SWISS to re-position itself

24 June 2003

Headed firmly for a turnaround, SWISS is to take drastic action to cut costs: 34 aircraft are to be withdrawn from services and around 3000 jobs will be lost. The new and massively reduced SWISS is reacting to far-reaching changes in the airline market: on intercontinental routes SWISS will offer its usual premium quality in three classes, whilst on European routes, passengers will in future be able to choose between alternative price and comfort levels themselves. In a meeting held on 23 June, the Board of Directors of Swiss International Air Lines approved the cornerstones of the new Business Plan. The essentials of the plan involve reducing the long-haul fleet to 18 aircraft, the medium-haul fleet to 21 and the regional fleet to 35. All in all, the number of seat-kilometres is to be cut by 35%. The changes will become effective on the 2003 winter timetable.

The enduring crisis in the airline industry points to sector-wide consolidation. Only healthy, well positioned companies will survive. The SWISS management has decided to take incisive action in response to this development. SWISS must reduce both its network and its fleet, continue to cut costs and shed a substantial number of staff. The SWISS Board of Directors is convinced that the planed restructuring is an essential condition for the survival of SWISS.

Premium on long-haul routes – efficient and cost-effective in Europe
SWISS plans to launch an innovative European concept this autumn, when it will become the first scheduled service airline to offer both a Premium Business Class and an extremely competitively priced Economy Class on European routes. This in order to meet customer demands for competitive cost levels. By doing so, SWISS aims to allow its customers to select which level of price-performance suits their individual requirements. The customer makes his or her choice, and pays only for what he or she actually wants. In the future, those who book Economy Class will have to pay for food and drinks. In Business Class, however, passengers can look forward to the usual SWISS service.

This new European concept will supersede both the previous pricing structure and temporary promotions (e.g. Swiss Europe Savers) within Europe. All European flights will be sold at transparent prices with clearly defined services. Outward and inward flights may be mixed as desired (e.g. Economy Class outward, Business Class back) depending on departure times, time of booking, availability and the customer’s personal preferences. All European flights will be operated either by SWISS or by Swiss Express.

Measures on the way
The benchmark figures set out in the Business Plan provide for a reduction in costs totalling CHF 1.6 billion.

Network and fleet

The first step in the direction of profitability is to make the necessary adjustments to our network. Focusing on profitable routes and destinations with a promising future will provide the basis for all further action. The network must, therefore, be trimmed by up to 35%. In line with this, there will also be a substantial reduction in the number of destinations served from all SWISS locations in Switzerland. On the precise number and choice of destinations to be eliminated SWISS is informing first its partners. The key markets will be maintained in the network.This reduction in destinations and frequencies will allow us to reduce our fleet to 74 aircraft (excl. Charter). We will retain 18 aircraft in the long-haul sector (MD-11, A340, A330), 21 in the medium-haul sector (A320 family) and 35 in the regional sector (Saab, Embraer, Avro).
Job losses
The reductions in our network and fleet will inevitably mean corresponding job cuts, i.e. around 3,000 redundancies. This is a painful measure, and SWISS is consulting with the unions to find the most partnerly solutions. Around 700 cockpit jobs, around 850 cabin jobs and up to 1500 jobs on the ground are affected.

Next steps
The cornerstones of the new Business Plan, and hence the long-term survival of SWISS, can only successfully take effect if everyone – staff, trade unions, suppliers, creditors and official authorities – pulls together in the same direction. The turnaround requires a clear commitment to the future of SWISS. Over the next few weeks we will therefore be calling on all those involved to find viable solutions which are necessary for success.
Ruling by the court of arbitration
The court of arbitration has stipulated that a proportional zipper system should apply to job losses amongst the two SWISS pilot corps. This will mean unaffordable costs and expenditure as well as unacceptable operational restrictions for SWISS until the contract with SWISS PILOTS expires in 2005.

This is a situation which jeopardises the implementation of the new Business Plan, and hence the company’s survival.

The SWISS Board of Directors has therefore decided to enter into immediate negotiations about the collective working agreements with all trade unions. Compromises will be required on all sides if the ambitious goal of the new Business Plan is to be achieved.
Bearing in mind the difficult situation the company expects the full willingness of the parties concerned to have discussions concluded until July 15 in order to have clarity on further options that will have to be taken.

OutlookSWISS remains committed to the same goal: to remain a leading airline with an international network that is carefully tailored to customer needs. Excellence on intercontinental routes and efficiency on European flights are where our future lies. The restructuring will also lead to a strengthening of the company’s position in the alliance negotiations.

To protect that future, SWISS will concentrate in priority on the unwavering implementation of restructuring, safeguarding our credit lines and creating the conditions to be a healthy partner to co-operate with. SWISS relies on the commitment of all its partners in these efforts.