Swissair scandle

1. Swissair Collapse
October 2001

2. Swissair was started in 1931 by the merger of two main
Swissairlines and it was in the market till 2002.
SWISSAIR
1931

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. 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. 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. 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. 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. 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. 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. 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. 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. THANK
YOU