After more than a week of frantic talks between the government and leading Swiss companies, a total package of $2.58 billion was put together at the last minute to salvage a national airline and its Zurich airport hub -- along with tens of thousands of jobs.
"We are happy and relieved that this effort has succeeded," Swiss President Moritz Leuenberger said in disclosing the rescue package, a combination of government and industry financing.
"But jobs will be lost," said Leuenberger. "We don't have cause for a great euphoria."
Labor unions and officials had earlier forecast that 9,000 to 27,000 jobs in the Swissair group would be sacrificed.
Under the rescue deal smaller regional carrier Crossair will acquire two-thirds of the fleet and destinations of 70-year-old Swissair, once the pride of Switzerland.
It will fly Swissair's European destinations starting next Monday and long-haul flights starting April 2002. A special steering commission headed by Nestle Chairman Rainer Gut, one of the country's most respected business leaders, will manage the integration of the two operations. It was not clear if it would keep the Swissair name.
The deal pulls Switzerland's airline industry back from the brink but a drastic restructuring program is still needed for the new company if it is to have a viable future in a global airline industry, where few firms show persistent profits.
The government had pledged to play only a minority role in the total rescue package, but now ends up paying nearly half of the total bill, much of it in aid that will never be paid back.
It was not clear Monday whether the European Commission would give its backing to the deal under its competition rules, which seek to ban states propping up their airlines.
While Switzerland is not a part of the European Union, it was due to adopt union rules in this area.
The company, which collapsed earlier this month, said the air travel chaos caused by the attacks on the United States delivered the final blow to the airline after months of massive losses.
"The situation of Swissair was worse than we thought for a long time, and it deteriorated dramatically after the events of Sept. 11," said Finance Minister Kaspar Villiger.
The Swissair debacle is expected to result in a Swiss budget deficit this year.
© MMI, CBS Worldwide Inc. All Rights Reserved. This material may not be published, broadcast, rewritten, or redistributed. The Associated Press and Reuters Limited contributed to this report