SAirGroup shares hammered by news of record losses

SAirGroup shares take a pounding swissinfo.ch

Shares in the SAirGroup plunged by more than 26 per cent on Tuesday after resuming trading on the Swiss Stock Exchange. Analysts said it was not worth holding on to the stock until the company's future plans were clear.

SAirGroup’s share price went into a tailspin on Tuesday, after trading in the stock was suspended on Monday when the company revealed a loss of SFr2.9 billion ($1.67 billion) for 2000 – the largest in its history.

“It is too early to bet on a turnaround,” said Zurich Kantonalbank analyst, Patrik Schwendimann, as uncertainty remains over the company’s ability to turn itself around.

The stock opened 22 per cent lower at SFr138.25 per share and continued to fall, dropping at one point by 29 per cent to more than a six-year low.

The new chairman and chief executive, Mario Corti, said on Monday that the group urgently needed a change of strategy, adding that its expansion policy of buying stakes in foreign airlines had failed.

The company has blamed the group’s investments in Belgian, French and German airlines for most of the huge losses.

Corti said a consortium of Swiss banks, including Switzerland’s UBS and Credit Suisse, was being put together to provide extra capital.

Schwendimann said he expected SAirGroup to issue SFr1 billion worth of interest-paying stock, adding that doubts remained as to whether provisions made for 2000 would be enough.

Corti also announced that the French airline, Air Littoral, would be sold off, while the future of the group’s controlling stakes in two other French airlines, AOM and Air Liberté, would be decided at the shareholders’ annual meeting on April 25.

Corti said the French airlines alone were causing a “cash drain” of SFr80 million a month. “This is no way acceptable. Immediate action is required,” he told the more than 400 journalists who attended the long-awaited conference.

A decision on the future of the group’s 49.5 per cent stake in the Belgian airline Sabena is to be taken this summer.

The SAirGroup intends to sell nearly half of its SFr1.5 billion investment in real estate and is in advanced negotiations for the sale of its Swissôtel hotel chain.

The group has said that its most urgent concern is to reduce the risks to which the group’s airline investments were currently exposed as “quickly and substantially” as possible.

Analysts expect the SAirGroup to drop its aim of heading an alliance of airlines and eventually to join either the “oneworld” alliance led by American Airlines and British Airways or Lufthansa’s Star alliance.

Corti has made it clear he wants to drop the unpopular SAirGroup name and return to the more universally recognised Swissair.

swissinfo with agencies