Swissair failure unleashes search for scapegoats

Corti blames the banks for last week's chaos Keystone

The collapse of Swissair is not only the biggest corporate failure in Swiss history, it has revealed gaping holes in the consensus that was thought to reign in Switzerland's business community. Business leaders have been rushing to blame each other for the mess that unfolded last week.

When UBS and Credit Suisse offered Swissair a SFr1.4 billion bailout package on Monday, they were showered with praise and hailed as saviours of the Swiss airline industry. Certainly, Swissair was to be broken up but it appeared a new national airline led by Crossair would rise seamlessly from the ashes.

But the mood quickly changed to anger as the banks failed to deliver funds until Tuesday evening – too late to prevent the grounding of the Swissair fleet.

With nearly 40,000 passengers left stranded all over the world and several thousand Swissair workers facing unemployment, Switzerland was described as a banana republic.

Search for scapegoats

As the government stepped in on Wednesday night to provide a SFr250 million bridging credit to allow the airline to resume flying until October 28, the search for a scapegoat to blame for the crisis kicked off in earnest.

Swissair’s boss, Mario Corti, said he felt betrayed by the banks, and claimed that they had dictated the terms of a “rescue” plan which placed Swissair’s 70 per cent stake in Crossair in their hands for what some say was a bargain price of for SFr260 million.

Corti described the deal as a conspiracy and says the banks prevented him from using the proceeds from Crossair sale to pump liquidity into Swissair.

Corti also says he tried to get hold of the head of UBS, Marcel Ospel, all day on Tuesday to ask for the money that would have kept Swissair flying, but that Ospel remained unreachable.

He added that only at 1930 on Tuesday evening did the banks send a fax giving the airline permission to continue its services until October 5. By then, Corti said, “it was already too late” because the fleet had been grounded at 1230 that afternoon.

Blaming the banks

The finance minister, Kaspar Villiger and the transport minister, Moritz Leuenberger, also laid the blame at the door of the banks, along with much of the public.

For their part, the banks said they could have done no more in the circumstances.

There have also been charges levelled at Moritz Suter, the founder of Crossair and president of its board. It’s been suggested that he was playing a double game to ensure that his long-held dream of a national carrier led by Crossair finally came to fruition.

Suter hit back – denying charges of a coup led by Basel-based business circles and accused Corti of failing to inform the Crossair board of the true extent of Swissair’s financial troubles.

Swissair planes may be flying again,but Corti believes Tuesday’s events have done severe damage to the image of the Swiss aviation industry.

Trouble ahead for Crossair?

Many fear the past week’s events will make it more difficult for Crossair to take up the baton as the country’s national airline, though aviation analyst, Sepp Moser, a fierce critic of Swissair’s old strategy, is optimistic.

“Basically, Crossair’s prospects are good. It’s a sound, stable company,” Moser told swissinfo. “But it is now in a very difficult situation because it has to grow under bad circumstances and that’s a big challenge.”

Shareholders have seen their investment in Swissair become worthless over the year. Suspended at the beginning of the week, shares lost more than 80 per cent of their value when trading resumed on Wednesday.

Shares worth around SFr260 at the beginning of the year are now priced at less than SFr10 each. With company debts of around SFr17 billion, shareholders can’t even expect a liquidity dividend. The stock was pulled from the market on Friday.

Small investors are arguing for an alternative rescue plan and accuse the banks of forcing a solution on Swissair out of self-interest.

“We are fighting for another solution that would allow the healthy part of the group to continue operations while sending the rest into bankruptcy,” says Hans Jacob Heitz, the leader of a group of retail investors.

Hard times for Zurich

Local politicians in Zurich also fear for the future of the airport and for the local economy.

The canton still has a 49 per cent stake in the airport and was planning more divestments. With the airport’s share price badly affected by the loss of its main customer, it’s hardly a seller’s market.

Zurich’s future as an international hub now looks uncertain.

“I doubt whether the airport can survive as a hub,” says Pierre Condom of the aviation magazine, Interavia. “But there are many other airports – Geneva for example – that are not really hubs but that do excellent business and are very useful to the local community.”

Swissair’s failure has done serious economic damage and with the accusations and counter-accusations flying, the image of a country and economy ruled by consensus has also taken a knock.

The atmosphere of rancour and mistrust among some of the country’s top business leaders will be hard to dispel.

by Michael Hollingdale