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22. oct 2001 - The Federal Council has taken the decision to release substantial financial resources to enable the creation of the new Swiss airline. It is aware of the risks that exist, but has taken this decision in order to ensure Switzerland remains connected to the inter-continental airline network and to prevent, as far as possible, serious economic and social harm. As the major banks and other players in the economy have decided to play the major role in the financing of the new airline, the federal government and finance committee of the Federal Assembly have approved two credits, namely the transitional financing of Swissair's reduced long haul routes in the winter timetable 2001/2002 with a supplementary credit of up to CHF 1 billion, as well as a subsidiary participation in raising share capital of CHF 600 million (22%). The capital participation should be reduced after an initial phase of several years. The decision is based on the working model of up to 26/26/82, whereby amendments to the model are reserved. In addition, the Federal Council expects to be informed swiftly with regard to any future intentions to enter into an alliance.
According to the present plans, the sum of additional financial means required to set up a new Swiss airline amount to around CHF 4.24 billion. Of that amount CHF 1.5 billion will not be destined for the new company: CHF 1 billion of that consists of transitional financing of reduced Swissair flight operations on long haul and selected medium haul routes by the Confederation until the end of the winter timetable, and roughly CHF 0.5 billion for the consolidation of auxiliary airline operations which are to be secured by other means (i.e. through restructuring, bank credits, contributions from airlines and cantons or partly through sell-off). A distinction must be made between that and the share capital of the new company: The initial position consists of existing Crossair capital of CHF 300 million per end of year, part of which amounting to CHF 260 million was taken over by the two major banks. The remaining financial requirement of CHF 2.74 billion is needed to increase capital stock. Included in that figure are CHF 0.94 billion in start-up and transformation costs needed to cover initial losses and the creation of the new company. The capital increase of CHF 2.74 billion is to be borne by the following investors: Private Industry (incl. CHF 350 m from the two major banks): CHF 1.69 billion; Confederation: CHF 600 m; Cantons: CHF 400 m (CHF 300 m from Canton Zurich) and the city of Zurich with CHF 50 m. Due to the broad based financing and significant contribution of private investors, an important condition for a contribution on the part of the Confederation has been fulfilled.
The board and management of Crossair will prepare a detailed business plan by the end of November based on the scenario of up 26/26/82, which complies with the financial framework and further explores the question of an alliance.
Maintenance of core competencies - limitation of economic and social damage
The decisions that have been taken have significant consequences: firstly, despite the continued tense financial situation of the Confederation, the Federal Council has extended an exceptional credit and made investments of substantial proportions. It justifies this exceptional use of financial resources from a budgetary perspective with the need to retain Switzerland's advantages as a business location and to prevent serious economic consequences for the country. An alternative decision to that taken would have resulted in the immediate chaotic grounding of all Swissair's long haul operations. In addition to the immediate damage that would have been caused, the longer term interests of the country would also have been affected. For the Federal Council and private investors it was a matter of ensuring the preservation of Switzerland's links to the inter-continental network as well as safeguarding thousands of jobs, the competitiveness of the country, economic structures and prosperity extending far beyond the aviation industry and its associated branches. Even though the success of the new airline cannot be guaranteed and further significant risks exist, the Federal Council justifies its decision with the prevention of even greater economic harm, as well as considerations of higher national interest. Furthermore, Swiss aviation companies, including the airports, are the most important instruments for the implementation of air transport policy and contribute substantially to the economic development of the country.
Guarantee Credit from the Confederation
Both federal credits received the approval of the finance committees of the Federal Assembly immediately following the session of the Federal Council.
The Fed. Department of Finance (FDF) and the Department of the Environment, Transport, Energy and Communication (DETEC) were charged with preparing the message which will be examined during the extraordinary session of parliament.
Decision of principle for long haul network taken after careful consideration
The starting point for the numerous rounds of discussions in the Federal Council and the delegations were the three models presented by the task force and Crossair working group. After considering the interests of the country in being connected to the international network and limiting the extent of the economic damage on the one hand and the risk involved with investing such significant sums of public money on the other, the Federal Council decided in principle in favour of the continuation of a reconfigured, but effective long haul network based on a model of up to 26/26/82 (see. fact sheet).
The strategy pursued by the Federal Council was bound to certain conditions right from the start, in particular to a proportionate distribution of commitments. The social plans are to be financed by the social partners assisted by the two major banks and flanked by measures taken by the Confederation and the cantons in which the company is based. Furthermore, in agreement with the administrator, the revenues concerned are to be used for financing flight operations and not to safeguard the interest of creditors.
Communication FDF, Bern, 22. October 2001
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