Commission Criticizes Swissair Management
Fri Jan 24, 4:52 PM ET Add Business - AP to My Yahoo!


By GUIDO SCHAETTI, Associated Press Writer

ZURICH, Switzerland - Leadership errors, dubious accounting methods and lack of controls all contributed to the collapse in October 2001 of the Swiss flag flier, Swissair, according to an official report Friday which left the way open for legal proceedings against former management.

The 3,300 page investigation by management consultancy firm Ernst & Young said the Swissair board must have known in summer 2000 that the company faced a deficit of 4.5 billion Swiss francs (then around $2.7 billion).

"If there had been immediate professional crisis management and personnel changes back then, chances to turn the company around would have been much higher," said Ancillo Canepa, a partner with Ernst & Young.

The abrupt grounding of the carrier on Oct. 2, 2001 — leaving thousands of passengers stranded — was unnecessary on strictly financial grounds because Swissair had 123 million francs (then $76.9 million) at its disposal, and not just the 14.5 million francs it claimed, said the report.

Canepa told a news conference that Swissair directors had ignored company directives limiting minority holdings in other airlines to a maximum of 30 percent. Instead, the company built up majority stakes in a number of troubled European carriers, spending a total of 5.9 billion francs between 1995 and 2001. Some of these acquisitions violated European Union (news - web sites) law.

The report said that as a result of Swissair's disastrous purchase of airlines like the struggling French regional carriers Air Littoral and AOM, its debts soared. But the extent was concealed in company reports.

The 1999 and 2000 accounts "did not present the economic and financial situation of the SAirGroup correctly," said Canepa. He said the company reports misrepresented subsidiaries and overvalued Swissair stakes. Even though there were "serious errors" in the 2000 accounts, these were approved by the company auditors.

The company's estate administrator Karl Wuethrich said liquidators would study the report before making a decision on whether to file a legal complaint against any former managers and directors in the second half of the year.

Switzerland's four main political parties demanded that former executives be held responsible. Top of the list was former chief executive Philippe Bruggisser who oversaw the expansion strategy until he was forced out in January 2001.

Bruggisser defended himself.

"I always acted to the best of my knowledge and conscience in the interests of Swissair and tried to do my best for the company," he said. "I regret that things went wrong."

The central government has so far been reluctant to file criminal charges, but under Switzerland's decentralized legal system individual states like Zurich — former headquarters of the company — could press ahead on their own.

Swissair was long a symbol of reliability and quality. After its abrupt demise, the Swiss government and big banks were forced to inject billions of dollars into a new airline, called Swiss.

Since starting operations last March, Swiss has struggled to regain passenger confidence. Last November it said it would cut 300 jobs from its 10,500 work force and trim eight planes from its 130-strong fleet. It hopes to break even this year.

The new airline has also been plagued by labor problems.

http://story.news.yahoo.com/news?tmpl=story&u=/ap/20030124/ap_on_bi_ge/swissair_3

Interesting too that the management may be held responsible for the demise of the airline because of what they did financially but will probably escape scrutiny as far as sr111 is concerned. Guess money is valued more than human life. Pretty horrific if you ask me.