Sir Richard wants to revive the Belgian airline industry

Investors in Sabena, which went bankrupt on 7 November, have been attempting to ensure the launch of a successor flag carrier, Delta Air Transport (DAT).

Virgin Express, which is based in Belgium, said in a statement on Friday: "The objective of the discussions [with DAT] is to explore the benefits of a possible merger of the two companies to create a single Belgian airline.

"[The airline] would benefit from the strengths of both companies and [be] aimed at reviving the Belgian airline industry."

The talks focus on the creation of a new airline with a new name which would offer both business class and low-cost air travel to the main European destinations.

Working together

The merger talks should be completed by Easter, Virgin Express said.

Major European destinations will be served

Virgin Express and DAT have extended until 28 March a commercial agreement signed just over a month before Christmas.

News of the merger talks emerged soon after a Belgian court ruled that bankruptcy protection awarded Sabena could not be extended to Sabena's in-house bank - Sabena Interservice Center (SIC) - which would have provided about one third of the money needed for DAT to create the new airline.

Without bankruptcy protection, the 109 m euros (�66.5m; $96m) owed to SIC by DAT would not be erased, threatening the viability of the former Sabena short-haul subsidiary's vision.

Embarrassing failure

The bankruptcy of the 78-year-old Sabena was seen as a national embarrassment.

It was the first European national flag carrier to go bust, and was already in dire financial straits before the 11 September terrorist attacks.

Both the government and several leading captains of industry had been keen to back the creation of a new airline.

But investors were unimpressed by Virgin Express's merger plans.

Shares in Virgin Express, which is majority-owned by Sir Richard Branson's Virgin Travel, were 9.5% lower at 6.56 euros in trading on Euronext Brussels on Friday.