3 OCTOBER 2001
Swissair is expected to file for bankruptcy as the company yesterday ran out of cash and grounded all its planes despite an attempted rescue bid by banks.
The demise of the airline has long been coming but the September 11 attacks provided the mortal blow to the Swiss national carrier, increasing costs to an already debt ridden company.
The airlines unexpected move yesterday left passengers stranded while Swissair aeroplanes caught at foreign airports were recalled to Switzerland. The company said it was not in a position to pay compensation.
The grounding of the Swissair fleet is the culmination of a long, drawn-out financial crisis, brought on by an ambitious but ultimately disastrous expansion programme. Only a year ago the company had denied reports that it was facing financial difficulties. However, in January this year the company changed its expansion policy, which did not reap the desired fruits.
Meanwhile, trading in Swissair's shares remains suspended, but investment analysts said that the shares were now worthless.
Swissairs collapse threatens its subsidiary regional carrier Crossair, which was attempting to take the lead role in the troubled group.
Banks had pledged to provide the necessary cash for the company to survive but fresh blows on Tuesday grounded the whole fleet. Two of Swissairs aircraft were held up in Londons Heathrow airport while fuel companies refused to supply its craft in Zurich.
The problem may also be carried on to Belgiums national carrier, Sabena in which Swissair has a 49.5% stake. The Swiss company refused to commit funds to Sabena threatening the Belgian carriers existence.
Belgian officials said that the company may file for voluntary bankruptcy if no solution is found in the days to come.
The airline industry at large has been facing a bad patch for quite
some time and the September 11 attacks only made matters worse. Following
the attacks, airlines had to face increased security, fuel and insurance
costs. Airlines also lost passengers, as people became wary of travelling.
The situation does not seem to have any reprieve with major airlines
announcing massive layoffs and reduction in routes.