A major restructuring programme implemented by Swiss International Air Lines (Swiss) has paid off, with the group improving results for 2004, according to Oliver Evans, chief sales and marketing officer with Swiss.
And with the supervisory board of Deutsche Lufthansa and the board of directors of Swiss having recently approved the business model jointly developed by both companies for the takeover and integration of Swiss into the Lufthansa Group, things are only going to get better (see story on page 21).
“In 2002, we made losses close to one billion Swiss francs. In 2003, we managed to half the losses. According to our provisional results for 2004, the loss was 122 million Swiss francs, a huge decrease in the losses compared to the previous years,” said Evans.
In the course of 2004, Swiss achieved its first quarterly profits in the third quarter of the year. “We have seen a clear improvement quarter by quarter and year by year in our business results, in the face of difficult circumstances,” he added. “In the course of 2003, we implemented a major restructuring programme aimed at meeting difficult conditions in the market place – particularly challenges of competition in Europe the intra-European business.
“We implemented that plan in 2003 and early 2004. A major component of the plan was a restructuring of the network, which has seen the fleet trimmed and non-profitable routes being discontinued. The coming months will see the airline further downsize its European regional fleet, in its aim to return to profitability and offer a competitive basis for growth.
“Other recent developments include establishment of a long haul network to serve medium range destinations with 18 aircraft – nine Airbuses A330 and nine A340, and that intercontinental network has been proving its value we have been enjoying some very high load factors and substantial improvement in load factor year on year, outperforming the average of our major competitors.
He added: “We implemented a number of other measures including re-negotiation of contracts with various suppliers downsizing the overheads of the company also and these led to turnaround in our results. In the course of 2004, we have been able to stop leading of cash, which was taking place in 2002 and 2003.”
Not surprising then that during the first nine months of 2004, Swiss was able to increase its cash reserves. “One of the major challenges that came in the course of 2004 was the increase in fuel prices,” Evans added. “We are still faced with tremendous challenge. No one knows which way the prices will develop. We are, therefore, basing ourselves upon a business plan with some prudent assumptions on fuel price. We are also putting into place some hedging to protect against any variance in the price of fuel and we will be implementing some further restructure in order to ensure that we reach profitability.”
So what has the outcome been so far? “We have seen some encouraging improvements in load factors and traffic volumes both in terms of intercontinental business and recent months in terms of European business and the key to our restructuring in 2005 will be decisions we announced some weeks ago whereby we will be looking to restructure the European network,” he explained. “We will maintain the market, we will also maintain the destinations we serve today by and large. And we will be looking to partners to operate a number of destinations on our behalf.”
Among others, the airline also plans to introduce a new user scheme at Zurich Airport, which will see Swiss flights from the Middle East land and depart exclusively at Dock E. This will lead to shorter check-in and transfer times and make it far more convenient to use the new Swiss lounges and shopping facilities introduced late last year.
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