Switzerland debates the need for a national airline

By Andrea Friedli

ZURICH, Aug 1 (Reuters) - As Swiss International Air Lines struggles to keep the flag flying the rest of Switzerland is at last wondering whether the tiny Alpine country can do without a national airline.

"(Switzerland) doesn't really need its own airline...I think one has to move away from the patriotism, from the Swiss cross on the tail," said Janwillem Acket, Bank Julius Baer's chief economist.

"But time is running out (to find a solution)...I think it's just a question of months."

The same questions were being asked after former flag carrier Swissair dented national pride with its failure in October 2001. The answer then was to create a new national airline, Swiss International, by folding the remains of Swissair into regional carrier Crossair in a 2.7-billion-franc ($1.98 billion) rescue funded by the government and major national companies.

But Swiss has been battling ever since to establish a reputation and find its niche in the overcrowded airlines industry.

Persistent speculation has swirled that Swiss might merge with Germany's Lufthansa as a way to end the financial woes it blames on a more general slump for the full-service network airlines caused by weak economies, the war in Iraq and the deadly virus SARS that grounded travellers.

Swiss says it has enough cash to get it through 2003 but needs 500 million Swiss francs ($366 million) to fund a restructuring which includes slashing around a third of its workforce and fleet and reducing its network by over a quarter.

Swiss's key creditor banks, UBS and Credit Suisse, and other investors have so far reacted coolly to the airline's pleas for more cash.

And while the Berne government still welcomes a national carrier, that doesn't mean it thinks there must be one, a spokesman for the Swiss transport ministry said.

POLITICIANS ALMOST AGREE

Politicians from the four main parties, busy campaigning for parliamentary elections in October, largely share the view that Switzerland could do without a national carrier.

"The main thing is we can fly and we have good intercontinental connections. With whom doesn't matter," said Ueli Maurer, president of the Swiss People's Party, adding he did not think it would be hard to find airlines to fill the gap.

"Zurich is an interesting business centre within Europe. If Swiss doesn't fly, others will."

Philipp Staehelin, head of the Christian Democratic People's Party, agreed the key was to have direct intercontinental connections. While he could imagine Swiss in a partnership with another airline, he shuddered at the Lufthansa rumour.

"Lufthansa is not a solution for me," he said, fearing that Switzerland would be reduced to a feeder for Germany's Frankfurt and Munich hubs.

Radical Democratic Party President Christiane Langenberger said the interests of Switzerland would best be served by a national airline, but the main thing now was to save jobs rather than to hang on to the idea of a national carrier.

But the Social Democratic Party fears thousands of jobs would go if Swiss disappears. "Of course there would be a substitute, but it wouldn't be an adequate substitute. There would be very drastic consequences," said Hans-Juerg Fehr, the party's vice president.

TOURISM MAY SUFFER

The Swiss Tourism Federation worries the lack of a national carrier could weigh on the tourism-dependent economy.

"We don't expect other airlines to fill the intercontinental gap if Swiss disappears and there would be more feeder services from Switzerland. And then we will clearly be at a disadvantage with regards to guests coming from distant places," said Judith Renner-Bach, director of the federation.

Swiss tour operator Kuoni, Europe's fifth-largest travel group, said it did not necessarily need a national carrier for its tourism sector because it had its own charter service. But Swiss was a reliable partner for business travel.

"We need a national carrier, but the national carrier can belong to a foreign investor," spokesman Stephan Wehrle said.