Swiss restructuring plans open to question

Swiss is due to unveil a new business plan on Tuesday Keystone

Speculation about the future of Switzerland's troubled national airline, Swiss, has intensified as the carrier prepares to unveil a new business plan on Tuesday.

Shares in Swiss were suspended from trade on Monday and Tuesday, as the airline’s board finalised a plan to stem daily losses of more than SFr3 million.

Swiss chief executive, André Dosé, is expected to announce wide-ranging cuts to the airline’s network.

As the company prepares to unveil its new business plan, swissinfo takes a look at six of the key issues surrounding the airline.

How many jobs could be lost at Swiss?

Swiss currently has around 9,000 employees. Weekend media reports suggested that the airline could slash up to a third of its staff and fleet in an effort to save SFr500 million ($376 million) by the end of the year.

Thomas von Ungern, an aviation analyst and professor of economics at Lausanne University, says the company should take the bold step of slashing its fleet of 25 long-haul aircraft by half.

But plans to reduce capacity have been complicated by a court decision last week, which Swiss said would prevent it from implementing necessary cutbacks.

The airline was ordered by a court in Basel on Thursday to reinstate 169 sacked pilots.

By how much should Swiss reduce its network and fleet?

The airline’s regional network has been responsible for some of its largest operating losses, while its long-haul flights have been buffeted by the war in Iraq, the pneumonia-like virus, Sars, and a stalling global economy.

Von Ungern believes that all unprofitable flights should be cut, adding that most of these involve long-haul destinations.

“For example, Swiss has a flight to Beijing every day of the week, which is far too many. One or two flights per week would be enough,” he told swissinfo.

Analysts also warn that Swiss faces difficulties associated with its fleet renewal programme.

The airline was due to take delivery of a new long-haul Airbus A340, the first of twelve, by the end of the month – a move that the airline now says is in doubt.

Von Ungern adds that if Swiss does not cut its network by half, the company can expect to go bankrupt within a few years.

What would the airline’s bankruptcy mean for Switzerland?

Von Ungern does not believe that a financial collapse would lead to a loss of flight connections from the country’s main international hub in Zurich.

The economics specialist points to the fact that Belgium did not suffer after its national carrier, Sabena, went bankrupt in 2001.

“If a destination is a money-spinner, plenty of other companies will line up to take over the route,” he says.

“When Swissair pulled back from Geneva airport, the airport authorities had little trouble finding other companies to replace it. We can expect the same thing to happen in Zurich.”

Is it a good idea for the government to help the struggling airline?

Financial worries have forced the government – which owns a 20.4 per cent stake in the carrier – to consider issuing a new commercial guarantee in order to calm jittery investors.

But Von Ungern believes this may be a step too far.

“The government has already done far too much for Swiss,” he says, adding that if the company arranges new credit lines with its banks, it will not be able to pay back what it owes, and taxpayers will be left to foot the bill.

“After Swissair’s aircraft were grounded [in 2001], the government totally lacked common sense,” he said.

Why has trading in Swiss shares been suspended at the stock exchange?

No surprises here. The company is simply trying to avoid share speculation based on insider knowledge ahead of Tuesday’s announcement.

Can the Swiss market sustain a large national airline?

Hamstrung by a lacklustre global travel industry and a saturated aviation market, the 14-month-old airline is battling for survival – Von Ungern believes this is proof that the dream of creating an international commercial aviation player in Switzerland has now become a nightmare.

For the Lausanne-based professor, the only choice the airline now has is whether to be a small, independent company, or to be a small member of one of the global airline alliances.

“But whatever the case, [the airline] will have to be small,” he says.

swissinfo, Marc-André Miserez (translation: Scott Capper)

Key facts

Swiss posted a net loss of SFr980 million ($727 million) for 2002.
In the first quarter, its net loss was SFr200 million, on revenues of SFr1.04 billion.
The company blamed Sars, the war in Iraq and the global economic downturn for the quarterly result and vowed to continue cutting costs in 2003.
Cost-cutting measures could involve shelving part of the airline’s fleet and downsizing its network.