By Tom Armitage

IBACH, Switzerland (Reuters) - The Swiss Army Knife -- the do-it-all penknife that for years has been a must-have accessory for practical travelers and a necessity for recruits to Switzerland's militia army -- is facing a double challenge.

Sales fell after September 11, 2001 when airlines banned knives on board, and the army will decide next year whether to put to international tender its contract to make them, opening the door to non-Swiss manufacture of the iconic product.

The Swiss companies Victorinox and Wenger are currently the only ones with the right to call their products Swiss Army Knives.

They joined forces two years ago when Victorinox, founded in 1884, took over Wenger which was nine years its junior, and are forging ahead with innovations to try to grow the business and keep it Swiss.

Models equipped with laser pointers and flash memory drives for business people, and a Cybertool' for techies are among the range now on offer alongside traditional versions, including the 'Soldier's Knife' made for Switzerland's militia army.

The firm has also developed a new tool for paramedics that includes blades to tear open clothing and a hardened point to smash open windows. Its travel knife had an upgrade and now includes a clock, alarm and stopwatch.

Workers at the Victorinox factory in Ibach, near Schwyz, produce 28,000 Swiss Army Knives a day, many hand-assembled. In addition, the factory's almost 1,000 workers turn out 32,000 other tools and 60,000 kitchen and butchers' knives.

Traditionalists can still pick up models with bottle openers, scissors, corkscrews, orange peelers, fish-scalers, screwdrivers as well as a range of rust-free steel blades; but the firms also sell a range of branded products including luggage, clothing and perfumes, each bearing the Swiss white-cross-on-a-red-background flag.

Although the army contract's value -- around 1 million Swiss francs ($880,000) -- is a drop in the ocean for Victorinox which had sales of 465 million Swiss francs in 2006, it is symbolically important.

"Clearly all of our workers are keen to win this contract," said Hans Schorno, Victorinox spokesman. "It is important emotionally that we can keep production in Switzerland."

(Editing by Sara Ledwith)
© Copyright 2007 Reuters.

Photo:
World's largest Swiss Army knife.