingling in the decision making?
- BA not being a state owbed airline anymore raises another important question. Are you as a country prepared to take proportional measures for all Belgian based airlines in order to guarantee a level playing field?
- the question that is usually forgotten: what is your exit strategy? History has learned us that in dire economic times it is usually the tax payer that runs the economic risk only to realise about a decade later that nobody has thoroughly thought through the entire scenario and we end up with yet another situation where strategic Belgian assets are sold to someone else for peanuts. Strategic is strategic...not only when it suits you.

nordikcam
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Re: Brussels Airlines in 2020

Post by nordikcam »

LH Board meeting today ? We will know more about SN future ?

oldblueeyes
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Re: Brussels Airlines in 2020

Post by oldblueeyes »

Tomorrow is shareholder meeting. Traditionally one day before the board meets and often investments or important decisions are announced - in the past it was typically fleet related. Now it could be last minutes adjustments to tomorrow's agenda and recommendations eg for the Swiss package etc.

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