Swissair Group Seeks Protection From Creditors

GLATTBRUGG, Switzerland – The Swissair Group on Monday said it was seeking protection from creditors in a massive overhaul of the troubled airline.

The national flag carrier Swissair -- which is part of the group -- has been facing bankruptcy since the Sept. 11 terror attacks on the United States.

Group chief Mario Corti told a news conference that Crossair, the regional airline in the group that remains financially healthy, would take over the bulk of the flights from Swissair.

Swissair has been trying to restructure since before the terror attacks, which added to the increasing pressure on the company in recent months after a failed expansion strategy.

Last Friday, Corti warned of the severe damage to the Swiss economy if Swissair had to declare bankruptcy. A partial liquidation was among the various possibilities under review, he said. Corti made the disclosure about protection at a news conference Monday.

Earlier Monday, the airline said it was unable to guarantee flights for the rest of the week.

But booking agents said Swissair hopes to be able to provide its scheduled service and advised passengers against making alternative bookings with other airlines. Swissair hopes to provide more information Tuesday, callers to its bookling lines were told.

Shares in Swissair and Crossair -- in which Swissair is the majority stakeholder -- were suspended in Zurich Monday until further notice, ahead of a crisis meeting between Swissair executives and Switzerland's government.

The Cabinet may decide on measures to save beleaguered Swissair.

The terror attacks in the United States triggered a worldwide passenger slump and threw the airline industry into chaos. Swissair said losses could amount to billions.

To keep the company's planes flying last week, the Swiss cabinet guaranteed third-party insurance claims in case of war-related damage. Many other governments also are guaranteeing insurance.

Swissair's failed expansion strategy led to a loss of $1.79 billion in 2000. In addition, a $123 million payout to Belgian airline Sabena is due Monday. Swissair has a 49.5 percent stake in Sabena.

On Sunday Switzerland's largest banks UBS AG and Credit Suisse Group said they would take part in a rescue package for Swissair, worth around $617 million.

UBS said it would put up 51 percent of the capital under the proposed rescue plan. Credit Suisse said it would assume the remaining 49 percent of the capital.

Swiss media reported that one solution under discussion was that Crossair -- the healthy arm of the Swissair group -- would be taken out of the group and continue operations, while other units could declare insolvency.

Last week, Swissair announced 3,000 job cuts at its catering unit Gate Gourmet and said it would merge Swissair and Crossair under the new holding structure Swissair Air Lines, but keep brands distinct.

More layoffs are expected from this move, adding to the 1,250 job cuts announced earlier this year. Swissair employs about 70,000 people.

The company also said it would conduct a major restructuring over the next three years to focus on European business travel while cutting back on trans-Atlantic flights.