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Swissair Grounds Flights - 2001-10-02

Thousands of travelers around the world were stranded when Swissair canceled all its international and domestic flights Tuesday. Swissair was forced to ground its entire fleet as suppliers refused to deliver fuel and creditors moved against the cash-strapped airline. The September 11 terrorist attacks in the United States have landed Swissair in a huge financial mess.

Swissair filed for protection from creditors Monday. That is one step short of bankruptcy. But that was not good enough to keep the creditors away. Many are taking direct action to try to recoup their losses.

A Swissair spokesman says two planes of the financially troubled company were blocked by authorities at London's Heathrow airport pending payment of fees. Swissair reportedly owes the airport nearly $450,000 in fees. The petroleum firm BP says it has stopped providing fuel to Swissair.

Swissair says it canceled its flights to Belgium for fear its planes would be seized. As part of a cost-cutting measure, the Swiss carrier failed to make a $123 million payment to the Belgian airline Sabena. Swissair owns nearly 50 percent of Sabena. The Belgium government, which owns the majority stake in the airline, says it will take legal action to get Swissair to pay what it owes.

At Zurich airport, hundreds of stranded passengers were told they would not be compensated for their canceled flights. They were advised to buy new tickets on other airlines.

The airline says it expects to lose nearly $2 billion because of the terrorist attacks against New York and Washington. Tens of thousands of jobs in airlines around the world have been cut since the September 11 attacks and the resulting plunge in air travel.

News reports say Switzerland's financially sound regional carrier, Crossair, will take over Swissair. As part of a rescue plan, the company succeeded in getting two of Switzerland's largest banks to loan it nearly $870 million. But a bank spokeswoman says the loans are on hold because there are "some problems" with the conditions.

The Swissair Group, which is comprised of Swissair and Crossair, says it fears more than 10,000 jobs could be lost worldwide. Swissair already has laid off 3,000 people in North America.

This is only the latest in a series of setbacks to upset Switzerland's national carrier. Last year, Swissair ran up $1.79 billion in losses from a failed expansion plan. Trading in shares of Swissair and Crossair have been suspended in Zurich until further notice.