Swiss airline: hawk turned pigeon in European sky wars

Switzerland's top airline, after being one of the hunters during the 1990s, succumbed to upheaval in the European air travel market last week to become the prey of German carrier Lufthansa. Switzerland's top airline, after being one of the hunters during the 1990s, succumbed to upheaval in the European air travel market last week to become the prey of German carrier Lufthansa. That followed the collapse of merger talks with Dutch airline KLM -- now owned by Air France -- with Scandinavian SAS and Austrian Airlines in 1993, and an aggressive alliance strategy that tied in with the now ailing US Delta Airlines. Before its expansion, Swissair was valued at about 4.3 billion Swiss francs (three billion dollars then). "The mistake was for Swiss to go for this policy of taking minority shareholdings in AOM and in Sabena, where it didn't have control over the operations or cashflow," said Nick van den Brul, an analyst at BNP Paribas. Switzerland's airline was partly hampered by being outside the European Union and not being allowed by EU rules to take a controlling stake in its prey at the time. Swissair expansion was also largely funded by debt, helping to drive the group into bankruptcy in October 2001. It was reincarnated under the name Swiss and took over Swissair's knowhow, visual identity, staff, infrastructure, flight slots and airliners with the help of about three billion Swiss francs in public and private investment. But the new offspring was immediately battered by low-cost carriers driving down fares in Europe, a slump in air travel and rising fuel prices. Swiss cut its fleet and staff by one-third last year.