too low
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Future Of Swiss... Interesting Article

Sun Jan 12, 2003 12:34 am

Swiss on Friday announced that it would be offering what it calls “Easy Savers” on flights to London Heathrow, Paris, Barcelona and Nice, with prices starting from SFr99.

These are all routes run by Europe’s leading “no frills” airline, easyJet.

“In the long run, it’s a very dangerous strategy because if you want to be a premium airline, you can’t compete with the low-cost carriers,” Lüchinger told swissinfo.

“You must decide if you want to be a premium airline with a good service and higher prices or whether you want to be low cost. I think to be both is impossible.”

Lüchinger said that the decision to pander at the same time to low-cost and premium passengers was a sign that the company was having difficulty in plotting a way forward.

Shareholders - especially those with smaller holdings – are reported to have been losing confidence in the airline and unloading their stock. Bigger shareholders are “locked in” until 2004.

Falling stock

On Thursday, the airline’s share price sank to a historic low of SFr13.50.

According to the “Neue Zürcher Zeitung” newspaper, the company’s value has plummeted from SFr2 billion a year ago to around SFr700 million.

“Swiss is going through a very, very difficult period,” said Lüchinger. “They have no alliance partner as every other big national airline in Europe has.

“They have big problems with the pilots and big problems with the capacity of their fleet. I think that when the share price goes down that is a sign that all these problems are big and shareholders do not think they will be resolved in the next few years.”

About turn

At its launch a year ago, Swiss insisted that it was not interested in the low-cost market.

“EasyJet and Swiss are taking different customer groups… they are not our main competitors,” the company told swissinfo.

However, Swiss denied that Friday’s decision to go head-to-head with easyJet signalled a major shift in the company’s strategy.

“We want to show our public that a premium airline can also offer some fares at a very low level but still have a premium airline product – that’s our advantage,” said Swiss spokesman, Jean-Claude Donzel.

“We are still a premium airline and we want to have quality on board our aircraft. But at the same time we are flying every day to a lot of destinations - we have over 650 flights a day – therefore with this new offer we want to sell the extra capacity at an attractive price for new customers.”

Premium service

Donzel also rejected claims that the airline’s premium passengers would feel they were subsidising low-cost passengers.

He said the latter would be bound by tight restrictions as to when they could travel.

He added that British Airways, KLM Royal Dutch Airlines and Lufthansa were also offering special deals on selected routes – something that Swiss had already been doing for some time.

“We have previously run other promotions and this is just a new marketing deal,” he said.

In November, Swiss announced it would be trimming its fleet and cutting jobs in an effort to save SFr400 million and break even in 2003.

The company made a budgeted loss of around SFr800 million in 2002.

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