Cabinet to meet on Swissair as investor search continues

The negotiations to find backers for a new national airline following the collapse of Swissair are taking on a sense of urgency as time begins to run out on the project put forward by the country's two main banks. Government ministers met leaders of the four main political parties on Tuesday evening, though no concrete proposals emerged from the session. Three of the four governing parties are in favour of state aid for the sector but the right-wing Swiss People's Party remains sceptical. The Cabinet meets later on Wednesday to discuss the alternative proposals. The favoured solution is for the regional airline, Crossair to take over 26 long-haul and 26 short-haul flights from Swissair. However, while the short-haul routes can be operated by Crossair from October 29, Swissair's long-haul licences cannot be transferred until next April.

Employee payouts

That means Swissair needs up to SFr1.7 billion to keep flying until next year. A further SFr650 million is needed for payouts to the 9,000 people who would lose their jobs under the plan.

In addition, Crossair says it needs to increase its equity capital from SFr450 million to SFr2.2 billion, which would give it an equity ratio of 25 to 30 per cent.

Crossair says it needs to know by the end of the week whether it has means to go ahead with the project.

The government is considering a number of financial options. One is the introduction of a special “Swissair tax” possibly funded through an increase in value-added tax (VAT).

Forgoing tax cuts

On Tuesday, the country’s main business association, Economiesuisse, said its members were willing to give up SFr300 million a year in planned tax cuts over the next five years to help save the country’s airline industry. The government however, wants a clear commitment from the private sector that it is willing to invest in the new venture.

The Swissair Group’s failure is Switzerland’s biggest-ever corporate collapse. It fell under a debt mountain that expanded to SFr17 billion as the company embarked on a misguided foreign expansion programme.

The attacks on the United States on September 11 led to a slump in air travel and brought the company to its knees.

At the height of the crisis earlier this month, the entire Swissair fleet was grounded for two days because of liquidity problems, leaving 38,000 passengers stranded around the world.

Rescue plan

UBS and Credit Suisse hammered out a rescue plan which saw them buy Swissair’s 70 per cent stake in the regional subsidiary Crossair. Crossair’s chairman, André Dosé has been mandated to draw up a detailed business plan.

Meanwhile, 20,000 Swissair employees have signed a petition urging the “rescue of Swissair”. The petition will be presented to parliament and the banks on Thursday.

The fallout from Swissair is hitting the tourist industry too, which was already suffering a downturn in the wake of the September 11 attacks.

At a press conference in Bern on Tuesday, the hoteliers association predicted an 11 per cent fall in reservations this winter, amounting to a cut in income of some SFr440 million.

“Swissair was an important ambassador for Switzerland abroad,” said Christian Rey, president of the Swiss Hoteliers Association.

In September, bookings fell by nine per cent, with resorts in the central Swiss Alps suffering most. The city of Lucerne, which relies heavily on American and Japanese tourists, was also badly affected.

swissinfo with agencies