A package of emergency measures proposed by the executive management was approved by the SWISS Board of Directors on 24 February 2003….
A package of emergency measures proposed by the executive management was approved by the SWISS Board of Directors on 24 February 2003. In Zurich, Geneva, Basel, Bern and Lugano, destinations will be reduced and routes discontinued. The fleet is to be cut by 20 aircraft: 17 regional jets, two Boeing MD-83s and one Airbus A321. These measures will also mean the loss of around 700 jobs. Swiss International Air Lines believes it is essential to react to the worsening economic situation by adjusting its route network and reducing its fleet. The changes will come into effect with the summer timetable from 30 March 2003.
The enduringly gloomy economic climate and deep crisis in the global aviation industry are having a serious negative impact on business development at SWISS and have forced the executive management to take swift action. Despite a higher market share, revenues and passenger numbers are in sharp decline on the European network.
The decisions taken last November were based on the figures for August/September 2002. Six months on, the situation has changed dramatically. A good load factor was enough to compensate for the fluctuations in yield (revenues per seat). Following the seasonal downturn in the number of passengers in November, however, this curve fell sharply against budget in December (-5%) and January (-10%) and continues to fall. Regional and short-haul routes are negative whilst long-haul routes are still performing to budget.
The generalised slump in the economy is reflected in the airline sector by a change in consumer behaviour. Former business passengers keen to make savings now tend to book Economy class. The forecasts for 2003 remain poor and there is no improvement in sight.
Fleet
The massive collapse in demand in European air travel makes adjustments to the European fleet capacity essential. SWISS is to take 20 aircraft out of operation. The aircraft involved are one Airbus A321, two Boeing MD-83s and 17 regional jets. This means the SWISS European fleet, including the Airbus A320s, will total maximum 84 aircraft.
Zurich
In Zurich, capacity adjustments will affect a total of 24 destinations. There will be one extra flight to Warsaw and Stuttgart. Frequencies on routes to London City, Graz, Hanover, Cologne, Nuremberg, Prague, Bucharest, Nice, Munich, Madrid and Barcelona will be reduced. Connections to Salzburg, Sarajevo, Tirana, Toulouse, Jersey, Guernsey, Dresden, Bremen, Turin, Bilbao and Goteborg will be discontinued. These capacity adjustments will reduce the number of seat kilometres on offer on European flights from Zurich by 12%.
Basel
In Basel, capacity adjustments will be made to a total of 18 destinations. There will be a reduction in frequencies on the routes to Hamburg, Berlin Tempelhof, Vienna, Brussels, Amsterdam, Bern and Geneva. Connections to Stockholm, Helsinki, Copenhagen, Stuttgart, Bordeaux, Marseilles, Palma de Mallorca, Florence, Toulouse, Bilbao and Seville are to be discontinued.
This will reduce the number of seat kilometres offered on European flights from Basel by 31%. There will be no transfer of destinations from Basel to Zurich. These measures are motivated purely by economic considerations rather than by any regional or political factors. The January load factor on flights from the EuroAirport in Basel was just 35%.
Geneva
In Geneva, capacity adjustments will affect six destinations. Connections to Rome will be increased, but there will be a reduction in frequencies on the Basel and Lugano routes. Connections to Alicante, Seville and Berlin are to be discontinued.
The number of seat kilometres on offer will therefore be reduced by 11%.
Bern and Lugano
Lugano will get its long-awaited early morning flight to Zurich, but the midday flight to Geneva will be cancelled. In the future there will only be one day-round-trip connection between Bern and the EuroAirport in Basel. SWISS has, however, given an undertaking to the government in Bern to make an active contribution to finding ways of connecting Bern to the Zurich hub more efficiently. The flight to Paris, whose withdrawal has already been announced, is not part of the SWISS strategy. There are too few local passengers on this route and SWISS prefers to have the long-haul passengers on its own network.
Job cuts
Up to 700 jobs will be affected: around 200 amongst cockpit crews, 200 amongst cabin crews and 300 amongst managers and ground staff. SWISS will work in consultation with the unions to find the best possible solutions. It is likely that the necessary reduction in cabin staff can be achieved via natural fluctuation alone.
Outlook
The prolonged slump in the economy and the serious difficulties in the international aviation industry mean that SWISS will not achieve its goal of breaking even in 2003. Given the uncertainty of future developments, no forecast of this year`s results can be given for the time being.
Theodore is the Co-Founder and Managing Editor of TravelDailyNews Media Network; his responsibilities include business development and planning for TravelDailyNews long-term opportunities.
