The board of Swiss International Air Lines on February 24 accepted management’s proposal to reduce its current fleet from 131 to 111 aircraft, furlough up to 700 employees and reduce routes. The airline grounded one Airbus A321, two MD-83s and 17 regional aircraft on March 30, which also marked the beginning of the summer timetable. The regional aircraft affected involve a mix of 50-seat Saab 2000s and 49-seat Embraer ERJ-145s, to be determined by cost of terminating leasing contracts. Swiss cites a slowing of traffic as the reason for the measure.
While the older MD-83s were scheduled to be phased out soon anyway, the mothballing of ERJ-145s comes as a surprise, as Swiss intended to maintain a strong regional network in keeping with the tradition of its predecessor, Crossair. The downturn in traffic will also affect the airline’s fleet-renewal program, although the replacement of 13 MD-11s by the same number of A340-300s during this year and next remains unchanged. On the other hand, delivery of 30 new 70-seat Embraer 170s and 30 Embraer 195s (108 seats)–scheduled to replace all of the company’s four Avro RJ85s, 15 RJ100s and 28 Saab 2000s between late this year and 2006–will be deferred. Swiss management is currently negotiating with Embraer to extend deliveries beyond 2006.
The business plan announced at the inception of Swiss in 2001 implied that the company would reach financial breakeven during the current year, after two years of losses. The worldwide airline crisis and uncertainty due to a possible war in Iraq have largely prevented Swiss from achieving that goal. In addition to the fleet cut, the airline will lay off up to 700 people, including 200 pilots, 200 flight attendants and 300 ground personnel and managers.
The bulk of flight reductions will hit the Zurich hub. Connections to Salzburg, Sarajevo, Tirana, Toulouse, Jersey, Guernsey, Dresden, Bremen, Turin, Bilbao and Goeteborg will be eliminated, while service to London City, Graz, Hanover, Cologne, Nuremberg, Prague, Bucharest, Nice, Munich, Barcelona and Madrid will be reduced.
Traffic originating at Basel and Geneva will also be reduced, although to a lesser degree at the latter airport. On the other hand, the summer timetable will bring some improvements, including a morning flight between Lugano and Zurich.
Swiss CEO André Dosé emphasized that the setback is attributable to a weak economy and a slump in demand, not to management errors. He noted that long-haul flights currently produce acceptable revenue, although there is a trend of passengers booking lower-priced coach seats rather than business class.
Observers agreed that the economy is to blame for Swiss’ poor financial results, but they also noted that regional airlines with low cost structures from neighboring countries are aggressively pushing into the liberalized Swiss market, most of them with aircraft having fewer than 50 seats. With the larger regional jets on order, Swiss is seen as moving progressively out of the thin regional routes that were once the mainstay of Crossair.
