Swiss business offers to forgo tax cuts to prop up Swissair

Crossair needs some SFr4 billion to successfully absorb Swissair Keystone

Swiss business has offered to give up planned tax cuts worth SFr1.5 billion to help salvage Swissair, which is on the verge of bankruptcy.

The country’s main business association, Economiesuisse, said it was prepared to forgo tax cuts of SFr300 million a year for the next five years to help save the country’s airline industry.

Business leaders said it was now up to the government to make a financial commitment to combine the remains of Swissair with its regional sister airline, Crossair, to form a viable national carrier.

Their comments came after the transport minister, Moritz Leuenberger, warned that the government would not intervene to salvage a national carrier without help from private business.

Under a SFr1.4 billion rescue plan brokered by the banks, UBS and Credit Suisse, the bulk of Swissair’s planes and flight routes were to be transferred to its regional sister carrier, Crossair, which would then become the country’s flag carrier.

SFr4 billion needed

But during discussions on Sunday between the leading players, Crossair chairman Andre Dosé said the venture would cost around SFr4 billion.

The government is due to meet on Wednesday to discuss whether to grant further state aid to the airline, after already having agreed a bridging loan of SFr450 million.

Leuenberger said the government was considering a number of options to raise money for the new airline including levying a special “Swissair tax”, possibly funded through an increase in value-added tax (VAT).

The finance minister, Kaspar Villiger, told a Swiss newspaper on Tuesday that he favoured the plan brokered by the banks, which would see Crossair take over 26 long haul and 26 short haul routes from Swissair. However, he said the cabinet remained to be convinced whether the plan was viable.

Dosé said the SFr4 billion is needed to boost the equity capital of an enlarged Crossair from SFr450 million to around SFr2.2 billion, which would give it an equity ratio of around 25 to 30 per cent.

He said that in addition a further SFr1.7 billion was needed to keep Swissair operating long-haul flights until next April when they are due to be transferred to Crossair, and a SFr650 million was required for payouts to the 9,000 staff made redundant under the terms of the deal.

Employees to present petition

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

Swissair Group’s failure is Switzerland’s biggest-ever corporate collapse. It fell under a debt mountain that reached SFr17 billion, due in large part to a misguided foreign expansion policy.

At the height of the crisis, some 38,000 passengers were left stranded for two days at airports around the world.

Fallout hammers tourism

The fallout from Swissair is hitting the tourist industry, 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 percent 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 percent, with resorts in the central Swiss Alps suffering most. The city of Lucerne, which relies heavily on American and Japanese tourists, was also badly hit.

swissinfo with agencies