SWISS improves its first-quarter operating result despite global uncertainties

Swiss International Air Lines (Group) achieved an operating profit of CHF 16 million for the first three months of 2011. The result is an improvement on the CHF 10 million operating loss sustained for the first quarter of the previous year, owing largely to the financial crisis. Total income from operating activities for January-to-March 2011 amounted to CHF 1.15 billion, a 7% increase on the prior-year period. The airfreight business of Swiss WorldCargo posted a satisfactory first-quarter performance.

While these first-quarter results are encouraging, the present operating environment still poses several major challenges. The continued strength of the Swiss franc, a renewed rise in fuel prices and the currently low yields are all weighing heavily on SWISS’s earnings results. Developments in Japan and North Africa also had a tangible negative effect on the company’s first-quarter performance.

“The headwinds we are facing have grown stronger since the beginning of the year, and the current global uncertainties are likely to continue to depress our business performance for some time to come,” confirms SWISS CEO Harry Hohmeister. “We have, however, taken numerous actions to ensure that, despite the present challenges, we can maintain our operating results at their favourable prior-year levels.”

SWISS does not expect yields to recover any time soon, and anticipates further sizeable volatility on the demand front. Currency movements and raw materials prices are also likely to continue to work against the company in the foreseeable future. On a brighter note, the robust demand within the home Swiss market, the present trends in the long-haul travel segment and recent cargo business developments are providing a promising foundation for a sound 2011 performance and result.

“The continuing volatility is confirming to us once again how vitally important it is that we retain our flexibility, our favourable cost structure and our ability to respond swiftly to changed and changing conditions,” adds CFO Marcel Klaus. “And we will continue to cultivate these prime performance assets.”

SWISS’s total production for the first three months of 2011 was an 11.8% increase on the prior-year period in available-seat-kilometre (ASK) terms. ASK production was raised 9.7% for the European network and 12.9% on intercontinental routes.

SWISS carried 3.43 million passengers in the first quarter of 2011, a 5.9% increase on the 3.24 million of the prior-year period. Systemwide seat load factor for the quarter amounted to 76.4%, a 1.9-percentage- point decline on the 78.3% of January-to-March 2010. The carrier operated a total of 36 956 flights, 7.1% more than the 34 495 of the same period last year.

On SWISS’s intercontinental routes, revenue-passenger-kilometre (RPK) traffic volumes were a 9.6% improvement on the first quarter of 2010, achieved on a 12.9% increase in ASK capacity. Intercontinental seat load factor slipped accordingly, from 83.6% to 81.2%.

European services saw a similar trend. While RPK traffic volumes for the period were 7.5% up on the first quarter of 2010, the improvement was achieved against a 9.7% increase in ASK production, prompting a 1.3-percentage-point decline in seat load factor from 68.4% to 67.1%.

The airfreight business of Swiss WorldCargo reported a substantial 9.2% increase in traffic for the period in cargo-tonne-kilometre terms. Cargo load factor (by volume) amounted to 81.1%, compared to 83.1% for the first quarter of 2010.

Personnel
SWISS remains a key generator of business and jobs, and offers young people who are fascinated by flying the opportunity to pursue their career in the air transport sector. The company plans to further recruit more than 200 new cabin personnel in 2011, along with 100 future pilots. At the end of March 2011 SWISS had a worldwide workforce (in full-time-equivalent terms) of 6 164 personnel, compared to 6 016 a year before. The positions were shared among 7 521 employees (against 7 418 at the end of March 2010).

Fleet and product investments: SWISS took delivery of its tenth new long-haul Airbus A330-300 in January 2011. The SWISS fleet was further expanded in March with the arrival of another new Airbus A320, its 21st. SWISS Group member carrier Edelweiss Air also marked the 15th anniversary of its foundation by adding a second long-haul Airbus A330 – an A330-300 – to its fleet. From August 2011 onwards, the entire SWISS intercontinental fleet will feature the carrier’s new Business Class.

SWISS’s firm focus on its customers and their wishes and needs was further confirmed in January when the carrier was named Best Airline for Europe and Best Airline for North & South America in the 2011 Business Traveller Awards. SWISS was also voted 2010 Airline of the Year in the short- haul category by the readers of Switzerland’s ReiseBlick travel magazine.

Record punctuality: Some 85.9% of all SWISS flights departed within the permitted 15 minutes of their scheduled departure time in the first quarter of 2011, compared to 75.7% for the prior-year period. The result represents SWISS’s best-ever first-quarter punctuality performance, and the second-best quarterly punctuality in its corporate history. As well as an impressive operating performance, the favourable punctuality result is attributable to advantageous weather conditions in this year’s first-quarter period.

Safety: SWISS successfully passed its fourth periodic IATA Operational Safety Audit (IOSA) in the course of the first quarter, enabling it to retain its certification as an IOSA operator for both its European and its intercontinental services for a further two years. The company achieved exceptionally good results in the latest IOSA audit, despite its more rigorous requirements.

Network news: SWISS is constantly reappraising its network and modifying its production in response to current circumstances and demand. Services from and to Basel were substantially expanded at the end of March, in partnership with bmi. The new services, which include three daily flights to London (Heathrow), have more than doubled the capacity offered between Basel and the UK. SWISS has also added Rome and Copenhagen to its Basel-based network, and increased frequencies on its Basel-Hamburg and Basel-Barcelona routes.

SWISS also raised its frequencies from a six-times-weekly to a daily service pattern on the Zurich- San Francisco and Zurich-Shanghai routes with the start of the 2011 summer schedules. This means that, with the exception of Nairobi and Yaoundé, SWISS now offers at least daily service to and from all its intercontinental destinations.
In a further network development, Edelweiss Air will be offering a weekly non-stop summer service to and from Beijing in collaboration with SWISS. Edelweiss Air will also be operating various further leisure routes in cooperation with SWISS from May onwards; and the new destinations of Cape Town and Colombo will join the network in autumn.

Environmental care: SWISS has reduced its specific fuel consumption (i.e. its fuel consumption per 100 passenger-kilometres or pkm) by over 17% since its foundation in 2002. The carrier reduced its specific fuel burn by around 3.9% from its prior-year level in 2010 alone, from 3.88 to 3.73 litres per 100 pkm. This further enhancement of its environmental credentials is due in no small part to the billions of francs that the company has invested and continues to invest in maintaining an advanced and efficient aircraft fleet.
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