Swiss Air and the Dissolution of the Qualifier Group
Essay Preview: Swiss Air and the Dissolution of the Qualifier Group
Report this essay
Aircraft of Swiss Air were grounded in Zurich back in 2001 due to the lack of cash flow. There was so little money left that there was not enough money to pay for fuel. This was even more surprising since this airline was in one of the richest countries in the world, Switzerland. Swissair managed to establish itself as a quality airline throughout its home country of Switzerland and in Europe. Swiss Air celebrated its 70th birthday in March that year with no indications of what would happen in early October of 2001.
Swissair was originated in 1931 from shareholders of two main Swiss airlines. The combination of these shareholders made the new company of Swiss Air. These two airlines were Ad Astra-Aero and Balair. At that time the two airlines had 13 aircraft
and 64 employees who flew 4 domestic and 14 international flights that went all over Zurich. More recently Swissair converted to an all Airbus fleet in which 3 members of the A320 family and A330-200 provided the services. It grew from the initial 18 routes to a stronger network encircling most of Europe.
In 1934 Swissair became the first airline to employ European airhostesses. The airline was known for its fleet decisions and catering among other services. In 1958 they made their first alliance with Scandinavian Airlines. During 1968 they became the third European airline to operate and all jet fleet which put them above and beyond all other airlines in the world. In 1988 Swissair became the worlds first airline with an all Category 3 fleet equipped for low visibility landings; once again the airline was at the forefront of technology. Then in 1991 they were the worlds first airline to publish an environmental impact report which showed the effects their jets had on the environment and the noise had on communities. In 1996 they became the worlds first airline to serve organic food in all classes of flights out of Switzerland.
It is clear that innovations had a lot to do with what made Swissair but it was not the only factor in the equation. They were the last European airline to change from an 8 to 9 abreast in the economy of their DC aircraft and from a 9 to 10 abreast in the economy on their Boeing 747 aircraft. Swissair earned their worldwide acclaim through their metal cutlery in their economy which had an appropriate balance of innovation and conservatism.
On the other side of things, Swissair also had their fair share of problems throughout their history. They suffered a number of accidents and incidents even though they had one of the best safety records in the industry. Their most recent one came in 1998 after nearly 20 years of zero incidents. One of their aircraft lost power to its engines and crashed in the Atlantic Ocean off the coast of Nova Scotia. Everyone on the flight died which included 215 passengers and 14 crewmembers. That was considered the darkest day in Swissairs history, but little did they know what was to become in 2001.
The end of Swiss Air was the result of poor decisions by managers who had little experience in the air transport industry. In the mid 1990s management went with an expansion plan that seemed to be in the right direction. It was suppose to help Swissair remain strong and grow and continue to be successful. Swiss Air acquired a large number of overseas airlines that included Delta Air Lines and Singapore Airlines. Their main thrust came from a number of European carriers with smaller routes but would open up other destinations to the Airline. They had created an alliance with smaller carriers that could compete with the bigger ones, which included One World and Star Alliance. The acquisition of these smaller but financially troubled airlines led to the beginning of Swiss Airs financial troubles.
Most of the Qualifier Group Airlines had their problems as well. One of the airlines, Sabena, had made profit only once during their existence. It soon became obvious that Swissairs formula did not work at other airlines the same that it did in theirs. In 2001 Swissair was in serious trouble and the first sign came from the man who pushed for the formation of the Qualifier alliance. On the same day Swissairs CEO, Philippe Bruggisser, resigned. The CEO had lead Swissairs expansion transforming them into a profitable airline and to the center of an ill-conceived alliance. He was replaced by Eric Honegger and Moritz Suter.
February was the date that was set to help the ailing company with a new vision and restructuring plan. Swiss air announced that they would not take a 34% stake in Air Portrigal. The same was said for the stake in Turkish airlines that was reserved for Swissair. Swiss air invested 40 million of bridge financing that would save Belgian Air.
The first real set back to the restructuring Swiss Air came when the revitalizing hero, Moritiz Suter said that the current structure of the airline would not allow him to restructure the airline in any meaningful way. Two days after this decision the board of managers resigned and the government of Switzerland would not give any assistance to the airline which came as no surprise. On March 16 Swiss air hired a new CEO, Mario Corti. Many people thought that the man who previously had ran the Italian Nestle would be the savior. The people of Switzerland were sure that the airline would be profitable in the nest five years. Over the next year the company would initiate many cost savings that would help bring the company into profitability.
While the restructuring of the company continues the shares of Swiss Air continued a downward spiral that was a runoff of the resignation of the previous CEO. To stop the spiral the government of Switzerland suspended the trading of Swiss air on the date the company announced its dismal earnings. The day after the release the shares continued to fall to a point that Swiss Air had almost zero equity.
Despite the hard times the airlines “in air” product was receiving accolades. The bad financial news was somewhat offset by the receiving of awards from the European community. The airline received the “World Travel Award”, “Best Economy Class”, and “Best European Airline”. Swiss air also secured the sale of its award winning hotels for 520 million which was a huge financial boost to the company. He would also sell Atraxis, Swissairs computer branch, and Swissairs 10% stake in the Austrian Airlines Group (AUA). That same month, Swissair was nominated the official carrier of the International Olympic Committee. The IOC was to fly the Swiss carrier until 2004, and could extend the contract to 2008.
In June, Swissair shares fell to an all-time low and the airline was close to bankruptcy. In September,