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Swissair Collapse
October 2001
Swissair was started in 1931 by the merger of two main
Swissairlines and it was in the market till 2002.
SWISSAIR
1931
Events
1978
So,No longer require government
subsidies and routes guaranteed by
the state.
This aimed to lowering the
stand...
THE SWISSAIR GROUP WAS RENAMED
SAIRgroup, WITH FOUR
SUBDIVISIONS SAIRlines:-
SAirGroup
1. Crossair belonged.
2. Sair
3. S...
Collapse root causes (1) :-
1. The Sair Group regarded white-collar staff are only in Switzerland.
2. Worldwide Sair Group...
collapse root causes (2) :-
1. The strategy was called as “Hunter Strategy”. This
strategy was mainly a result of governme...
collapse root causes (3) :-
1. Swissair’s decision to acquire airlines instead of
partnering with them was taken under pol...
collapse root causes (4) :-
1. Crises had been building up at Swissair since the
year 2000. For the first time in its hist...
2001
collapse
Intensive negotiations took place
with the main creditor banks, (UBS)
and (CS), over further credits and the...
THE UGLY OF CORPORATE
GOVERNANCE
• Swissair was the symbol of national pride of
Switzerland.
• 30 % government ownership ,...
1. Swissair should have an independent
structure of boards ,that able to check
and balance structure for management.
2. co...
THANK
YOU
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Swissair collapse (khaled elhemaly & sherif gaafar intake 40 c_int. finance)

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Swissair collapse (khaled elhemaly & sherif gaafar intake 40 c_int. finance)

  1. 1. Swissair Collapse October 2001
  2. 2. Swissair was started in 1931 by the merger of two main Swissairlines and it was in the market till 2002. SWISSAIR 1931
  3. 3. Events 1978 So,No longer require government subsidies and routes guaranteed by the state. This aimed to lowering the standards for passengers and personnel. NEW CHEAP FLIGHT, NO EXTRAS OPERATORS
  4. 4. THE SWISSAIR GROUP WAS RENAMED SAIRgroup, WITH FOUR SUBDIVISIONS SAIRlines:- SAirGroup 1. Crossair belonged. 2. Sair 3. SAir 4. SAir Services Logistics Relations 1997
  5. 5. Collapse root causes (1) :- 1. The Sair Group regarded white-collar staff are only in Switzerland. 2. Worldwide Sair Group employs 72,000 staff, with 21,000 working in Switzerland. 3. This is a much higher staffing level compared to other airlines, with Swissair employees among the best paid in the world. 4. Due to high labor costs and the country’s strong currency is also one of the most expensive business locations in the world –, and the very cyclical nature of the airline industry. The Financial Times Deutschland commented: “The old Swissair enjoyed living it up. Its staff enjoyed privileges that were inconceivable for the competition.”
  6. 6. collapse root causes (2) :- 1. The strategy was called as “Hunter Strategy”. This strategy was mainly a result of government influence in decision making Ambitious equity-based alliance and acquisition strategy instead of partnering strategy to distribute the risks. On the other hand, passenger numbers remained well behind expectations and the beginning world recession meant the enterprise was unable to finance its ambitious plans and accumulated a gigantic mountain of debt.
  7. 7. collapse root causes (3) :- 1. Swissair’s decision to acquire airlines instead of partnering with them was taken under political pressure as it was considered national pride. 2. Social and political pressures on decision making didn’t consider and acknowledge the changes in economy in the airline sector itself or European Union at that time.
  8. 8. collapse root causes (4) :- 1. Crises had been building up at Swissair since the year 2000. For the first time in its history, the company recorded a great loss, amounting to 2.9 billion francs ($1.8bn) and which consumed almost its entire capital reserves.
  9. 9. 2001 collapse Intensive negotiations took place with the main creditor banks, (UBS) and (CS), over further credits and the reorganisation of Swissair. End of September 2001:- 1-The banks were no longer prepared to pump any more money. As They regarded the white- collar staff as the main problem. 2-Swissair and Cross air developed a new airline—the Swiss Air Line. 3-To further reduce costs, the number of dismissals would be increased to 10 percent of the staff. 4-practically bankrupt on September 26, after several smaller banks cut their lines of credit. 5-it was agreed on September 29 that the banks UBS and CS would purchase a 260 million franc ($160m) share in Crossair and give Swissair an interim credit of 250 million francs ($154m) to guarantee flights until October 3. 6-Signing of the contract and the transfer of funds was delayed so much by the banks that the cash arrived “too late” 7- Swissair had to ground all its flights. The company did not even have the money to pay for fuel and airport taxes 8-declared bankruptcy.
  10. 10. THE UGLY OF CORPORATE GOVERNANCE • Swissair was the symbol of national pride of Switzerland. • 30 % government ownership , so it decide the selection the CEO. • The CEO conducting the business congruent with the political agenda of the Swiss government. • The Switzerland political norm pressured auditors (PricewaterhouseCoopers) in auditing financial statements.
  11. 11. 1. Swissair should have an independent structure of boards ,that able to check and balance structure for management. 2. comprehensive review of the stakeholders’ theory of corporate governance which points out the presence of many parties with competing interests in the operations of Swissair
  12. 12. THANK YOU

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