Swiss - Slim Down or Die
As per usual, Switzerland’s Sunday press has plenty of not so positive [major understatement] articles about Swiss’ future. This is one from LeMatin, translated by me, and definitely worth a read:
***Translated quote from LeMatin***
Swiss: Slim or Die
The bankruptcy of Swiss wasn’t enough. The new airline is flying in circles and the government refuses to make a decision. Silent savings plans against a major reduction of the long-haul fleet, the duel between prestige and modesty is raging.
The accounts of the Swissair debacle have yet to be sorted one year after the bankruptcy was announced. With more than 2 Billion of government money invested in the adventure, one expected to at least bear the fruits of a new airline with full pockets. But no, true courage was lacking in the dimensioning of Swiss and yesterday’s political choices are once again causing tremors today.
Swiss is losing 2 million a day, the pilots are fighting, the service isn’t great, the planes frequently break down, the large fleet is preventing it from joining an all important global alliance. In these conditions, how can one break-even at the end of 2003 without making serious cutbacks. Without these, the capital of the new company would dilute with fatal consequences.
Swiss managers are taking that exact question very seriously. However, taking simple stops such as cancelling the plans for a new uniform won’t be enough. André Kudelski - Swiss-French administrator of Swiss confirms that employees will only be hit if the ex-Crossair pilots continue to be so demanding.
Swiss versus Crossair, the war without an end in sight
This menace is central to the problem. Even the Swiss government does not dare face the subject, instead it contents itself with reports from Swiss’ management. The urgent need for arbitration between the Swissair side and Crossair side really doesn’t need to be demonstrated more clearly.
The pilots war isn’t going to blow over either. On the Crossair side, one claims a “monumental mobbing” according to the terms of an ex-manager of the regional airlines. On the opposite side, the Swiss pilots do not hide their superiority. For example, one captain said “the Swissair pilots are more reliable and definitely more profitable”. To operate a long haul, 10 Swissair crews are needed compared to 13 Crossair crew.
This confrontation also changes the fundamental strategy that should lead Swiss to profitability. For the moment, the management are holding on to the sizeable long-haul fleet inherited from Swissair. They claim that savings are to be made on the European side. This angers the Crossair side. According to them, one must drop the expensive prestige of long-haul flights.
Even the statistics are read through this antagonism. A Basel-Brussels flights with a load factor of 38% (full-fare tickets) is more profitable than a Zurich-Bangkok with a load factor of 92% (discount tickets). For André Kudelski, it is not yet the proof that long-hauls are not profitable, in fact it is the opposite.
Prestige side versus that of modesty, slimming down the wings for Swissair employees or Crossair employees: the equation isn’t being ignored by anyone, especially not the tax payers who are indirectly the major shareholders in Swiss. Then again, the government has to give its opinion before it is too late or before a war in Iraq produces a poor excuse to restructure our dear airline.
Interview: André Kudelski
“I believe in it”
André Kudelski, 42, businessman from the Canton of Vaud, seat on Swiss’ board of management since the 6th of December 2002.
-- The objectives for 2003, aren’t they too optimistic?
-- The 2003 objectives were set in the autumn of 2001. The current management has to achieve these targets, while knowing that the parameters evolved positively or negatively. The potential for a war in Iraq is another unknown, which would send the results into turmoil. I am convinced 2003 will be a determining year for Swiss, and I am certainly not pessimistic.
-- The condition of success?
-- Our concept is just being formulated. I cannot reveal anything today. Swiss will do it before the end of the year-
-- Are you going to reduce the long-haul fleet?
-- It isn’t a major problem, in fact it is the opposite. It is in the long-haul sector that profitability is at its highest. We have already reduced the long-haul fleet by 30% compared to Swissair, considerably more than competitors.
-- Until when will you be able to reduce prices?
-- For the transition team, the target is to maximise cash, sometimes at the cost of prices. The aim is to maximise long-term profitability.
-- The entrance of Swiss into an Alliance is skidding. Because of too many long-hauls?
-- I don’t think negotiations are skidding. There certainly are concessions to be made but there is also a lot to gain.
-- If Swiss isn’t too big then how can you explain the indiscretion evoking the management’s plans for cut-backs?
-- The publications are not concurrent with what I know. A plan for cutbacks is being studied in case not agreement if come to with the ex-Crossair pilots since many regional flights would be loss making.
-- But also ?
-- As I said, we are improving our yields. We are also looking to reduce our non-crew operational costs.
-- Aren’t you acting under pressure from the ex-Swissair people?
-- I find that statement shocking. The Swissair people agreed to make many sacrifices, while others totally misunderstood a situation. Crossair survived because of customers brought by Swissair.
-- What do you make out of the failed merger of two company cultures?
-- It is normal that the sequels of traumatism remain. A lot of work and goodwill is still needed to overcome these.
Interview: Sepp Moser
“I don’t believe in it”
Sepp Moser, Zurich journalist, long-time specialist in air transport matters.
-- Since the very beginning, you claimed Swiss wouldn’t succeed. An instinct?
-- It isn’t me who said that. Many experts and even several Swiss managers confirm it. The new company is only built on the obsession to maintain the prestige of a long-haul network (40 destinations), totally oversized for Switzerland. With the population taken into account, the Swiss’ long-haul fleet is five times the size of Lufthansa’s. It is a bit like if you built a 1000 bed hotel on the shores of the black sea.
-- A mistake only made in Switzerland?
-- Many European airlines have opted for modesty and are doing well. To fill long-haul aircraft, one needs an airport that works well as a hub bringing foreign customers. Despite the over-priced investments, Kloten really doesn’t compete with other major European hubs. Therefore, Swiss has to fill its aircraft by lowering prices.
-- Will the savings planned by Swiss be enough?
-- The long-haul fleet would have to be drastically reduced and the airline will have to concentrate on niche regional traffic, like Crossair. But the antithesis is occurring, the ex-Swissair people are setting the reules and are trying to make savings from the regional traffic which will hit only ex-Crossair personnel.
-- The war between pilots is symbolic of the failure to integrate both airlines. Dangerous?
-- Safety is not put into cause in the sense that Crossair and Swissair pilots do not fly together. However, it is the costs problem. On average, the Swissair pilots are twice as expensive . The climate is very unhealthy for the company: those who are mislead are those who previously succeeded. Instead of wanting to leave Swissair die, one wanted to reanimate it and implant the corpse into Crossair. The risk is even greater.
-- Will the saviour come come from the integration of Swiss into OneWorld?
-- In the current negotiations, British Airways are firm. Swiss will never get in unless it reduces its long-haul fleet. The English have adopted the opposite of Swiss’ strategy for the past two years, fly fewer people but get more yield.
To read the whole article in French, go to the following URL: http://www.lematin.ch/home/actualite/15325.html
Admittedly, it is easier to criticise Swiss than to praise them and I would definitely take that last bit (Sepp Moser interview) with a pinch of salt. He has been a long-time basher of anything Swissair and now anything Swiss. However, it is obvious that Swiss does face many problems:
-- A cut back plan is being formulated. This must mean something.
-- Losing two million Francs (€1.33 million) a day. Yes it is lower than expected but nevertheless is a lot.
-- Pilots dispute. Whatever the management claim, it certainly isn’t going to solve itself.
-- Problems with OneWorld negotiations. Even the reliable FT confirmed that BA won’t leave Swiss join unless the long-haul fleet is reduced.
What do you think?