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Swissair cuts threaten Zurich airport

Zurich airport is expanding at a time when its main customer is cutting back


Zurich airport is facing an uncertain future, following a decision by its main customer, Swissair, to scale back its operations. The recently privatised airport is pressing ahead with a huge expansion programme at a time when passenger numbers are falling.

The SFr2.3 billion ($1.43 billion) airport expansion includes a huge parking bay for aircraft and a new terminal and shopping centre linked by a railway. It was given the go-ahead at a time when the authorities expected a huge increase in passenger traffic.

Those estimates now look hugely inflated since the Swissair Group unveiled a sweeping restructuring plan on Monday, which will lead to a 25 per cent reduction in long-haul flights and a decline in transfer passengers. The plan will also merge the group's two carriers, Swissair and Crossair.

"The airport is going to be too big," says Armin Rechberger, an analyst at Zurich Cantonal bank. "It's built for 18 million passengers and last year we had almost 23 million. Over the next two years passenger numbers will fall to around 20 million and after the expansion the airport will be able to handle 34 million."

Construction work is already at an advanced stage so "Unique", the company that runs the airport, is pressing ahead. However, it is cutting costs in other areas.

Recruitment freeze

"We have implemented a recruitment freeze and we have put a stop on all other investments apart from the expansion," says Unique spokesman Andreas Siegenthaler.

"We are looking to Swissair to see how far the cuts will go but we are sure they will affect our business plans."

Swissair and Crossair account for around 65 per cent of the airport's passenger numbers and the airport estimates that it will lose SFr3 million a year for every percentage drop in passenger numbers. A ten per cent decline is predicted over the next two years.

Unique says it's impossible to say where the current crisis will lead but insists that Switzerland still needs an airport the size of Zurich.

"The Swiss are really frequent flyers and our economy is more dependent on foreign trade than any other European nation," says Siegenthaler. "All these connections really are necessary for business and for tourism."

Airport's future depends on Swissair

But doubts are growing about whether the airport will retain its position as an important central European hub and much hangs on the route Swissair now takes.

"It all depends a lot on the kind of alliance Swissair builds," says Rechberger.

"If they join an alliance such as "Oneworld" [which includes British Airways and American Airlines] it won't look too bad. Zurich might become the hub for Asia or Africa and parts of Europe. But as things stand now, it looks pretty serious; Zurich could become a minor European airport."

The airport is also grappling with the consequences of the attacks in New York and Washington.

It no longer has full insurance cover for terrorist attacks. Several insurers have reduced cover and raised premiums since September 11, prompting the European Union to launch an enquiry.

It's hoped that insurers will resume war cover for airlines and airports but in the meantime, Zurich airport asked the government for SFr1.2 billion emergency guarantee for the next two weeks.

If it doesn't receive the guarantee, the airport's closure cannot be ruled out. The government is expected to make a decision on Friday.

by Michael Hollingdale


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