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"Swiss" reports lower-than-expected loss

Swiss losses in the first half were one third lower than expected swissinfo.ch

The national carrier, Swiss, which was formed earlier this year following the collapse of Swissair, has reported a first-half loss of SFr447 million ($299.4 million).

This content was published on September 16, 2002 - 12:24

The loss was one third less than the company had forecast in its business plan.

Swiss said on Monday it had made sales of SFr1.754 billion in the first six months of operations, far in excess of the SFr1.209 billion sales forecast.

The business plan - drawn up last year - had predicted a loss of SFr1.1 billion for the year as a whole, or SFr550 million for the first half.

"Impressive results"

While the result was worse than the SFr340 million loss predicted by some analysts, Hilary Cook, an analyst at Barclays Private Clients, said the company had done surprisingly well.

"These are a very impressive set of results. All year we have seen this company delivering more than expected one year ago," she told swissinfo.

Cook pointed out that the airline industry as a whole fared better than expected in 2002, possibly contributing to the positive results.

"I think Swiss have been very conservative in their predictions from the very beginning. It is a very volatile industry, which depends on some external factors such as the Iraq issue or September 11," Cook added.

The company's CEO, André Dosé, said that even though he was never happy with a loss he is still very pleased with the results.

"We mustn't forget that Swiss is a start-up project and initial losses were planned. The good news is that we are ahead of the plan by SFr200 million," he told swissinfo.

"I have always said I was only going to be happy once we manage to turn around without a loss - even though [the result] is better than planned," he added.

On course for profits

Speaking in early July, Dosé said the company would reach its targets by the end of the year. He predicted Swiss would break even by 2003 and turn a profit by 2004.

"Breaking even in 2003 is certainly one of our biggest ambitions at the moment but it's also a very difficult task. The Iraq situation is going to have a big influence on the whole world world economy," Dosè said.

"And a little bit closer we observe a recession in Germany and as the Swiss economy is not exactly doing great either things could get worse and that's not foreseen in the business plan."

In Cook's view, however, Swiss has acquired a solid base that could withstand some difficulties. "Swiss is financially strong enough at the moment and I think it would be able to weather more storms," she added.

Low-cost airlines

The rising number of low-cost airlines has increased competition for national carriers worldwide. Cook thinks, however, that having emerged from Crossair, Swiss is in a much better position to cope with its low-cost competitors than many other airlines.

"In the UK, for example, discount airlines have put a lot of pressure on British Airways. However, Swiss's ability to be both a discount airline and a national carrier is a real achievement," Cook told swissinfo.

However, Dosè thinks that Swiss is not as exposed to the competition of no-frills-airlines as national carriers in other countries.

"We're not quite as exposed to budget airlines as in the UK or Germany, for example. We lack a big home market and we lack big volume destinations between Switzerland and certain cities in Europe," Dosè told swissinfo.

"There are a few and it is a competition one has to take seriously but it is certainly not anywhere near the massive attack of the budget airlines that we observe right now in Germany," he added.

The new company has achieved greater flight occupancy than expected, with most intercontinental flights fully booked.

Oneworld alliance

Swiss is also currently in the process of negotiating entry to the Oneworld airline alliance, which is seen as key to its long-term success.

"Given the number of airlines across the world it is very important to be part of a successful alliance and to share a pool of costs and resources," said Cook.

"It is very important for Oneworld to work, and it is very important for Swiss to be a part of that alliance."

However, Swiss still faces a number of unresolved issues, notably a dispute with former Crossair pilots over a collective pay deal.

Swiss said it also needed to improve its organisation and management structure.

Better-than-expected

Swiss's first-half loss, while described as "better-than-expected", pales in comparison to recent figures reported by some of its chief rivals.

The German national airline, Lufthansa, announced in August that it had more than trebled its profit in the first half of 2002 compared with the previous year.

The company posted an operating profit of €332 million (SFr488 million).

And the British national carrier, British Airways, also posted better than expected results for the first quarter of this year, achieving an operating profit of £158 million (SFr369 million) - up from £50 million (SFr116 million) in 2001.

Swiss was formed as a successor to Swissair, with SFr2.3 billion in capital from the government, cantons and a host of Swiss companies, including Nestlé, UBS and Credit Suisse.

swissinfo, Billi Bierling

Swiss summary

Swiss has reported a first-half loss of SFr447 million - one third less than forecast.
It made sales of SFr1.754 billion in the same period.
The business plan had forecast a loss of SFr1.1 billion for 2002.
Swiss reported a first-quarter loss of SFr190 million.
CEO André Dosé has predicted that the company will turn a profit in 2004.

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