Court gives green light to Swissair case

Swiss is finally in the black after years in the red Keystone

A Zurich district court has accepted criminal proceedings against 19 people alleged to be responsible for the collapse of national carrier Swissair in 2001.

This content was published on July 27, 2006 - 17:50

Charges brought at the end of March, which were initially rejected, have now been modified and accepted by the court in Bülach, close to what was Swissair's Zurich home base.

The 19 defendants, including 16 members of the management and board of directors of the company, are to appear in court early next year.

Swissair collapsed under a mountain of debt in October 2001, after its aircraft were grounded worldwide and thousands of passengers were left stranded.

The collapse was widely considered in Switzerland as a national humiliation, with the government, banks and private business later pumping well over SFr2 billion ($1.62 billion) to try to rescue the airline.

Members of the management and board of directors, including former Credit Suisse CEO Lukas Mühlemann and industrialist Thomas Schmidheiny, will face charges of defrauding creditors, falsifying documents, making false statements about the business and mismanagement.

Other notable names are former chairman Eric Honegger, former CEO Mario Corti and the former head of finances, Georges Schorderet.

And the modified charges, handed in to the court on July 12, also include the names of former Swiss Senate member Vreni Spoerry and private banker Bénédict Hentsch.

Revised charges

The Bülach court accepted the revised charges after prosecutors put forward a hypothetical figure of SFr1.1 billion in damages suffered by shareholders when the airline folded.

At the initial hearing, prosecutor Andreas Brunner said the case was not about business criminals or frauds at work but people who wanted to prevent the demise of Swissair.

In all about 4,150 files are aimed at putting the blame on the 19 people who featured in the first version of charges.

The Zurich hearing will aim to find out the real reasons for the collapse of the airline and its parent SAirGroup, which ran out of cash leaving thousands of investors, creditors and passengers stranded as outstanding claims spiralled to SFr38 billion.

Prosecutors have alleged that Swissair knew in 2000 that the company was saddled with too much debt and tried to hide it with a restructuring plan.

Aggressive strategy

One of the main reasons cited for Swissair's downfall was the airline's aggressive takeover strategy, which saw it buy stakes in minor and unprofitable European carriers, including Belgium's Sabena, to try to form an alliance.

But the heavily indebted Swissair collapsed after the downturn of the aviation market caused by the September 11, 2001 terrorist attacks against the United States.

The airline's successor, Swiss International Air Lines, was created in 2002 from regional carrier Crossair and the rump of Swissair, but struggled to find its place in the cutthroat airline business.

Taken over by Germany's Lufthansa in 2005 and now a member of the Star Alliance, Swiss on Thursday announced a net profit for the first six months of SFr76 million, compared with an SFr89 million loss for the same period last year.

swissinfo with agencies

Key facts

In the 1990s Swissair entered alliances with a number of loss-making airlines, including the Belgian carrier, Sabena. It was the beginning of the end.
In 2000, Swissair posted a net loss of around SFr3 billion, which signalled the departure of CEO Philippe Bruggisser.
Swissair employed Nestlé finance chief Mario Corti in the spring of 2001 to try to rescue the situation.
Swiss International Air Lines was officially launched on April 1, 2002 and Swissair disappeared.
Now under the wing of Germany's Lufthansa, Swiss has just emerged from the red, posting a first-half net profit for 2006 of SFr76 million.

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