SWISS Business Report Q1 2014

Swiss International Air Lines (SWISS) generated total income from operating activities of CHF 1,191 million in the first three months of 2014 – precisely the same amount as for the same period last year. Despite adverse currency movements and growing competitive pressures, the company achieved an operating profit for the period of CHF 3 million, a substantial improvement on the CHF 24 million operating loss of the first quarter of 2013. The result was boosted in particular by the changed depreciation policy of the Lufthansa Group.

Swiss International Air Lines (SWISS) generated total income from operating activities of CHF 1,191 million in the first three months of 2014, precisely the same amount as for the prior-year period. Despite still-challenging market conditions, SWISS also achieved an operating profit of CHF 3 million for the quarter, a substantial improvement on the CHF 24 million loss of the same period last year.

The improved first-quarter result is attributable to a large degree to the revised depreciation policy of the Lufthansa Group. But even adjusted to exclude this influence, the result would be a slight improvement on its prior-year equivalent. It should also be borne in mind here that, unlike the previous year, 2014’s first-quarter revenues did not benefit from the Easter holiday falling in the period.

The global sales and competition landscape showed strongly varying trends. On the cost front, currency movements provided some relief compared to prior-year levels. But revenues suffered from both a further intensification of competitive pressures and adverse currency trends, particularly the weakness of the euro, the yen and the US dollar against the Swiss franc. The period also saw a further steep decline in yields, especially on European and North American routes.

“That we are able to post these favourable first-quarter results is a tribute to all the efforts we have been making in all areas of our company,” comments CEO Harry Hohmeister. “But, with the tough competition we face and the difficult markets we have to work in, we cannot let up for a moment if SWISS is to achieve further growth and success.”

Steady progress with SCORE

The Lufthansa Group’s SCORE results enhancement programme remains a key factor in SWISS’s business performance. The various SCORE projects implemented and defined at SWISS by the end of 2014 should add some CHF 226 million to annual bottom-line results; and current ambitions should see this figure increased to CHF 313 million by 2015. In addition to the realignment of Geneva business and operations, the main projects here include insourcing line maintenance, the Lufthansa Group-wide fuel management programme and the planned increase to the earning capacity of the SWISS Airbus A320 fleet.

Fuel management remains a key SCORE challenge. And various projects are under way at SWISS and elsewhere in the Lufthansa Group to reduce fuel costs, which are the biggest cost item.

The Lufthansa Group achieved further substantial progress last year in reducing its specific fuel consumption. Groupwide kerosene consumption per 100 passenger-kilometres was reduced below four litres for the first time, to 3.91 litres. SWISS also raised its fuel efficiency by more than 2% last year, and now uses an average of 3.58 litres of fuel per 100 passenger-kilometres, over 20% less than in 2002.

New services and a website dedicated to customer needs

SWISS relaunched its swiss.com website at the end of March. The new swiss.com is one of the first fully responsive websites in the airline sector, and offers visitors a new virtual world that features various information boxes for their flights, a new destination guide incorporating valuable crew tips, and the option of maintaining their own personalized flight logbook. The new site pays due and full regard to the growing demand for products and services that are as individualized as possible. And, in the course of this year, the new “SWISS Choice” programme will add further innovative services that are closely tailored to customer needs – like the option (for a fee) of reserving their preferred seat or arranging a small inflight surprise.

Load factors and passenger volumes both slightly down

A total of 3.53 million customers flew SWISS in the first three months of 2014, a 2.3% decline on the prior-year period. The airline also operated 3.9% fewer flights: 34,321, compared to 35,722 in the first quarter of 2013. Systemwide seat load factor for the quarter stood at 78.8%, a slight 0.8-percentage-point decline from the 79.6% of the prior-year period.

SWISS offered 2.4% more capacity systemwide in the first three months of 2014 than it had a year before in available seat-kilometre (ASK) terms. Total traffic volume, measured in revenue passenger-kilometres (RPK), was 1.4% up on the first quarter of 2013.

Total cargo sales for the period were up 5.2% year-on-year, while the cargo load factor (by volume) of 81.1% was a 0.4-percentage-point improvement on the 80.7% of January-to-March 2013.

New aircraft types ahead

SWISS will begin the renewal of its present long-haul aircraft fleet in 2016. To this end, six Boeing 777-300ERs were ordered at the beginning of 2013. The firm orders represent an investment of over CHF 1.5 billion. SWISS’s total aircraft orders at the end of the first-quarter period stood at 30 Bombardier CS100s, one Airbus A330-300, one Airbus A321 and the six Boeing 777s.

The new and forward-looking collective labour agreements which had been negotiated with the company’s Aeropers, IPG and Kapers cockpit and cabin staff associations were both subsequently rejected by the unions’ members in referendums held in March. SWISS remains committed to making the structural changes required, however, and is continuing its discussions with the associations to this end. SWISS remains equally committed to taking the actions needed in a spirit of social partnership, and to finding solutions that further enhance productivity and flexibility and provide a suitable framework for the introduction of its new Bombardier CS100 and Boeing 777 aircraft types.

Source / Author: SWISS