SWISS sees operating profit slip to CHF 306 million

“Our operating results for 2011 clearly reflect the crisis in Japan and the upheavals in North Africa in the course of the year,” says CEO Harry Hohmeister. “But they are also the product of a far-from-easy market, especially in the fourth-quarter period. While our load factors remain high,” he continues, “the yield situation is giving us sizeable cause for concern. We see little prospect of any improvement here at present; and these difficulties are being exacerbated by very high oil prices and the strength of the Swiss franc.” 



In response to these trends, SWISS has already initiated short-term actions to stabilize and improve its earnings for 2012. These include a hiring freeze for overhead functions and reappraisals and reductions of both representational expenses and the costs of external consultants. Parallel to this, SWISS is also involved in the broader long-term “SCORE Change for Success” structural results-enhancement programme of the Lufthansa Group. All in all, SWISS expects these endeavours to permanently improve its operating results by some CHF 100 million. “Given the changed parameters in which we are now operating, we must take substantial action now if we are to achieve a sustainable and recurrent improvement in our operating results,” underlines Marcel Klaus, SWISS Chief Financial Officer and SCORE Project Leader. 



Fourth-quarter earnings down 87% 

SWISS’s total income from operating activities for the fourth quarter of 2011 amounted to CHF 1,220 million – a 2% decline on the CHF 1,244 million of the prior-year period. Operating profit slumped 87%, from CHF 135 million to CHF 18 million. “We are facing two key challenges here,” explains CFO Marcel Klaus. “First, the strength of the Swiss franc is intensifying competition, as our rivals are working from a euro or a dollar cost base; and secondly, the rising fuel prices can only be offset to a limited extent by raising our own fuel surcharges.” 



SWISS increased its fourth-quarter capacity by 3.2% (Europe up 7.3%, intercontinental up 1.2%) compared to the prior-year period. The 37,216 flights operated were 4.4% more than in the comparable period of 2010. Total passengers carried numbered 3.75 million, up 4.1% on the 3.61 million of October-to-December 2010. Systemwide seat load factor for the period amounted to 80.9%, down 1.3 percentage points. Seat load factor for European services slipped 0.6 percentage points to 72.5%, while seat load factor on intercontinental routes also fell slightly to 85.2% (down 1.4 percentage points). Fourth-quarter capacity at Swiss WorldCargo was raised 7%. Cargo load factor for the period amounted to 79.4%, down 3.5 percentage points. 

Capacity and passenger growth in 2011 

“As our results trends for 2011 all too clearly show, high passenger numbers and seat load factors are only part of the story in the airline business, and don’t always translate into strong earnings results,” explains CFO Marcel Klaus. “Earnings per ticket and other factors such as currency movements and fuel prices are just as important.” 



SWISS transported more passengers in 2011 than any airline had done previously in the history of Swiss aviation. The 15,317,275 passengers carried were an 8.1% increase on the 14,168,718 of 2010. Total capacity in available seat-kilometres (ASK) was up 7.7%, while total traffic volume in revenue passenger-kilometres (RPK) was a 7.1% improvement on the prior year. Systemwide seat load factor amounted to 81.8%, slightly below the 2010 record of 82.3%. All in all, SWISS operated 150,131 flights in 2011, a 6.2% increase on the 141,405 flights of the previous year.  On its intercontinental routes, SWISS raised its ASK capacity by 6.8%. RPK traffic volumes increased by 5.5%. Seat load factor slipped accordingly to 85.7%, a decline of 1.1 percentage points. For its European network SWISS increased its ASK production by 9.4%. RPK traffic volume for the year was 10.6% up on 2010; and seat load factor showed a corresponding improvement, rising 0.8 percentage points to 74.3%. 



On the airfreight front, Swiss WorldCargo raised its total cargo tonne-kilometres for the year by 3%. Cargo load factor stood at 78.5%, a 2.6-percentage-point decline on 2010. 



Tables with detailed figures are available in the attached PDF document. 



Fleet expansion and new destinations 

SWISS continues to pursue its planned fleet expansion. Two further Airbus A330-300s – the eleventh and twelfth – joined the fleet in January and February 2012, and a thirteenth will follow in October. Two more new Airbus A320s will be delivered this spring. February saw the inauguration of SWISS’s 25th intercontinental destination, Beijing. Service on the new Zurich-Beijing route will be increased to daily from the end of May. Elsewhere, a new Geneva-Nice service was established, and further frequencies were added on the existing routes between Geneva and London, Moscow and Madrid. This May SWISS will be revising its schedules from and to EuroAirport Basel-Mulhouse-Freiburg. Direct service will be reintroduced between Basel and London City; the Basel-Brussels route will switch to a codeshare operation with SWISS partner carrier Brussels Airlines; and the existing Basel services to Budapest, Copenhagen and Manchester will be withdrawn, along with certain frequencies on further routes. 



Further increases planned in operational personnel numbers 

A total of 7,644 persons were employed at SWISS at the end of 2011 (2010: 7,506), or 6,326 in full-time-equivalent terms (2010: 6,140 FTEs). SWISS thus created around 200 new full-time positions in the course of 2011. The company will continue to make securing existing jobs and further expanding its workforce one of its prime priorities. The fleet expansion planned for 2012 should create some 300 new jobs in the cockpit and cabin alone. SWISS is also establishing its own line maintenance operation, which will add some 200 further jobs to the company workforce. 

A strengthened positioning and a sharper brand profile 

SWISS sharpened its brand profile in autumn 2011 to strengthen its positioning as “The Airline of Switzerland” and its strong focus on closeness to the customer and on product and service quality. Following completion of the corresponding programme in September 2011, the entire SWISS long-haul fleet is now equipped with the advanced new Business Class cabin. SWISS is the only carrier in Europe to offer a three-class product on all its intercontinental flights. 

Outlook 

Yields remain under pressure, and the market is still saddled with excess capacity. SWISS has already responded to these adversities, by making specific adjustments to frequencies and routes in line with changed and changing demand. “We are monitoring developments very closely, and will act swiftly to realign our capacities to the market situation as and when required,” confirms CEO Harry Hohmeister. “We have taken a number of actions to enhance our earnings already, and more will follow. Given the present pressure on margins, we will also need to reappraise our current pricing structures and consider fare increases, too.”