Swissair to axe 1,250 jobs

August 30, 2001 Posted: 0750 GMT

LONDON (CNN) -- Swissair Group, the debt-laden Swiss airline, said it plans to cut 1,250 staff and sell more assets as it posted a first-half loss.

Europe's fifth-largest airline is reversing an expansionist policy of developing its own airline alliance, called Qualiflyer, through the acquisition of stakes in regional carriers. That policy proved to be costly as losses soared.

The Zurich-based company now plans to return to profitability through the sale of assets worth 4.5 billion Swiss francs ($2.7 billion). The previous target for the sell-off plan was just 3 billion francs.

In the process, 1,250 jobs including 250 management post will go. Chief Executive Mario Corti, who took over in March after his predecessor Philippe Bruggisser was ejected, has said the company plans to cut costs by 500 million francs in 2001, after the company posted it worst loss in history in April.

"The Swissair Group has started on the road to recovery," the company said in a statement. "Tangible progress has been made and management is fully committed to turning the group around. However, the pace of change needs to be accelerated further."

Swissair said on Thursday it fell to a first-half net loss of 234 million francs from a profit of 3 million francs in the same period of last year. The loss included a 251 million franc provision for its 49-percent owned German charter subsidiary LTU.

Analysts polled by Reuters had expected, on average, a loss of 300 million francs, but estimates had varied widely.

Revenues rose eight percent to 8.14 billion francs, beating analysts' forecasts of 7.76 billion.

Swissair plans to use the money raised through the disposal of majority stakes in Swissport, its airport ground handling services business, and airport retail arm Nuance Group to reduce debts. Borrowings rose to 7.8 billion francs at the end of June from 6.9 billion at the end of last year, the company said.

Debt will be reduced by 2 billion francs by the end of 2002, and by a further 1 billion a year later, the company said.

Swissair's asset disposal programme almost came unstuck after the Belgian government threatened legal action against the airline, which was  attempting to undo an agreement to increase its stake in Belgian airline Sabena.

Under the eventual settlement, Swissair will continue to own 49.5 percent of Sabena and agreed to invest 430 million ($370 million) in the loss-making carrier.

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