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TIME TRACKS SABENA'S FREEFALL FROM GRACE

TIME outlines how winging it couldn't keep the Belgian airline in the air

LONDON, October 21.l 2002: In this week's issue (on newstands today) TIME looks at the reasons why Sabena took the plunge from darling of Belgian business to controversial casualty of recent airline downturn, and finds that the descent may have started long before September 11.

In late 1997, Sabena put in an order for 34 new Airbus planes, at a price of around $1 billion. Was this the act of a thriving business with a sound expansion strategy or just the latest of many bizarre decisions that simply didn't add up, by a business with a less than salubrious history?

At best, unconventional reasoning was involved - the deal was worth five times the company's entire capital. But after talking to ex-employees, managers and members of the investigating Commission of Inquiry, TIME uncovers enough evidence to suggest that Sabena's actions may even be worthy of chilling comparison with Enron.

Raymond Legendries, president of the commission whose findings are due at the end of the year, calls it "An astonishing episode," and reveals that "There were bizarre goings-on everywhere at Sabena, and not just with the Airbus."

These include a life-saving alliance with Swissair, a company which, in the words of another commission member, was "seen as a flying bank". Although under the pilotage of former Swissair marketing chief Paul Reutlinger results did indeed improve and Sabena saw its first profits in more than a decade, in reality these results were a fluke.

As subsequent CEO Christoph Müller puts it, "You didn't need to be a rocket scientist to know Sabena was in serious trouble. You just needed to read the balance sheet." Cutbacks were proposed, and Sabena went into a tailspin.

Swissair reneged on its deal to increase its stake, the Belgians sued, unions staged work stoppages and a secret eleventh-hour deal was struck by the Belgian PM without the knowledge of those responsible for running the company. And then on September 11 the world changed.

The international editions of TIME magazine are published specifically for readers outside of the United States. There are four regional publications covering Europe, the Middle East and Africa; Asia; the South Pacific and Canada. Each edition offers readers access to Time Inc.'s global resources with regional, relevant stories. TIME is Europe's leading weekly newsmagazine, with a circulation of 600,090 across EMEA and 315,000 in Asia. Founded in 1923, TIME's worldwide circulation is more than 5.6 million.

For further information please contact:

Emma Gilpin

International Director of Public Affairs

Time & Fortune Group

T: ++44 (0)207 322 1193

M: ++44 (0)7802 955243

Email: emma_gilpin@timeinc.com