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Tuesday, 2 October, 2001, 21:19 GMT 22:19 UK
Swissair grounds all flights
Swissair's check-in desks in Zurich airport
Swissair's check-in desks in Zurich are empty
Ailing carrier Swissair has run out of cash and suspended all its flights "indefinitely".

But there is a sliver of hope for the airline. Chairman Mario Corti told Swiss television that it would receive fresh money from two banks, as first instalment of a 1.36bn Swiss franc rescue package.

However, flights were unlikely to resume before Thursday, Mr Corti said. In the hours before the shut-down, some of Swissair's planes had been impounded, while suppliers refused to fuel up the remaining planes.

Swissair in crisis
2000
July - Swissair denies it is in financial trouble

2001

Jan - Abandons policy of buying up foreign airlines
March - New chief executive Mario Corti
April - Swissair posts huge loss, begins restructuring
June - Air Liberte goes bankrupt, Air Littoral sold
July - Swissair agrees Sabena restructuring
Sept - Swissair to merge with Crossair
Oct - Flight operations terminated
Swissair aeroplanes at foreign airports have now been recalled to Switzerland, and stranded passengers were told they will get no compensation.

Trade unions warn that up to 10,000 jobs could be lost if Swissair can not be rescued.

The grounding of the Swissair fleet is the culmination of a long, drawn-out financial crisis, brought on by an ambitious but ultimately disastrous expansion programme.

Trading in Swissair's shares remains suspended, but even before the termination of flights analysts at investment bank Merrill Lynch said the shares were now "effectively... worthless".

Rescue attempt fails

The Swissair collapse threatened a rescue deal that would have seen its subsidiary Crossair take on the lead role in the troubled group, by acquiring two-thirds of what was left of Swissair's operations.

Marcel Ospel, chairman UBS, and Mario Corti, Swissair chairman
Swissair thought it had stitched up a deal over the weekend
Two Swiss banks - UBS and Credit Suisse - would have injected 1.36bn Swiss Francs into the company, in return of a 70% stake in Crossair. To help the deal go through, Swissair filed for protection from total bankruptcy.

But on Tuesday, the first instalment of the promised money failed to materialise, dealing a blow to the carrier's hope to relaunch most of its services as normal. Mr Corti blamed UBS for the delay, saying he had "begged on his knees" for the money.

Swissair was then immediately hit by a series of blows, including the seizure of two of its aircraft at London's Heathrow airport, and the refusal of fuel companies to supply its operations in Zurich.

The failure of the banks to act caused a huge outcry in Switzerland. President Moritz Leuenberger described the shutdown "unacceptable" and called on the banks to act responsibly.

At the same time, the Belgian government said it was considering legal action over Swissair's refusal to commit funds to Sabena, the airline in which it holds a 49.5% stake.

A Swissair plane
The airline made a record loss last year

The Sabena board is due to meet later on Tuesday in order to discuss ways to keep Belgium's troubled carrier going, which could include voluntary bankruptcy.

Hopes hit

Swissair had suspended its flights on Tuesday morning, in the hope of being able to restart operations later in the afternoon.

But the airline failed to find the money to pay for its immediate needs like jet fuel to keep its aeroplanes flying.

Earlier, a spokeswoman had admitted that there were "some problems" associated with the rescue deal.

Belgian worries

Even before the suspension, flights to Brussels were not operating, having been cancelled for "security reasons", after Swissair was unable to pay its portion of a rescue plan for Belgian airline Sabena.

Swissair was due to provide 60% of the bailout funds for Sabena, which were jointly agreed with the Belgian government.

But Swissair's decision to seek protection from creditors - part of the deal hammered out over the weekend - meant that it effectively defaulted on its Sabena obligations.

'Flagrant violation'

The Belgian government, which called the decision a "flagrant violation" of the agreements, has said it may take Swissair to court. Sabena itself may follow suit.

The future of Sabena is now in doubt, with some Belgian analysts saying the country's flag carrier may have to file for bankruptcy in the coming weeks.

The company's board is meeting on Tuesday evening in the hope of hammering out a rescue plan.

Sabena grounded more than one-quarter of its flights on 1 October as a pilots' strike went into a fourth day in protest against plans to restructure the ailing Belgian airline.

The Belgian Cockpit Association, which represents 900 staff at Sabena said it will resume strike action unless the chief executive resigns and the airline abandons plans to cut 2,000 out of 12,000 jobs.

The failed rescue package

Swissair's had hoped to save itself by getting rid of 24 aircraft, and reorganising schedules for the remaining 52 planes under its European regional arm Crossair.

The non-flight operations would have sought bankruptcy protection, jeopardising thousands of jobs in catering, airport retailing and ground services.

Swissair chairman and chief executive Mario Corti emerged from emergency talks on 1 October to say the airline would sell the 70% stake it currently holds in Crossair to Swiss banks UBS and Credit Suisse.

The banks' offer had been worth 1.36bn Swiss francs (569m; $840m)

Mr Corti had blamed the suicide airliner attacks in the US on 11 September for causing billions of Swiss francs in costs for the cash-strapped group.

But the company was already struggling under a mountain of debt caused by a failed expansion strategy, before the US tragedy.

 WATCH/LISTEN
 ON THIS STORY
The BBC's Tom Symonds
"Swissair is the biggest casualty yet of the downturn in the global aviation industry"
Reiner Meier, head of Swissair corporate affairs
"At the moment we have people stranded"
Chris Tarry, Commerzebank
"The key issue is ensuring you have enough cash"
See also:

02 Oct 01 | Business
Q&A: Booked on Swissair?
02 Oct 01 | Business
Swissair: Proud past, grim future
02 Oct 01 | Business
Airline collapse dents Swiss pride
02 Oct 01 | Business
Q&A: Swissair in crisis
02 Oct 01 | Business
Swissair accepts rescue plan
26 Sep 01 | Business
Aviation firms axe 26,000 jobs
30 Aug 01 | Business
Swissair cuts 1,250 jobs
09 Aug 01 | Business
Sabena flies into jobs storm
30 Jul 01 | Business
Pilot rescues French airline
02 Oct 01 | Europe
Swissair passengers stranded
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