Belgium “forced Swissair to bail out Sabena”

Blame game: Eric Honegger pointed the finger at Belgium Keystone

Belgium threatened to derail the European bilateral treaty process unless Swissair bailed out Sabena airlines, a former SAirGroup chairman said in court on Wednesday.

Defending himself against charges of mismanagement that led to the collapse of Swissair, Eric Honegger said Swiss government ministers knew about the deal. He also denied allegations of tax evasion.

Honegger is one of 19 former top executives, board members and consultants facing charges that include damaging creditors, mismanagement, making false statements about the business and forging documents. He appeared in court on Wednesday.

He claimed the Belgian government used the unsigned bilateral treaty negotiations between Switzerland and the European Union to force the crippling €150 million (SFr243 million) payment to Belgium’s ailing Sabena airlines in 2001.

At the time, Belgian government officials pointed out that they had yet to approve the signing of the bilateral treaty between Switzerland and the EU.

“I knew exactly what that meant: that pressure could be built up to ensure that SAirGroup paid the €250 million,” said Honegger, referring to the €150 million paid by Swissair and the €100 million paid by Belgium that constituted the financial rescue package.

Tax allegations

Honegger insisted that the payment averted more damage than it created by saving Sabena from liquidation, which would have resulted in demands for billions of francs in compensation for breach of contract.

He added that the Swiss transport as well as the foreign ministers, Moritz Leuenberger and Joseph Deiss, advised SAirGroup to make the payment to avoid endangering the bilateral agreements.

Swissair bought a 49 per cent stake in Sabena in 1995 as part of its “hunter strategy” of acquiring foreign airlines in order to expand its business. It also bought shares in Italy’s Volare, France’s Air Littoral and AOM, Germany’s LTU, Poland’s Lot and Portugal’s TAP.

In 2000, SAirGroup agreed to raise its stake in Sabena to 85 per cent, but later cancelled the deal as the airline ended the year with debts of €150 million.

The financial rescue plan was thrashed out early the following year, but both Swissair and Sabena went bust that November.

Honegger, a former Zurich politician, also contested charges that he evaded taxes amounting to SFr146,000 in the same year.

Prosecutors claim he failed to declare a SFr50,000 portion of his salary, a company car and notebook in his tax declaration. He is also alleged to have filed incorrect expenses claims.

However, Honegger denounced these allegations as an “enormous assumption” on the part of the prosecutors.

swissinfo with agencies

In brief

Swissair planes were grounded in October 2001, after the company had been in business for 71 years.

The downturn in the aviation market after the terrorist attacks of September 11, 2001, proved the last straw for the heavily indebted Swissair, which folded the following year.

The airline collapsed after buying stakes in numerous loss-making airlines, including Belgium’s Sabena and Poland’s Lot, in an attempt to form its own airline alliance.

Swissair left behind debts to the tune of SFr17 billion ($13.7 billion) and resulted in 5,000 job losses.

The remains of Swissair and the regional carrier Crossair were brought together in 2002 to form the new national carrier Swiss, which was in turn taken over by Germany’s Lufthansa in 2005.

Key facts

The trial opened on January 16 and should run until March 9 at Bülach district court near Zurich.
There are 19 defendants, including 16 former members of the Swissair board and the company’s top management.
All nine defendants who have so far appeared have proclaimed their innocence.
Apart from Corti and Thomas Schmidheiny, all the others refused to answer the prosecution’s questions on grounds that it could prejudice parallel civil proceedings brought by former employees and shareholders seeking hundreds of millions of francs in compensation.