The grounding of the Swissair fleet on October 2, 2001 was a prospect the originators of the Phoenix plan were prepared to accept, SAirGroup CEO Mario Corti told the Council of States’ Business Investigation Committee in Bern today. Corti was assisting the Committee in its compilation of a report intended to determine who was responsible for the grounding of the Swissair fleet and the repayment of millions of Swiss francs in loans to investors.
Just under two weeks before the Swissair fleet was grounded, the SAirGroup had notice served on two cash pooling agreements. On September 28, the Friday before the grounding, the cash pool facility was effectively withdrawn. “The withdrawal of the cash pool facility greatly exacerbated the SAirGroup’s liquidity problems,” Corti told the Business Investigation Committee. One day later, on September 29, the “New Crossair” concept was presented for the first time to the SAirGroup Board of Directors - by an external attorney who had received no mandate to devise such a concept from the SAirGroup Board. The concept called for the sale of the SAirGroup’s shareholding in Crossair to a group of bank investors, and an application for “Nachlassstundung” administration and protection from creditors to permit debt restructuring under Swiss law to be granted to SAirGroup (the holding company), SAirLines and Swissair
The concept further envisaged that Swissair’s flight operations should continue until the end of October. UBS and Credit Suisse, the two major banks involved, agreed to support the New Crossair concept. It was presented to a delegation of the Federal Council on September 30. There was no talk of a planned grounding at the time. In the evening of the same day, the future majority shareholder in Crossair formulated additional conditions for the concept’s implementation. These included a stipulation that the proceeds from the sale of the Crossair shareholding could not be used to finance the continuation of Swissair’s flight operations beyond October 3.
“In dictating these conditions,” Corti told the Committee, “the parties concerned clearly accepted the prospect of a grounding of the Swissair fleet.” The day of the grounding On October 1, the day before the grounding, Corti asked the Swiss Federal Council to approve an emergency loan of CHF 250 million to maintain Swissair’s flight operations. Finance Minister Kaspar Villiger promised half of this amount, provided the two major banks each supplied half of the rest. While Credit Suisse would have been prepared to make its contribution of CHF 62.5 million, no such undertaking was obtained from the other bank. “If an emergency loan had been arranged, the grounding could certainly have been avoided,” Corti concluded.
On the morning of October 2, Swissair’s available cash funds amounted to CHF 4.2 million: barely enough to permit the day’s first short and long-haul services to depart. To avert the now-immediate threat of a grounding of the Swissair fleet, Corti asked UBS to provide a CHF 100 million advance on its share of the purchase price for the SAirGroup’s holding in Crossair. UBS did not meet this request. Instead, the signing of the purchase agreement for the Crossair holding was further delayed by the addition of more new demands. At 15:35, Corti was finally obliged - on the recommendation of the Head of Swissair Flight Operations - to suspend all Swissair flight operations in view of the growing safety risk of cockpit crews exceeding the maximum duty times permitted under their Flight Duty Regulations. Only mature loans repaid Turning to the SAirGroup’s repayment of loans in the first half of 2001, Corti emphasised to the Committee that, in addition to maturities from derivative contracts, only loans which had become due for repayment (and had not been extended by the banks) and “commercial papers” - short-term bonds - which could no longer be refinanced on the markets had been repaid.
A net total of CHF 777 million had been repaid in this period, he added, to all investors with the exception of the leasing companies. Note to editorial staffs: You will find the related factsheet in the internet: www.sairgroup.com, media lounge.