Swissair Bankrupt; Sabena On A Knife-Edge

by Ulrika Lomas, Tax-News, Brussels

02 October 2001

As expected, Swissair yesterday filed for bankruptcy while UBS and Credit Suisse, Switzerland's two biggest banks, launched a SFr1bn rescue package to recapitalise and effectively take over Crossair, Swissair's 70% subsidiary regional airline, which will take over all of the profitable Swissair routes in a bid to ensure that Switzerland maintains a national airline.

The two banks are paying SFr260m for Swissair's 70 per cent stake in Crossair and will provide Crossair with SFr500m of working capital. They will also underwrite a SFr350m capital increase. The Swiss government said late on Monday that it would not buy shares or provide cash to Crossair. The restructuring will result in the loss of 2,560 jobs out of Swissair's 7,300 staff, and Gate Gourmet, the airline catering operations, together with other profitable Swissair operations will now be put up for sale.

Swissair has applied for a "moratorium of debt enforcement" for SAirGroup, its parent company, SAirLines, its airline division, and Flightlease, its leasing operation. The airline hopes to keep flying through Crossair, but creditors, particularly foreign ones, may see it differently and may try to impound Swissair assets abroad, notably its planes, which will have very nervous pilots over the next few days, never knowing from one airport to the next whether they will be able to refuel or whether marshals or bailiffs will arrest their planes.

Sabena, the Belgian national airline in which Swissair still holds a 49 per cent stake, is also close to bankruptcy. Swissair was supposed to pay up $130m to Sabena yesterday as its part of a recapitalisation package agreed with the Belgian Government, but the payment was of course not made. Instead the Belgian Government promptly lent the money to Sabena, which without any question is a breach of EU State Aid rules. But will the EU (whose officials use Sabena to get home every weekend from Brussels) be prepared to send the airline and its 12,000 employees down the chute?

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