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Despite loss, new airline encouraged by first quarter

Switzerland's new airline "swiss" has reported a first quarter loss of SFr190 million ($119.2 million), a result it described as "better than expected".

The carrier, which replaced the collapsed Swissair and was built around regional airline Crossair, said the results were an improvement of some SFr100 million on the projections of the business plan presented in December.

First quarter sales revenues were SFr517 million.

"swiss" CEO André Dosé said in a statement that he was confident that the company could keep to its business plan.

"In particular, we can assume that our net annual result will be better than the projected SFr1.1 billion loss."

Still too early

"But it is still too early to make a more precise prediction of our bottom-line result for the year as a whole," he commented.

"swiss", which started operations on March 31, said the second quarter loss would be higher than that of the first three months because of the expansion into intercontinental air services and associated start-up costs.

However, the airline said higher load factors and increased yields should, with operational improvements, ensure an improvement in earnings from the third quarter onwards.

The company said it carried 1.9 million passengers on scheduled services in the first three months, generating operating revenue of SFr446 million.

Together with SFr18 million in revenue from charter operations and SFr13 million from cargo activities, this produced a total revenue from flight operations of SFr477 million.

oneworld

At their annual meeting on Monday, shareholders voted in favour of replacing the name Crossair in the commercial register with the name Swiss International Air Lines Ltd.

Dosé told shareholders that the airline was in continuing talks to become a member of the oneworld airline alliance, which analysts have said is of key importance for profitability as this would help fill its planes.

In April, "swiss" announced a cooperation agreement with American Airlines, a founding member of oneworld.

However, oneworld member British Airways is known to be reluctant to allow "swiss" to enter the alliance.

Quality at low cost

Analysts and investors have yet to be convinced about the viability of a business plan that calls for quality at a low cost base in an industry that is suffering from overcapacity and in which low budget, no frills airlines such as easyJet are expanding.

They have also noted that not all the company's pilots have accepted a pay deal that aims at cutting operating costs.

Last week, chairman Pieter Bouw said in a newspaper interview that he did not rule out the possibility of strike action.

The Swissair Group, which is now in the hands of a court-appointed administrator, collapsed last October under the weight of its debts, resulting in a two-day grounding of its fleet over a lack of cash.

Fear of flying after the September 11 terrorist attacks in the United States added to the failure of the group's "hunter" strategy of acquiring stakes in foreign airlines.

"swiss" was created with SFr2.3 billion in fresh capital from the government, many cantons and a host of Swiss companies, including food group Nestlé, and the UBS and Credit Suisse financial services groups.

swissinfo with agencies


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