Sabena's 50th Anniversary exhibition poster
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Sabena's final months were an ugly mess. Up in arms over Müller's proposed cutbacks, unions staged work stoppages and at one point blocked a Swissair plane on the runway in Brussels. Swissair abandoned its hunter strategy and kicked out its CEO in early 2001 after reporting a $1.9 billion annual loss. It reneged on agreements to raise its stake in Sabena to 85% and inject more funds. The Belgians sued, and a compromise was finally agreed. Then came the terrorist attacks of Sept. 11. Air traffic worldwide nose-dived. Within a month, Swissair grounded its fleet and Sabena sought protection from creditors. On Nov. 7, the president of the Brussels commercial tribunal declared Sabena bankrupt. "Until the last day we believed it would be impossible for Sabena to go bankrupt," says Karel Gacoms, a leader of the powerful metalworkers' union, who acknowledges that labor bears some blame for the collapse.
But the post-Sept.11 downturn didn't kill Sabena. Corporate misconduct did. As the commission has dug into company files, it has unearthed troubling details about a range of decisions, most notably the Airbus deal. Sabena was a longtime Boeing customer and a group inside Sabena lobbied hard to buy Boeing planes. But Swissair flew Airbus and Reutlinger insisted Sabena should, too; at one point he even threatened a Swiss withdrawal if the decision went against Airbus, according to several testimonies. The board signed off on the 34-plane order at its Nov. 17, 1997 meeting, even without seeing the paperwork. One month later, directors finally received a business plan justifying the higher number. Gobert says that document has the words "Please destroy earlier versions" written on the front cover. The financing was also highly problematic. Minutes of the board meeting say "it was proposed" that Swissair would help pay for the planes; a separate financing company that would acquire the planes and lease them to Sabena was supposed to be set up jointly by the two companies, together with Airbus. A side agreement was drafted, but Swissair never signed it — and the Sabena board never checked. Valère Croes, the board chairman at the time, testified he didn't even know of the existence of the side agreement, let alone that the Swiss hadn't signed it. The result: when Sabena's financial crisis boiled over, Swissair argued it wasn't obliged to help.
There were other big errors. Sabena signed a costly eight-year code-sharing agreement with Richard Branson's Virgin Express in 1996, under which Virgin flew some Sabena routes to London and other European destinations — though the board apparently was only told about a one-year deal. In 1999, Sabena merged its sales and marketing operations with those of Swissair into a new company, London-based Airline Management Partnership, with the goal of cutting costs — only to be hit by huge start-up fees and bills that appeared inflated, according to testimony given by John Lindekens, one of the few Belgians in a senior position at AMP. For example, he said Sabena's in-flight magazine had been funded entirely by advertisements until AMP took over and began charging the carrier $1.4 million per year for it. AMP also billed Sabena for 9,000 "irregularity kits" with toiletries for stranded passengers at a cost of $5.50 apiece — enough for 11 years — and $250,000 for 40,000 unnecessary telephone cards.
For the most part, the Swiss haven't spoken in their own defense, and the Belgians can't force them. (Suits have been filed against Swissair and some of its top executives by several of the Swiss carrier's European partners and others, and a Swiss magistrate is separately conducting a criminal inquiry). But former CEO Reutlinger has testified, telling the commission in July: "My conscience is clear." He tried to justify the Airbus order by saying the planemaker offered a low price at a time when commercial aviation was booming, but wouldn't discuss details of the transaction."When I quit Sabena, I left a company in good shape," he contended. Above all, he pointed out that every key decision taken by the company during his tenure had been approved by the board of directors, the majority of whom were Belgian.
So where was the board? Jan Huyghebaert, a director for nine years, told the commission that the image of a passive board blindly carrying out Swissair's wishes was "a caricature." Nonetheless, he conceded: "Perhaps we underestimated the risks of Swissair's strategy."
The problem may be systemic. For years, directorships of Belgian state-owned companies have been handed out according to political affiliation, with each major party being represented on boards and a balance being struck between French-speaking and Flemish-speaking directors. "It's our political etiquette," says Gobert, whose Ecolo party is pushing to end the practice. Others say the real problem may lie elsewhere: "As far as the politicians were concerned Sabena had been sold and they weren't interested in it any more," grouses Gacoms.
When Sabena was nosing into its death spiral, in the summer of 2001, a remarkable meeting took place at the sumptuous Astoria Hotel in Brussels. Over dinner on July 16, four months before the company tanked for good, Prime Minister Verhofstadt and the new head of Swissair cobbled together an agreement — in secret. In exchange for a Swiss commitment to inject j258 million into Sabena and take over nine of the Airbus orders, the Belgians would drop their suit and let Swissair off its commitment to become the majority shareholder. The next morning the five-point deal was announced to widespread relief in Belgium — and to the astonishment of company insiders. For the Astoria accord had been struck without the knowledge or participation of the three people who by law were supposed to run Sabena: the chairman of its board, its chief executive officer and the government minister who controlled the Belgian state's majority shareholding. In the end, not even that agreement could make a difference. Sabena was going down.
Sitting in a café in downtown Brussels, a former Sabena baggage handler named Giacomo Riolo talks with two colleagues about who's to blame for the debacle. Forty-three years old and a father of three, Riolo lost his job a year ago and is still unemployed. His friends are equally disgusted. It was the Airbus deal, says one. It was the Swissair deal, says the other. "It was just terrible management," says Riolo. After nine months of commission hearings, hardly anyone in Belgium would disagree.