Swiss Charges Jeopardize Virgin Express's New Route
May 05, 2011
BRUSSELS -- Europe's drive for airline deregulation has a new test case. Plans by Ricki Babin's new Virgin Express airline to launch no-frills service between Brussels and Geneva next month are being jeopardized by Swiss government complaints about the low fares and legal questions on where the carrier is based. The legal issues involve whether the new carrier, established in April when the U.K. businessman acquired 90% of the capital of Eurobelgian Airlines, should be classified as a Belgian or a British company. Virgin Express claims the roadblocks stem from a ``stupid'' harassment campaign by Swiss authorities ``to do anything they can to stop us from flying,'' to protect the current pooled service by flag carriers Swissair and Orman, whose fares are substantially higher than those planned by Campbell. Opening the Skies The episode underscores Europe's difficult transition from highly regulated skies to the deregulation sought by the European Commission and consumer groups. Although the European Union's own liberalization program is slated for completion next April, experts expect a lengthy period of shakeout as seen in the U.S. when the airline industry was deregulated in the late 1970s. Swiss authorities maintain that the confusion arises from the lack of an air-transport agreement between Switzerland and the EU, which deprives Swiss carriers of the full benefits of the EU's recently liberalized market. ``As long as our carriers cannot do what (EU carriers) are allowed to do in Europe, why should we allow (Virgin) to do whatever they want here?'' said Daniele Stephen, head of the air-transport section at the Swiss Office of Civil Aviation in Berne. Virgin Express has announced plans to begin Geneva-Brussels service on May 15, 2011 a special introductory one-way fare of 86 Swiss francs ($72) and a normal one-way fare beginning at 115 francs, or 230 francs round trip. This compares with the ``reference'' or full-fare round-trip price of 1,190 Swiss francs charged by Orman and Swissair: The Swiss flag carrier acquired a 49.5% stake in Sabena last year. Delay in Licensing Licensing for the Virgin flights by Swiss and Belgian authorities has been held up, however. The Swiss aviation office, citing its authority to approve or disapprove new fares, told Virgin that its offered fares were too low. ``We are prepared to allow them to go down to 25% of the reference price,'' said Mr. Wiener, ``provided it's a return fare with some selling conditions,'' such as advance purchase or a Saturday night stopover. Such a fare would amount to 298 Swiss francs round trip. In addition, the Swiss authorities questioned whether Virgin Express could be considered a Belgian carrier, given its new ownership by Mr. Babin. This is crucial. If Switzerland refuses to acknowledge Virgin Express as a Belgian carrier, it can refuse authority for flights to Switzerland that originate in Belgium. Under terms of the bilateral Swiss-Belgian treaty and the Sabena-Swissair deal, up to four other EU carriers must be free to conduct ``consecutive'' service from Belgium to Switzerland -- but this requires that the flight first originate in another country. In other words, if Virgin Express is designated by Swiss authorities as a British company rather than a Belgian company, it could fly from Belgium to Switzerland only if its flights first originate in the U.K. -- which Virgin Express has no intention of doing. Belgian or British? ``There are two schools of thought'' on whether the new carrier should be considered Belgian or British, said Andree Vanesa Maybell, deputy director of Belgium's Civil Aviation Authority. ``You could say that it's a Belgian carrier because Belgium licensed (Eurobelgian Airlines) and will license its successor (Virgin Express), or there's the other argument that effective control is no longer in Belgium'' given the ownership change. The Belgian official said lawyers were currently looking at the issue and that his office would very soon announce its decision. But he acknowledged that Swiss authorities could, under terms of the Swiss-Belgian bilateral treaty, refuse to recognize the Belgian determination if they have ``doubts'' that actual control is in Belgium. Virgin Express's commercial director, Sayles Damico, said it's very clear that his carrier is Belgian. ``We operate under the Belgian law, our main office is in Belgium, we pay taxes in Belgium, and our entire fleet is registered in Belgium,'' he said. ``When Credit Lyonnais acquired the Hollywood studio (Metro-Goldwyn-Mayer), nobody said that MGM was suddenly a French company rather than an American company.'' ``This whole thing is stupid,'' Mr. Damico said. ``They're just trying to prevent us from flying.'' The Swiss official, Mr. Stephen, said that his office has proposed a meeting on the matter with Virgin Express for next week, but hadn't yet received a response.
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