Swiss billionaire, Thomas Schmidheiny said the airline failed because of the September 11 terrorist attacks in the US and not board mismanagement.
A Swiss court this week is scrutinizing transactions made within Swissair that led up to its 17 billion-Swiss franc ($13.6 billion) bankruptcy three weeks after the 2001 attacks on New York and Washington. Schmidheiny, one of 19 former Swissair Group directors facing charges over the carrier's collapse, said Swissair had enough liquidity to cover its debts during his term as board member. „As long as I was on the board, over-indebtedness was never an issue,” Schmidheiny told a district court in Buelach, near Zurich.
„The group was grounded because of the consequences of September 11,” which led to a slump in aviation travel, he said. Swissair, which was replaced by Swiss International Air Lines Ltd., collapsed October 2, 2001, after running out of cash, the country's biggest corporate failure. Schmidheiny, who pleaded not guilty to charges of breaching his fiduciary duties, served on the airline's board between 1980 and March 2001.
Schmidheiny said the company's board was fully aware of the risks associated with its so-called „Hunter” strategy, which included buying stakes in regional airlines such as Belgium's Sabena SA to bring more passengers into Swissair's long-distance network. „It was clear to everyone that transforming state-regulated Swissair into a private European airline wouldn't be a walk in the park,” said Schmidheiny, listed by Forbes Magazine as the world's 140th richest person in 2006.
The collapse of Swissair, founded in 1931 and voted the world's best airline by Conde Nast Traveler magazine in 1994, left 38,000 passengers stranded around the world. Schmidheiny said he regretted the carrier's demise, particularly for its employees. About 5,000 workers lost their jobs in the bankruptcy. „I believe the board carried out its obligations with care” and cleared the way for a new strategy to be developed when it scuttled „Hunter” in January 2001.
Schmidheiny, currently a member of Holcim Ltd.'s board, is the first defendant testifying in Switzerland's biggest corporate trial to have answered questions from judges. The five previous defendants that have taken the stand since the trial started on January 16 have limited themselves to pleading not guilty and reading prepared statements.
The trial is the first time that members of a board of directors have faced criminal charges for corporate failure in Switzerland. The Zurich-based carrier's failure remains a source of national anger and shame for many Swiss citizens. Former board members Gerhardt Fischer, Benedict Hentsch, Andres Leuenberger and Antoine Hoefliger all entered not guilty pleas to the same indictment of breaching fiduciary duties to shareholders and creditors by depleting corporate assets.
A fifth former Swissair Group board member this morning denied criminal charges related to the company's bankruptcy and refused to answer detailed questions, broadcaster Schweizer Fernsehen reported. Vreni Spoerry-Toneatti, a former national politician and a member of catering company SV (Schweiz) AG's management board, said she didn't want to prejudice pending civil actions, according to a transcript of her remarks on SF's Web site.
For the charges under articles 158 and 164 of the Swiss Penal Code, the prosecution must show the defendant either intended the damage or was aware damage would be a likely result, Filippo Beck, spokesman for the Swissair Group's liquidator Karl Wuethrich, explained in an interview on January 17. Beck said damages of approximately 600 million Swiss francs were sought in three civil action claims by the liquidator against Swissair Group board members, with more planned. So far more than 24,000 creditors are registered with the liquidator. The trial is due to last until March 9. (Bloomberg)