SIMON WARBURTON / ZURICH
Massive cost savings identified from additional sale of assets, holdings and aircraft to reduce $4.4 billion debt
Beleaguered Swissair Group says that its newly unveiled restructuring plan will secure its future as the cash-strapped operator extricates itself from myriad partnerships, including Belgian carrier Sabena.
Revealing details of the plans last week in Zurich, Swissair chairman and chief executive Mario Corti said that improved efficiencies and a SFr1 billion ($560 million) bridging loan from Credit Suisse First Boston, Deutsche Bank and Citibank would ensure the carrier's future.
The group has a net debt of SFr7.8 billion compared to SFr6.9 billion at the end of last year. Swissair claims to have "more than sufficient" liquidity and cites as encouraging a drop in net debt from SFr8.3 billion to SFr7.8 billion during the first three months of this year. Restructuring measures are designed to cut the debt by SFr2 billion by the end of next year and SFr1 billion by the end of 2003.
Removing Swissair from numerous unprofitable partnerships is "top priority", says Corti, particularly a majority holding in troubled Sabena. "We have told the Belgian Government that increasing our participation in Sabena to 85% is no longer realistic in view of the difficulties that the group is in."
Corti admits that the Swiss group is "walking a tightrope", and declines to rule out job losses. Specific measures to stop the financial haemorrhaging include Swissair's swift exit from French carriers Air Littoral and AOM-Air Liberte. The recent sale of Air Littoral to former chairman Marc Dufour will yield the Swiss group savings of SFr160 million, while getting rid of its AOM-Air Liberte interest should lead to savings of SFr960 million.
Group efficiencies of SFr215 million have also been identified. Some SFr900 million of savings have already been achieved through aircraft disposals, the sale of Swissotel and Panalpina, withdrawal from Austrian Airlines and restructuring the Flightlease portfolio.
Corti says that over the next 18 months a further SFr3 billion can be garnered following a review of its holdings in Galileo and Equant, property assets and additional aircraft sales and refinancing.
The airline will focus on its subsidiaries Crossair, Gategourmet, Swisscargo, SR Technics, ground handler Swissport and in-flight retailer Nuance. Swissair has also signed a memorandum of understanding with the UK's Compass Group to acquire its Eurest In-flight catering arm in return for Compass taking Swissair's Restorama, Rail Gourmet and Gourmet Nova divisions. Swissair IT subsidiary Atraxis, meanwhile, is in talks with Lufthansa Systems Group with a view to a possible merger.
Corti says the group's decision to sell its French interests and extricate itself from Sabena "does not mean that the Qualiflyer Alliance is dying". Swissair's relationships with LOT of Poland, South African Airways and Italy's Volare Airlines all have good outlooks and the group has no plans to change its participation in these airlines in the short term, says Corti. He adds that one of the group's priorities is to make sure American Airlines, with which Swissair has strong links, is "comfortable with us in these uncertain times".
Source: Flight International
