Swissair claims agreement on global airline is close: Alliance forecast to add 760m pounds to bottom line of partners

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The Independent Online
SWISSAIR, one of the four European carriers involved in talks to create a new global airline force, said yesterday that agreement was close.

The airline also forecast that the alliance, codenamed Alcazar, would add pounds 760m to the combined bottom line of Swissair and its three partners - KLM of the Netherlands, the Scandinavian carrier SAS and Austrian Airlines.

In a statement issued in Zurich, Swissair said that negotiations had reached an 'intensive stage' and that a memorandum of understanding could be signed in the next few weeks.

However, a number of key sticking points remain - notably the value to be ascribed to each airline in the new alliance and the choice of a partner airline in the US.

Swissair's bullish statement was being seen in some quarters as an attempt to get the troubled co-operation talks back on track after a number of setbacks. The four airlines have been negotiating since last spring and have twice put back the deadline for agreement.

KLM, the only privately owned airline of the four, and SAS, which is half-owned by the governments of Sweden, Denmark and Norway, are said to have disagreed on a number of aspects of the deal while Austrian Airlines has also been courted separately by the German flag-carrier Lufthansa.

If agreement can be reached the resulting carrier would be Europe's biggest airline, with 32 million passengers, 300 aircraft and 70,000 employees.

The provisional plan is for KLM, Swissair and SAS to hold stakes of 30 per cent each and Austrian Airlines a 10 per cent stake in a new management company that would start operations next spring.

However, any deal would first have to be approved by the European Commission's competition directorate. Other stumbling blocks include the location of the new company, the need to renegotiate bilateral air traffic agreements in each of the six countries involved, and political opposition to the heavy job losses that would follow.

Swissair said yesterday there would be a 10 per cent cut in the combined workforce over three years through natural wastage and projected that the mixture of increased revenues and cost savings would raise profitability by Sfr1.6bn ( pounds 762m).

But Swiss unions fear job losses could be as high as 25 per cent if the new alliance is to achieve its cost-cutting target.

The other sticking point is the choice of a US partner. KLM owns 20 per cent of Northwest Airlines, Swissair has a 4.5 per cent stake in Delta and SAS has a 10 per cent holding in Continental Airlines.

Lufthansa is expected to announce on Monday that it has selected United Airlines as its US partner in preference to American Airlines. United used to have a marketing tie-up with British Airways but this was scrapped after United took over Pan Am's routes between the US and Heathrow.