Switzerland's debt-ridden airline conglomerate, Swissair Group, has begun talks with the Swiss government in a last-ditch effort to save the company from bankruptcy. The group, which has accumulated debts worth SFr17 billion ($10.5 billion), is in urgent need of liquid assets.
Two members of Switzerland's cabinet, including the Swiss president, Moritz Leuenberger, and the finance minister, Kaspar Villiger, are taking part in the discussions in Bern, according to Daniel Eckmann, spokesman at the Federal Office for Finance. Also present at the meeting are Swissair Group officials, delegates from the economy and bank representatives.
Swissair Group's spokesman, Rainer Meier, told the Swiss news agency SDA on Sunday his company was searching for funding to cover short-term obligations and was also examining a longer-term refinancing.
"We're working on a solution but we don't have any details yet," Meier said. "Liquidity is tight."
He added that the company "can't get through without government help."
In parallel, Swissair Group is negotiating with its three main creditors - Credit Suisse First Boston, Deutsche Bank and Citibank.
Results of the discussions are expected later on Sunday.
On Friday, Swissair Group's Chief executive, Mario Corti warned that employees might not receive their October salaries.
Corti told Swiss German television that the company was lacking an important amount of cash. "Our liquid assets are being managed from day to day," he explained.
He said that this was partly due to the fact that a SFr1 billion ($620 million) credit granted by Swissair Group's main banks remained inaccessible. He added that the credit deal had in fact collapsed because the company was no longer able to fulfil the required conditions.
Swissair Group's bankruptcy could have disastrous consequences, Corti warned.
"One has to imagine what happens if a plane has to wait abroad for money to pay the kerosene."
Swissair Group's already shaky financial position was undermined by the terrorist attacks in the United States. Passenger numbers, 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, Swissair released plans for a major restructuring programme 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.
swissinfo with agencies