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Corti plans massive asset sell-off to reduce debt mountain

Mario Corti says Swissair's financial position "remains tight"

(swissinfo.ch)

The chief executive of the Swissair Group, Mario Corti, says he aims to sell assets worth more than SFr3 billion ($1.7 billion) over the next 18 months as part of efforts to restore the group to profitability. Corti also wants to cut costs by SFr215 million annually.

In a statement on Thursday, Corti said net debt rose to SFr8.3 billion from SFr6.8 billion in the first three months, before dropping to SFr7.8 billion at the end of June.

An audit has shown that Swissair has enough cash to stay airborne. "But the initial findings of this exercise have revealed that the financial position of the group remains tight," he said.

Corti clearly placed the blame on the group's financial crisis on the shoulders of his predecessor, Philippe Bruggisser.

"Swissair's problems stem from its foreign participations," Corti said during a conference call with journalists, ahead of a planned media conference. "We want to focus on the profitable growth of Swissair and Crossair in future and the non-airline business."

Correspondents said there was little new in what Corti had to say, although the markets responded positively in early trading.

The Swissair Group share price closed up 13.8 per cent by the end of trading on Thursday, ending the day at SFr104.25.

Asset sales have raised more than SFr900 million this year. So far Swissair has sold off aircraft worth SFr390 million, as well as its hotel subsidiary, Swissôtel, and its 10 per cent stake in logistics specialist, Panalpina.

Apart from asset sales and concentration on Swissair and Crossair, Corti's five-point plan includes continuing efforts to try to extricate the company from its financial commitments to loss-making carriers, including Belgium's Sabena and France's AOM-Air Liberté.

Other measures include a "fundamental overhaul" of many of the group management and control systems, as well as more transparency in the publication of accounts and traffic statistics.

Swissair will reduce pilots' salaries by five per cent in another move to cut costs. Corti said the airline would not fire pilots, although those lost due to attrition would not be replaced.

The group has announced plans to cut an unspecified number of jobs in a restructuring bid to save at least SFr500 million this year.

Corti was upbeat about the group's recent performance, saying that total revenues in the first five months of the year had risen by 5.2 per cent to SFr6.4 billion, with revenues in core airlines up by 8.9 per cent to SFr2.9 billion.

Commenting on lawsuits it faces from Sabena and the Belgian government, Corti said that they were not "a feasible way to solve the situation".

Sabena and Belgium have demanded €529 million (SFr802.5 million) in loans after the Swissair group made it clear it did not wish to increase its present 49.5 per cent stake in Sabena to 85 per cent. Sabena sued for another €500 million to pay for cancelled aircraft orders.

Corti said Swissair was continuing "intense discussions" with Belgium to renegotiate its commitment to increase its stake.

The Belgian government said in response that it had "taken note" of the announcement by Swissair's boss.

Belgian public enterprise minister, Rik Daems, repeated the government's conviction that it would find a solution to the problems facing Sabena. The minister also said that any solution must guarantee the long term future of the airline.

Swissair also hopes to return Germany's LTU group, in which it holds a 49.9 per cent stake, to profit by 2003 through cost-cutting measures.

The unions in Switzerland have reacted mainly favourably to Corti's plans, in particular welcoming that no hasty decision had been made concerning job cuts within the group.

However, they said that prospects in the mid-term for group staff remained uncertain.

An organisation representing small shareholders also expressed "basic satisfaction" with Corti's restructuring measures.

In a related development, some 400 Belgian trade unionists staged a peaceful but noisy demonstration near Swissair Group's headquarters at Kloten, protesting at the company's intent to pull out of Sabena.

swissinfo


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