Virgin Express creates Brussels airline

Sir Richard Branson's Brussels-based budget carrier, Virgin Express, is to take a stake of just under 30 per cent in a new airline group formed through a merger with SN Brussels Airlines, part of the now-defunct Belgian state airline Sabena.

Sir Richard Branson's Brussels-based budget carrier, Virgin Express, is to take a stake of just under 30 per cent in a new airline group formed through a merger with SN Brussels Airlines, part of the now-defunct Belgian state airline Sabena.

Under the terms of a non-binding letter of intent signed by the parent companies of the two airlines, Virgin Express will own 29.9 per cent of the new combined business and SN Brussels the remainder.

A series of put-and-call options gives Virgin Express the right to sell its stake to SN Brussels for €64m (£43m) and SN Brussels the right to buy the stake for €100m. The options would be exercisable for a two-year period from 2005 to 2007.

The aim is to create one group but continue to operate from Brussels' Zaventem airport as two independent airlines - one, Virgin Express, serving the low-cost market, and the other, SN Brussels, offering a full service to passengers.

The two airlines would then be able to rationalise their route networks. At present they compete on a number of routes from Brussels, including services to Geneva, Barcelona, Milan, Rome and Madrid.

Virgin Express, which is 88.6 per cent-owned by Sir Richard's Virgin Group, would continue to be a quoted airline with listings on the Belgian and US markets.

In a statement, the two airlines said they both expected "significant mutual benefits" through the optimisation of their networks, but neither would go into details about cost savings or job cuts.

Virgin Express has a fleet of 12 Boeing 737s and a workforce of 780, and last year carried 2.5 million passengers. SN Brussels carried 2.9 million with a fleet of 38 aircraft - consisting mainly of regional jets - and a workforce of 2,000.

Virgin Express shares closed unchanged at €1.41.