Swissair Group close to bankruptcy, says Corti

Mario Corti is battling to keep Swissair afloat Keystone

Swissair Group's chairman and chief executive, Mario Corti, does not rule out bankruptcy for Switzerland's debt-ridden airline conglomerate. He said the group's finances were in such a bad way that employees might not receive their October salaries.

Corti told the Swiss Broadcasting Corporation that Swissair Group’s finances were so tight that “liquid assets are being managed from day to day”.

He said the company urgently needed access to credits worth SFr1 billion ($620 million), which he agreed with a group of banks earlier this year.

The credits, which were to be provided by Credit Suisse First Boston, Citibank and Deutsche Bank remained inaccessible, Corti said, because the company is unable to fulfil the required conditions.

He warned that unless funds were made available soon the group would not be able to cover all of its employees’ salaries in October.

Potential bankruptcy

A bankruptcy of the group could have disastrous consequences, Corti warned.

“One has to imagine what would happen if a plane had to wait abroad for money to pay the kerosene.”

Swissair Group’s management board met on Saturday to discuss emergency measures to save the group from financial ruin. However, company spokesman Rainer Meier said after the meeting he “could not provide any details.”

The group’s already shaky financial position was undermined by the September 11 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 when its former management 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, which it jointly owns with the Belgian government.

On Monday, Swissair is supposed to make a SFr200 million ($124 million) payment to Sabena. The sum is part of a deal reached between Sabena’s two shareholders in July.

Under the agreement, Swissair and the Belgian government decided to give Sabena a final SFr635 million ($393 million) capital injection to keep the troubled carrier in the air. As part of the deal, Swissair was freed from a commitment to increase its stake in Sabena from 49.5 per cent to 85 per cent.

Last 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.

After the September 11 attacks, the Swiss government hinted that it may intervene to prop up Swissair, if other countries do the same.

The United States Congress has since approved a $15 billion package to assist its struggling airlines.

swissinfo with agencies