Swiss warns it may not break even in 2004
Switzerland’s national airline has admitted it may not meet its target of breaking even by the end of the year.
In a statement released on Monday, Swiss said the unstable price of oil meant it had to adjust its earnings before interest and tax (EBIT) objective for 2004.
News of the warning sent the Swiss share price falling by more than 6 per cent to SFr10.55 during early trading on Tuesday.
“Current projections suggest that the company’s business performance for the year could fall short of a breakeven operating result,” said the airline.
“The latest developments in the price of crude oil and the associated steep increase in aviation fuel costs are having an adverse impact on Swiss’s business results.”
Swiss added that if the price of kerosene remains at its current level of $360 (SFr540) per ton, the company would incur “unplanned additional costs” of approximately SFr85 million.
The airline also warned that the high costs of aircraft maintenance would have an impact on its 2004 balance sheet.
Analysts were unimpressed by the airline’s statement that it could miss its target.
“This is obviously not good news and just another incident of where Swiss says they will do something and then don’t deliver,” commented one trader.
No fuel hedges
Monday’s profit warning follows a recent announcement by Swiss that it had sold a series of fuel hedges which would have offered the carrier some relief from rising oil prices.
Last month the airline said it was increasing all fares from Switzerland by three per cent to help offset the cost of surging oil prices.
The company did not say how long it would keep the fare surcharge in place.
Swiss has not made a single franc in profit since it took to the skies in April 2002 and airline executives have insisted until now that the company was on course to break even by the end of the year.
Kudelski resigns
In a separate development, the airline also announced on Monday that it had accepted the resignation of board member André Kudelski.
The 44-year-old was appointed to the airline’s board in December 2001.
His resignation comes just weeks after the airline announced it was abandoning negotiations to join the British Airways-dominated Oneworld alliance.
At the time Swiss said it could not proceed with its application to join Oneworld because of disagreement over how to integrate its frequent flyer programme with that of British Airways.
Swiss said it was parting company with Kudelski following differences of opinion about the “consequences of the entry into Oneworld under the conditions imposed by British Airways”.
Not the first
Kudelski’s departure is the latest in a series of resignations at the troubled airline.
Last November Chief Commercial Officer William Meaney quit his post following “differing views on the company’s future management structure”.
In March of this year the company’s Chief Executive Officer, André Dosé, was forced to step down when he became the subject of an investigation by the Swiss Federal Prosecutor into a plane crash two years ago.
He was replaced at the helm by former Lufthansa executive Christoph Franz, who officially takes up his post on July 1.
Franz’s appointment has led to speculation that Swiss may be positioning itself to tie up with Lufthansa and join the German airline’s Star Alliance.
swissinfo
Swiss took to the skies in April 2002 following the collapse of Swissair in 2001.
The airline had hoped to break even in 2004.
But the rising price of oil forced the company to issue a profit warning on Monday.
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