SAirGroup creditors told to wait

SAirGroup court-appointed administrator, Karl Wüthrich (right) addresses the creditors meeting in Zurich swissinfo.ch

Claims against the collapsed SAirGroup are not likely to be settled until 2004, the company's administrator told a creditors meeting on Wednesday.

Creditors, including former Swissair employees, banks, suppliers and foreign partners, were demanding SFr72 billion from the three companies built around Swissair – SAirGroup, SAirLines, and Flightlease. SAirGroup alone is facing claims of around SFr38 billion.

Although the meeting had been expected to be stormy, creditors present reacted calmly to the announcement by the court-appointed administrator, Karl Wüthrich, that in all probability no payments would be made before 2004.

Wüthrich added that the process of working through claims could drag on for between five and ten years.

He also said that documents relating to the aviation group obtained from the accountancy firms PriceWaterhouseCoopers and KPMG were incomplete.

Creditors voted by an overwhelming 97 per cent majority to elect Wüthrich as the official SAirGroup liquidator and elected the seven members for the creditor’s committee.

Creditors lose out

On Thursday, creditors of the SAirGroup subsidiary, Flightlease, also elected Wüthrich as their administrator. In the case of Flightlease the administration process is expected to take less time than for SAirGroup and creditors should see their money sooner.

Analysts believe most creditors will end up with little in their pockets, since Swissair’s former holding company has assets worth SFr1.65 billion, an amount which represents only a fraction of the total claims.

So-called “third-class” creditors – a category which includes Swissair’s former partner airlines, Sabena and Air Littoral – can expect to be paid around four to twelve per cent of their outstanding claims, Wüthrich said.

First-class creditors, including some former Swissair employees, are in a much better position since administrators have previously agreed to recognise SFr92 million of claims totalling around SFr148 million.

Belgium wants billions

Belgium’s defunct national carrier, Sabena, is making a single claim for SFr8.2 billion, while the Belgian government – Sabena’s former main shareholder before the airline collapsed under massive debt last November – is requesting a further SFr800 million.

French creditors, which include groups representing the country’s regional airlines Air Lib and Air Littoral, are demanding about SFr500 million as compensation for both broken contracts and a loss in income.

Walter Stoffel, a professor of law at the University of Fribourg, said the airlines’ large claims made them “important creditors”.

“The more money one gets, the less money there is available for everyone else,” Stoffel told swissinfo.

“There will surely be clashes between the various creditors,” he adds.

Managers at fault?

But creditors are not only seeking financial compensation: they also want to find out if Swissair managers, board members and auditing companies are to blame for SAirGroup’s demise.

The consulting firm Ernst & Young is currently investigating who is responsible for the company’s collapse and is due to publish its findings in the autumn.

“It is possible that claims will be made against the former Swissair management, but this depends on the results of the Ernst & Young investigation,” said Filippo Beck, a partner at Wenger Plattner, the legal firm which is representing SAirGroup.

Three areas

However, so far their findings have shown that the SAirGroup has failed in three areas. Wüthrich said that one shortcoming was the fact that earnings from affiliated companies abroad, such as the French airlines AOM and Air Lib or the German airline LTU, were not fully consolidated.

Another blunder was the de-facto share of 100 per cent in Air Littoral, which was illegal under EU law and should also have been consolidated.

In trying to get around the problem the management employed trustees, through which the company bought 95.3 per cent of the French airline in two tranches.

Wüthrich also mentioned the SAirGroup’s risky equity swaps as a possible factor for the collapse of the airline. The company sold their own shares at market value to banks and bought them back at the current market value after a certain period of time.

However, as the share price did not rise but drop, the company had to pay back millions of francs to the banks.

SAirGroup collapsed in October 2001, grounding the country’s national airline and forcing the company into receivership.

In April of this year, the Swiss regional carrier, Crossair, took over the bulk of Swissair’s profitable long-haul routes when it re-launched as the new national carrier, “swiss”.

swissinfo with agencies