Swissair becomes biggest casualty of industry slump

War on terrorism: Aviation

Swissair, Europe's fourth biggest carrier, yesterday became the biggest airline to collapse following the terrorist attacks on the US.

The company was forced to seek protection from creditors of parts of its business, becoming the latest in a line of smaller airlines to have been grounded by the impact on demand and insurance premiums after the atrocity. It was already struggling with huge debts because of a disastrous attempt to expand overseas.

Gloom surrounding the industry deepened in Britain yesterday as a firm supplying baggage handlers and check-in staff for airlines announced that it was to cut 700 jobs.

Union leaders called to Gatwick Airport for a meeting with Aviance about the losses were told that the jobs of ground staff at airports across the country will be affected.

Unions were yesterday critical about steps taken by some quarters of the industry to try to protect themselves from the worst effects of the latest crisis. "The airline industry is talking itself into recession," said a spokesman for the GMB union. "There are some businessmen who, quite frankly, have over-reacted to the crisis and have helped to spread, through their actions, a mood of panic when what we need is calm reflection.

"There is pressure on the industry – there has been for some time – and we won't know the implications for several months. What we don't want is knee-jerk actions which simply add to the crisis."

British Airways and Virgin have already slashed routes across the Atlantic and cut 8,200 jobs between them in the aftermath of the attacks, a pattern of job losses which has been repeated across the world.

US airlines also announced thousands of job losses and President Bush responded by bolstering the industry with $15bn (£10bn) in state aid.

Australia's second biggest airline, Ansett, collapsed following the attacks but Swissair is the first major European carrier to be forced into such emergency finance measures.

The chairman of Swissair, Mario Corti, had earlier warned that he could not guarantee the 70-year-old company had enough to money to pay the October wages of its 72,000 staff.

Beatrice Enggist, a representative for Geneva ground staff, said: "Up to now, it has been impossible to imagine Swissair disappearing. It is a brand that stands out."

Swissair has sold off some of its assets and even tried to offload its catering and ground handling operations but that strategy has also run into difficulties. The company secured a refinancing deal with the two big Swiss banks on Sunday, to give it some breathing space. But any deal would keep only part of the airline going and involve thousands of redundancies.

Swissair said that it needed government help.