SN Brussels & Virgin Express towards a full merger

Post by **sn26567** » 04 Jan 2006, 15:51

I have just posted the story hereunder in the Latest News. An interesting topic for a good discussion!

According to an article published today in La Libre Belgique, 2006 will be the year of truth for the Belgian airlines SN Brussels Airlines (SNBA)and Virgin Express (VEX), which are now together under the same shareholder SN Airholding.

The new CEO Neil Burrows will manage the two companies for one year, and since he has nothing to lose during those twelve months, it is expected that he will clean up and restructure in depth.

The financial situation of SNBA needs adjustments, even if it is not critical. The problems have been identified:

1) SNBA loses money in Europe
2) The load factor is too small (65pc) and both Belgian airlines have lost market share in Brussels
3) SNBA will no longer get some exceptional income, especially the hefty dividends of the former Sabena coordination centre SIC that compensated for the low operational results
4) The competition in Africa is getting stronger under the leadership of Air France/KLM
5) The Brussels market is small and will not increase dramatically during the next few years; moreover there will be a strong pressure on prices through the competition of rail transport and low cost carriers; and finally, Brussels is not among the cheapest airports in Europe...

Conclusion: to survive, SNBA will have to cut costs. Some costs are inherited from another era, that of DAT, the regional subsidiary of Sabena.

SNBA will have to be more aggressive on prices in order to fill its planes. There is a project in the air later this year to sell seats four months in advance at very attractive prices.

In this spirit SNBA has launched the "Sunrise" project in order to optimise the utilisation of the current fleet and to better coordinate schedules of SNBA and VEX. This is even more necessary than ever because of the codeshare policy of SNBA contributes to weaken its position in the commercial management of the codeshared routes and to reduce the revenues it gets on these routes.

It is expected that Neil Burrows will unveil his strategy during the first quarter of 2006. In a first period, he will probably maintain two separate airlines with their own names, position in the market, culture and payrolls. But ultimately it will probably lead to a single airline, already at the end of 2006 or early 2007. This will need a slimming of the personnel through natural departures.

This merger is seen as the only viable solution for the two airlines. Maintaining two corportae images, two distribution networks, two categories of personnel costs money. And even together SNBA and VEX represent only 40pc of the total market of Bussels airport, one of the lowest ratios in Europe for a national airline.

Of course, the payrolls will need to be harmonised, and that could lead to frictions between some categories of personnel. The SNBA pilots, even though that accepted some cuts after the bankruptcy of Sabena, still enjoy some advantages that the VEX pilots do not get: pendion fund, insurance, ... Moreover, the VEX pilots are more productive. This could induce some social unrest among SNBA pilots.

FlightSimCrew · Post by **FlightSimCrew** » 04 Jan 2006, 16:01

fly
Embraer 190-member
Joined: Feb 11, 2003
Posts: 66
Location: based in Brussels
Posted: Wed Jan 04, 2006 12:16 pm Post subject: Virgin and SN Brussels Airlines to merge

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If you ask me, the beginning of a new company....
http://www.standaard.be/Artikel/Detail. ... 012006_013

http://www.lalibre.be/article.phtml?id= ... _id=260604

Seems the new CEO is only their to start a new company and leave the rest to his followup.

FlightSimCrew · Post by **FlightSimCrew** » 04 Jan 2006, 16:03

natacha737
Cessna 152-member

Joined: Feb 28, 2003
Posts: 3
Location: Brussels
Posted: Wed Jan 04, 2006 4:01 pm Post subject:

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Hi All,
What's your opinion about SN's future ? I'm feeling a little bit scared...
Cheers, and best wishes for 2006

SierraGolfDelta · Post by **SierraGolfDelta** » 04 Jan 2006, 16:49

The future of a small airline, operating from a congested base that is constantly suffocated by politics (night flights and growth), surrounded by a few very big and powerfull alliances has indeed very few chances to stay in the race, unless, they become a niche carrier..

Furthermore, i wouldn't really know why to choose SNBA as a Belgian. National feelings in Belgium only pop up when things go wrong ("oh Christ Sabena went bankrupt when we all witnessed the foreplay") or during football. They are not cheap and they don't fly to places other airlines don't fly cheaper.

This said, I would be sorry to see another Belgian airline disappear out of the skies. So thumbs up and lets hope all turns out well....

Atlantis · Post by **Atlantis** » 04 Jan 2006, 17:44

Like I started up an earlier topic, SNBA is in big troubles. I have no good feelings about this full merger. It could cut costs, ok, but still.

I'm wondering about the financial figures. It's already a while ago that they have published them.

My opinion is that they have to take some risks. They play always very careful, that's ok, but not in this aviation world. I would say that they have to lease some aircrafts for mid-haul and long-haul. Expand in Africa and open some destinations in the Middle East.

SNBA, take the change and do something about your situation

lumumba · Post by **lumumba** » 04 Jan 2006, 21:45

Ho atlantis.
I think your right about to open some more African destination.That's where they are making there money.
Regards
Pat

bkonner · Post by **bkonner** » 05 Jan 2006, 02:10

Howdy,

Here's the problem. Virgin is an LCC carrier. SN is a full service carrier with a reasonable reputation. How can you merge these two concepts? SN's concept seems to be working producing a small profit. Virgin I don't think has made any money lately (have they ever made any money?). If this report is correct, I wonder if management has thought out what it is doing thoroughly. I have some doubts! In a way it reminds me of America West; one minute it’s an LCC and the next a full service carrier.

bkonner

Boeing767copilot · Post by **Boeing767copilot** » 05 Jan 2006, 08:46

In my eyes: Virgin is no longer a LCC, ticket prices are quit expensive compared to Ryanair, easyJet a.o. Maybe a low cost carrier, but NOT a low fare carrier. In that way, a merge is not so bad.

FlightSimCrew · Post by **FlightSimCrew** » 05 Jan 2006, 09:16

Boeing767copilot wrote:In my eyes: Virgin is no longer a LCC, ticket prices are quit expensive compared to Ryanair, easyJet a.o. Maybe a low cost carrier, but NOT a low fare carrier. In that way, a merge is not so bad.

Just take a look at the current VEX website, you'll find prices of 4 and 7 euro excluding taxes... think this is low fare enough dont you ? 8)

Problem is the expensive Brussels airport which charges over 20€ taxes where as Ryanair and Easyjet have much lower a/p charges (and get kick backs). I must say that VEX does charge a fuel surcharge which FR and EZY don(t because that of course have a lower cost base and are more able to deal with increasing fuel prices !

Boeing767copilot · Post by **Boeing767copilot** » 05 Jan 2006, 09:25

Which destinations? I can not find one flight for that price!

FlightSimCrew · Post by **FlightSimCrew** » 05 Jan 2006, 09:33

Look better... currently over 30.000 people found these flights so you should be able to find them too ! all destinations... but please do not take tomorrow as a reference date, obviously then these fares are not available.

Post by **sn26567** » 05 Jan 2006, 09:37

VEX is currently selling tickets at 39.95 and 49.95 euros one way to ALL their destinations.

Airbus330lover · Post by **Airbus330lover** » 05 Jan 2006, 10:08

I dound easy 4 or 7 € but for flights in 3/2006 and not the friday, quite normal.
As said the biggest problem for VEX .... and SNBA is to find in the taxes in BRU

airazurxtror · Post by **airazurxtror** » 05 Jan 2006, 11:33

Those low prices (39,95 and 49,95 euros) are not valid on all flights (only on those who are less popular, I guess).
AND don't forget you have to add 10,00 euros (in very small prints on the ads) just to please the travel agents...
For me, I don't care if they merge or even if there is still a Belgian flag carrier (we are European, aren't we ?), as long as we can get good flights from Belgium, frequently, to interesting destinations and, last but not least, at a low cost.

tolipanebas · Post by **tolipanebas** » 05 Jan 2006, 12:19

What a surprise that those fares are not valid on all destinations all the time!! <not>

Do the math:
45 (average of 40 and 50) x 120 (which means a good loadfactor) = €5400.

Knowing it cost about €3750/hr to operate a 737 (fuel, plane, crew, airway taxes), €5400 won't get you far, because you also have to pay landing fees (easily 500 euro per landing), handling (again easily 300 euro), publicity, catering etc too.

BTW, don't be fooled, NO airline can offer those prices for ALL seats, no matter what they say to make you believe. Even FR (who is a master at diverting all possible costs but fuel, crew and leasing of their planes to the regional airports) has ticket prices well into the 3 digit numbers for much of their seats....

Strange that people -who all know all too good themselves just how expensive fuel has become- have actually come to believe without any serious questioning one can easily make a modern jet plane fly for 2 or even 3 hrs at ticket fares lower than for a short train ride to the Belgian coast...

Avro · Post by **Avro** » 05 Jan 2006, 13:10

I totally agree with you on that one tolipanebas. Airlines cannot make any money if they sell all tickets a 5 euros or even at a few cents !!! People tend to forget that.

AFApresident · Post by **AFApresident** » 05 Jan 2006, 13:47

A full merger of SN and VEX COULD work, however they will need to take some risks and most of all have a leader.

They miss both of the above minimum criteria right now ...

SN get your act together now, or it will be too late!

aocmember · Post by **aocmember** » 05 Jan 2006, 16:28

There are rumours that SNBA wants to merger in order to do
selfhandling via Virgin-express, who already do this for
themselves. It would be cost-cutting to stop the coop.
with Flight Care for pap handling.
Virgin Express already started a project to have their own
loadcontrol department, so maybe not so many staff will
loose their job, but will be reassigned within the company.

SN_fan · Post by **SN_fan** » 05 Jan 2006, 16:49

handling of vex in bru is still by flightcare

Or maybe they should do like Aeroflot create a new class

All the Vex planes go to SNBA, VEX disappaere
and they sell Business, Economy and low cost seat on one plane.
The last rows (close to the toilets

) with less space, with less baggage allowed and food and drinks available only when they asked it at reservation, ofcourse with a extra cost, and if they didn't ask it at reservation they can get drinks but at a higer price

So Four classes

First (not for SN now but maybe later)
Business
Economy (full service)
Low fare (less bags, less space, food and drink on request)

Airbus330lover · Post by **Airbus330lover** » 05 Jan 2006, 18:17

SN_fan wrote:The last rows (close to the toilets ) with less space, with less baggage allowed and food and drinks available only when they asked it at reservation, ofcourse with a extra cost, and if they didn't ask it at reservation they can get drinks but at a higer price

Business
Economy (full service)
Low fare (less bags, less space, food and drink on request)

Like the project of SAS (not sure!)

Aviation24.be

SN Brussels & Virgin Express towards a full merger

SN Brussels & Virgin Express towards a full merger

I wonder if SN is run by Americans! (I am an American)

SN Brussels and Virgin