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Monday, 22 October, 2001, 18:37 GMT 19:37 UK
State saves Swissair
Swissair planes
The Swiss national carrier has been saved, for now
The Swiss Government has stepped in to save the country's national airline industry, following the collapse of Swissair.

We are happy and relieved that this effort has succeeded. But jobs will be lost. We don't have cause for a great euphoria

Swiss President Moritz Leuenberger

The state is to pay the lion's share of a $2.65bn (£1.86bn) rescue package aimed at keeping a scaled-down Swissair service flying and creating a new company to replace it.

Central government will pay 1bn Swiss Francs (£424m) to allow Swissair to continue operating some long-haul routes until April.

At the same time it will take a 20% stake in Crossair, the former subsidiary of Swissair, which is to take over most of the crisis-hit carrier's planes and routes.

However, between 9,000 and 27,000 jobs are likely to be lost out of a global workforce of 70,000.

Pitching in

Crossair is expected to take 26 long-haul and 26 short haul planes from Swissair, out of a fleet of 75, effectively becoming Switzerland's national carrier.

It may even take Swissair's name eventually, observers said, although this has not been confirmed.

Private companies will invest a total of £720m in the new airline, including the £92m already pledged by Swiss banks UBS and Credit Suisse.

Some of the country's biggest companies, including confectionery giant Nestle and pharmaceutical firm Roche, are also understood to have pitched in.

The governments of Zurich and Basel, which host airports that benefit from international flights, have also contributed.

Share boost

Crossair shares jumped 8% on news of the rescue package, while Swissair stock rose 3.1%.

The government has already provided up to 450 million Swiss francs in emergency funding for Swissair, after its planes were grounded earlier this month when the carrier ran out of cash.

Commenting on Monday's rescue package, Swiss President Moritz Leuenberger said: "We are happy and relieved that this effort has succeeded.

"But jobs will be lost. We don't have cause for a great euphoria."

Uncertain future

"Nobody can forecast when the... aviation industry will be recuperating," Crossair chief executive Andre Dosť told BBC World Business Report.

Asked why Crossair shouldn't go the same way as Swissair, Mr Dosť said they would have a leaner and more efficient management.

"The number of aircraft we operate can be adapted to the general world economic situation", he said.

Commenting on the stake taken by the government, Mr Dosť added, "It was not my intention to build a state airline but government help was necessary."

Budget deficit

Swissair Group filed for bankruptcy protection earlier this month.

The airline has been overwhelmed by the weight of debt accumulated during a disastrous expansion programme.

The global slump in air travel following the terror attacks in the US in September finally pushed Swissair over the brink.

Earlier, Mr Leuenberger, warned of an economic disaster for the whole country if no agreement was reached.

Unlike neighbouring countries, which are members of the European Union, Switzerland does not have to abide by strict European rules on airline subsidies.

The Swissair debacle is likely to result in a Swiss budget deficit this year.

The BBC's Pauline Mason
"The deal still needs EU approval"
Crossair chief executive
Nobody can predict when the aviation industry will recouperate
Kevin O Toole, Airline Business
"Swissair can't carry on flying any services for very long on this current basis"
See also:

22 Oct 01 | Business
Round-up: Aviation in crisis
16 Oct 01 | Business
Companies back Swissair rescue bid
11 Oct 01 | Business
Question marks over Swissair rescue
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