Shares in the Swissair Group, fighting for its survival, plunged on Thursday as investors worried about the group's future.This content was published on September 27, 2001 - 13:34
Swissair shares, which have lost more than four-fifths of their value this year, traded 14 per cent lower on Thursday, closing at SFr42.00.
Debt at the ailing Swissair Group has leapt to SFr16-17 billion ($10-10.7 billion) compared to SFr15 billion at the end of June, according to CEO, Mario Corti. He said Swissair was also struggling to fill seats because passenger numbers on transatlantic flights had plummeted since the September 11 attacks in the United States.He said the off-balance sheet debts were SFr4.5 billion and that there are more than SFr12 billion in net debts on the balance sheet.
Corti added that passenger numbers on the transatlantic flights were down by 40 to 60 per cent in the wake of the September 11 attacks in New York and Washington.
He confirmed speculation that the group was facing the threat of bankruptcy because of the "millstone" of old debts accumulated by former management, during its disastrous expansion policy, when it bought stakes in financially weak foreign airlines in an attempt to build its own international alliance.
Corti, who took up his post last March, said a number of "harsh decisions" needed to be taken in the next few days because the company was under "terrible time pressure". He said he could not rule out forced layoffs, but that the company would try to achieve as many of the cuts as possible through natural wastage and early retirement.
Corti declined to be drawn on the size of the company's immediate need for capital, but said it needed money to rebuild its share capital, to finance its restructuring costs and to deal with the old debts.
Thomas della Casa, an airline analyst at Deutsche Bank, said he expected a short-term solution for Swissair based on debt forgiveness and debt-equity swaps by its creditor banks.
"If a required SFr2-3 billion is not found to shore up the company, Swissair Group will be technically bankrupt in a few weeks," he said.
US attacks at worst possible time
Speaking on Swiss television, Corti said "The effects of the events of September 11 came at the worst possible moment for the company. We are at the start of our overhaul."
Swissair Group announced on Monday that it would be merging its Swissair airline with the majority-owned Crossair regional airline, as part of a major restructuring. It is also cutting 3,000 jobs at its Gate Gourmet catering unit, mainly in North America, and reducing its long distance network by 25 per cent.
Many other European and US airlines have taken drastic measures to counter the fall-out on business from the attacks, Italy's Alitalia being the latest on Tuesday to announce capacity cuts.
Corti said in the end the market would decide what the size of the Swissair network needed to be.
Crossair pilots in favour of merger
Thomas Häderli of the union of Crossair pilots told swissinfo that he agreed with Swissair's decision to merge its operations with Crossair and said he regarded it as the only way for the group to survive.
"As Crossair comes into this partnership as a healthy airline we do not really fear that our jobs as pilots are at stake at this time," he said.
However, one issue of concern is the big discrepancy in the salaries of Crossair and Swissair pilots. The starting salary for a Swissair pilot is in the region of SFr80,000, whereas a Crossair pilot only earns SFr56,000.
For Häderli, a creation of a two-class society would be unacceptable. "One thing we are not going to accept as Crossair pilots from a union's point of view is a two-class society amongst the pilots," he told swissinfo.
However, Tom Leupin, a Swissair pilot and board member of the pilots' union, justifies the higher salary of Swissair pilots with the fact that Swissair operates much bigger aircraft, which cannot be compared with Crossair planes.
"We also have a difference in our initial training in the flight schools and in the selection of pilots. Of course, we would like Crossair pilots to earn a lot of money as we do, but we have no solution up to now," he said.
Oneworld most likely partner
Swissair Group's failure to lead a viable international airline alliance has led to speculation that the company will now try to link up with a bigger grouping such as Oneworld, lead by British Airways and American Airlines.
The new head of Swissair's Air Lines division, which includes Swissair and Crossair, Andre Dosé, said in an interview with Swiss business newspaper "Finanz und Wirtschaft" on Wednesday that Oneworld would be the group's most likely alliance partner.
"I don't want to negotiate anywhere without having another option in my pocket. Oneworld is, however, certainly the choice which is nearest at hand," he said in the interview.
swissinfo with agencies
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