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Swiss pulls out of Oneworld talks

Swiss has not made a profit since it was launched in 2002. Swiss

Switzerland’s national airline has pulled out of negotiations to join the British Airways-dominated Oneworld alliance.

This content was published on June 3, 2004 - 07:48

Swiss chairman Pieter Bouw said the company had been unable to agree with British Airways (BA) on how to integrate their frequent flyer programmes.

Swiss announced last September that it had “accepted an invitation” to join Oneworld subject to negotiations with BA.

But after months of talks the airline admitted on Thursday it had failed to reach agreement with the British carrier.

"I feel sorry for these developments because we would have liked to join the Oneworld alliance, but the price is just too high," said Bouw at a press conference in Zurich.

Bouw added that the cost of integrating the two frequent flyer programmes would have run into "double-digit millions" for Swiss.

Swiss spent SFr5 million on its failed attempt to join Oneworld.

But the airline's chairman defended last autumn's move to join the aviation alliance, saying that difficulties only emerged after negotiations with BA got underway.

Amicable agreement

Swiss also said it would no longer be pursuing its long-term strategic partnership with BA.

"The abandonment of the proposed integration means that the bilateral agreement between Swiss and BA cannot be put into practice," said the airline.

The company said it had reached an “amicable agreement” with the British airline but declined to provide further details.

Swiss and BA will no longer offer joint codeshare services except for the route between London Heathrow and Geneva which will continue for the next three years.

Both airlines signed a memorandum of understanding in September which gave the British carrier rights to eight of Swiss's 14 landing slots at Heathrow.

In exchange, BA offered its new partner a SFr50 million credit facility which has already been used by Swiss.

BA said it was disappointed that talks had broken down but accepted the airline's decision.

"It is up to Swiss to decide what is in its best interests," said chief executive Rod Eddington, "and we are pleased that we have reached an amicable conclusion," he added.

Next stop Lufthansa?

News that Swiss was abandoning efforts to join Oneworld came as no surprise to analysts.

"It's been known for months that there were problems integrating the frequent flyer programmes," said Patrik Schwendimann of Zurich Cantonal Bank.

The breakdown in talks between Swiss and BA comes amid speculation that Switzerland’s national carrier may be positioning itself to join the rival Star Alliance, which is headed by Germany’s Lufthansa.

"It seems more likely now that Swiss will get closer to Lufthansa," commented Schwendimann.

The markets reacted positively to the speculation, with shares in Swiss closing six per cent higher at SFr12.20 by the end of the trading day.

Dampening speculation

Bouw sought to quell speculation about an imminent deal with Lufthansa by saying that no discussions were underway with alternative alliance partners.

"It is still a priority to enter into an alliance, but it is not a requirement for survival," he said.

The Swiss finance minister, Hans-Rudolf Merz, said the government would welcome a tie-up with Lufthansa.

"Swiss needs a strategic partnership... and a decision to work with Lufthansa would be very much welcomed," said Merz.

The German carrier declined to comment directly on the collapse of Swiss's bid to join Oneworld, saying only that it was not currently engaged in talks with the airline.

"There is no need to negotiate. It is up to Swiss now to decide how to proceed," said Lufthansa spokesman Klaus Walther.

Swiss, which has failed to make a single franc in profit since it took to the skies in 2002, appointed a new chief executive officer in April.

Christoph Franz, a former Lufthansa manager, will officially take up his duties on July 1.

swissinfo with agencies

Key facts

Swiss in figures:
Operating loss for 2003: SFr497 million.
Net loss for 2003 (including restructuring costs): SFr687 million.
Revenue: SFr4.126 billion.
Liquidity as of December 31, 2003: SFr503 million.

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