National Swiss Airlines Bankruptcy

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.

III. SWISS, THE NEW NATIONAL AIRLINES COMPANY

The new National airlines company, Swiss should do various things to regain customer and investor confidence in the high Swiss quality and reliability. Prior to filing bankruptcy, Swissair was highly respected, both for its innovation as well as its respect for consumers and its treatment of investors. Consumer and investor confidence in Swissair immediately disintegrated upon Swissair's bankruptcy filing. Swiss, the new National airlines company has the potential to capitalize on Swissair's goodwill by restoring consumer and investor faith. In order to do this, Swiss must demonstrate the same (if not higher) level of innovation and respect for consumers and investors that Swissair previously had.

There are various ways Swiss may restore consumer and investor faith. First, Swiss may consider giving both domestic and foreign travelers incentives to use their airline. Such incentives may include discounts on future flights, added perks such as high quality meals or frequent flier programs, etc. Next, Swiss should pursue an aggressive marketing campaign designed to both capitalize on the previous high respect that Swissair enjoyed with domestic and foreign travelers as well as distinguish itself from Swissair. In order for consumers and investors to restore the trust that was lost with Swissair, Swiss must prove that it is able to deliver on its promises, both in terms of innovation as well as in terms of customer service.

Third, Swiss may want to pursue partnerships with airlines in the United States and other countries. Not only do these airlines have more travel business (particularly in the United States), but also such partnerships may enable Swiss to tap into previously underutilized markets. In addition, such partnerships may enable Swiss to become financially stable and avoid the cash crunch that Swissair suffered. Likewise, such partnerships may give consumers and investors faith that Swiss has the potential to be successful, both in the short run and long run. In addition, such partnerships will allow Swiss to pursue a conservative strategy yet also take risks.