Swiss cuts up to 1,000 jobs

Swiss is under pressure from low-cost carriers like easyJet Keystone

The national airline, Swiss, has announced it is to reduce its fleet and axe up to 1,000 jobs in a bid to cut costs by SFr300 million ($253 million) by 2007.

The announcement that the airline would have to further restructure in order to compete with low-cost carriers came after two days of media speculation.

Swiss said it would cut between 800 and 1,000 jobs over the next 18 months and reduce its fleet by 13 aircraft.

It said it hoped that one third of the jobs due to be axed could be lost through natural attrition. Swiss would be discussing the compulsory job cuts with the unions, it added.

The airline blamed pressure from low-cost carriers, such as easyJet, for the decision to downsize, and said it would focus in future on profitable routes.

“The progress we have achieved to date in improving our cost structures and tapping revenue potential is impressive, but is by no means enough given the present market trends,” said President and CEO Christoph Franz.

“The additional actions we have now resolved are essential to make Swiss sustainably competitive and create prospects for growth.”

The airline warned that it needed to implement the measures quickly to be in a position to post an operating profit for 2005.

Some analysts doubt however that the strategy would be enough to improve Swiss’ earnings on a sustained basis.

“Some spirit and vision are missing,” said Patrik Schwendimann of the Zurich Cantonal Bank. “It seems their only strategy is based on cost cuts, and that is not a strategy in the long term.”

Code-sharing

Swiss said that partner airlines would take over many of the routes Swiss currently operates out of Basel.

The airline also announced plans to shut down its French subsidiary, Europe Continental Airways, a small airline which employs 42 people at Basel airport. The airline operates flights from Basel to Berlin, Madrid and Hamburg on behalf of Swiss.

Some non-profit-making flights operated out of Geneva would become code-sharing services. The decision on which routes to transfer would be taken after careful analysis, it said.

The airline said it remained its goal to be a network carrier with a hub in Zurich connecting Switzerland with Europe and the world.

The announcement had been expected after Swiss confirmed on Monday that it was considering restructuring its regional fleet.

Ahead of a meeting of the company’s board of directors, the airline asked the Swiss stock market to suspend trading in its shares until midday on Tuesday.

“Painful”

Swiss Finance Minister Hans-Rudolf Merz described the restructuring as “painful but correct”.

Merz told Radio 24 that without it, the survival of the airline would be in doubt.

He said the decision allowed Swiss to continue its strategic course with a greater hope of survival.

Merz said the government – as the biggest shareholder in Swiss – still had faith in the airline’s management, and would continue to support the carrier.

The Swiss stock exchange also welcomed the airline’s announcement. After trading in Swiss stock was resumed at midday on Tuesday, shares gained 14 per cent in value.

swissinfo with agencies

Key facts

Swiss reported an operating loss of SFr498 million for 2003.
It expects to report an operating loss for 2004.
The company has forecast its first-ever annual profit in 2005.
Swiss carried 9.2 million passengers in 2004.
The airline currently employs 6,900 people, and has a fleet of 80 aircraft serving 75 destinations.

In brief

13 regional aircraft will be sold off and up to 1,000 jobs slashed as part of the national carrier’s latest cost-cutting measures.

The airline has not yet decided which type of aircraft to phase out: Embraer 145, Saab 2000 or Avro 85/100.

Swiss wants to save approximately SFr300 million by 2007.