=20 ---------------------------------------------------------------------- This article was sent to you by someone who found it on SF Gate. The original article can be found on SFGate.com here: http://www.sfgate.com/cgi-bin/article.cgi?file=3D/news/archive/2003/05/02/f= inancial0827EDT0023.DTL ---------------------------------------------------------------------- Friday, May 2, 2003 (AP) Struggling Swiss national airline announces spinoff of regional lines, mana= gement pay cuts PETER HODY, Associated Press Writer (05-02) 05:27 PDT BASEL, Switzerland (AP) -- Struggling Swiss International Air Lines announced cost-cutting plans Friday that will include spinning off regional operations into a new low-cost subsidiary to be called Swiss Express. "Swiss Express will offer a competitively priced product that is careful= ly tailored to the regional air-travel market by reducing the costs of these regional operations by some 20 per cent from their current levels," a statement said. The airline -- known as Swiss -- told reporters that the spinoff is part of a savings plan that includes hopes of winning approval from labor unions to cut by 10 percent the company's payroll of 1 billion francs ($744 million). "Swiss' top management are setting an example here, agreeing to voluntarily reduce their own salaries by 14 percent with immediate effect," the company said in a statement. The creation of the new subsidiary "is being taken in response to new market conditions to offer low-cost air connections, especially within Europe," said Swiss. It said Swiss Express will start operations late this year. Swiss said the proposal is part of its effort "to ensure the airline's sustainable success." The airline has already adjusted its flight schedules in response to what it calls "the collapse in passenger volumes following the Iraq war and the outbreak of SARS," the deadly respiratory illness that has spread from China in recent months. The airline's passenger capacity has already been reduced 6 percent, the statement said. Swiss is hoping for stronger demand in the typically strong summer travel period. Swiss is the successor to Swissair, which collapsed in 2001 under a mountain of debt. Swissair's profitable subsidiary, Crossair, formed the basis of the new airline launched in March last year. Swiss was created after an infusion of more than 4 billion Swiss francs = in taxpayers' and private money to keep Swissair flying during its final months and then to form the new company. Andre Dose, the airline's chief, last month demanded lower taxes, insurance premiums and airport charges and more support from the government and banks if Switzerland wants to maintain a national airline. But the government has said further support for the airline is excluded. Swiss recently has been canceling flights due to lower passenger demand caused by SARS and the war in Iraq. The company also has cut 20 planes from its fleet of 132 and halved its order for new aircraft to replace its aging regional fleet. It shed 1,000 staff last year. Swiss, which had about 861 million francs ($641 million) in cash at the end of March, said it will still have around 500 million francs ($372 million) by the end of the year even without new capital transactions or loans. The fleet already was trimmed from the planes inherited from Swissair and Crossair. The company lost 980 million francs ($706 million) in 2002. =20 ---------------------------------------------------------------------- Copyright 2003 AP