Swiss dives deeper into the red

Swiss continues to sustain substantial losses Keystone

Swiss International Air Lines has announced a loss of SFr178 million ($136.36 million) for 2005, SFr38 million more than the previous year.

The airline, which is now a subsidiary of Germany’s Lufthansa, said on Thursday that restructuring costs of SFr41 million and currency adjustments of SFr65 million were the two main factors weighing on its result.

Swiss increased its total income from operating activities to SFr3.732 million and achieved a net result from operating activities before restructuring costs of minus SFr14 million (minus SFr122 million in 2004).

The restructuring costs were incurred in connection with the partial reduction in the surplus of pilots and the reorganisation of the company’s call centres and sales organisation.

The airline said in a statement the high cost of jet fuel eroded an additional SFr213 million from the operating result compared with the previous year.

It added that with competition still intense, the higher fuel costs could only partially be recouped by the fuel surcharges levied.

Substantial improvement

“Despite the high fuel prices and intensified competition, Swiss achieved a further substantial improvement in 2005 in its annual operating result,” commented chief executive Christoph Franz.

He said the restructuring programme was delivering results but the airline was still sustaining “substantial losses”.

“This underlines that we must continue to consistently pursue our current restructuring endeavours and must – as a top priority – bring our present collective labour agreement negotiations to a satisfactory conclusion.”

On the airline’s longer-term prospects, Franz added that to achieve the goal of securing sustainable profitability, Swiss had to deliver an Ebit (operating profit) margin of at least five to eight per cent.

Only then would Swiss have sufficient earnings power to support the prospect of future corporate growth.

Lufthansa

The airline’s parent company, Lufthansa, on Thursday reported net profit of €453 million (SFr713.76 million) for 2005, up by 12.1 per cent on 2004, despite record fuel prices.

Lufthansa’s chief executive and chairman, Wolfgang Mayrhuber said he was “highly satisfied” with the integration of Swiss into the German carrier.

“Synergies are surfacing faster and to greater effect than we targeted,” he said in a statement.

“Customers of both airlines are profiting from the tie-up; their response is entirely positive.”

Mayrhuber noted that the Swiss carrier was expecting to break even this year and return a profit in 2007.

swissinfo with agencies

Key facts

Swiss financial figures 2005

Total income from operating activities: SFr3.732 million
Loss from operating activities before restructuring: minus SFr14 million
Net loss: minus SFr178 million
Employees at year end: 6,094 (-531 compared with 2004)

Lufthansa financial figures 2005

Revenue : €18.065 billion
Net profit : €453 million

In brief

Swiss increased the number of passengers carried on its scheduled services in 2005, the first time this has been achieved since the company was founded.

A total of 9.56 million passengers were transported during the year, a 4.1% improvement on 2004.

The seat load factor (a key industry benchmark) was 78.1%, up 3.2 percentage points compared with the previous year.

Swiss saw its European yield (revenue per passenger kilometre) decline 5.7% year-on-year as continuing overcapacities in the market led to further stead fare erosion.

The yield for its intercontinental routes rose 8.6%.