Swiss International Air Lines reports an operating profit of CHF 185 million for the first nine months of 2012, a 36% decline on the same period last year. An operating profit of CHF 124 million was achieved for the third-quarter period, 22% down on its prior-year equivalent. The market environment remains very challenging.
Swiss International Air Lines generated total income from operating activities of CHF 3 814 million for the first nine months of 2012, an increase of 3% on the CHF 3 707 million of January-to-September 2011. Despite the income improvement, however, the CHF 185 million first-nine-month operating profit was a 36% decline on the CHF 288 million achieved in the prior-year period.
The third quarter also brought no easing of the current market difficulties. The CHF 124 million operating profit for the period was 22% below the CHF 159 million of Q3 2011, on total income from operating activities which, at CHF 1 363 million, was a 5% improvement on the CHF 1 301 million of July-to-September last year.
“These results do not keep us on track to remain sufficiently profitable to finance our future investments in the longer term,” concedes SWISS CEO Harry Hohmeister. “Increased market capacities, continued fare erosion and the current economic climate in Europe have combined to put SWISS in an extremely challenging position and our entire industry in a critical situation.”
SWISS has already identified improvements that should add a recurring CHF 115 million to its corporate bottom line from 2015 onwards under the SCORE results enhancement programme which was initiated at the beginning of this year. “On top of this, though, we will need to take more action to make up for further recent setbacks – such as the high price of oil and the impact of currency trends – if we are to achieve our longer-term bottom-line objectives,” adds Chief Financial Officer Marcel Klaus. Higher fuel prices have added some CHF 120 million more to SWISS’s expenses in 2012 compared to last year in the first nine months alone.
Additional passenger services
SWISS’s long-term results-enhancement goals are being pursued on various fronts. In product terms, for instance, passengers are to be increasingly provided with additional optional services or “added-value offers”. These should be introduced from the end of 2013 onwards, once the corresponding systems have been modified accordingly. Extra action will also be taken to promote SWISS’s premium First Class product by intensifying the sales efforts here. And further enhancements and synergic potential will be sought and evaluated in procurement and administrative functions throughout the SWISS Group.
Rising passenger numbers and record load factors for the third-quarter period
SWISS carried 12.06 million passengers in the first nine months of 2012, some 4.3% more than the 11.56 million of the prior-year period. Total flights operated rose 1.1%, from the 112,915 of January-to-September 2011 to 114,103 flights. The systemwide seat load factor of 83.5% was also a 1.4-percentage-point improvement on the 82.1% of the same period last year. On the airfreight front, the 78.7% cargo load factor (by volume) was up 0.5 percentage points, while cargo revenues for the period were a full 6% above their prior-year level.
For the third-quarter period, the total passenger volume of 4.36 million was a 3.8% increase on the 4.2 million of the same three months last year. Total flights operated rose from 38,302 to 38,834, an increase of 1.4%. Systemwide seat load factor amounted to 87.7%, up 0.8 percentage points from the 87.0% of the third quarter last year. Cargo load factor (by volume) rose 1.4 percentage points, while cargo revenues were up by 11.2%.
Fleet, product and network
Despite the currently difficult business and market environment, SWISS continues to pursue its adopted course of sustainably profitable growth. A thirteenth Airbus A330-300 joined the fleet in October, and a fourteenth will follow next April. The SWISS fleet will also see the arrival of a further new Airbus A320 in March and an A321 in April. And from the end of 2014 onwards, the present Avro RJ100 regional fleet will be gradually superseded by new Bombardier CS100s. SWISS’s further fleet growth beyond these already-planned additions and renewals will depend on future market trends.
SWISS will also be adding the 24th intercontinental destination to its network next May with the introduction of daily non-stop service between Zurich and Singapore. Business on the new Zurich-Beijing route which was inaugurated this spring has exceeded expectations, with seat load factors already averaging over 90%.
The new SWISS Winter 2012/13 schedules feature a number of modifications that have been made in response to demand. In addition to the usual seasonal frequency reductions to certain destinations, SWISS will be increasing frequencies on its Zurich-Miami route from 29 November onwards.
The company continues its endeavors to provide consistently high-quality products and services in the air and on the ground. For the second year in succession (and the fourth time since 2005), SWISS was named “Europe’s Leading Airline Business Class” in October in the prestigious annual World Travel Awards.
SWISS employed a total of 8,037 personnel at the end of September (compared to 7,641 at the same time last year), representing 6,776 full-time equivalents (versus 6,358 FTEs at the end of September 2011). The company will add some 300 new cockpit and cabin jobs to its workforce this year through its fleet expansion alone.
SWISS expects the overall business and market environment to remain challenging for the rest of this year. And, despite the revenue growth achieved and the actions already being taken to enhance its bottom-line performance, SWISS’s management does not expect the company’s operating result for 2012 as a whole to reach its prior-year level.