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SWISS posts CHF 153 million EBIT for the first half of 2016

August 3, 2016 Financial No Comments Print Print Email Email

Swiss International Air Lines (SWISS) generated total income from operating activities of CHF 2,278 million in the first six months of 2016, a 3% decline on the same period last year (H1 2015: CHF 2,356 million). http://www.rembrandtbkk.com/EBIT for the period was 28% down at CHF 153 million (H1 2015: CHF 214 million). The substantial earnings decline is primarily attributable to non-recurring items in the first-half EBIT for 2015 deriving from new collective labour agreements for cockpit and cabin personnel, and to a higher prior-year currency-hedging result.

SWISS’s total operating income for the first half of 2016 was 3% down on the prior-year period at CHF 2,278 million (H1 2015: CHF 2,356 million). The decline was due largely to currency factors, with the present strength of the Swiss franc having an increasingly adverse impact on Switzerland’s business credentials. SWISS’s competitors are also taking full advantage of the new scope offered by the franc’s strength to lower their own fares, which is putting corresponding pressure on yields.

SWISS also suffered a decline in its EBIT for the first-half period, which was down 28% at CHF 153 million (H1 2015: CHF 214 million). The substantial decline here is primarily attributable to non-recurring items in the first-half EBIT for 2015 which derived from new collective labour agreements for cockpit and cabin personnel, and to a higher prior-year currency hedging result.

“Like many other Swiss-based companies, we are now clearly feeling the adverse effects of the Swiss National Bank’s abolition of its previous minimum Swiss franc/euro exchange rate,” says SWISS CEO Thomas Klühr. “At the same time, though, we are confident that with our strategic alignment and with the even closer collaborations that we plan in future within the Lufthansa Group, we are well placed and equipped to maintain our business success within this challenging market environment.”

Second-quarter revenues increased

SWISS did feel a certain easing in the pressure on its revenues in the 2016 second-quarter period. Total operating income for April to June amounted to CHF 1,208 million, up 0.4% on the same period last year (Q2 2015: CHF 1,202 million). EBIT for the quarter declined 20%, however, to CHF 131 million (Q2 2015: CHF 163 million).

Key figures from the income statement
1st half 2nd quarter
in CHF million 2016 2015 Change 2016 2015 Change
Total income from operating activities 2,278 2,356* -3% 1,208 1,202* +0.4%
EBIT 153 214 -28% 131 163 -20%

* The total first-half and second-quarter operating incomes communicated in 2015 were CHF 2,441 million and CHF 1,247 million respectively. Their restatement here is due to a change in the income-statement accounting of single-seat revenues from Edelweiss, in accordance with IFRS 15.

Outlook

SWISS will continue to modernize its aircraft fleet as planned. A total of 30 Bombardier C Series aircraft will have joined the fleet by the end of 2018, largely replacing existing short- and medium-haul equipment. The nine Boeing 777-300ERs which are currently being acquired will replace part of the present Airbus A340 fleet. The renewals will give SWISS one of the youngest aircraft fleets in Europe. At the same time, the continued strength of the Swiss franc and the competitive disadvantages this brings will continue to depress revenue and earnings results. SWISS expects to post an annual EBIT for 2016 that is below its prior-year level.

First-half passenger volumes broadly stable

SWISS carried 7.710 million passengers in the first six months of 2016, a slight 0.9% decline on the prior-year period. A total of 71,827 flights were operated, a year-on-year increase of 1.4% (H1 2015: 70,870 flights). First-half systemwide seat load factor amounted to 78.5%, down from the 81.3% of the prior-year period.

SWISS offered 4.0% more capacity systemwide in the first six months of 2016 in available seat-kilometre (ASK) terms. Total traffic volume, measured in revenue passenger-kilometres (RPKs), was raised 0.5%.

Total cargo sales for the first-half period were broadly unchanged in revenue tonne-kilometre terms. Cargo load factor (by volume) amounted to 74.0%, a decline of 2.6 percentage points (H1 2015: 76.6%).

Second-quarter passenger numbers also at prior-year levels

SWISS transported 4.212 million passengers in the second quarter of 2016 (Q2 2015: 4.246 million). Systemwide seat load factor for the quarter amounted to 81.0%, a 2.6-percentage-point decline. Total ASK capacity was raised 5.7%, while quarterly RPK traffic volume was up 2.4%. Revenue-tonne-kilometre cargo sales were increased by 4.3%, while cargo load factor for the period was 0.5 percentage points below its prior-year level.

Fleet renewal still on track

Despite the tough market conditions, SWISS continued to consistently pursue its present fleet modernization programme throughout the first-half period. A total of six new Boeing 777-300ERs are now in operation. The new long-haul twinjets also offer SWISS travellers the innovation of inflight internet and telephone connectivity. On the short- and medium-haul network, the new Bombardier C Series began to supersede the present Avro RJ100 fleet in July. Nine of the 30 C Series aircraft on order will be delivered this year.

SWISS has also been further expanding and refining its ground product for its premium customers, opening new First Class, Business Class and Senator Lounges at its Zurich Airport hub.

In a further development, SWISS assumed responsibility for all polymechanic and automation engineer training from SR Technics with effect from 1 August. The action is being taken in view of the company’s increased demand for such specialist personnel following the expansion of its Zurich aircraft maintenance operations.

As a result of the arrival of its new Boeing 777-300ERs and Bombardier C Series aircraft, SWISS will create some 500 new jobs by the end of 2018.

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