ZURICH – Stricken Swissair Group said on Monday it would slash its work force by 12 percent after almost halving its flight schedule, despite an emergency cash injection by the Swiss government to the once-proud flag carrier.
Chairman and Chief Executive Mario Corti told the group's staff, assembled in a hangar at Zurich airport, that 9,000 jobs of the total work force of 71,000 would be cut. As good news, he could tell his staff that the October wages would be paid.
Swissair Group spokesman Rainer Meier told Reuters the job cuts would be announced shortly. He added Swissair would try to fly 70 percent of the long-distance destinations and 50 percent of flights in Europe until October 28, in the final three weeks before its former regional subsidiary, Crossair AG takes over most of Swissair's operations.
Swissair on Monday cut fares in a bid to fill seats on those planes it could get airborne.
"Now or Never Special" return tickets for as low as 300 Swiss francs ($187) for any European destination and 800 francs for the rest of the world aim to drum up customers and raise cash for the last three weeks of operation under Swissair Group.
The ticket offer is valid until October 27, the day before former Crossair to take over most Swissair airline operations under a salvage deal with the banks UBS and Credit Suisse .
The banks bought Swissair Group's 70-percent stake in smaller but healthier Crossair and are providing funds to both airlines to smooth the transfer of operations.
Crossair is also set to obtain the Swissair brand. Crossair stock declined 12.4 percent to 359 francs on Monday.
One travel agent said business was fairly brisk as clients switched from more expensive flights with other airlines to take advantage of Swissair's special fares. The Swiss railroad's travel agents demanded cash payments, while other agents requested clients to sign a form acknowledging they knew about the airline's predicament.
Another agent said clients were reluctant. "They have their doubts whether they will fly at all," she said.
NO BRIDGE OVER TROUBLED WATER
The 70-year-old airline and its parent Swissair Group won court protection from creditors on Friday after a severe cash crunch forced them to ground planes for two days last week before the government promised emergency funding.
A Swiss court also granted Swissair's cargo division, Swisscargo AG, and its cargo handling unit, Cargologic AG, protection from creditors for two months as well on Monday. The cargo units use the belly load of the Swissair passenger planes and lost many customers due to the grounding and uncertainty over future operations.
Mortified by the damage to Switzerland's efficient and reliable image, the Swiss government has paid 320 million francs of the maximum 450 million francs pledged.
But the Swissair Group is still waiting for a 250 million franc bridge loan for its non-airline activities, also part of the deal with the banks last week.
The Zurich bankruptcy judge overseeing the airline and its parent company since Friday told Reuters he would not be rushed into deciding whether the bank loan could proceed.
Credit Suisse Group and UBS, which put together the 1.4 billion Swiss franc rescue deal for parts of the airline, are ready to pay out the bridging loan.
One of the conditions is that Swissair Group put up as collateral its so-far profitable non-airline subsidiaries such as the Gate Gourmet caterers, the Nuance airport retailers and the Atraxis IT-unit.
But Swissair cannot agree to the transfer without permission from the court-appointed administrator and the judge now in charge of sorting out the worst corporate failure in Swiss business history.
The loan would help those units of Swissair Group that have not filed for creditor protection but still face a cash problem because their outstanding bills to the airline and holding group will not be paid for a very long time, if at all.
Spokesman Meier said the non-airline units had no cash problems at the moment but added it would be "dramatic" if, for instance, Atraxis ran out of money.
Stefan Laser, marketing chief at Atraxis, said the company needed cash from the loan "urgently."
"We need it before the end of the month. At the moment we have a bigger need for cash than before but we are managing it. This can not last much longer," Laser said.
Were Atraxis to run out of cash, it would be unable to supply its clients with key services such as booking systems and ground handling services. Zurich's Unique Airport (ZUAZn.S) would lose its automated flight information system that keeps passengers informed about departures and arrivals.
Catering unit Gate Gourmet said it was chopping 420 jobs in Zurich, part of a 10 percent world-wide staff cut announced amid the fall in airline traffic after the September 11 attacks.
Swissair said it would be flying 55 percent of normal services on Monday and Tuesday due to limited liquidity and fears its planes could be seized by creditors in some countries.
The Swissair Group, already struggling with heavy debts and a 2.9 billion Swiss franc loss in 2000, was then hit by the share fall in air travel demand after the September 11 attacks in the United States.
But Zurich bankruptcy judge Felix Ziltener said he would not be hurried into a decision about the transfer of assets for the loan.
Administrator Karl Wuethrich was "aware of the urgency" of the situation and willing to have "a constructive attitude," his spokesman said, but he needed to establish whether the transfer would not have an unduly negative impact on the position of other creditors to Swissair Group.
Swissair said on Sunday it would work with Crossair to build a new Swiss airline -- burying hopes for an alternative structure to pull it out of its problems -- provided the Basel-based firm sticks to plans to take over 52 Swissair planes and their associated crews of flight attendents and pilots.
Swissair shares, struck out of the Swiss blue-chip index, fluctuated wildly on Monday before ending up 2.1 percent at 5.75 francs, only four percent of their value at the start of 2001.