Crossair to fly the flag as Swissair gives up the struggle

Crossair is to take over Swissair's profitable routes Keystone Archive

Swissair Group on Monday abandoned efforts to save its debt-ridden carrier, and is to transfer its profitable routes to its regional subsidiary, Crossair. The move, part of a rescue plan by the country's top banks, is expected to lead to 2,560 job losses.

The plan leaves Crossair as the country’s flag carrier.

At a press conference in the federal capital, Bern, the Swiss government said it would not become involved in the financing of the new venture.

The finance minister, Kaspar Villiger, said the government regretted the “painful consequences” which would follow for a section of the Swissair Group workforce, but confirmed that a state intervention in the financial operation of Crossair was “not necessary”.

The precise outcome for Swissair is not yet clear, but aviation analyst, Sepp Moser, told swissinfo that the ailing airline was likely to be declared bankrupt.

“Swissair is in receivership. It is no longer an operating entity – its operations have been taken over by Crossair and at the same time reduced in scale. So Swissair is in the process of being dissolved.”

Under the plan, Swissair Group is to sell its 70 per cent stake in Crossair to Switzerland’s two biggest banks, UBS and Credit Suisse, for about SFr260 million. In addition, Swissair will transfer its key European and long-haul routes to Crossair.

Announcing Swissair Group’s acceptance of the plan at a press conference in Zurich, boss Mario Corti said some 2,560 jobs were likely to be lost at Swissair, of which 1,750 would be in Switzerland.

He said the losses had to be balanced against the “competitive worldwide” Swiss airline that would result. The group employs 72,000 people, 21,000 of whom are in Switzerland.

Crossair to keep its name

The airline says it will keep the name “Crossair” for the moment, although it has the option to change it to “Swissair”.

Sepp Moser said Crossair would need to consider any name change carefully. “I don’t think it would be wise because the name Swissair has lost a lot of its glamour.”

Marcel Ospel, chairman of UBS, said the plan would enable “a fresh start for Switzerland’s airline industry”.

“It is important for the Swiss public and for our economy and financial centre that a national flag carrier should provide services out of Switzerland,” he said, adding that “in light of Swissair’s situation, there is no viable alternative to the proposed way forward”.

In a statement, both banks said they view the purchase of Crossair as a financial investment and that overall responsibility for the operational management would rest with Crossair.

Banks provide further support

The banks are to provide further support for Crossair in the form of SFr500 million in additional working capital. It will also make available a capital increase of SFr350 million, provided the new company is granted the necessary operating licences.

The banks have also asked the Swiss government and the cantons to buy a 30 per cent stake in Crossair.

Swissair’s problems began under the previous management, which embarked on a disastrous expansion policy by buying up stakes in smaller loss-making airlines in a attempt to build an international alliance.

Swissair Group has spent since January trying to extricate itself from these commitments. Its biggest liability was the Belgian carrier, Sabena, in which Swissair has a 49.5 per cent stake.

Being placed in receivership has now freed Swissair from these commitments, according to Sepp Moser. “Sabena will definitely not get any more money because under receivership Swissair Group is not allowed to do so,” he said.

“For Sabena, and for all the other companies concerned, this is very bad news because Sabena will almost certainly be bankrupt within days.”

Sabena intends to continue operations

Shortly after Swissair Group’s announcement, Sabena said it intended to continue operations and that its other shareholder – the Belgian government – was “looking at ways to bridge financially this uncertain situation”.

The impact of Swissair’s announcement was less clear for two small French regional airlines, in which it holds stakes.

Corti said on Monday that Swissair Group had sought to protect its creditors by not declaring bankruptcy immediately. It has debts worth SFr17 billion ($10.5 million).

Last week, Corti unveiled plans for a major restructuring programme that would cost thousands of jobs. The proposals would see the long-haul network cut by a quarter while Crossair would be fully integrated into the group.

The company also said that 3,000 jobs were to go immediately at its catering unit, Gate Gourmet.

Losses since the September 11 suicide attacks in the United States have added to Swissair’s woes. Passenger numbers on transatlantic flights have plummeted by 40 to 60 per cent in the wake of the attacks.

Shares in both Swissair and Crossair have been suspended until Tuesday evening.

swissinfo with agencies