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SAIR GROUP POSTS RECORD LOSSES

Difficult times call for strong leadership. The new chairman of SAirGroup, Mario Corti, has been brought in to rescue the ailing Swiss flag carrier in its hour of need. The bad shape the industry giant really is in was revealed at the press briefing on its annual results at the beginning of April in Zurich. Although turnover rose by 24.8% to SFr 16.229 billion ($9.332 billion), SAirGroup, whose subsidiaries include the long-established Swissair, recorded a deficit of SFr 2.9 billion ($1.7 billion) for the year 2000, its biggest loss ever. Two-thirds of shareholders' capital has been wiped out.

In Corti's view, the causes of this catastrophe lie in the Qualiflyer Group. Building up this alliance of 14 airlines single-handed had simply proved too much for the SAirGroup. Primarily to blame for the negative asset situation were SAirGroup's equity holdings in a number of loss-making foreign airlines acquired under the direction of Philippe Brugisser, who was forced out from his position as chairman of the company in January. In the year 2000 alone, the Swiss parent company had to find SFr 3.7 billion ($2.1 billion) to cover the other airlines' losses.

Faced with this difficult situation, Corti, already the third man to head Swissair this year after Brugisser and Crossair founder Moritz Suter, will have to take drastic measures to offload the risky investments as quickly as possible. The ex-Nestlé finance chief, who has been praised very much, made it clear in Zurich that every part of the Group must at least cover its costs of capital. As an initial measure he cut off the cash-flow to Air Littorial, of which SAir holds a 49 per cent stake. Decisions on the future of Air Liberté (49.6%) and AOM (49%) are imminent. The total losses incurred by the three French companies came to SFr 600 million ($345 million). The deficit run up by Sabena, in which SAirGroup has a 49.5% holding, is of a similar order of magnitude (SFr 500 million / $287 million). If the Belgian carrier does not recover, Corti intends to shed the ailing company. Corti is being more generous to the German LTU Group, which, after making a loss of DM 438 million ($197 million) in 2000, has been given until 2003 to return to profit. With regard to SAirGroup's non-airline-related operations, the Swissotel chain is to be sold to restore shareholders' capital.

By contrast, the other divisions, SAirLogistics, Swisscargo, SAirServices and SAirRelations, succeeded in some cases in making record sales. Even SAirLines increased its turnover by 11.7%, although increased fuel costs caused Swissair, Crossair and Balair to finish the year in the red. Soon only two airlines will be left, since by 2002 the charter carrier Balair is to have been integrated into Swissair and Crossair.

From page 34 of FLUG REVUE 6/2001