March 23 (Bloomberg) -- Hanspeter Danuser lives in the alpine resort of St. Moritz and uses Swiss International Air Lines Ltd. to travel the globe in a band playing the alphorn, a 3 1/2 meter- long (11-foot) wind instrument made from a hollowed-out fir tree.

``Swiss is the only airline that allows you to take an alphorn on board,'' said Danuser, 57, who sometimes entertains passengers on flights home from the Far East. ``Other airlines require it to be flown as cargo. They are regularly destroyed.''

Danuser isn't the only one who may lose out as Cologne, Germany-based Deutsche Lufthansa AG, which doesn't allow bulky items in the cabin, acquires Swiss for as much as 310 million euros ($409 million) from shareholders including the government.

The acquisition will end 74 years of independence for air travel in Switzerland, the world's fourth-richest country, according to the World Bank. It's home to Nestle SA, the world's biggest foodmaker, UBS AG, Europe's No. 1 bank, and Swatch AG, the world's largest watch company. The land-locked country even won the America's Cup, the world's oldest yacht race, in 2003.

``It's certainly not good for Switzerland's image that we can't keep a national airline,'' Robert Jeker, 69, a former chief executive of Credit Suisse Group who's now chairman of Basel, Switzerland-based builder Batigroup Holding AG, said in an interview. ``It seems that there wasn't any other solution.''

Grounded

Set up by the government and the country's biggest companies in a 4.2 billion Swiss franc ($3.6 billion) bailout in 2002, Swiss never recovered from the 2001 grounding of Swissair Group and racked up combined losses of 1.81 billion francs since then.

Lufthansa, Europe's second-biggest airline behind Paris-based Air France SA, is buying the Basel, Switzerland-based company to gain destinations outside Europe as carriers such as Dublin-based Ryanair Plc and Easyjet Plc, based in Luton, England, win market share on short-haul flights.

Under Lufthansa's plan, the Swiss federal and Zurich regional governments, Zurich-based UBS, Nestle, based in Vevey, Switzerland, and Novartis AG in Basel will get as much as 265 million euros for their stakes in the carrier. UBS, Nestle, Novartis and the government agreed to fund the airline in 2002 to save more than 10,000 jobs, routes and the country's reputation for quality and reliability.

The Swiss airline was too big for its home market of 7.4 million people and never generated a profit. It began flying during the global airline industry's largest slump since World War II brought on by the Sept. 11 terrorist attacks, and the carrier was unable to cut costs enough to compete with budget airlines.

Protection Needed

Smaller European airlines ``may have to seek the protection of larger carriers or the alliances to help them get through,'' said Edmond Rose, a London-based analyst for GCW Consulting.

Belgium's Sabena SA collapsed in 2001, while Italy's Alitalia and Scandinavian Airlines are unprofitable. Air France last May acquired Amsterdam-based KLM to form Europe's biggest airline.

Swiss started with a fleet of 128 aircraft, including 26 serving intercontinental routes. It shrunk the fleet to 80 planes, and in January announced plans to ground ``at least'' another 13.

The airline's workforce of 10,000 in March 2002 fell to 6,600 last year, and Chief Executive Officer Christoph Franz, 44, said in January he plans to eliminate another 1,000 jobs.

``In the first two years after Swiss was created you could really see that the service had worsened a lot compared with Swissair,'' said Peter Schifferle, 61, chief executive of Sia Abrasives Holding AG, a Frauenfeld, Switzerland-based maker of sanding products. He said he ``always'' flew with the carrier.

Inflatable Planes

Gone were the inflatable baby planes with the Swiss flag the airline used to hand out to children, and in came charges for drinks and food in economy class on European flights.

Swissair, founded in 1931, suspended service during World War II and was designated the national airline of Switzerland in 1947. It adopted the Swiss flag for its livery in 1978. Its attempts to form alliances with Austrian Airlines, Finnair Oyj and SAS AB in the early 1990s failed, forcing it to seek other partners.

The Lufthansa takeover probably means an end for Danuser's flying performances on the alphorn, which has a mellow sound that was used by shepherds and cowherds to calm sheep and cattle.

``There's an area in the cargo hold for fragile items'' where the alphorn could get ``special treatment,'' said Stefan Schaffrath, a spokesman for Lufthansa.

To contact the reporter on this story: Malcolm Shearmur in Zurich at mshearmur@bloomberg.net

Last Updated: March 23, 2005 04:04 EST