Day of reckoning for Swiss
Plans for a takeover of Switzerland's national carrier by Germany's Lufthansa will be presented to Swiss's main shareholders later on Monday.
Any deal is subject to the approval of these investors, who own 86.1 per cent of the troubled airline. The Swiss government is the biggest shareholder.
The government holds a 20.4 per cent stake in Swiss, followed by banking group UBS (10.4 per cent), canton Zurich (10.2 per cent) and the Credit Suisse Group (10 per cent).
The federal authorities declined to comment in any detail on the latest development.
However, a spokeswoman for the finance ministry said the government was awaiting the outcome of the negotiations before taking any decisions.
Lufthansa has said that, should the deal - which is subject to further approval by both company boards - go ahead, it would buy out smaller investors.
The offer would be based on the Swiss carrier's average share price over the past few weeks.
Poor payout prospects
But Swiss aviation analyst Sepp Moser doubts whether shareholders can look forward to a large cheque in the post.
"[They can expect] pretty well zero. At a rough guess, the price offered would apply to about five per cent of shareholders. As there is no premium, the recent rise in the share price will not be taken into account," Moser told swissinfo.
Moser stressed that the takeover bid was the best way forward for the crisis-ridden airline.
"This is the only possible strategy as Swiss is effectively broke, even if it is not technically bankrupt. They are losing market share, people, everything," said Moser.
News of the deal had a positive effect on the Swiss share price.
When the Swiss Market Index opened on Monday morning, the price of Swiss shares increased by 18 per cent.
Unions were initially upset that Swiss had not informed them personally of the takeover bid.
Viewing the development with cautious optimism, most agreed that a merger could improve the situation for employees and that jobs in Switzerland should be preserved.
The Groundstaff Aviation Technic and Administration union called for all Swiss jobs to be guaranteed for at least three years.
Lufthansa and Swiss released a joint statement on Sunday, which said the aim of the talks was the full integration of Switzerland's national airline into Lufthansa. It added that a business model had been drawn up.
Under the terms of the proposed deal, Swiss would continue to fly independently under its own brand.
"The jointly developed business model aims at providing a concentration of the strengths of both airlines, while retaining the independence of Swiss to the extent possible," said the statement.
The airline's hub at Zurich, which is Switzerland’s main airport, would remain.
Reports in the Sunday press said Lufthansa was interested in taking over its rival if the Swiss airline implemented its latest cost-cutting programme of SFr300 million ($260 million).
The struggling carrier said last week that it had narrowed its net loss to SFr140 million in 2004.
In January Swiss announced plans to reduce its fleet of 80 aircraft by 13 and axe up to 1,000 jobs by next year.
The airline has been making losses ever since it was formed three years ago following the collapse of Swissair.
Swiss pulled out of previous merger talks with Lufthansa - which heads the Star Alliance - two years ago.
Negotiations with British Airways aimed at entering the rival Oneworld alliance collapsed last year.
swissinfo with agencies
Net profit 2004 (provisional): €400 million (SFr620 million)
Net loss 2004: SFr140 million
Sales: SFr3.6 billion
Passengers: 9.2 million
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