Swissair, Gone with the Wind...
By Jeremiah Teahan January 27, 2002
Once one of the world's great airlines, Swissair is
no more. On October 2, 2001, dozens of aircraft stood grounded at Zurich
Unique Airport. Flights could not take off due to the simple lack of
So little was available that there wasn't enough money
to pay for jet fuel.
No, we are not talking about a young airline in a developing
country; we are talking about the airline which flew the flag and the
pride of the people of one of the richest countries in the world, Switzerland.
The airline was, of course, Swissair. Many people were aware that Swissair
was ill, maybe even very ill, but no one ever thought it could reach
this level of gross humiliation. Passengers were left stranded with
valueless tickets; 70 years of the Swissair brand's goodwill were gone
in a matter of hours. With this article, I hope to give you an idea
on what led to the end of Swissair.
Despite being based in a small, landlocked country and
never receiving any state subsidy, Swissair always managed to establish
itself as a quality global airline. Celebrating it's 70th birthday in
March of this year, no one could have guessed the drama which was going
to unfold in early October, the drama that was going to shut it down
and put the world famous Swissair brand to rest.
The Swissair story started in March 1931 when shareholders
from the two main Swiss airlines at the time, Ad Astra-Aero and Balair,
approved the merger of both those carriers to form Swissair. At the
time the airline's 13 aircraft and 64 employees flew 4 domestic and
14 European destinations, all from Zurich. Over time, the airline grew
slowly, operating such aircraft as the Douglas DC-4, Sud Aviation Caravelle,
Convair CV-990 Coronado, DC-8, DC-9, DC-10, MD-11, B747-300. More recently,
Swissair began converting to an all Airbus fleet, with the 3 members
of the A320 family and the A330-200 providing most services. The A340-600
would have replaced the MD-11 between
2002 and 2006. Swissair grew from its 18 initial routes
to a varied and strong network encompassing most of Europe and numerous
long haul destination, including Taipei, Ho Chi Minh City, Manila, Osaka,
Johannesburg, Santiago de Chile and Rio de Janeiro, just to mention
a few of the more exotic locales.
Through the years, Swissair was always a true innovator
in every aspect of the airline business, from fleet decisions to catering.
1934, the first European air hostesses were employed
by Swissair; in
1958 the first ever alliance was forged (with SAS Scandinavian
Airlines); in 1968 Swissair became the third European carrier to operate
an all-jet fleet; in 1988 the withdrawal of DC-9s made Swissair the
world's first airline with an all Category-III fleet equipped for low
visibility landings; in 1991 they were the world's first airline to
publish an environmental-impact report; in
1996 Swissair was the world's first airline to operate
A319s, A320s and A321s concurrently; and in 1999 they became the first
airline to serve organic food in all classes on flights out of Switzerland.
Innovations were not to be the only element that made
Swissair what it was; acting conservatively also played a role. Swissair
was the last European airline to change from 8 to 9 abreast in the economy
of their DC-10 aircraft, and from 9 to 10 in abreast in economy on their
747 aircraft. Another example is the metal cutlery in
Swissair economy, an element that belonged to the past on most other
airlines. Such outstanding service, with an appropriate balance of innovation
and conservatism, earned Swissair worldwide acclaim.
With all its successes, Swissair also had its fair share
of problems. Despite having one of the best safety records in the industry,
like most airlines it suffered a number of accidents and incidents.
The most recent and worst one, following nearly 20 incident-free years,
was the 1998 crash of SR-111, a McDonnell Douglas MD-11 (HB-IWF), lost
in the Atlantic Ocean off the coast of Nova Scotia while en-route from
New York to Geneva. All
215 passengers and 14 crew perished. For many, that
was the blackest day in Swissair's history, but nothing could have ever
prepared anyone for what was going to unfold in October this year.
The end of Swissair was certainly not an overnight process.
It followed years of poor decisions, made by arguably incompetent and
mostly absentee managers who had little experience in the air transport
industry. Since the mid-1990s, the airline's management decided to go
ahead with an impressive expansion plan. It should have helped everyone:
helped Swissair to remain strong and independent outside the major alliances
that were about to be created, and would have helped the smaller, money-losing
airlines that would, it was assumed, return to profitability by using
the "proven" Swissair formula for success.
Swissair bought into a large number of overseas airlines,
including Delta Air Lines and Singapore Airlines, but the main thrust
of its expansion plans were met by large stakes in a number of European
carriers, such as Sabena, AOM, Air Liberte, Air Littoral, Austrian,
Volare, the German charter company LTU, Air Europe, LOT Polish Airlines,
TAP Air Portugal and Turkish Airlines, just to name a small few. Swissair
created an alliance of smaller carriers that could compete with the
bigger alliances, such as OneWorld and the Star Alliance. Hence, the
Qualiflyer Group was born, but so too was the financial troubles that
eventually led to the demise of Swissair.
The vast majority of the Qualiflyer Group Airlines had
major financial problems. For example, Sabena had made a profit only
once in its long history. Nevertheless, once it became obvious the Swissair
formula did not work at other airlines, the company's managers continued
to spend money on their purchases, including a promise to take 36% more
of perennial financially disabled Sabena, on top of the 49% they already
had. On January
23, 2001 the first sign that Swissair was in serious
trouble came from the man who pushed the formation of the Qualiflyer
alliance and Swissair's disastrous expansion plan.
On that day, Philippe Bruggisser, Swissair's CEO, resigned.
He had led Swissair's expansion, transforming the airline from being
a relatively conservative but profitable European airline to being the
centre of an ill-conceived alliance. Eric Honegger and Moritz Suter
(the Chief Executive Officer of Crossair, the highly successful regional
subsidiary of Swissair)
February 1 was the date when the first steps were taken
to save the ailing company. It was announced that Swissair would not
take a 34% stake in TAP Air Portugal that had been planned by Bruggisser.
Then, on February 2, the same was said for the 51% of Turkish Airlines
that was reserved for Swissair. On the 23rd, Swissair invested ?240
Million to save Sabena because without the "bridge financing"
the Belgian company would be grounded.
In March, the Swissair revitalisation plan suffered
its first real setback.
On March 7, Moritz Suter, who many called "The
Swissair lifesaver", left the airline, claiming that the structure
of the Swissair Group would not allow him to restructure Swissair in
any meaningful way. Two days later the board of managers also resigned.
On March 12, the government announced that it would not offer state
aid to Swissair under any circumstances, a decision which came as little
surprise to many.
On March 16, Swissair set course with a new Chief Executive
Officer, Mario Corti, or as some people affectionately nicknamed him
"Super Mario." Many believed that the Swiss-Italian Corti,
previously the financial director of the Swiss food company, Nestle,
would change everything. The Swiss people were assured that Swissair
would be profitable within 5 years. Several cost saving initiatives
were launched, including an internal magazine called "Voice",
in which employees could contribute cost saving measures. March
26 saw Swissair celebrating the company's 70th birthday.
No one realised that it would be their last.
While Corti tried to resuscitate moribund Swissair,
the airline's shares continued a downward spiral, which was initially
set off by former CEO Sutter's resignation. Group shares plunged as
low as 201 Swiss Francs, very near the previous lowest-ever level of
197 Swiss Francs. To prevent dumping of the devalued stock, Swiss authorities
blocked trading of Swissair shares the day the airline announced it's
dismal 2000 results. The day after the release of the financial statement,
shares plummeted even further, down to 139 Swiss Francs. But these figures
pale in comparison to the price of Swissair shares as the end approached.
Just before the airline collapsed, once-mighty Swissair had almost no
stockholder equity left; the carrier's once valuable shares reduced
to penny stock status.
April's arrival didn't bring better news for the Swissair
Group. Sabena, Swissair's loss-making Belgian affiliate, announced a
loss of SF497 million on April 3. Despite this crushing loss, Sabena
CEO Christoph Müller attempted to find some silver in an otherwise very
dark cloud. Müller said that the maximum possible financial loss had
been reached and that from now on "things could only get better."
His assertion was backed-up by an ambitious cost-cutting plan called
Despite Swissair's many troubles, the carrier's in-flight
product was still receiving accolades. April's disastrous financial
results were somewhat offset by the presentation of two "World
Travel Awards" to Swissair; one for the "Best Economy Class
Worldwide" and the other for "Best European Airline."
Swissair also secured the sale of its award winning chain of hotels,
Swissôtel, to the Raffles Hotel Group for a potentially life-saving
May started with a promise by Mario Corti that he would
do his best to bring Swissair through the crisis without any job losses.
After selling Swissôtel, he would also sell Swissair's computer branch,
Atraxis, and Swissair's
10% stake in the Austrian Airlines Group (AUA). The
future of Swissair's leasing branch, Flightlease, was under consideration.
That month had its brighter moments, too. Although the airline likely
had a "lock" on the designation, Swissair was nominated the
official carrier of the International Olympic Committee. Despite the
fact that the Swiss carrier's future was bleak at best, the IOC pledged
to fly the Swiss carrier until 2004, with an option to extend the contract
to 2008. Swissair painted one of their aircraft, an Airbus A321 (HB-IOC,
named Lausanne where the IOC are based) with the Olympic rings. May
ended with Swissair pilots accepting a 5% pay cut for 2 years.
Little happened in the June, except for an announcement
by Mario Corti that Swissair would have to save SF500 million before
the year's end if the company hoped to survive. On June 21, Swissair
shares dipped under 100 Swiss Francs, their lowest-ever level. Even
less happened in July and August, minus a major shock at the end of
August, when Swissair said it would sell its duty-free arm, Nuance,
and also eighty percent of its ground handling company, Swissport.
September started bad and became disastrous following
the attacks on September 11. Like its competitors world-wide, Swissair
asked for state aid and then announced that the airline was close to
bankruptcy. Only drastic changes and an infusion of funds would save
the storied Swiss airline from collapse.
Corti announced a major restructuring plan on September
24. Swissair and Crossair would merge, creating a new entity called
Swiss Air Lines, while at the same time maintaining each airline's individual
brand. Thousands of jobs would be lost in the consolidation, including
3000 at Swissair's catering company, Gate Gourmet. Swissair and Crossair's
short haul network would merge and Swissair's long haul network would
be cut by twenty-five percent.
Representatives from Swissair and Crossair announced
that Swiss Air Lines would use the lower-cost Crossair structure, while
maintaining Swissair's high quality. Hence, the best of both worlds.
On the same day, the Swiss government announced that they would cover
the increased war insurance premiums for Swissair and Crossair. Without
this provision, Swissair and Crossair would probably have faced certain
grounding. On September 28, despite the news only a few days earlier
that both companies would merge, the real beginning of the end began.
Swissair shares went down to a little under 39 Swiss Francs. On the
following day, October 1, Mario Corti announced the unbelievable: Swissair,
the pride of Switzerland, was bankrupt.
The two main Swiss banks and Swissair's major creditors,
UBS and Credit Suisse, would take over Swissair's share in Crossair,
and Crossair would then take over Swissair flights. Some 2650 jobs would
be lost, including 1750 in Switzerland. The following day, at 15:45
Central European Time, all Swissair flights were suspended because Swissair
did not have any cash to pay for fuel. The only flights to take-off
were aircraft abroad, allowing them to return to Switzerland. A journalist
from a Swiss-French newspaper famously wrote "La Suisse n'est plus
la Suisse," translated as, "Switzerland isn't Switzerland
anymore." Nothing could be closer to the truth. Few people abroad
could ever realise the impact that Swissair had on the Swiss people,
that Swissair to the Swiss was more than just an airline. It carried
the Swiss flag on the tail and along with it the values and beliefs
of all the Swiss people. The wings of Switzerland were clipped.
It was only with help of the previously recalcitrant
Swiss Government that Swissair operations re-started on October 4. The
Swiss Confederation agreed to provide Swissair with ?300 Million of
bridging money to allow the airline to fly until midnight, October 27.
What happened to some of the other airlines involved
in the Qualiflyer Group? Despite a steel will and great dedication by
the airline's employees, Sabena ceased operations on November 7. The
last ever Sabena flight was from Abidjan and Cotonou in Africa to Brussels,
operated by A340-300, OO-SCZ.
In the following days, there were mass protests by employees
at Brussels Zaventem airport, who could not come to realise that the
long and sometimes painful relationship with their company was over.
But with the help of government money, Sabena's regional subsidiary
DAT restarted flying on key routes from Brussels on November 10, using
their fleet of regional jets, with plans to add eight ex-Sabena Airbus
A319 aircraft later. Sadly, DAT is in deep financial trouble and are
having problems finding investors. The future of Belgian aviation is
The future of AOM & Air Liberte looks a little brighter.
After merging and filing for bankruptcy, they restructured themselves,
then re-branded under the name "Air Lib." The new name was
chosen through a telephone survey among frequent AOM and Air Liberte
customers. Although Air Lib is still making loses, they aim to return
to profit within two years. They are also launching a new route to Algeria
in co-operation with their long time rival, Air France.
On the October 8, the real job of creating the new Crossair
started. Mario Corti announced the loss of 9000 jobs in the Swissair
Group worldwide, including 2600 jobs in its airline activities. Some
unions estimated that total job losses at Swissair and its suppliers
could top an incredible 170000. On the 14th, a task force set up by
the Swiss Parliament spoke in favour of transforming Crossair into an
international airline, taking up twenty-six long haul aircraft and twenty-six
short haul aircraft from Swissair's fleet. In Crossair's corporate offices,
three options were being considered, including one where no Swissair
aircraft would be taken up. Whichever plan came to fruition, the new
Crossair would need SF4 billion in start-up funding.
On October 17, the Swiss Parliament announced that it
was willing to give money to the new company, as long as businesses
and Cantons [Swiss states] would be willing to do likewise. Finally,
on the 22nd , the Swiss Parliament gave their official green light to
the project. The Swiss government would control 20% of the new company,
the Cantons 18% and the private sector 62% of new airline.
Despite this progress, the future of the new company
is certainly not sealed yet. Management has to make many decisions and
overcome many challenges, not the least of which are crushing debts,
leery financiers and disgruntled employees. These decisions are not
made any easier by the state of the world economy, nor was management
helped by the loss of a Crossair RJ-100 (HB-IXM)
and twenty-five people on November 24. Crashes are always
terrible, but this one particularly as it could not have come at a worse
time. This tragedy will undoubtedly put into question plans to use the
Crossair brand name. Perhaps an extra effort will be made to use Swissair,
or maybe even an entirely new brand?
One thing for certain is the ill-conceived Qualiflyer
Group is dead.
Several years late, and with hat in hand, the new Swissair/Crossair
is looking for an alliance to join. Many believe the most likely choice
will be Oneworld, which includes British Airways, American Airlines,
Cathay Pacific and Aer Lingus. Other options include the Star Alliance,
with United Airlines, Lufthansa, Air Canada and Singapore Airlines anchoring
that, the largest, international alliance, and the Wings Alliance with
KLM Royal Dutch Airlines and Northwest. Some analysts wonder what assets
a smaller Swissair/Crossair can bring to the now well established alliances.
However, the greatest challenge facing the new Crossair
is its long-term survival. At a time when many analysts believe the
future is made only for so-called "mega-carriers" (which Swissair
aspired to be, but the new Crossair will never be), it is ironic that
the latest round of airline problems sees carriers cutting their size
as fast as possible.
One thing is sure; the father of Crossair, Moritz Suter,
won't join the management of the new airline. During a meeting on December
6, close to tears, Suter announced that he was leaving Crossair. It
is the end of his long career in aviation, which started when he got
a job as a Luxair pilot in 1965. Following that, he joined Swissair,
flying the DC-9, in 1974.
Only one year later founded "Business Flyers Basel",
which then became Crossair in 1979. Even though he is leaving, he promised
he would be available if the new Swiss airline ever needed him.
The clock can't be turned back. Swissair is finished
and now we can only look forward with hope. No one doubts that the new
company will provide good service to Switzerland. However, what many
do doubt is if the new airline can possibly gain the admiration and
respect Swissair gained from every Swiss person over the past 70 years.
No matter what happens, Swissair will always be remembered in the hearts
of many, including this writer, as the world airline of its time. Not
overly big but definitely setting the world standard. On no other airline
would you get the little extra that simply made you love the company,
the little extra that changed everything. In particular, the dedication
of employees deserves a mention. These people didn't just consider Swissair
as their job; they considered it as a way of life, and that there were
part of a family. They took the Swissair spirit everywhere they went,
representing their company with pride and dedication.
But all things come to an end sometime, and Swissair
came to that end far earlier than anyone could or would have predicted.
Had it not been for mismanagement, Swissair would surely still be flying
in seventy years time.
On March 31, 2002 the last official symbol that one
is flying Swissair will go: the "SR" flight number prefix
will be used for the last time, being replaced with "LX",
the code for Crossair. Swissair then will only be a part of history;
Swissair will be Gone with the Wind.