Additional Swissair funds blocked

The Swiss government has sounded out big companies for their readiness to buy stock in Crossair, the regional airline that aims to replace collapsed Swissair as Switzerland's national flag carrier.

The airline's parent, Swissair Group, was in search of more funds last night after a court administrator blocked a UBS and Credit Suisse loan to tide over subsidiary businesses involved in ancillary activities.

In Belgium, reports said the government was looking to abandon the Sabena airline's intercontinental status and to downgrade it to become a short-haul airline - in order to remain in business.

The initial response to the Swiss government's plan was cool as the scramble continued to ensure Crossair has enough money to function as a fully-fledged long-haul airline - and salvage tens of thousands of Swissair-related jobs in the process.

UBS and Credit Suisse Group have led the initial SFr1.4 billion (€940 million) salvage plan to make Crossair the national airline, but say the new company needs much more capital for the long term.

Swissair Group and five subsidiaries - including the airline itself - had to seek court protection from creditors last week when a sharp drop in air travel after the September 11th attacks brought the already debt-laden group to its knees.

Blocking the release of further funds, court administrator Mr Karl Wuethrich, who is temporarily overseeing the group's affairs, told a news conference he thought the Swissair airline had enough cash on hand to keep operating until the planned October 28th handover to Crossair.

Sabena, which is preparing a restructuring plan to present to the Belgian government next week, will give up most of its activities to focus on those of its short-haul subsidiary, Delta Air Transport (DAT), according to newspapers De Morgen and Le Soir.

A government source said the move was an option for the airline, but could not confirm any of the details published in the reports. Sabena declined to comment.

Sabena was granted bankruptcy protection last week after Swissair, which owns 49.5 per cent of the airline, backed away from a pledge to inject more cash into it.

Late on Thursday, Sabena said it was talking with a number of interested parties about saving the airline, adding that it was working towards creating a new airline outside the existing structure.

German flag carrier Lufthansa said yesterday the current airline crisis cast doubt over the future independence of smaller European rivals Iberia, KLM Royal Dutch Airlines and Alitalia. Suggesting the European industry could consolidate around Lufthansa, Air France and British Airways, Lufthansa chief executive Mr Jⁿrgen Weber said smaller firms might not emerge as stand-alone airlines from the crisis sparked by last month's attacks on the United States.