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Swissair considers banks' rescue package

President Moritz Leuenberger shakes hands with Swissair Chief executive Mario Corti Keystone

UBS and Credit Suisse Group have announced they are prepared to contribute to a rescue package for Switzerland's debt-ridden airline conglomerate. Swissair Group, which has accumulated debts worth SFr17 billion ($10.5 billion), is in urgent need of liquid assets. Swissair plans to make a statement about its future on Monday afternoon.

This content was published on October 1, 2001 - 12:23

The banks' announcement came after the Swiss government had held a four-hour meeting with Swissair Group officials and some bank and industry representatives in Bern.

UBS spokesman, Michael Willi, said Switzerland's largest bank would provide 51 per cent of the capital needed under the proposed rescue. "We want Switzerland to keep its successful airline," he added.

Credit Suisse would contribute the remaining 49 per cent, according to its spokesman Andreas Hildenbrand. "The focus is on a solution based on a partnership between UBS and Credit Suisse," Hildenbrand said.

However, he refused to disclose any details of the proposals as "they were still under consideration."

Swissair Group was in negotiations with Credit Suisse First Boston, Deutsche Bank and Citibank on Sunday, however, UBS did not take part in the talks as, according to its chairman, Marcel Ospel, the government should not be involved.

"We think that it wouldn't be right for the government to participate in a solution, and we don't think that it will be necessary."

Emergency meeting

As Sunday's emergency meeting did not produce any concrete results, president Moritz Leuenberger announced that the government would decide on Monday how to deal with the crisis facing Swissair.

Swissair Group's Chief executive, Mario Corti, said after the meeting that "much work remained to be done" and that the supervisory boards of Swissair and Crossair, its regional subsidiary, were to meet separately later on Sunday.

Corti warned that if Swissair had to declare bankruptcy it would do severe damage to the Swiss economy.

The losses since the September 11 terrorist attacks have added to Swissair Group's already shaky financial situation. Passenger numbers have plummeted by 40 to 60 per cent in the wake of the attacks.

Swissair has also been struggling because 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.

Swissair and Sabena

As a result, it now has to grapple with its commitment to the Belgian carrier Sabena, in which it has a 49.5 per cent stake.

On Monday, Swissair is committed to paying Sabena SFr200 million ($124 million). The sum is part of a deal reached between Sabena's two shareholders in July.

Under the agreement, Swissair and the Belgian government decided a final SFr635million ($393 million) capital injection to keep the troubled airline in business.

On Monday, Sabena pilots staged a walk-out for the fourth consecutive day in protest at management's restructuring plans.

Swissair released plans for a major restructuring programme last Monday that would cost thousands of jobs. The move came as the government considered a rescue package for the group.

The plan unveiled by Swissair's management envisaged 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 to just six people. The company also announced 3,000 more job losses at its Gate Gourmet subsidiary.

Shares in both Swissair and Crossair have been suspended until Tuesday evening.

swissinfo with agencies

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