Peter Siegenthaler, State Secretary of the Swiss finance ministry, told a news conference yesterday that the government had created a task force which was urgently studying ways of recapitalising Swissair - the SFr450m already loaned by the government would run out by the end of October.

The task force, consisting of government officials, the two big Swiss banks, Swisssair, regional carrier Crossair and Zurich airport was discussing three proposals.

Proposal A, backed by Crossair Chief Executive Andre Dose, would see the transformation of Crossair into a full-scale international airline with its acquisition of 26 short-haul and 26 long-haul jets from Swissair, and the laying-off of 9,400 staff - 14% of Swissair's total work-force. This plan would require at least SFr2.2bn, nearly twice the original capital offered by the banks.

Scenario "B" calls for Crossair to buy 26 short-haul jets and only 15 long-haul aircraft. This would require only SFr1.6bn in new capital but lead to 14,500 layoffs.

Scenario "C" envisages keeping Crossair as a regional airline, buying no Swissair planes, and laying off 27,000 people at a cost of SFr2.7bn in redundancy payments.

Mr Siegenthaler made it clear that decisions by the public and private sector would have to be taken within the next week if Swissair was to avoid a second grounding, with all the attendant damage to its image and prospects.

Although Switzerland is not a member of the EU, it has signed up to much of the 'acquis communitaire' through a series of bilateral treaties, and faces potentially serious problems with the European Commission if it injects fresh capital into its national airline.

Crossair still hopes to have received permission to operate Swissair's short-haul flights by October 28, the start of the group's winter schedule, but the transfer of the long-haul routes cannot be effective until next April due to licensing problems, even if it is agreed.

Although the airline itself has the cash to operate over the next few weeks, it said that cash was running out at crucial subsidiaries involved in maintenance, ground handling, data processing, catering and other activities. The court-appointed administrator overseeing Swissair's affairs last week blocked a SFr250m loan to these units by banks UBS and Credit Suisse Group for fear this could disadvantage other creditors. The banks said they were working on alternative ways to lend the money, which is essential to keep Zurich's airport running.