Swissair stock soars

July 18, 2001 Posted: 0952 GMT

LONDON (CNN) -- Shares in Swissair soared on Wednesday after agreeing a deal to save Sabena and ending an acrimonious battle with the Belgian government.

Swissair, Europe's fifth-largest airline, rose almost 19 percent to 122.00 francs in Zurich trade.

Belgium and Swissair agreed late on Tuesday to invest another 430 million euros ($370 million) in loss-making Belgian flag-carrier Sabena. Swissair will pay 60 percent of the committed funds and the government the rest.

The government and Sabena also dropped a 1 billion lawsuit against Swissair that would have crippled plans by the Swiss company to restructure its business under the weight of $4.4 billion in debt.

Swissair flew into trouble with the Belgians after saying it wanted to go back out of a deal signed in January to increase its stake in Sabena to 85 percent from 49.5 percent. The latest agreement frees it from that deal.

The agreement "will reassure our lenders and shareholders concerning future funding by the Swissair Group and removes the uncertainty created by the various lawsuits filed against us," Swissair Chief Executive Mario Conti said.

"With the payment phased over two years, the strain on our cash flow is reduced. This will further stabilize our financial situation," Conti said.   

The Swiss company, which ejected its chief executive and chairman on January 23, is reversing an expansionist policy to build an airline alliance around Swissair through the acquisition of stakes in regional carriers.

That policy proved to be costly as losses soared. The Zurich, Switzerland- based company made a 2000 net loss of 2.9 billion Swiss francs. Swissair now plans to sell assets worth 3 billion Swiss francs to stay afloat.

The Belgian government, the majority shareholder in Sabena, and Swissair made it quite clear to Sabena that they will not put up anymore cash to bail out the airline.

"Neither the Swissair group nor the Belgian government will have any future funding obligations to Sabena, other than those set forth in the agreement signed today," the two said in a statement.

Belgian Public Enterprises Minister Rik Daems said the agreement provided Sabena with funding to restructure its business until 2005.

"I therefore hold the Sabena management and its board of directors to their firm commitment to convert Sabena into a long-term profitable company," he said.

Under the agreement terms, Swissair will take over Sabena's orders for nine Airbus aircraft. Swissair said the costs of the agreement have been factored into its 2000 accounts.

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