Shares in Switzerland’s national airline took a tumble on Monday amid speculation that the company was planning a new round of job cuts.
Reacting to reports that up to 1,000 employees could be laid off, Swiss said it had ruled nothing out and was examining all areas of its business to reduce costs.
During morning trading, shares in the airline fell by as much as 17.6 per cent to SFr7 ($5.46), down from Friday’s close of SFr8.50. The stock later recovered to end the day down by 1.4 per cent.
One factor that weighed on airline stocks in general on Monday was a new warning of possible terrorist attacks on major financial institutions in the United States.
“It’s been a tough time for stock markets. We’ve seen the oil price rise. We’ve seen increased uncertainty, [which is] a real recognition that the global war on terror is nothing like won yet,” commented Hilary Cook, director of investment strategy at Barclays Stockbrokers.
“That hit stocks across the board and particularly the airline sector. It was hit by fears that travel will be reduced, particularly from the US, and of course oil is one of its big costs,” she told swissinfo.
Reacting to speculation about a new round of cost-cutting at Swiss, a company spokeswoman said the airline was considering a range of options.
“As [CEO Christoph] Franz has said to the unions, there are no more taboos,” she said.
The airline refused to confirm or deny reports that it was considering withdrawing from Geneva and Basel airports to focus exclusively on its intercontinental hub in Zurich.
Swiss has warned investors that it will probably make a loss this year because of rising oil prices and the associated steep rise in aviation fuel costs.
The carrier, which has not made a profit since taking to the air more than two years ago, had previously set an end-of-year breakeven target.
Swiss is now in the hands of former Lufthansa manager Christoph Franz and is due to publish its first-half figures on August 17.
Analysts expect the firm to report a significant loss for the period from January to June.
In June the airline established a working group to examine how costs could be saved. The project, known as “Continuous Improvement Swiss”, was launched in the wake of the profit warning.
“One problem for Swiss is that it really is seen as being in a relatively parlous financial situation,” commented Cook.
“So a small increase in operating costs or a slight fall-off in traveller numbers has a much more damaging effect on it than it does on, for example, British Airways.
“For Swiss, there’s clearly still some way to go in terms of cutting costs. They’re going to have to make some more tough decisions and inevitably that does involve job losses.”
Geneva-based aviation analyst Oliver Sutton believes that any cuts to the company’s network and fleet will probably affect its routes within Europe.
“Swiss has an intercontinental network which should be profitable. Load factors to the Middle East, Asia and the US are quite high,” he told swissinfo.
“But the cuts could come... in the regional operations within Europe, where Swiss has too many routes and too many aircraft. And that also means that they've probably got too many people.”
Sutton also noted that there were concerns about the current overcapacity in the European airline sector.
“There’s a huge amount of capacity out there in Europe and [this winter] there’s going to be a battle for market share,” he said.
The authorities at Geneva airport, meanwhile, warned on Monday of job cuts if Swiss decides to concentrate solely on operating flights from Zurich.
Airport spokesman Philippe Roy said the airline's complete withdrawal from Geneva would be a “splendid own goal” for Swiss and for Zurich.
He said Swiss and the operators of Zurich airport risked losing the business of hundreds of thousands of passengers who fly from Geneva to Zurich to connect up with intercontinental flights.
Around 80 per cent of the 700,000 people who fly with Swiss each year from Geneva to Zurich are transit passengers.
swissinfo, Robert Brookes
German Christoph Franz took over officially as CEO of Swiss on July 1.
The company is due to publish its first-half figures on August 17.
Analysts expect a further loss.
Rumours of large job losses and a possible withdrawal from Geneva and Basel airports are behind the fall in the Swiss share price.
Swiss has made it clear that no cost-cutting measures have been ruled out.
A warning about possible terrorist attacks in the United States has hit the airline sector at the stock markets.