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Long-haul competition New Swiss budget airline launches fundraising

easyJet and Swiss International Air lines aircraft

The new, yet unnamed airline, could launch in mid-2019 if the fundraising is successful.

(Keystone)

A Ryanair pilot and three other industry veterans hope to raise at least $100 million (CHF96.9 million) in Switzerland this week to launch a low-cost, long-haul airline that defies the economic forces which have grounded some small European carriers in recent months.

The new airline — as yet unnamed — will focus initially on serving North America, and expects to undercut larger, established carriers with a cut-price service from Basel airport, on Switzerland’s border with France and Germany.

The founders believe their business model will avoid the problems which hit other carriers. Their move comes just weeks after the collapse of SkyWork airline, which served European destinations from Bern airport, Switzerland.

The past 18 months have also seen Air Berlin file for insolvency, the collapse of UK budget airline Monarch and of Belgium’s VLM.

The Basel project — which has yet to decide on its branding but is using the working title “Swiss Skies” — could launch in mid-2019 if its fundraising is successful.

The airline expects to have a cost base 30% lower than established network carriers and to be profitable in its third year — with margins comfortably in excess of industry averages.

“There is undoubtedly potential in this area,” said Alex Paterson, an analyst at Investec. “The [low-cost, long haul] models are less well tested but would suggest that if you can use new aircraft well and have an efficient cost base, it is possible to start with a niche and then grow.”

Caribbean, Asia, Middle East

As well as the US, the airline plans to add destinations in the Caribbean, Asia, Middle East and Brazil from a handful of European departure points. 

It does not, however, plan a UK operation because of the competitiveness of the country’s airline industry — and the uncertainty created by Brexit.

“We want to see what is going to happen with the [EU] agreements on aviation after Brexit,” said Alvaro Oliveira, an entrepreneur and one of the founders who works as a part-time Ryanair captain on a self-employed basis.

“We have a full network prepared but because of the competition we don’t want it in the press right now,” said Armin Bovensiepen, another of the founders, who worked previously at Air Berlin and Austrian Airlines.

Rather than the traditional “hub and spoke” operations of the large national airlines, the new company will fly from point to point, using less popular airports near large urban catchment areas. It believes that will give it advantages over rivals such as Norwegian Air. The Basel region is home to many of Switzerland’s largest companies, including drugmakers Novartis and Roche.

Mr Oliveira hinted one possible US destination could be Cincinnati — which also has a significant health sector industry. Currently, “if somebody wants to fly from Cincinnati to Basel, it’s a nightmare,” said Mr Oliveira.

Prices will be kept low by “unbundling” — breaking down prices and requiring passengers to pay extra for pre-ordered food and onboard entertainment as well as seat allocations and baggage.

Swiss Skies will cut costs further by using just one type of aircraft, the new long-range Airbus A321neo with about 190 seats passengers and a range of 7,500km. The business plan envisages 16 aircraft by the second year of operation, and 38 by the fourth.

Copyright The Financial Times Limited 2018

Financial Times

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