Lufthansa Ready for Swiss Rescue

German airline Lufthansa has made a rescue takeover bid for Swiss International Air Lines, the national carrier that rose out of the collapse of Swissair last year, according to reports over the weekend.

The Swiss airline's chief executive, André Dosé, had conceded that Swiss might have to consider relinquishing its independence if it was to avoid a fate similar to that of Swissair.

The company has reportedly received a firm bid from Lufthansa that is expected to guarantee the Swiss carrier's survival - albeit in a slimmed-down form - according to reports in Swiss weekly SonntagsZeitung.

Neither Swiss nor Lufthansa would comment on the report yesterday, but a tie-up between the two European carriers is likely to be seen as a blow to British Airways and other airlines which are said to have been watching developments at Swiss closely.

The airline was formed out of the remnants of Swissair early last year with the help of SFr2.7bn (£1.2bn), including a slice of state aid. It has failed to meet predicted growth targets as the market for air travel remained depressed.

Last week, Swiss was forced to announce a cut in its route network by more than a quarter, reducing the number of destinations from 96 to 71. Among destinations dropped was the Swiss federal capital, Berne.

The airline last month announced plans to cut its fleet by a third to 74 aircraft and and reduce its headcount by 3,000 to 10,000. It said the measures would generate savings of about SFr1.6bn.

Both the Swiss government and the airline's major creditor banks are reported to be in favour of the Lufthansa rescue deal.

Lufthansa and other potential bidders such as British Airways had suggested that Swiss was likely to be an unattractive partner unless it was able to drastically slim its operations and resolve potential disputes with its pilots.

The airline is seeking SFr500m to help it survive the international downturn in business and tourist airline travel.

However, its banks, which include UBS and Credit Suisse, are said to have been resisting all pressure to provide further funding. The Swiss government has also made clear it will not offer any further subsidies.