Integration with Lufthansa paying off
As most airlines report huge losses, SWISS this week posted a profit. ABTN talks to the carrier's UK manager about what has brought this success.
It was almost precisely four years ago that Lufthansa paid €310m to take over Swiss International Airlines. These were already challenging times for a carrier which had arisen from the ashes of Swissair.
The next year was taken up with integration into the Lufthansa Group and aligning the synergies and savings which could be made from the acquisition before SWISS emerged as a part of the Lufthansa group but operating under its own livery.
It was these two challenging years which Gregor Koncilja, SWISS's UK country manager, believes laid the foundation for the success the carrier is now enjoying. While other airlines are reporting losses, some of a record levels, and reducing operations, SWISS this week posted a pre-tax profit of CHF507m (€335.3m)for 2008.
Its revenue for its operating activities rose by 7.6% to CHF5,267m(€3,421.3m) while the number of passengers carried was 13.5m, an increase of 10.6% on the 2007 figure of 12.2m.
"I think one of the reasons for these results", Mr Koncilja said, "is that we went through challenging times three to four years ago and we emerged as a leaner organisation. Other airlines are now going through this re-structuring which we had already done."
Being part of both the Lufthansa Group and a member of Star Alliance, the biggest in the world, has also helped the carrier by enabling it to offer its customer a far wider network than a small, stand alone carrier could.
The link up with Lufthansa has produced synergies worth millions of Euros a year. These include an integrated sales force, except in the major markets of Switzerland, Germany and the UK where the two carriers still operate separately, and integrated support, business development and analysis departments.
This firm base has allowed SWISS to expand. Mr Koncilja said new routes had started form Zurich, its hub, to Shanghai and Delhi in the last couple of months following new services from the Swiss city to St. Petersburg and Florence launched last year.
There is also increased frequency for the UK with 31 flights a day operating from London City, Heathrow, Manchester and Birmingham to Switzerland. The wider SWISS network serves 76 destinations in 42 countries.
"This is a substantial offering for business travellers looking for the best time to fly. We have for example, 15 flights a day from London City with six a day from Heathrow to Zurich," he said.
SWISS is an airline which carries a large number of business travellers. About 60% of its revenue comes from business travel as do 50% of its passengers. With both London and Zurich among the world's major financial centres, a good proportion of these are in banking, not a profession which usually travels coach. But while travel in premium class has fallen, many are switching to economy rather, as in some regions, simply not travelling at all.
"Bankers are important to our business model. We still have not lost passengers from the UK. They increased by 5% in the last year and while at the moment the outlook is challenging for us, we think by the end of this year, the number should be more or less flat compared with previous years," he said.
SWISS has been helped to an extent by competitors pulling out or reducing frequency. For example Air France has pulled two routes from London City to Zurich and Geneva and BA has cut frequency on services from Gatwick to Switzerland.
Others have or are due to start services to the country, including easyJet and Aer Lingus. It is, as Mr Koncilja said, a fluid market.
But SWISS has not entirely escaped the world economic downturn. In its results this week, the airline said the fourth quarter was weaker than the previous three with revenue growth not as good as in the previous months. The airline has, as Mr Koncilja confirmed, also cut capacity.
But what is different from some other airlines is that while they are holding their breath and expansion plans until the recession ends, SWISS is still looking to expand. It is due to start its new three class service in a newly delivered A330-330 between Zurich and New York next month.
It will be followed by services in other new A330-300s to Dubai and Delhi. "A challenging economic situation is also one of opportunity," he said.
Mr Koncilja is also confident that the profit for 2008 will be repeated in for 2009. "We are very well positioned for this," he said.
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