=20 ---------------------------------------------------------------------- This article was sent to you by someone who found it on SFGate. The original article can be found on SFGate.com here: http://www.sfgate.com/cgi-bin/article.cgi?file=3D/news/archive/2004/03/16/f= inancial0853EST0046.DTL ---------------------------------------------------------------------- Tuesday, March 16, 2004 (AP) SN Brussels, Virgin Express sign nonbinding letter of intent to merge PAUL GEITNER, AP Business Writer (03-16) 05:53 PST BRUSSELS, Belgium (AP) -- After years of flirtation, SN Brussels and Virgin Express said Tuesday that they had signed a nonbinding letter of intent to merge ownership of the two Brussels-based airlines through a stock swap. SN Brussels -- the 3-year-old successor to Belgium's bankrupt flag carri= er Sabena -- also reported Tuesday it earned 600,000 euros ($738,000) in 2003, its first profitable year. The airline lost 36.8 million euros ($45.3 million) in 2002. In the new joint holding company, SN would remain the dominant player wi= th 70.1 percent, the airlines said. VEX PLC, part of British entrepreneur Richard Branson's Virgin business empire, would contribute its shares to SN Airholding, the majority owner of SN Brussels, in exchange for a 29.9 percent stake. The two would remain separate entities and fly under their own brands, t= he joint statement said, adding that management details had yet to be worked out. SN Brussels would remain a "a flexible full service airline" and Virgin Express would continue as a budget carrier, they said. "Both companies expect significant mutual benefits through network optimizations." SN Brussels Airlines has 38 aircraft and nearly 2,000 employees. It serv= es 54 European and 14 African cities, as well as the United States in a code sharing arrangement with American Airlines. Virgin Express, with 780 employees, serves 16 European cities from Brussels with a fleet of 12 Boeing 737s. It also flies from Amsterdam to Rome and Milan. SN and Virgin Express tried to merge once before, shortly after Sabena went under, but talks collapsed in 2001 over issues of control. They settled on a partnership that expired last March and have been competing ever since. Analysts had said a merger would make sense for both, with Brussels too small for two airlines to flourish. "Usually when you put two airlines where you have competing routes together you get a better solution," said Nick van den Brul, airline analyst with BNP Paribas in London. Buoyed by its partnerships with American and British Airways, SN Brussels said in its earnings report that net revenue in 2003 rose 30 percent to 533.5 million euros ($656.2 million). "In two years time and despite the worst ever market conditions for the aviation industry we turned SN Brussels Airlines into a profitable company," executive chairman Rob Kuijpers said. Virgin Express also has been struggling but had a profit of 2.6 million euros ($3.2 million) in 2002. It expects to report 2003 results later this month. Both airlines are expected to benefit from cutbacks by no-frills carrier Ryanair at nearby Charleroi airport following last month's European Commission decision outlawing some of the subsidies Ryanair enjoyed. But Van den Brul noted Brussels is still a "niche market" and Virgin Express a "minor investment" for Branson, who also owns Virgin Atlantic Airways and is forming a new budget carrier in the United States, Virgin USA. ---------------------------------------------------------------------- Copyright 2004 AP