Swissair Group went bankrupt in 2001 because of „miserable management,” not the collapse in air travel after the September 11 attacks or the refusal by banks to extend more credit, a prosecutor said.
„How could it happen that our Swissair, known as „The Flying Bank,” could go down with debt of more than 16 billion francs?” asked Christian Weber, the lead prosecutor in a criminal trial against 19 former Swissair executives, directors and consultants. „Something like this doesn't happen overnight,” Weber told a makeshift courtroom near Zurich today as the case restarted after a two-week break. „Real crises come as a result of weak management.”
Swissair was grounded after running out of cash on October 2, 2001, and the company filed for bankruptcy two days later with about 17 billion francs ($14 billion) in debt. The defendants are fighting charges including falsification of documents, mismanagement and creditor preference. The trial is the first time a Swiss board has faced criminal charges for a company's collapse. Switzerland's biggest corporate trial is being held in a gym in Buelach, near Zurich, to accommodate onlookers.
About 200 spectators, journalists and lawyers attended today's hearing. The trial is due to run until March 9. Swissair's remains were merged with those of regional airline Crossair in 2002 to form Swiss International Air Lines Ltd., which cut its fleet and workforce and then agreed in 2005, after three unprofitable years, to be taken over by Deutsche Lufthansa AG.
Mario Corti, Swissair's last CEO, testified January 30 that the carrier was „strangled” by decisions made by creditor banks including UBS AG. The blame lies rather with management's „unprofessional actions,” Weber and Hanspeter Hirt, another prosecutor, said yesterday. Swissair's „hunter strategy” in the late 1990s led to the grounding and bankruptcy, Hirt said. Under that business plan, the company bought stakes in smaller carriers and airline-related businesses to build a group to challenge larger rivals such as Lufthansa. SAirGroup had about 270 subsidiaries by 2001.
Claims by 4,921 Swissair creditors totaling 2.95 billion francs have been recognized so far, according to a circular published by the office of the carrier's liquidator, Karl Wuethrich. Decisions on whether to accept another 2.22 billion francs worth of claims are currently suspended, pending court rulings, according to the statement, which is dated February 13.
Swissair's disposable assets stood at 424.3 million francs as of December 31, the liquidator said in the statement. Third-class creditors, which make up a majority of the claims, can only hope to get back as much as 9.4% of their money, while the others could get as much as 100%, according to the liquidator. Creditors will testify before the court in Buelach next week. (Bloomberg)