The troubles at debt laden Swissair Group have dominated the business news through the week. Despite more news of a restructuring plan, shares lost out again as debts mounted.
Swissair released plans for a major restructuring programme on Monday that would cost thousands of jobs. The move came as the government considered a rescue package for the group in the wake of the US attacks that have undermined the group's already shaky financial position.
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.
On Tuesday evening we heard that debt at the ailing group has jumped up to SFr16-17 billion ($10-10.7 billion) compared to SFr15 billion at the end of June.
Fewer transatlantic passengers
Chief executive Mario Corti said that passenger numbers on the transatlantic flights were down by 40 to 60 per cent in the wake of the September 11 attacks in New York and Washington.
He added that the group was facing the threat of bankruptcy because of the "millstone" 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.
Shares in the Swissair Group dropped sharply again through the week, with the company's stock losing more than 80 per cent of its value over the past year.
On the economic front the Swiss National Bank cut interest rates for the second time in a week on Monday, citing concern about the renewed strength of the swiss franc in the wake of the attacks in the United States.
The bank cut the rate by half a per cent, meaning the bank's three-month LIBOR (London Interbank Offered Rate) band now stands at 1.75 to 2.75 per cent.
Effects of US slowdown
Since the rate cut the franc lost ground against the dollar and the euro. Economists had been warning that if the Swiss unit remained so strong it would have a negative impact on the economy as exports became too expensive for our trading partners.
Over the past week, economists downgraded their forecasts for the Swiss economy as the US economy slowed.
Credit Suisse said on Thursday that it expects the Swiss economy to expand by 1.6 per cent this year and next. While on Wednesday, UBS Warburg slashed its growth forecast to just one per cent in 2002, saying the weakening American economy was dragging down growth in Switzerland.
Both Credit Suisse and UBS Warburg agreed that the weakening in US financial markets, following the September attacks, will depress consumer confidence there and this will have implications for Europe.
by Tom O'Brien