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Struggling SAirGroup unveils restructuring plans
By Mark Odell in London and Bill Hall in Zurich
Published: April 2 2001 14:40GMT | Last Updated: April 2 2001 14:49GMT
SAirGroup, the parent of Swissair, unveiled the first raft of measures on Monday, including the disposal of some non-core assets, aimed at shoring up the company after its airline investments brought it to the brink of collapse.
The details of the planned restructuring of the group, which includes changing its name back to Swissair, were unveiled as it reported a net loss for 2000 of SFr2.89bn ($1.66bn) compared with a profit of SFr273m the previous year, its worst performance ever.
Mario Corti, the group's new chairman and chief executive, outlined plans to sell the Swissotel hotel chain and dispose of SFr700m of its property portfolio.
It will also sell its 10 per cent stake in Austrian Airlines (a hangover from a now defunct relationship between Swissair and its neighbour), its 7 per cent stake in Galileo, the central reservation system, and its holding in Equant, the telecommunications group.
Mr Corti stopped short of detailing his plans for the other airline investments built up by his predecessor, Philippe Bruggisser, who was sacked in January, but promised action would be taken over the coming months.
"The company must and will correct the problems it is currently experiencing. The matter of most urgent concern is reducing the risk to which the group's airline investments are currently exposed as quickly and as substantially as possible," Mr Corti said.
The losses in the airline division, which include the core business of Swissair alongside stakes in a number of highly unprofitable European airlines, combined with the provisions taken to restructure the business amounted to SFr3.73bn.
The extent of the losses underlines why the SAirGroup board decided to follow Mr Bruggisser, resigning en masse in early March.
The group said the three French airlines - AOM, Air Libere and Air Littoral - it had planned to merge into one to create a competitor to Air France reported a combined net loss of SFr600m last year. Sabena, in which SAirGroup currently holds a 49.5 per cent stake, lost E325m ($284.2m), and German charter airline LTU lost E224m.
SAirGroup's equity has shrunk from SFr4.2bn to SFr1.2bn and its debt equity ratio has soared from 1.01 to 4.68 primarily because of the SFr3.7bn net cost of writing down the airline investments.
The group's large non-airline businesses helped offset the operating losses on its airline business, and group earnings before interest and tax and write-offs, only fell 10.5 per cent, to SFr603m while revenues rose 25 per cent, to SFr16.2bn.
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