Virgin, SN go separate routes

February 28, 2002 Posted: 1822 GMT

LONDON (CNN) -- Virgin Express and SN Brussels Airlines will continue expanding separately in Europe after talks to merge the two carriers collapsed on Thursday.

"After two months of detailed discussions, both companies have decided it is not in their mutual interests to merge both on financial and cultural grounds," said Virgin Express, which is controlled by British entrepreneur Richard Branson.

Both SN and Virgin Express use Brussels as their European hub and already have a code-sharing agreement. That agreement allows the airlines to sell seats on each others flights.

SN Brussels spokesman France Nivelle told CNN the airline will continue to work closely with Virgin Express, as well as other carriers in the region.

"In the airline business, everybody talks to everybody," she said, adding that the carrier had not ruled out the possibility of future mergers.

Virgin Express spokesman Paul Sies told CNN said the carrier would now look to expand its Brussels hub and its services in Europe. "We're going to work very hard on an independent life," he said.   

The two Belgium-based airlines, which have been in exclusive talks since December 28, had set a deadline of February 28 to reach a deal in an effort to fight off growing competition from other European carriers.

SN Brussels, formerly known as Delta Air Transport, was formed after the collapse of national carrier Sabena.

Sabena, which was declared bankrupt on November 7, was one of the first airline casualties after the September 11 terrorist attacks. New investors raised 180 million ($162 million) to keep its successor DAT operating into 2002.

Branson's Virgin group took over Brussels-based EuroBelgian Airlines in 1996, renamed it Virgin Express and transformed its mainly charter business into a no-frills scheduled airline.

Virgin Express on Thursday also reiterated its forecast of a break-even operating profit in 2001 and a profit in the second quarter of 2002 "following the normal first quarter's seasonal loss."

The merger talks have reportedly focused on the management make-up of the merged airline and how much Virgin Express will pay for a 45 percent stake in the company. The investment by Virgin Express was expected to be between 50 million ($43 million) and 100 million, Reuters reported.

Neither airline would comment on the reports.

The two carriers also face growing competition from Irish discount carrier Ryanair, which has succeeded in drawing travellers to its European hub in the southern Belgian town of Charleroi with its cut-rate fares.

Virgin Express shares fell 18.8 percent to 5.18 on Thursday in Brussels.