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UBS hit by Swissair collapse

Swissair employees demonstrate outside UBS at Geneva airport Keystone

The collapse of Swissair was more harmful to the country's biggest bank, UBS, than the September 11 attacks in the United States, the UBS chairman said.

“I cannot draw a comparison (between the terror attacks and the ruin of Swissair),” UBS chairman Marcel Ospel said in an interview with the “Neue Luzerner Zeitung” newspaper on Saturday.

“The attacks were by far more tragic. About 40 per cent of our workforce is based in the US and is heavily concentrated in New York. Almost all of our employees lost friends or relatives.”

“The grounding of Swissair was for our bank undoubtedly more damaging though,” Ospel continued. “We found it so regrettable because in our opinion, our intentions were honest in finding a constructive solution.”

His comments coincided with a demonstration by around 100 Swissair employees outside a UBS branch at Geneva airport. “We denounce UBS’s responsibility in the Swissair debacle,” said Rémy Pagani, the head of the Swiss union of public services for western Switzerland.

UBS rejects responsibility

Ospel rejected criticism that UBS failed to save Swissair from bankruptcy by refusing to give a vital cash supply.

“We did not cause the collapse of Swissair,” Ospel said. He stressed that UBS had unjustly been held responsible for events that were beyond its control.

The Swiss national carrier was grounded on October 2 when it ran out of money. The government intervened a day later with an emergency credit of SFr450 million.

“We wanted to save what we could,” Ospel argued.

Corti blamed banks

Swissair group boss, Mario Corti, accused UBS and Switzerland’s second-largest bank, Credit Suisse, of failing to do enough to keep the fleet in the air.

He said UBS had promised to keep Swissair’s cash pool facility open until the end of October when the regional carrier, Crossair, would take over the beleaguered airline.

However, the bank axed the airline’s funds a month early.

The Swiss government also launched an unprecedented attack on the banks. The president, Moritz Leuenberger, said he was “profoundly disappointed by the behaviour of the banks.”

The two banks have taken a 70.5 per cent of the share capital of Crossair since the collapse of the Swissair group, with the remainder in the hands of 12,000 small share-holders.

Ospel said UBS does not intend to retain its Crossair stake in the long-term. “It’s an investment for a certain period, which is held in the interests of the economy and the Swiss financial situation.”

Government bailout

The UBS chairman also supported the government’s involvement in Crossair. Despite his belief in the separation of the state and private enterprise, Ospel said that after Swissair was grounded, it was no longer possible to find the necessary money to fund the new airline.

The Swiss finance minister, Kaspar Villiger, on Saturday said Bern had little alternative.

“We did not have a choice. Direct links with major world cities are vital for our economy,” he said in a newspaper interview.

“Certainly, the cost of our involvement was huge. But had we not taken this action, then 35,000 employees would have been decimated. Switzerland would have been plunged into recession which would have ultimately cost the state the same amount.”

Villiger, who is due to become president of Switzerland next year, has given Crossair a more than 50 per cent chance of succeeding. However, he cautioned that there are “inherent market risks” that need to be considered.

swissinfo with agencies

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SWI - a branch of Swiss Broadcasting Corporation SRG SSR

SWI - a branch of Swiss Broadcasting Corporation SRG SSR