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Monday, 15 October, 2001, 05:35 GMT 06:35 UK
Swissair future on knife-edge
Crossair Saab 340 plane
The logo of regional carrier Crossair could soon adorn Jumbo jets
The future of Swissair Group and its 72,000 employees worldwide could be decided shortly, with former subsidiary Crossair debating on Monday which parts to save of Switzerland's collapsed flag carrier.

Crossair - a regional airline operating small commuter planes - now owns 70% of Swissair. The Crossair board is weighing its options, while Swiss government officials have been meeting bankers to round up financial backing for any rescue deal.

Crossair executives have warned that up to 27,000 jobs could go, and outlined the need for multi-billion dollar subsidies.

At the beginning of the month, Swissair was forced to file for bankruptcy, overwhelmed by the weight of debt accumulated during a disastrous expansion programme. The global slump in air travel following the terror attacks in the United States in September finally pushed Swissair over the brink.

Three options

Swissair is still flying for now. A 450m Swiss Franc aid package provided by the government will keep its planes in the air until 28 October.

But under a rescue deal backed by two Swiss banks - UBS and Credit Suisse - Crossair was taken away from Swissair and is now set to take over its former parent company. It will keep some of Swissair's planes and staff, and rebrand what remains of the airline under its own name.

Meeting bankers and government officials on Sunday, Crossair chairman Andre Dose outlined three options for Swissair:

  • Option 1: Crossair takes over 52 of Swissair's plane - half flying European routes, the other half serving intercontinental services. Mr Dose believes he would need 4bn Swiss Francs ($2.4bn) to make this work. 9,400 jobs would be lost.
  • Option 2: Crossair keeps 26 short-haul jets to fly European routes, and 15 intercontinental planes. 14,500 jobs would be lost. The carrier would require financial backing to the tune of about 2.85bn Swiss Francs ($1.65bn).
  • Option 3: Crossair does not take over Swiss air, leaving 27,000 workers without a job at a cost of 2.7bn Swiss Francs ($1.65bn) in severance payments.
Crossair will now investigate all three options, and its decision will depend on how much money it can raise from investors and the Swiss government.

Swiss government officials are hesitant to stump up more money, fearing that they might end up footing much of a bill that could add to as much as 4bn Swiss Franc.

The government will be meeting on Wednesday to weigh the options laid out by Crossair.

The bank consortium led by UBS and Swissair has put up 1.4bn Swiss Franc so far, but this money has mainly gone to extricate Crossair from the collapse of Swissair Group.

But Swissair needs about $120m every month just to keep going, and some of its key subsidiaries responsible for things like plane maintenance and ground handling are running out of cash fast.

Rights to routes in doubt

The situation has been complicated by Switzerland's Federal Civil Aviation Authority, which has warned that Crossair may not be allowed to take over Swissair's long-haul routes immediately.

The licences could not be re-assigned to another carrier before March next year, the regulator said.

Mr Dose has already said that Crossair is unlikely to take on Swissair's intercontinental flights for at least five months, which would make government funding even more urgent.

See also:

11 Oct 01 | Business
Question marks over Swissair rescue
08 Oct 01 | Business
Banks blamed for Swissair failure
09 Oct 01 | Business
Swissair cuts 9,000 jobs
11 Oct 01 | Business
KLM talks up alliances
05 Oct 01 | Business
State warned against buying Swissair
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