Swiss flies into SFr200 million first quarter loss

Searching for a solution: Swiss records another loss Keystone

The troubled national airline, Swiss, has posted a first-quarter net loss of SFr200 million ($155 million), increasing pressure on the carrier to cut costs.

Although revenues rose to SFr1.04 billion, costs swelled to SFr1.27 billion, cutting the firm’s liquidity by SFr343 million – a “cash-burn rate” of around Fr3.8 million per day.

The unaudited result was in line with market expectations, after the chief executive, Andre Dosé, recently indicated the loss would not exceed SFr250 million.

“The results reflect the extremely difficult economic environment currently affecting all airlines, a situation which has been exacerbated by the war in Iraq and the Sars virus,” Swiss said in a statement on Tuesday.

Formed from the remnants of Swissair, which collapsed in late 2001, Swiss has struggled to stem losses after taking to the skies on April 1, 2002.

Since November, the company has cut around 1,000 jobs and reduced its fleet by 27 aircraft.

It has also temporarily scaled back a number of long- and short-haul routes following the Iraq war and Sars.

More cuts?

Swiss has neither confirmed nor denied weekend news reports that it planned to slash another 3,000 jobs and cut the fleet.

The German-language newspaper, the SonntagsZeitung, said Swiss would reduce its fleet of jets from 18 to 26, its mid-range fleet of Airbus planes to 18 from 25 and its regional fleet of smaller planes to 30 or 40.

By cutting its fleet, Swiss hopes to boost its case for entry to an airline alliance, a move many analysts see as vital for carrier’s survival.

Despite making it a “top priority”, the airline has so far failed to join a major alliance.

British Airways chairman, Lord Marshall, recently said Swiss could only hope to join the OneWorld alliance – led by BA – if Swiss reduced its long-haul network.

Confidence

Aviation expert, Sepp Moser, told swissinfo that the airline’s current rate of losses meant it was in danger of running out of money by autumn.

“Under Swiss law, the company must have sufficient cash to sustain operations for a certain period of time without any revenues, and this limit is about SFr500 million,” Moser said.

“With cash and cash equivalents of around SFr900 million they currently have around SFr400 million which they can burn. [And] that will last only a few months at the present rate,” he added.

Moser said the airline still needed to address the size of its long-haul network.

“A study by Swissair that was done in Summer 2000 and never published concluded that it was possible [for Switzerland to sustain] only 8 or 12 long-haul aircraft. And that was three years ago when the economy was far better than now.”

Although the airline is unlikely to diminish its financial reserves at the first-quarter rate, Moser said coming months would be risky.

“I would be surprised if there was a considerable improvement,” he said.

“The financial situation is very bad and bookings for the summer months are also very bad. Obviously the market has lost confidence in this company.”

Spinoff

The carrier also hopes to cut some 20 per cent in regional costs by spinning off its regional operations into a separate airline.

Swiss said cost-cutting measures already implemented were “now beginning to take effect”.

Revenues from scheduled flights totalled SFr880 million during the first quarter, with 2.7 million scheduled passengers.

Its seat-load factor was 67.9 per cent and the average yield per seat-kilometre was SFr0.14.

swissinfo and agencies

Key facts

First-quarter results for Swiss:
Net loss: SFr200 million ($155 million)
Revenues: SFr1.04 billion
Costs: SFr1.27 billion
Liquidity: SFr913 million (down by SFr343 million)
Swiss blames Sars, the war in Iraq and the global economic downturn for the result and has vowed to continue cutting costs in 2003.