The SAirGroup has announced it is withdrawing its bid for a 34 per cent stake in TAP-Air Portugal, after calling a halt last week to all new investment and acquisitions in the airline industry.
SAirGroup, the company which controls the national carrier Swissair, said it had decided "to pull out of TAP's privatisation process". TAP will continue to remain part of the Qualiflyer Group.
"Portugal's public works minister, Jorge Coelho, and the SAirGroup chairman, Eric Honegger, discussed the situation in an open climate and in mutual confidence," the SAirGroup said in a statement.
Last week, the Portuguese government warned the Swiss airline that it would seek damages if it withdrew from the deal.
The Swiss group had agreed to pay 20 billion escudos (SFr154 million) for a 34 per cent stake in the loss-making Portuguese airline.
The deal was thrown into doubt last week when the SAirGroup said it was stopping its acquisitions in the airline sector in the wake of the news that its chief executive, Philippe Brugisser, was stepping down.
Although the deal with TAP was signed over two years ago, authorisation from the European Commission was still pending.
SAirGroup has been trying to improve its market position in recent years with a series of alliances. Its profits were hit hard not only by its poor investment record but also by the soaring cost of fuel over the last year.
In its last results - reported in August - first-half profits for 2000 dropped SFr3million ($1.84million) from SFr87million the previous year.
swissinfo with agencies
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