There has been a mixed reaction to plans announced by the chairman of Swissair Group, Mario Corti, to return the company to profitability. Its shares leapt by almost 10 per cent on Thursday, but analysts said much remained to be done.This content was published on April 26, 2001 - 17:36
Under pressure to reveal just how he intends to revive the ailing aviation group, Corti put forward a series of measures at Wednesday's AGM aimed at restoring public confidence.
He unveiled a bank loan of SFr1 billion from a consortium made up of Citibank, Credit Suisse First Boston and Deutsche Bank to help offset losses last year of SFr2.9 billion ($1.7 billion).
He confirmed, too, the group would be shedding its loss-making French airlines, and that the SAirGroup would revert to its original name of Swissair.
But the measures were seen as just the beginning of the challenges facing Corti.
"The group did not present major background information," said analyst Paola Orler of Banca del Gottardo, "Swissair will solve its liquidity problems in the short-term, but we believe other measures will be taken."
There was also concern that Switzerland's biggest bank, UBS, failed to contribute to the financing deal after taking part in preliminary talks. Corti said the bank had wanted more details about the credit line.
Corti's decision to pull out of its two remaining French airlines, AOM and Air Liberté, in which it has 49 per cent stakes, was better received.
"The controlled disposal of the French stakes is welcome," said Zurich Cantonal Bank analyst, Patrick Schwendimann, "but the exact costs remain an open question."
Swissair Group and the majority stakeholder, Taitbout, are expected to pump SFr115 million into the airlines before Swissair Group withdraws in two months' time. Airline officials in Zurich said the decision would lead to at least a third of the two airlines' 7,500 employees losing their jobs.
Corti had already made it clear that Swissair Group would concentrate on its core airline business as part of efforts to return to profitability. Involvement with another French airline, Air Littoral, was halted after he took over as chairman and chief executive last month, and a decision on Swissair Group's 49 per cent holding in the Belgian carrier, Sabena, is expected this summer.
Audit of company finances
Shareholders on Wednesday approved the annual report for last year, but they also voted almost two-to-one in favour of an independent audit of the company's finances.
Three of Switzerland's four governing political parties, the Social Democrats, the Radicals and the Christian Democrats welcomed news of the audit. A spokesman for the Christian Democrats, Paul Felber, said it was a necessary development if the company wanted a fresh start.
The Radical Party said it hoped the AGM marked a turning point for the company. The right-wing People's Party refused to comment saying the affair was a private business matter.
Several Swiss newspapers on Thursday also commented on the audit, which was approved against the wishes of the board.
"Der Bund" of Bern said the decision to hold the inquiry is justified, partly because the Swissair Group board "failed to fulfil the shareholders' legitimate right for further information" about the company's losses.
The tabloid "Blick", under picture of board members who announced their resignations in March, described the shareholders' vote as "a revolt against the failures".
The papers were impressed with Corti's performance at the AGM - the Zurich-based "TagesAnzeiger" said "Corti was a very effective antidote against exaggerated emotions. His dry and professional manner had a calming effect on over-charged shareholders".
Many newspapers predict major problems ahead for the Swissair Group. The "Neue Zurcher Zeitung" says the SFr1 billion cash injection by banks will not resolve the financial problems, and Corti will need a re-capitalisation programme.
The Geneva-based "Le Temps" says that despite the standing ovation he received from shareholders, Corti will face a tough time at the next public meeting in autumn when he has to detail the group's financial strategy.
All members of the board, with the exception of Corti, announced their resignations in March after taking responsibility for the failed expansion policy blamed for the group's huge losses.
During the AGM, Corti confirmed that several board members, including the last chairman, Eric Honegger, had received substantial pay-offs. He said that under an agreement with Honegger, reached earlier this week, he would receive an SFr480,000 pay-off.
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