Swiss flies into profit at last

With its finances looking better, Swiss can consider expanding its operations Keystone

Former national carrier, Swiss International Air Lines, has recorded its first-ever net annual profit since rising out of the ashes of Swissair and Crossair in 2002.

This content was published on March 8, 2007 - 12:02

The airline, which is being taken over by Germany's Lufthansa, said that the current economic climate had given its earnings a lift and that it was now in a position to consider expanding operations.

Swiss reported a consolidated net profit of SFr263 million ($215.4 million) for 2006, compared with a SFr178-million loss the previous year. Earnings before interest and tax reached SFr231 million, a figure that was negative in 2005.

The company's operations generated SFr4.153 billion in income last year, an improvement of more than 11 per cent over the previous financial period. Swiss said high load factors and slightly higher yields boosted its income.

Last year also saw the end of the airline's restructuring programme launched in 2005. The carrier added that it had signed new contract agreements with most personnel and key suppliers.

"We made further progress in improving our cost base," said Swiss CEO Christoph Franz in a statement on Thursday. "But this is still not sufficiently competitive yet."

"The cost and revenue synergies deriving from our integration into the Lufthansa Group account for about half of our operating result. And the current positive economic environment is giving us additional lift," he added, hinting that further savings must be made to cope with less favourable conditions.

Flight cancellations

There was some turbulence for the company last year when a pilot shortage in October due to crew taking sick leave and training forced flight cancellations.

At the time the illnesses were considered action over an ongoing pay dispute but the airline and unions denied this. In September, a strike by the Swiss Pilots Union had forced the airline to cancel 142 flights.

The cost and revenue synergies stemming from the company's integration into the Lufthansa group accounted for about half of Swiss' operating result, added Franz.

The high cost of jet fuel weighed on the company bottom line, even if prices declined during the fourth quarter. According to Swiss, surcharges on tickets did not entirely cover additional costs.

Passenger figures climbed in 2006. The company transported 10.5 million people, up ten per cent, and its aircraft were nearly 80 per cent full on average.

Swiss is optimistic the results will continue to improve this year, and the future is looking bright.

"We are now in a position to take advantage of opportunities for growth and invest in our product," said Franz.

Germany's double standards

Franz also took a swipe at German transport minister Wolfgang Tiefensee concerning the night and weekend flight ban over southern Germany that was imposed in 2003.

The restrictions on aircraft flying into Zurich airport over this area have caused a major headache for Swiss.

Tiefensee will meet up with other European Union transport ministers later this month to decide on proposals to liberalise air traffic between Europe and the US. Germany is one of the main promoters of the "open skies" initiative.

"It is difficult to believe that the transport minister across the Rhine talks about increasing competition when he also puts restrictions on a neighbouring airport that he does not put on his own airports," Franz said.

Franz also called on relaxation of a general ban on take-offs and landings at Zurich airport before 6am. He said aircraft arriving from India ahead of schedule are currently obliged to circle overhead burning unnecessary fuel into the environment.

"We do not want to change our schedules but we are asking for flexibility. We would like a half an hour buffer in the mornings to allow these planes to land," he said.

swissinfo with agencies

In brief

Lufthansa said on Thursday its 2006 profit rose 77 per cent.

The Cologne-based airline announced that net profit increased to €803 million (SFr1.29 billion), up from €453 million the year before.

Sales gained 10 per cent to €19.85 billion.

Operating profit came in 46 per cent higher than the previous year, at €845 million.

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Key facts

Swiss 2006 income: SFr4.153 billion.
Ebit: SFr231 million.
Consolidated profit: SFr263 million.
Cash and cash equivalents on December 31, 2006: SFr922 million (+65.2%).
Seat load factor Europe: 71.3%.
Seat load factor intercontinental: 83.8%
Personnel: 5,532 (-13.3%).

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