Switzerland’s loss-making national airline has been criticised for giving away too much to British Airways in its efforts to join the Oneworld alliance.This content was published on April 16, 2004 - 20:56
But in an interview with swissinfo, Swiss deputy chairman Walter Bosch defended the deal and said the carrier was on track to turn its financial fortunes around.
Bosch was appointed as right-hand man to chairman Pieter Bouw last month, following the resignation of CEO André Dosé.
Swiss has been burning money – at one stage at the rate of nearly SFr2 million per day – since it took to the skies in 2002 following the collapse of Swissair.
The carrier has spent the past two years cutting staff, taking aircraft out of service and ditching unprofitable destinations.
Last September Swiss signed a preliminary agreement with British Airways (BA) to join the Oneworld alliance - which also includes Qantas, Cathay Pacific and American Airlines – and simultaneously entered into a “strategic partnership” with BA.
Swiss had been casting around for an alliance partner and hailed the deal as a turning point.
But critics say the airline had to buy its way into the alliance by offering BA some of its lucrative landing slots at London’s Heathrow airport as security for a SFr50 million credit facility.
swissinfo: Swiss accepted an invitation to join the Oneworld alliance last year but membership negotiations continue. What is holding things back?
Walter Bosch: We are talking about two things here: one is the Oneworld alliance and the other is the strategic partnership with BA. These two issues are linked but are not the same. For the time being we are working on entry to the alliance and we have some problems with our partnership with BA - on both a technical and business basis.
Take the technical side of things. Integrating the frequent flyer programmes of BA and Swiss is very complex and is taking more time than we thought. But there are also some misunderstandings about what we give and what we take, because we don’t want to give out all our client data and receive nothing in return.
That’s under discussion right now, as is the issue that our frequent flyer programmes are different. BA, for example, only has 200 frequent flyer clients in its top tier, while at Swiss we have 1,200 at the highest level. So it’s very difficult to see how we can bring these two programmes together without hurting our passengers.
swissinfo: Some analysts have criticised Swiss for buying its way into Oneworld by, for example, offering some of its landing slots to BA as collateral. Isn’t the deal brokered by Swiss somewhat one-sided?
W.B.: No, I think that there are some advantages for both parties. It’s a fact that we are the small part of the deal and that we have to protect our interests. But basically it’s still a good idea to have this strategic alliance with BA and I’m sure we’ll sort out the problems that are there because we have no intention of changing our goal.
swissinfo: On Tuesday Swiss announced that it had filled more seats in the first quarter of 2004 than during the same period last year. But since the fleet is now much smaller than a year ago, does this really mean that you are making any progress?
W.B.: March was the best month we had in terms of filling seats and we are very positive about this. I am confident that very soon we will have a month when we break even and that will mark the turnaround as being successful.
We’ve gone through very tough times having to make one-third of our employees – 3,000 people - redundant. That whole process was very tough but is now finished. We also had to cut our fleet and the number of cities we fly to. We think we now have a sustainable model and that the business plan seems to work...so we are very confident that we will achieve a successful turnaround.
swissinfo: When do you think the airline might break even?
W.B.: In our business the first three months of the year are always very difficult and I think all airlines around the world lose money in the first quarter. But the second quarter – let’s say May and June - could show us positive figures.
swissinfo: This week a new airline, Premium Air, announced it was planning to launch business flights on the lucrative transatlantic route between Switzerland and the United States. Are you worried by the threat of new competition?
W.B.: For the time being, I’ve just heard this as a rumour. As long as they are not actually in the air there is nothing to worry about. I also think that we have a very strong position, we already have a lot of competition and I’m not really worried about having one more competitor.
swissinfo: The German airline, Lufthansa, has made it clear it intends to increase its market share in Switzerland by poaching Swiss business passengers. How concerned are you about this?
W.B.: Well, it’s always difficult to have a company that is so near to Switzerland and which tries to take our passengers away. But you could also argue that it’s not cheap to gain market share and they will have to think about how much they want to invest and how much this [potential] gain in market share will actually cost them in the end. So I think there are some limits to this [battle for market share] and we are well prepared to fight back.
swissinfo: How far advanced are ongoing negotiations with the banks on securing an additional credit line for the airline?
W.B.: Well, it’s the same old question and the same old answer. Talks are going on but there is no conclusion in sight. It’s complex but we are still confident of reaching an agreement. But I should say that the urgency is not the same as it was in the autumn when we were really faced with a very low liquidity.
We are confident that we are no longer under the same pressure and that we can manage with our own cash for much longer than we thought back in the autumn.
swissinfo-interview: Isobel Leybold
Walter Bosch was appointed as a deputy chairman at national airline, Swiss, in March following the resignation of CEO André Dosé.
He reports to chairman and acting CEO, Pieter Bouw, and is currently involved in the search for Dosé's successor.
The 60-year-old Bosch has previously served as editor-in-chief of the Swiss women’s magazine, “Annabelle”, and the tabloid newspaper, “Blick”.
In compliance with the JTI standards