Switzerland Plans To Sell Swiss Stake
May 19, 2004
Switzerland wants to sell its more than 20 percent stake in Swiss International Air Lines once the flag carrier is on course, the country's finance minister said in a newspaper interview.

"I have always said that the government needs to bid farewell to Swiss," Finance Minister Hans-Rudolf Merz said in an interview with the Tagesanzeiger daily published on Wednesday.

"But first Swiss needs to reach a cruising altitude at which it can survive. Then the government has to sell."

With a 20.4 percent stake the government is Swiss's biggest shareholder and helped put the airline together in a 2.7 billion Swiss franc (USD$2.1 billion) scheme to save the national airline industry after the collapse of Swissair in late 2001.

Swiss has not yet made a profit since its formation but says its painful restructuring and cost cutting measures are starting to pay off. It aims for a break even at the operating level this year.

Merz said the federation would wait until Swiss posts its 2004 full year figures.

"If it continues as it has done so far, then one can then say that the worst is over for Swiss. From then on it [the sale] will have to go quickly, in my opinion," Merz added.

The Swiss government and other large shareholders have entered into a lock-up agreement whereby they cannot sell their stakes until August 31.

Switzerland would sell to a buyer with strategic intentions, Merz said. Asked whether it was aiming to sell to oneworld founding member British Airways, Merz said: "It is clear that British Airways is in the forefront as a partner."

But problems integrating Swiss's frequent flyer rewards system with BA's meant that "the last word had not been spoken", he added.

Swiss decided last year to join BA's oneworld alliance rather than Lufthansa's Star Alliance but delays in Swiss's entry into the club have sparked talk that it may revert to joining with its German rival after all.

Merz added the government would sell its stake to Lufthansa if it offered a sensible strategy for Swiss. Lufthansa has not ruled out restarting negotiations with Swiss.

Merz had got involved in Swiss's attempts to sign a credit line for some 400 million Swiss francs (USD$311.6 million) which Swiss has tried to get from banks for almost a year now, he said.

A capital increase was an option after it gets this credit to put Swiss on a firmer footing.

"We would contribute to that, but only if the other big shareholders do too," Merz said, adding that would be the cue for the federation to sell its shares.

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