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Swissair announces restructuring plan and job cuts

Swissair and Crossair are expected to merge under the programme


The troubled airline conglomerate, Swissair, has released plans for a major restructuring programme that would cost thousands of jobs. The move comes as the government considers a rescue package for the group in the wake of the US attacks that have undermined the group's already shaky financial position.

The plan unveiled by Swissair's management on Monday envisages cuts to the group's long-haul network, as well as the full integration of the regional airline, Crossair, and a reduction of the group's board from 12 to just six people.

The group's long-haul fleet will be cut by a quarter.

The current head of Crossair, André Dosé, is to take over the running of the new integrated airlines division to be called Swiss Air Lines. He will also assume responsiblity for the reorganisation, which is expected to take three years.

It's not clear how many jobs will be lost but the company says there will be reductions across the board, including sales, marketing and customer service.

Workforce slashed

The Gate Gourmet catering division will immediately slash at least ten per cent of its 30,000 workforce, primarily in North America, amid a decline in travel following the attacks in New York and Washington.

"The reorganisation of the Swissair Group was already launched a few months ago by our chairman, Mario Corti," company spokesman, Jean Claude Donzel told swissinfo. "Now, because of the events in the US we have to go much further and much quicker than we planned."

The plan comes after the government announced at the weekend that it is to set up a special task force to consider ways to save the airline.

The task force, to be set up in the next few days, will be headed by the ex-parliamentarian and entrepreneur, Ulrich Bremi. The government, Swissair management and representatives from the banking sector are expected to take part.

The decision came after a meeting on Saturday that included the finance minister, Kaspar Villiger, the transport minister, Moritz Leuenberger and Swissair's chief executive, Mario Corti.

Government cautious about intervention

The aim of the meeting was to discuss proposals for the long-term recapitalisation of Swissair. During the meeting, Villiger pointed out that the government was not obliged to intervene in the crisis and that it would not do so unless there was active participation from the banking sector.

Under civil aviation legislation, the government is allowed to buy shares or to take part in measures to boost a business's capital if it is to benefit general interests. The government currently owns around a three per cent stake in the group.

There has been some surprise, however at Bremi's appointment.

"In a way it is certainly a bad choice," explained airline industry expert, Sepp Moser, to swissinfo. "Ulrich Bremi belongs to that tight-knit group of Zurich capitalists responsible for Swissair's mess."

"Clearing up the mess"

"But perhaps that's the motivation for the choice," he adds, "Those that caused the mess should clear it up."

Swissair says the recapitalisation plan will be ready by 10 October with a shareholder vote due on 9 November.

Swissair made losses of almost SFr3 billion ($1.9 billion) last year due in large part to a failed foreign expansion policy.

Moser believes that today may be the beginning of a new era for the company.

"I think it's the beginning of a more realistic time," he says, "The fantasy of omnipotence is over and Swissair will shrink to be a sensible, mid-sized, European airline."

Shares in Swissair rose by more than 11 per cent after details of its restructuring plan were released and closed at SFr.52.50 on Monday. Shares in the group had lost around half their value since the attacks in New York and Washington.

Cabin crew affected

Kapers, the cabin crew union, said even though the union was expecting about 1,000 jobs to go among cabin crew it supported the new concept.

During an afternoon meeting with labour union representatives the union's chairman, Martin Guggi, said Corti had not put forward concrete numbers of jobs to be cut. "Unfortunately in this situation job cuts are inevitable," he said.

A spokesman for the Aeropers pilot's union said it expected 300 pilots to lose jobs and added the union doubted the new strategy was right.

Investment analysts said the cost cuts were laudable but did not address the company's weak equity base.

Government follows suit

The Swiss cabinet has also followed the example of many other governments worldwide and announced they would guarantee third-party insurance claims in case of war-related damage, enabling Swissair to keep flying this week.

Since the attacks in the US insurance underwriters said they would cancel war-risk liability coverage for third parties from midnight Monday unless airlines agreed to pay more, which would have resulted in Swissair grounding some of its aircraft.

by Michael Hollingdale

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