Swissair to Resume Flights With Government Funds

The Swiss government gave collapsed Swissair Group a hefty cash injection Wednesday to get its planes flying again after a cash crunch grounded the flag carrier and stranded thousands of passengers.

Swissair Chairman Mario Corti said the $280-million credit--unlikely ever to be repaid--will allow Swissair flights to resume today. The deal was struck after a round of emergency meetings with top government officials and leading banks.

But the group’s future remained bleak. The taxpayer money is meant only to secure flights until Oct. 28, when most of its flight operations will be taken over by its former subsidiary, Crossair, under a $871-million salvage plan by banks UBS and Credit Suisse.

Swissair, once a top-five European airline with global connections, will be relegated to a lower division as Crossair will focus primarily on European destinations.

Swissair was forced to halt all flights Tuesday when fuel companies refused to deliver kerosene without advance payment, stranding tens of thousands of passengers without any compensation.

Swissair had run out of cash after its finances, already stretched to the limit by a failed expansion strategy, melted away after the Sept. 11 terrorist attacks in the U.S. prompted a plunge in air travel around the world.

Swissair’s collapse reverberated around Europe and beyond. In Belgium, flag carrier Sabena filed for bankruptcy protection after Swissair failed to pay a cash injection due this week to its 49.5% affiliate.

The bailout plan put together by UBS and Credit Suisse is designed to save most of Swissair’s flight operations and combine them with regional airline Crossair to create a new but scaled-down national carrier. As part of the deal, the banks took over Swissair Group’s 70% stake in Crossair. But the $161-million price for the stake did not get to Swissair accounts until late Tuesday, hours after it had run out of cash and grounded its fleet.