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Swissair grounded amid urgent search for cash

Executives of stricken aviation group Swissair, top banks and Swiss government ministers held an emergency meeting on Wednesday to find fresh cash to allow the collapsed flag carrier to resume flying on Thursday.

Government sources said the aim was to find fresh bridge financing for struggling Swissair, which grounded its entire fleet because of a severe cash crunch after a proud 70-year history as the nation's economic ambassador around the world.

Swissair Group ran out of cash after its finances, already stretched to the limit by a failed expansion strategy, melted away at an amazing speed after the September 11 airline attacks in the United States prompted a drastic fall in air traffic around the world.

The new money would be provided by Credit Suisse Group together with public authorities, but possibly without the participation of Switzerland's top bank UBS, the sources said.

Spokespersons for the banks confirmed a meeting was taking place in the capital Berne. The full cabinet was due to meet at 1130 GMT and hold a news briefing later in the day.

Swissair shares plunged some 97 per cent to 1.27 francs when they resumed trading on Wednesday morning after a two-day suspension as investors dumped a stock now only being backed by a near-worthless and debt-laden shell company. Swissair stock had been as high as 262 francs in January.

UBS and Credit Suisse on Monday put together a 1.4 billion Swiss franc ($866.3 million) emergency bailout to save most of Swissair's flight operations and combine them with regional airline Crossair into a new, but much smaller national carrier.

The rump of the Swissair Group was left to file for creditor protection with the loss of thousands of jobs.

As part of the deal, the banks took over Swissair Group's 70 per cent stake in Crossair. But a 258.8 million franc payment for the stake did not arrive on Swissair's accounts until late on Tuesday, hours after the company had run out of cash and grounded its fleet.

Shell-shocked Swissair managers and government leaders put the blame for what politicians and newspapers called a "national catastrophe" squarely on UBS, which they accused of stalling in the transfer of the cash.

UBS's main office in Zurich was evacuated briefly after a bomb threat that police said they assumed was connected to the Swissair crisis.

Sources said the banks had already allowed Swissair to use the proceeds from the sale of Crossair until Friday and not just until the end of Wednesday as Swissair had indicated. But it was not clear whether that was sufficient to get the fleet of about 77 planes back into the air immediately.

Employees protest

Swissair employees, set to lose their jobs in the most ignominious corporate failure in Switzerland's history, gathered for a mass demonstration outside company headquarters and planned to march on nearby UBS offices.

At travel agents, people were scrambling to rebook flights ahead of a key autumn holiday season starting Saturday.

A Swissair spokesman said the company was "technically ready" to resume flying on Thursday. "We just need the green light, we need cash," he added.

Swissair Group has started filing for creditor protection for those parts that will not be saved in the bank deal.

With dozens of empty planes clogging the group's main hub at Zurich's airport, the company warned it would take time restart operations even if the necessary financing could be secured.

"It is not that simple to take an entire fleet to the air again," Swissair Chairman Mario Corti told Swiss television on Tuesday. Swissair has about 77 planes, recognised around the world by the stark red-white Swiss flag painted on the tailfin.

Swissair said a total of 470 scheduled flights were cancelled on Wednesday, affecting some 40,000 passengers. Its former Crossair subsidiary, now taken over by the banks which want to turn the smaller airline into a new Swiss flag carrier, will take over 88 of Swissair's European flights on Wednesday.

Crossair shares rallied more than 30 per cent.

"Swissair tickets are not reimbursed, we are telling passengers to contact their travel agencies, other airlines," a Swissair official at Zurich airport said. "But unfortunately most of the other airlines do not honour our tickets."

With thousands of travellers stranded around the world since Tuesday, irreparable damage has already been done to one of the best names in the struggling global aviation industry.

"What a shame," mass daily Blick screamed in a front-page headline. "Switzerland is grounded," it added.

The Swissair Group also includes the Gate Gourmet catering unit, Nuance airport retailers, Atraxis information services, as well ground handling and technical service activities.

Gate Gourmet and Nuance said they were healthy and not affected by creditor protection proceedings by the parent group.

Swissair's ignominious collapse reverberated around Europe and beyond. In Belgium, flag carrier Sabena filed for bankruptcy protection after Swissair failed to transfer much needed liquidity. Swissair has a 49.5 per cent stake in Sabena.

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