Swissair buys 49% stake in Sabena

Swissair has bought a 49 per cent stake in Belgium's state airline, Sabena, in a $230m (£150m) deal that gives the Swiss carrier a foothold in the lucrative European Union market.

In total the loss-making Belgian airline is getting a $353m capital injection, with the government investing $53m and a consortium of Belgian investors putting up the rest.

The deal is subject to clearance by the European Commission, although it was thought unlikely to meet much opposition. One UK airline said: "It is one to watch, but is not necessarily a problem.''

Since Swiss voters rejected proposals to join a European free trade pact in a 1992 referendum, Swissair has been worried about being excluded from the preferential treatment open to other European carriers.

The company has estimated that it risks losing between $88m and $176m a year by being shut out of Europe. Swissair began talking to Sabena after the failure of negotiations on a four-way alliance with KLM Royal Dutch Airlines, Scandinavian Airlines System and Austrian Airlines.

Swissair is about twice Sabena's size, carrying 8.4 million passengers in 1994, compared with Sabena's 4.3 million. Sabena has a fleet of 39 aircraft, excluding charter and regional planes, while Swissair's fleet totals 62.

Both airlines will retain their separate identities and names. Sabena's board will consist of five Swissair representatives and six members appointed by Belgian shareholders. A chairman will be of Belgian or other EU nationality and be jointly nominated by Swissair and the other shareholders. Swissair will also receive warrants allowing it to increase its Sabena stake at a later date if EU rules permit.

The long-awaited agreement is a gift for cash-strapped Sabena, whose alliance with Air France failed to produce the hoped-for results. Under the deal Swissair will buy the 37.5 per cent owned by a consortium led by Air France.

Swissair said the deal was a perfect fit, with little duplication of routes. The airlines plan to improve their services between Brussels and the three Swiss airports of Zurich, Basel and Geneva. There will also be cost savings on aircraft maintenance, cargo and catering.