In late May, a grim man strode into the Brussels offices of Sabena, Belgium's national airline. He had come to talk with Pierre Godfroid, chairman of the money-losing carrier. It wasn't long before employees figured out that the mystery man was the industry's most ruthless cost-cutter, Robert L. Crandall, chairman of American Airlines Inc. parent AMR Corp.

For an airline struggling to transform itself from a once protected monopoly into a competitive enterprise, the barbarians were at the gate. Crandall said American wanted the kind of capacity-sharing deals Sabena has with Delta Air Lines Inc.--such as block purchases of seats--and a minority stake. And right behind Crandall came Swissair, which opened talks with Sabena amid reports that it wants a 49.5% stake. The bottom line: "Sabena's in play," says a top manager of one of the airlines in pursuit.

Such talks aren't new to Sabena. In 1991, the Belgian government offered a 37.5% stake to outsiders. American, British Airways, and KLM Royal Dutch Airlines all showed interest but were rejected. The Belgians feared they would demand big cuts in Sabena's staff, then loaded with patronage workers. The nod went to Air France, run by a sympathetic Socialist government. But since the $182 million deal was sealed in April, 1992, neither airline has benefited much. Sabena lost $136 million in 1993. Air France spilled $1.5 billion in red ink last year and has negative cash flow. "On paper," says Bertrand d'Yvoire, an airline consultant with Paris-based Consultair, "it's bankrupt."

Inevitably, politics will play a role in any sale. Air France is not rushing to unload its Sabena stake, because the proceeds from such a sale would hardly solve its financial problems, including $6.8 billion in debt. Belgium, which favors a sale, hopes to push things along by tentatively backing a French plan before the European Union to give Air France $3.5 billion in state aid. That's just one of many ways to grease a deal.

American is the most logical buyer. It's the only major U.S. carrier without a European partner. And Brussels' uncongested airport would make a good hub for the Fort Worth-based carrier.

A European buyer, such as Swissair, would be more palatable to France, however. Alarmed about Crandall's ambitions, Delta could live with a choice of Swissair, one of its European allies. The Atlanta-based airline is eager to avoid being drawn into a bidding war as it tries to cut $2 billion in costs by 1997.

Swissair can't benefit from deregulation of the EU airline industry because Switzerland isn't an EU member. But a Sabena stake would give it a piece of national carriers' new freedom to fly around Europe. Bob Crandall made an impressive entrance, but Swissair could be the one to walk away with the prize.

WHO'S EYEING SABENA
      AMERICAN        Wants Sabena as a partner to bolster its position in Europe
      DELTA           Wants to preserve its relationship with Sabena by blocking
                      any deal with American
      SWISSAIR        Needs a link with a European Union carrier to take advantage
                      of a deregulated airline market
      DATA: BUSINESS WEEK
      
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