Swissair deal likely to remain in news

The banks' SFr1.4 billion bailout package for Swissair is likely to remain top of the business headlines over the coming week.

The plan involves the Swissair Group selling its 70 per cent stake in its regional subsidiary, Crossair, which will take over the most profitable routes and become the country’s new national carrier.

But the banks’ failure last week to advance sufficient funding, which led to the chaotic grounding of the Swissair fleet, caused outrage and has prompted a closer inspection of the agreement.

The chairman of the Swissair Group, Mario Corti, has spoken of the deal as a conspiracy and said the banks dictated the terms which saw them acquire the company’s stake in Crossair for just SFr260 million.

In the days following the agreement, Crossair’s share value doubled, leaving the banks with a profit of around SFr160 million.



Challenges facing Crossair

However, many dealers say Crossair faces a huge challenge in creating a new network out of the two companies and that the share price could fall again when the dust settles.

Some shareholders are also eager to point out that the banks’ move means they elbowed ahead of other creditors to the front of the queue.

Investors’ groups are pushing for an alternative rescue plan that would see the healthy parts of the Swissair Group carrying on in business with the loss-making ones being declared bankrupt. Analysts will be keeping an eye on alternatives though most think the banks’ proposal is the only realistic way forward.

Trade unions are also likely to organise more demonstrations against the rescue plan, which threatens thousands of jobs and goes far beyond a restructuring plan announced by Corti two weeks ago.

There will also be further discussion over whether the government’s injection of SFr450 million will be sufficient to keep Swissair flying until the end of the month, when most operations will be folded into Crossair.



US response to terror attacks

In other news this week, the markets will be keeping watch on the United States’ possible response for the attacks on New York and Washington.

Markets have recovered some stability after the wild swings which followed the attacks but the threat of a US recession means more trouble lies ahead.

The Swiss franc has also been volatile in recent weeks and made big gains against the dollar in the days after September 11. It lost some of its attraction with the crisis that hit Swissair but should remain at its current level this week of around SFr1.62 against the dollar, barring unforeseen events.

And in an otherwise quiet week for corporate news, the flavours and fragrances group, Givaudan, announces third quarter figures this week. The numbers will show whether the company, which has so far weathered the economic storm better than most, is finally feeling the heat from the US slowdown.

by Michael Hollingdale