The debt-ridden Swissair Group has accepted a SFr1 billion bail-out package put forward by the country's top two banks, UBS and Credit Suisse. The plan is expected to lead to a radical scaling back of the airline's activities, and potentially thousands of job losses.
Swissair Group boss, Mario Corti, said the company had accepted the banks' plan on Monday, ahead of a government meeting to decide whether to help save the group from bankruptcy. That meeting is still scheduled to go ahead.
UBS and Credit Suisse put forward the rescue package on Sunday. The plan envisages providing SFr1 billion ($620 million) to keep the carrier flying. UBS would provide 51 per cent of the capital and Credit Suisse 49 per cent.
But analysts say the banks' proposal could lead to thousands of layoffs at the group's airline-related businesses. They say the plan would see the group's regional airline subsidiary, Crossair, buy up the healthy assets of Swissair.
Aviation analyst, Sepp Moser, told swissinfo that Swissair was "clinically dead already", and that the rescue package was aimed at keeping Crossair "alive to be the nucleus of a future strong Swiss airline". He added that "there is no hope for Swissair in its current form".
The group employs 72,000 people, 21,000 of whom are in Switzerland.
The ailing carrier, which has run up debts of SFr17 billion ($10.5 million), is in urgent need of a capital injection and has admitted that it doesn't even have enough money to pay October's salaries.
On Monday, the airline's reservation desk warned passengers that it could not guarantee flights for the rest of the week.
The company's financial problems date back to its failed expansion policy when it bought stakes in financially weak foreign airlines in an attempt to build its own international alliance.
As a result, it now has to try to honour its commitment to the Belgian carrier, Sabena, in which it has a 49.5 per cent stake. On Monday, Swissair was meant to pay Sabena SFr200 million as part of a deal reached in July with the Belgian government, the airline's other shareholder.
Under the agreement, Swissair and the Belgian government decided a final SFr635 million capital injection to keep Sabena in business. But a restructuring plan there has met stiff resistance from pilots, who remained on strike for a fourth consecutive day on Monday.
Mountain of debt
Swissair's cash haemorrhage to loss-makers in France and Germany also contributed to the company's growing debt mountain.
The expansion policy was discarded in January and Mario Corti was brought in to implement a new strategy. He has since struggled to extricate the company from its obligations, though he has had some success in ridding Swissair of its liabilities in France.
The former management's business strategy saw Swissair incur a record SFr2.9 billion loss in 2000.
Last week, Corti unveiled plans for a major restructuring programme that would cost thousands of jobs. The proposals would see the long-haul network cut by a quarter while Crossair would be fully integrated into the group.
The company also said that 3,000 jobs were to go immediately at its catering unit, Gate Gourmet.
Losses since the September 11 suicide attacks in the United States have added to Swissair's woes. Passenger numbers on transatlantic flights have plummeted by 40 to 60 per cent in the wake of the attacks.
Shares in both Swissair and Crossair have been suspended until Tuesday evening.
swissinfo with agencies
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