Government rules out more cash for Swiss

The government won't bail out ailing Swiss Keystone

The government has refused to pump more cash into the struggling national airline, Swiss.

Transport Minister Moritz Leuenberger said on Wednesday that it was not up to the state to bail out private companies.

The government – which is Swiss’s largest shareholder – said further public money or debt guarantees were out of the question.

When Swiss was launched from the ashes of the former national carrier, Swissair, in April last year, the cabinet insisted its investment of SFr600 million ($442 million) would be a one-off.

Leuenberger said on Wednesday that the government would not get involved in the day-to-day running of Swiss.

“The government does not belong in the cockpit,” he said.

However, Leuenberger, together with the economics and finance ministers, will form a committee to monitor the situation.

“We will… think through all possible scenarios – new ownership structures, alliances and, purely theoretically, the end of the airline,” he added.

Heavy losses

Swiss, which lost SFr980 million in its first year of operation, is currently haemorrhaging SFr30-40 million a month as a result of the effects of the Sars pneumonia virus.

The carrier has so far been unable to negotiate a new credit line with Switzerland’s leading banks, UBS and Credit Suisse, after cancelling a SFr400 million agreement in May last year.

Responding to Wednesday’s decision, Swiss spokesman Dominik Werner told swissinfo that the company was “satisfied” with the government’s response.

“The opinion that Swiss has to be capable as a private company to deal on its own with the current situation is completely in line with the attitude of the board of directors and the management of Swiss,” he said.

In a newspaper interview on Tuesday, chief executive André Dosé had urged the government to take emergency measures to save the company, saying it could not get through the crisis on its own.

New strategy

Both Credit Suisse and UBS, who between them own a 20 per cent stake in Swiss, say they want to see the carrier’s new business strategy – expected to be unveiled on Friday – before deciding whether to grant the airline more cash.

But they have made it clear that their final decision will not be affected by “external pressure”.

“Banks have their credit policy, according to which loan requests are assessed according to several criteria, such as earning and risk potential. All clients will be treated the same way,” Credit Suisse spokeswoman Regula Arrigoni told swissinfo.

Analysts, however, believe the banks are unlikely to offer further credit and that Swiss – in the worst case scenario – may have to take drastic action if it is to survive.

“The situation is as dire as it was before,” said aviation expert Sepp Moser.

Downsize

Moser believes that – in a worst-case scenario – the airline may not survive beyond the summer, and argues that its only hope is to shed most of its intercontinental flights and substantially downsize.

Swiss has already slashed around 1,000 jobs and 20 aircraft from its fleet, and cut new plane orders.

In mid-April, Swiss scrapped a slew of short and long-haul flights across its global network, citing the war in Iraq and the effects of the Sars virus.

Despite the grim outlook, Dosé insists the carrier has enough liquidity to last until the end of the year.

Swiss is scheduled to hold a press conference in Basel on Friday when a new business plan is expected to be presented.

Company spokesman Dominik Werner declined to reveal details of the meeting but said the company would be announcing “some new measures”.

swissinfo, Faryal Mirza and Isobel Johnson

Key facts

Swiss made a loss of SFr980 million in 2002.
The airline has slashed over 1,000 jobs and cut its fleet by 20 planes.
It has cancelled a further 80 flights in Europe later this week due to a lack of demand.
Swiss is due to hold a press conference in Basel on Friday when it is expected to reveal its new business plan.