Swiss International Air Lines (SWISS) generated total operating income of CHF 1,191 million in the first three months of 2013, a 2% increase on the CHF 1,167 million of the same period last year.
With market conditions remaining difficult, however, the company reported a substantially lower operating result for the period: a loss of CHF 24 million (which compares to a CHF 4 million operating loss for January-to-March 2012.
SWISS increased its quarterly operating income 2% in the first three months of 2013, from the CHF 1,167 million of the prior-year period to CHF 1,191 million. But with the combination of negative exogenous factors and a still-unfavourable market situation, the company sustained a CHF 24 million operating loss for the first-quarter period – a substantial deterioration on the CHF 4 million operating loss of January-to-March 2012.
The markets continued to show no signs of recovery, while SWISS’s fuel expenses suffered a disproportionately high increase year-on-year. “Thanks to our rigorous cost discipline and the countermeasures we have taken, the rest of our cost items remained broadly stable or were even improved,” comments CEO Harry Hohmeister, “even though we increased our production in the period concerned. But we must now take our efforts even further if we are to restore our earnings to the levels we need to ensure SWISS’s continued sustainable development.”
Continuing earnings-enhancement actions
SWISS continues to make further cost optimizations and seek potential new revenue sources as part of the Lufthansa Group’s broader SCORE Change for Success programme to secure the group’s long-term business future.
These endeavours include redeveloping its organization and flight operations at Geneva Airport over the next few months to provide greater flexibility and align this business more closely to local and regional needs. Recruitment for the new Geneva crew base is already under way, and 150 cabin crew members and 90 pilots should be stationed here in the medium term. The first actions on the Geneva sales and marketing side have been scheduled for the second-quarter period.
With kerosene accounting for one of its biggest cost positions, SWISS is also steadily working to optimize its fuel management. The fuel surcharge on intercontinental tickets was also slightly increased at the beginning of the year in response to fuel price trends.
Recent moves to expand the SWISS service range have extended to further new online booking options at swiss.com. These include a seat selection facility and the possibility of provisionally reserving a seat at a guaranteed fare for up to 72 hours.
As part of a broader concerted drive to make greater use of synergies within the Lufthansa Group, certain SWISS financial accounting activities were transferred to a shared service centre at the beginning of 2013. A few positions were also eliminated following simplifications of the processes involved. A total of 19 positions in Basel were affected by these actions.
New appointees to the Management Board
Two new members of the Management Board were appointed in mid-April. Markus Binkert (41), previously Head of Sales & Marketing for Switzerland, Germany and Austria, was named as SWISS’s new Chief Commercial Officer. He succeeds Holger Hätty. And Roland Busch (49), currently Head of Finance & Information Management at Lufthansa Passenger Airlines, was designated to succeed Chief Financial Officer Marcel Klaus, who will be leaving SWISS at the end of July.
The two appointees return the SWISS Management Board to full numbers. The four-member Management Board further consists of CEO Harry Hohmeister and Chief Operating Officer Rainer Hiltebrand.
Still-strong demand and high passenger volumes
A total of 3.61 million travellers flew SWISS in the first three months of 2013, a volume that was virtually unchanged from prior-year levels. The 35,722 flights operated during the period were 4.5% down from the 37,391 of 2012. Systemwide seat load factor stood at 79.6%, a 1.8-percentage-point improvement on the 77.8% of the same period last year.
Systemwide capacity for the first three months was a 2.1% increase on the prior-year period in available-seat-kilometre terms. Total traffic volume – in revenue passenger-kilometres – rose 4.5% over the same period.
Total cargo sales were a 4.0% improvement on the first quarter of 2012, while cargo load factor (by volume) increased slightly from 80.5% to 80.7%.
Fleet, product and route network
SWISS will embark on a programme to renew its long-haul fleet in 2016. To this end, six Boeing 777-300ER aircraft were ordered at the beginning of this year. The firm orders represent an investment volume of over CHF 1.5 billion. As a result, SWISS’s first-quarter aircraft order book consisted of 30 Bombardier CS100s, two Airbus A330-300s, two Airbus A321s and six Boeing 777-300ERs.
The first SWISS Airbus A320 equipped with “sharklets” on the tips of its wings has been in revenue service since 22 March. Depending on route length, the new blended winglets deliver fuel savings of between one and four per cent, together with corresponding reductions in carbon dioxide emissions.
On the network front, SWISS will be introducing a new daily non-stop service between Zurich and Singapore in mid-May. The Geneva-based network will see the vacation destinations of Olbia, Catania and Ajaccio, along with St. Petersburg, added during the summer timetable period. And Kiev will enjoy a new daily service from Zurich from the 2013/14 winter schedules onwards.
SWISS’s management expects the market and earnings environment to remain tough throughout 2013, though higher passenger and revenue volumes are also projected. Thanks to the actions already initiated, the Management Board expects the company to post an operating result for 2013 as a whole that is broadly in line with its prior-year level.