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Belgian airline shows Swiss route to profitability

SN Brussels is profitable, while Swiss is still stuck in the red (swissinfo montage)

(swissinfo.ch)

Switzerland’s national airline has been racking up multimillion-franc losses since it took to the skies in 2002 following the collapse of Swissair.

But aviation experts say Swiss could learn from the case of Belgian airline SN Brussels, which was also launched two years ago and has already turned a profit.

SN Brussels was set up following the demise of Belgium’s national carrier, Sabena, which went bust in 2001 with the loss of 12,000 jobs.

The collapse was partly blamed on Swissair’s parent company, which owned a 49.5 per cent stake in Sabena. The now-defunct Swissair Group was accused of failing to honour its commitments to the Belgian airline when it turned down a request for an emergency cash injection.

Like the spectacular fall from grace of Swissair, Sabena’s bankruptcy after 78 years in the air was widely regarded as a national embarrassment.

But while Swissair’s successor, Swiss, was set up with the help of billions of francs of government money, SN Brussels was established largely without the support of the Belgian authorities.

Paying the price

Geneva-based aviation expert Oliver Sutton said that Swiss was now paying the price for receiving too much start-up capital from the government.

“When Sabena went bust, it was just going to be closed down and forgotten. Its successor, SN Brussels, had to go through complete trauma,” Sutton told swissinfo.

“But in Switzerland things were done rather too nicely at the moment the crunch came.

“The Swiss government should have stepped back and done the same as Belgium did with Sabena, and probably today we would have a very different airline, most likely half the size of what it is now.”

Analysts warn that despite several rounds of cost-cutting in the two years since it was set up, Swiss is still too large for its home market and needs to axe loss-making routes if it is to survive.

The airline is currently burning cash at a rate of SFr1 million ($0.78 million) a day and analysts expect a substantial loss when Swiss reports its half-year figures on August 17.

Turning a profit

As Switzerland’s national carrier struggles to downsize and stem its losses, SN Brussels is currently expanding its operations and in 2003 posted a small profit of €600,000 (SFr924,000).

Swiss currently operates 42 services in Europe and a further 28 to the United States, South America, Asia, Africa and the Middle East, while SN Brussels has chosen to concentrate on 53 destinations within Europe as well as 15 African destinations.

The Belgian airline’s chief executive, Peter Davies, said SN Brussels recognised that it was operating from a small home market and had vowed not to repeat the mistakes made by its predecessor.

“We want to grow. But it is important to do this step-by-step and not to run before you can walk,” he said.

Davies has consistently rejected calls to restart loss-making routes formerly operated by Sabena.

Expansion

Oliver Sutton points out that while the periodic restructuring at Swiss has succeeded only in generating negative headlines, SN Brussels is expanding in parts of the world where it is making money.

“The old Sabena had some profitable routes to Africa… which SN Brussels has taken over. All in all the management has done a good job and got a handle on costs,” he said.

Swiss carried 10.6 million passengers in 2003, more than three times the number of people who boarded an SN Brussels flight in the same year.

But Sutton says those in charge at Swiss have yet to recognise that passenger numbers count for nothing if the airline is making a loss and that it must slim down to survive.

“The case of SN Brussels proves that it is much easier to build up an airline than it is to downsize one… and certainly with Swiss it is taking a long time to get to the right size.”

swissinfo, Ramsey Zarifeh

Key facts

Swiss:

Fleet: 81
Passengers (2003): 10.6 million
Employees: 7,865
2003 results: SFr498 million loss
CEO: Christoph Franz

SN Brussels:

Fleet: 38
Passengers (2003): 3.2 million
Employees: 1,950
2003 results: €600,000 (SFr924,000) profit
CEO: Peter Davies

end of infobox


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