Last call for the Swiss flying bank

For the European business traveller the disruption caused by the recent failure of Swissair and Sabena will have been an annoyance. For the countries involved, it has meant much more.

Both Swissair and Sabena could look back on a long history of serving and representing their nation throughout the world. Indeed, until recently Swissair embodied the description of “flag carrier” perhaps better than any other airline. The company once nicknamed the “flying bank” collapsed in September, however, with debts of SFr15bn (&£6.4bn), and also brought down with it the Belgian airline, Sabena, in which Swissair’s parent company, SAir Group, held a 49.5 per cent stake.

Previously confident, stable and with a presence on the international stage far belying its size, Switzerland has been hit by a succession of events that have shaken its inhabitants and led many to wonder: “What’s next?” As a symbol of the country’s values, Swissair played an important ambassadorial role.

In fact, the company had been under pressure since the early Nineties , following a referendum in which Swiss entry to the European Union was rejected. It found itself disadvantaged when routes were allocated in favour of companies, such as Lufthansa and Air France, based in EU-member countries. Subsequent attempts to form an alliance with KLM, SAS and Austrian Airlines met with resistance at home over diluting the national identity of the airline. As a result of its failure to form such an alliance, Swissair embarked on an acquisition and investment drive that, ultimately, was to cause its demise.

Though less overtly branded with the national flag, Belgium’s Sabena similarly carried its home country’s image worldwide and was a source of pride for the country’s inhabitants. Essentially a loss-making enterprise supported for many years by “soft budget constraints” and, latterly, SAir Group, Sabena had nevertheless been a pioneer of international air travel and its continued presence among the world’s major carriers had seemed ensured. However, a loss of BFr13bn (&£202m) last year only added to the company’s existing BFr100bn (&£1.5bn) debt, making survival – in a world where “soft budget constraints” on the part of protective, indulgent parent governments are no longer an option – impossible.

Those are the realities. Swissair will to some degree be reborn by “reverse-engineering” it into its smaller sibling, Crossair. As for Sabena, Belgian support has been rallied around a successor, DAT, with a business model based on a regional, rather than worldwide presence.

It is worth pointing out that, according to the country’s institute for national accounts, INR, Belgium’s economy may shrink by 0.2 per cent this year as a result of the failure of Sabena. At a rough estimate, that equates to BFr100bn (&£1.5bn), a sum equivalent to the size of the company’s debt. What price, then, the maintenance of a national symbol, whether as a carrier of passengers or as a flying promotional tool?

John Shannon is president of Grey International