Will Brussels Airlines once again become a state-owned company?
Like many other airlines, Brussels Airlines is severely affected by the corona crisis. The airline would have appealed to the Belgian authorities for at least 200 million euros in aid. According to some sources, the group of experts in charge of rescuing the large Belgian companies as a result of the COVID-19 crisis is also looking into the renationalisation of the airline company. “Just do it: if it burns, you have to put it out”, says economist Paul De Grauwe.
Essential for the Belgian economy
Brussels Airlines’ aircraft have been on the ground for two weeks and will remain there until 19 April, unless for repatriation. The company provides 3 500 direct jobs, but many other companies and sectors are directly dependent on it, such as the Brussels Airport and the tourism sector.
The majority of the staff is on temporary unemployment, but this intervention will not be enough to deal with this crisis. According to the umbrella organisation International Air Transport Association (IATA), most airlines have a liquidity buffer of about three months. In other words: if this continues for a while, the money will run out. Brussels Airlines needs cash.
Economic Risk Management Group
According to the French-language news channel LN24, one far-reaching scenario is on the table of the high-level group of experts charged with rescuing large Belgian companies in this health crisis: the renationalisation of Brussels Airlines.
The Economic Risk Management Group (ERMG) is chaired by the CEO of the National Bank, Pierre Wunsch, and Piet Vanthemsche, ex-chairman of the Farmer’s Union. Koen Van Loo, of the Federal Holding and Investment Company (FPIM), and Olivier Vanderijst, of the regional investment company of Wallonia (SRIW), are also part of this group.
Pro and contra
It is a scenario with ardent supporters, but also with opponents. Paul De Grauwe (London School of Economics) belongs to the first category. “Just do it”, he says in De Morgen. “We must not let fall Brussels Airlines as a result of the corona crisis. Nationalisation is a good idea, also because the company can operate under normal circumstances. Once the storm has passed, we’ll see.”
Others are much more cautious. “A temporary or partial nationalization might be the last resort”, says transport economist Eddy Van de Voorde (UAntwerp). “It may even be the only option. The government has to go along with this so that Brussels Airlines can survive. “Full nationalization excludes Van de Voorde. “Europe would never allow this”.
EU rules on competition
The European Commission attaches great importance to its rules on fair competition. At the same time, the Commission is already stretching its state aid rules to the limit in order to deal with the corona crisis. “If Europe were to allow nationalisation here, it would set a precedent for other countries”, says Professor Steven Van Hecke, an expert on European politics at KU Leuven. “They will want to avoid that.”
Though there may be a shortcut. “If Belgium decides to nationalize now, Europe can’t judge right away”, says Van Hecke. “That normally takes weeks, even months. The government could gamble on the fact that it will only be whistled back in a post-corona era. And then the worst suffering might already have been avoided.”
Brussels Airlines contradicts the reporting that it is virtually bankrupt. “We disprove every rumour that says otherwise”, said the airline. It does, however, reaffirm that there are on-going discussions with the government about support. Whether a nationalisation of society is on the table, they don’t comment.
Other aviation players, such as TUI Belgium, Air Belgium, Sabena Aerospace, Aviapartner and Swissport, would also have asked for government support.
In a reaction on Friday, Minister of Finance Alexander De Croo (Open Vld) states that “if Brussels Airlines asks for a financial intervention to cope with the corona crisis, I first want to understand what exactly the money should be used for.
Minister De Croo remained cautious. The file is being looked into, but there are no concrete paths on the table, he said. “Most of the staff is in economic unemployment. So what’s that money for? What costs are still running”, said the Deputy Prime Minister.
Belfius and Lufthansa
According to LN24, several financial mechanisms are being examined, including loans convertible into capital or conditional credit lines. “At this stage, Belgium expects the German parent company Lufthansa to put their cards on the table and formulate precise questions regarding liquidity and/or capital. Several sources specify that the public bank Belfius can play a role in mobilising capital.
Several European countries are considering the nationalisation of their airline, including France and Italy.