Job losses at Swissair dominate business headlines

Cost savings could mean job reductions at Swissair Keystone Archive

Prospective job cuts at the Swissair Group dominated the business headlines this week, along with another scandal at Credit Suisse First Boston, this time in New Zealand.

Swissair Group refused to rule out job cuts, and said some tiers of management may go, as part of plans to reduce costs by at least SFr500 million ($279 million) by the second half of this year.

The airline group said on Tuesday that the cost cutting measures to produce such savings would inevitably lead to staff reductions, but gave no indications of how many.

Its shares took a hammering on Friday, falling by as much as 10 per cent at one point, following a downbeat report on the company’s prospects by the bank ABN-Amro.

The report continued to advise investors to sell the group’s stock and said the company’s share price was over-valued. It revised its six-month price target for Swissair shares to just SFr70. “We expect no improvement in the underlying results of the Swissair Group in 2001,” said the report. “Normalised losses are expected to be SFr688 million.

There was also bad news for Credit Suisse First Boston (CSFB), which on Wednesday was accused of breaching stock market rules in New Zealand during a takeover battle. The charge was the latest blow to the group’s reputation following similar scandals in India, Japan and the United States.

The New Zealand Stock Exchange (NZSE) ruled that CSFB had bought shares in the New Zealand winemaker, Montana, on behalf of the Australian brewer, Lion Nathan, in a period when the brewing group was not allowed to increase its stake.

CFSB, the investment banking arm of Credit Suisse, had argued that the trades were agreed after restrictions on Lion Nathan had been lifted – a claim which was rejected by the NZSE.

Thursday saw the release of the latest gross domestic product (GDP) figures, which showed that the Swiss economy continued to expand by an annualised rate of 2.5 per cent in the first quarter of 2001, maintaining the strong pace seen in the last quarter of 2000.

Economists had expected GDP – the broadest measure of economic output – to grow by between 2.2 and 2.5 per cent, compared to 2.5 per cent growth in the previous quarter. A buoyant export sector helped to keep the figure at the upper end of analysts’ expectations.

Despite the economy’s strong performance, analysts are still expecting a cut in Swiss interest rates, possibly as soon as next week, to offset an expected slowdown in economic growth over the remainder of the year.

The Swiss government’s economic advisory panel said on Thursday that it expected GDP growth for 2001 to be two per cent, down from its forecast of 2.25 per cent, made in December.

Expectations of an impending slowdown were supported by new unemployment data released on Friday, which showed that the number of jobless had remained steady at 1.7 per cent in May.

The number of people unemployed in Switzerland now stands at 61,097, slightly down from April’s figure of 63,032.

by Tom O’Brien