Pressure increases on government to aid Swissair

The government is being pressured to help Swissair Keystone

Pressure is mounting in Switzerland on the government, and even banks to help the embattled Swissair Group as it fights for survival.

The Swiss finance minister, Kaspar Villiger, said on Friday that the confederation might help Swissair by taking part in a capital increase. But the aid would be only “subsidiary” because it was first and foremost up to the private economy to inject funds to assure the company’s survival.

The government has a three per cent stake in the Swissair Group and Villiger said any state intervention would have to be in line with that fact.

Calls for some kind of financial support have become louder since it has become apparent that the United States government is preparing to give state aid to its airlines, after last week’s terrorist attacks in New York and Washington.

Congressional leaders and the White House are nearing agreement on a $15 billion (SFr23.91 billion) bailout that would include direct cash aid and loan guarantees.

The measure was drawn up to help restore the finances of major airlines, which are staggering from the effects on their business of last week’s hijackings.

Heavy losses

Swissair, which is reeling from a loss of SFr2.9 billion last year and first half losses of SFr234 million, said on Thursday that it estimates revenue losses at about SFr65 million for the past week.

Switzerland’s mass-circulation tabloid “Blick” reported in its Friday edition that the government would consider a SFr1 billion aid package for a capital increase at Swissair.

However, it is likely that any plans for state aid to Swissair would come under attack from left-wing politicians arguing that pressure should be put on the banks and not on taxpayers’ money.

Before Monday, the government had rejected any idea of state aid for Swissair but then economics minister Pascal Couchepin hinted that if state aid were given to US and other global airlines, Swissair could not be left to swim without similar help.

Competitive disadvantage

In a position made public on Thursday, the government left a door open, arguing that Swissair would be at a competitive disadvantage if other airlines received state aid.

However, it said that fundamentally the government did not want to give state aid to the company because such support would represent “an unacceptable distortion of competition” and it would be wrong to use public money to offset management errors of a private company.

It added that any eventual aid given by the state would not be compensation for errors of the past.

The general interest

The federal aviation law permits the Swiss confederation to buy shares or take part in capital increases in the aviation sector if it is in the general interest. That would require a parliamentary decree for the necessary credit.

Both the Swiss House of Representatives and the Senate are expected to hold an “urgent” debate on Swissair at the beginning of next month.

On Thursday, Swissair said it was now looking at measures needed to improve its financial position, prompting fears of additional job cuts.

It added that the group expected a decline in passengers of between 10 and 15 per cent on the North Atlantic routes, and between five and 10 per cent on services to other destinations, compared to its original forecasts.

Spokesman Rainer Meier said on Thursday that Swissair had to cut more costs rapidly and management was studying all options available. Further details are to be announced next month.

He added that discussions with the banks were continuing and repeated that the group was not asking for its debts to be waived.

The Swissair Group had total debts of some SFr15 billion at the end of June. However, Meier has said that bankruptcy was “out of the question”.

swissinfo with agencies