Swissair fears grounding as clock ticks

Another grounding for Swissair could be in the offing Keystone

The collapsed national carrier, Swissair, fears a final grounding of its fleet as time runs out for a rescue deal and the winter schedule deadline approaches.

“The winter flight planning should already have been in place,” said a Swissair spokesman. “The longer it takes to get the financing in place, the more unlikely it becomes that we will be able to fly from October 28.”

The airline needs to have its crew and equipment in place, book hotels for the crew, arrange refuelling and catering services, and above all have passengers to fill the seats.

The reservation office at Swissair remains open for anyone wanting to book a flight for after October 27 but the lines are quiet and in travel agencies around the world, Swissair flights do not feature on the Galileo and Amadeus reservations systems.

“If the financing came late next week then we probably will have to cancel a number of flights,” the spokesman said.

Employee petition

Swissair employees on Thursday handed a petition to the government calling for state intervention to prop up the airline, which has been placed under protection from creditors. The petition, signed by 30,000 people, was launched two weeks ago.

It supports a partial rescue plan put forward by the banks, under which the regional airline, Crossair, would take over 26 long-haul and 26 short-haul flights run by Swissair, to form a new national airline.

The petition also demands support from banks cantonal authorities and says Swissair’s former management should take on responsibility for the financial mess.

Government promised help

On Wednesday the Swiss government said it was willing to help rescue the national airline industry in the wake of the spectacular collapse of the Swissair Group, but made it clear that it would only do so if the private sector provided a large chunk of the funds required.

Officials from the federal government, local authorities, banks and business leaders were continuing talks behind closed doors to try and hammer out a plan ahead of a government imposed deadline next Monday.

“If there is a deal on Monday, it will already be difficult to get the flights organised in time. With every extra day it will become increasingly complicated,” said a Swissair spokesman.

“There is a fear that we will not be ready in time and that there will be another grounding of the fleet, or at least part of it.”

Swissair obtained protection from creditors on October 5 after the impact of the sharp drop in air travel since last month’s attacks on the United States bowled over the financially frail group.

Switzerland’s two biggest banks, UBS and Credit Suisse Group, had sponsored a rescue package on October 1, which envisaged a transfer of some two-thirds of Swissair’s airline operation to regional carrier Crossair.

As part of the deal, now totalling SFr1.5 billion ($915 million), the banks bought Swissair’s 70.4 per cent stake in Crossair.

The government then stepped in with SFr450 million in emergency funds to get Swissair planes airborne again after the fleet was grounded for two days because it had no cash to pay for fuel or landing fees.

Phoenix from the ashes

But the race is now on to find some SFr4 billion to finance the ambitious rescue plan named “Operation Phoenix”, with tens of thousands of jobs at Swissair and related export and tourism businesses riding on the outcome.

Under the plan, Crossair would take over two-thirds of the Swissair fleet in two stages – its European flights on October 28 and its intercontinental service by the end of March.

This scenario envisages Crossair needing to raise SFr2.2 billion in fresh capital while up to another SFr1.7 billion is needed to sustain Swissair’s long distance flights until the end of March, while hundreds of millions more francs could be needed to finance thousands of layoffs.

However, Swissair said the airline did not need the money in cash right away.

“We think that in order to be able to fly we need a few hundred million francs as long as the state gives a guarantee for the remaining amount,” the spokesman said.

This would let Swissair obtain services from suppliers on normal credit terms and would drastically reduce its need for cash. Under its current circumstances it has to pay up front.

But Swiss President Moritz Leuenberger said on Wednesday that the government was unwilling to bankroll the period between October and March if there was no private-sector financing deal in place by Monday for the enlarged Crossair.

Slots could go

Another problem facing the rescue plan is landing and takeoff rights. Swissair has so-called “grandfather rights” to hold onto its takeoff and landing slots at international airports and in Switzerland and elsewhere in Europe it does not see a difficulty in transferring them to Crossair.

But for long haul flights the Swiss have to be able to convince the local airports and authorities that Crossair is the new flag carrier, otherwise the slots will revert to the airports’ pool and Crossair will have to go to the back of the queue.

Tight situation for other subsidiaries

Swissair Group also includes information technology unit Atraxis, caterer Gate Gourmet, airport retailer Nuance, maintenance group SR Technics and ground handling unit Swissport.

These units are not under protection from creditors but their liquidity is tight due to the plight of the parent and primary customer.

“We live day to day. The cash situation is getting tighter as time goes on,” said a spokesman with SR Technics. “But more important than the cash is that we get news on whether Swissair will fly next week and to what extent.”

swissinfo with agencies