Swiss finds security in Frankfurt

Lufthansa is just the ticket for Swiss shareholders Keystone

It’s official – Switzerland’s national airline is to become German. But Swiss is not the only European airline that has had to consider handing over control.

This content was published on March 22, 2005 - 09:33

It may be cold comfort for those who remember the glory days of Swissair, but at least Swiss has secured a future, albeit one that will be ultimately decided in Frankfurt.

Just a short hop across the Alps, Italy’s Alitalia is waging an increasingly desperate battle for survival, against the background of a steadily growing financial deficit.

Alitalia finds itself squeezed between the same two forces as Swiss – fierce competition from low-cost airlines, and the growing global dominance of the continent’s three major international airlines.

Despite a major restructuring plan, thousands of job losses and a €1.2 billion (SFr1.86 billion) government-backed recapitalisation plan, the airline still saw its operating loss (before interest and tax) reach €402.5 million last year.

And Alitalia, whose 184-plane fleet is more than twice the size of its Swiss neighbour, now faces a European Commission inquiry into the government bailout.

Olympic heights?

Greek airline Olympic Airlines is not in much better shape. Founded in the 1950s – as Olympic Airways – and nationalised in 1975, it has continued to make a loss ever since.

The name change in 2003, which was accompanied by the introduction of major restructuring measures, did little to help.

Now, as in Italy, the government is looking to extricate itself financially as soon as possible, but first it has to find a suitable negotiating partner.

The major interest to date has been shown by domestic rivals, in particular Aegean Airlines.

Same story elsewhere

Another European airline currently flying against the financial winds is Hungary’s Malev, which currently has debts amounting to €150 million.

A first attempt by the government to sell the airline to the highest bidder foundered last November, when the only consortium to express a serious interest failed to meet the minimum requirements.

Further north, Scandinavian airline SAS is also fighting a losing battle against the red ink, despite backing from the governments of Denmark, Sweden and Norway, which together own a 50 per cent stake.

However, aviation experts say there is currently little indication that the Scandinavian airline is a takeover candidate.

SAS is a member of the Lufthansa-led Star Alliance, which Swiss will now join.

Star quality?

Another Star Alliance member, Austrian Airlines, is also not on the market – at least according to CEO Vagn Sörenson.

Sörenson said on Tuesday that the Austrian government, which owns 40 per cent of the airline, did not plan to sell its stake in the foreseeable future.

He added that Lufthansa was happy with the "partnership synergies" already being realised through alliance membership and had no interest in spending more money on a direct acquisition.

Sörenson added that Austria was different from Swiss because it had a clearly-defined niche strategy of serving eastern Europe, Asia and the Middle East.

He said the main mistake made by Swiss since it was launched in 2002 had been to try to provide "global service with no specialisation".

However, the Lufthansa-Swiss deal was a reminder that Austrian Airlines needed support to improve service and cut costs – both from political leaders and from Vienna airport and domestic flight control agency Austro Control.

swissinfo, Chris Lewis

Key facts

Swiss was formed in 2002 by merging the remains of Swissair with the regional carrier, Crossair.
After a failed attempt to join the British Airways-led Oneworld alliance, Swiss accepted a second takeover offer from Lufthansa.
Swiss has failed to break even since it took off.

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