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Judgement day looms for Corti

Swissair boss Mario Corti is facing a sceptical audience

(swissinfo.ch)

Swissair Group is set to unveil a long-awaited restructuring plan on Thursday. Analysts say that the chairman, Mario Corti, will have his work cut out to convince the markets that he is the person to rescue the troubled aviation group.

Swissair has been studying ways to restore its profitability since the beginning of the year after abandoning an ill-conceived foreign expansion policy that saw its losses mount to SFr2.9 billion ($1.61 billion) last year.

Analysts want to hear Corti explain how he intends to withdraw from foreign investments and how he plans to cut a planned SFr500 million from the group's cost base in the second half of the current year.

Many are already preparing to be disappointed.

"Expectations are not high because so far there has been no initiative from Swissair to thoroughly reform the company," aviation industry expert, Sepp Moser, told swissinfo.

"What I expect is more superficial measures such as dropping a few routes here and cutting some personnel there. I don't think we'll see the radical changes necessary."

The staff cuts are reported to include early retirement plans for up to 300 pilots out of a total of 1,250.

It's also anticipated that Corti will outline a simpler structure for the group to make cash savings and analysts will also want to hear about the future of the company's activities in catering, information technology, technical services and retailing.

But the biggest challenge remains how to manage the withdrawal from loss-making foreign airlines to concentrate on the core business provided by Swissair and Crossair.

In Belgium, the government and management of the national carrier, Sabena, last week announced plans to take Swissair to court over what they perceive as a breach of contract to provide sufficient funds to the airline.

Swissair is also having difficulty negotiating a release from a commitment to increase its stake in Sabena from 49.5 to 85 per cent once a set of agreements between Switzerland and the European Union comes into force.

In France, the company has transferred its minority stake in Air Littoral to the airline's co-owner, Marc Dufour, but no buyers have come forward for the AOM/Air Liberté carrier. Swissair owns a 49 per cent stake in that airline.

Swissair also has financial commitments in Poland, Germany, Italy and South Africa.

The crisis at Swissair led to the resignation of the entire board apart from Corti earlier this year. Many analysts fear that Corti himself may yet fall victim to the problems facing the conglomerate.

"Corti needs to rebuild the airline from scratch and decide whether Swissair wants to remain globally active, but I doubt he has the power to do it," says Moser.

If Corti doesn't begin to satisfy analysts' doubts on Thursday, some may begin to question whether Swissair can survive in its present form at all.

by Michael Hollingdale


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