Swissair's bankruptcy and its effects on Swiss hospitality industries

SWISSAIR'S (EX NATIONAL SWISS AIRLINES) BANKRUPTCY

On October 2, 2001, dozens of aircraft stood grounded at Zurich Unique Airport. Flights could not take off due to the simple lack of cash flow. Swissair, the airline that flew the flag and pride of the Swiss people, had declared bankruptcy. While many people knew that Swissair was ill, maybe even very ill, no one ever thought it could reach this level of gross humiliation. Passengers were left stranded with valueless tickets, and 70 years of the Swissair brand's goodwill totally disintegrated in a matter of hours.

This paper analyzes and examines the multitude of issues related to Swissair's bankruptcy. Part II discusses the evolution and impact of Swissair's bankruptcy for the hospitality, hotel, and restaurant businesses. In Part III, Swiss, the new National airlines company is reviewed. Lastly, this paper concludes with recommendations for improving the likelihood of success for Swiss.

SWISSAIR'S BANKRUPTCY AND ITS EFFECTS

Swissair's bankruptcy had numerous economic and social consequences for the Swiss hospitality, hotel, and restaurant business. First, Swissair's bankruptcy caused numerous individuals to lose their jobs as well as their retirement funds. Likewise, Swissair's bankruptcy resulted in many investors losing their investments. More immediately, Swissair's bankruptcy forced numerous consumers to scramble for new flight arrangements as their plane tickets were suddenly worthless.

Next, Swissair's bankruptcy also had social consequences for the Swiss hospitality, hotel, and restaurant business. Prior to its bankruptcy filing, Swissair had enjoyed great respect with both Swiss consumers and foreign travelers. Not only had Swissair been in existence for 70 years, but also it was known as a true innovator in every aspect of the airline business, from fleet decisions to catering. Such outstanding service, with an appropriate balance of innovation and conservatism, earned Swissair worldwide acclaim.

All of Swissair's former goodwill and reputation as a top-notch airline instantly disintegrated as a result of its bankruptcy filing. Once Swissair filed bankruptcy, the airline, hotel, and restaurant industries suffered. Swissair's bankruptcy filing caused individuals to lose faith in the stability of Switzerland's hospitality industry. For a period after Swissair filed bankruptcy, individuals began booking fewer flights, eating out less, and staying in hotels less often. In order for things to change, airlines in Switzerland had to restore consumer and investor faith in the stability of the hospitality industry as well as the safety of traveling.

IV. CONCLUSIONS AND RECOMMENDATIONS

The bankruptcy of Swissair offers numerous invaluable lessons for both the Swiss airlines and the airlines in the United States. First, Swissair's failure illustrates one of the most essential and often forgotten lessons of business. Despite how long a company has been in existence and succeeded, unless a company manages its finances zealously and adapts to change quickly, the potential for failure is a distinct possibility. Next, Swissair's bankruptcy is a glaring reminder that a corporation's goodwill is everything and that once a company fails (or even makes a temporary mistake), its goodwill may totally disintegrate in a matter of hours. Once a corporation loses the faith of consumers and investors, it makes it nearly impossible for the corporation to regain their faith and also makes it more difficult for the corporation's competitors to maintain the faith of their own consumers and investors. Numerous recent high-profile accounting scandals involving well-respected corporations such as Arthur Andersen, Enron, Global Crossing, Tyco, and WorldCom poignantly illustrate this fact.