SWISS generated total operating income of CHF 2,441 million in the first six months of 2015, a 3% decline on the CHF 2,523 million of the same period last year. But despite a strong Swiss franc and a tough competitive environment, the company posted first-half earnings before interest and taxes (EBIT) of CHF 214 million, a substantial increase on the CHF 114 million of the prior-year period. The much-improved EBIT result is primarily attributable to low oil prices and the actions taken to reduce costs.
Swiss International Air Lines (SWISS) generated total income from operating activities of CHF 2,441 million in the first six months of 2015, some 3% down from the CHF 2,523 million of the same period last year. The fall was due largely to continuing competitive pressures – especially in the Swiss home market and throughout Europe – and the associated yield declines. First-half revenues were also depressed by the strength of the Swiss franc against other currencies.
On a brighter note, fuel procurement activities felt the strong benefit of lower oil prices in the first-half period. And earnings were further boosted by the 360-odd actions that have now been launched on both the cost and the revenue side within the Lufthansa Group’s SCORE earnings enhancement programme. A total of 167 such actions had been adopted and concluded by the end of June, of which those designed to raise fuel efficiency and to expand Geneva market share remain some of the most important.
Thanks to these and further factors, SWISS reported first-half earnings before interest and taxes (EBIT) of CHF 214 million for the first half of 2015, a substantial improvement on the CHF 114 million of the same period last year.
Second-quarter EBIT raised to CHF 163 million
Market conditions remained challenging in the second-quarter period. At CHF 1,247 million, total operating income for the period was 6% down on the CHF 1,332 million of April-to-June 2014. Second-quarter EBIT was improved, however, from CHF 115 million to CHF 163 million. “These earnings results confirm to us that we are on the right track,” says SWISS CEO Harry Hohmeister. “But we still need to make our organization and our processes even more efficient, both within SWISS and throughout the Lufthansa Group, to make ourselves even more dynamic and responsive for the months and the years ahead.”
Stable load factors and passenger volumes
SWISS transported a total of 7.778 million travellers in the first six months of 2015, which was 0.6% more than the 7.735 million of the prior-year period. Some 0.9% fewer flights were operated: 70,870, compared to 71,518 in January-to-June 2014. But systemwide capacity was still raised by 1.4% in available seat-kilometre (ASK) terms.
Total traffic volume (measured in revenue passenger-kilometres or RPKs) was up 0.9%. Systemwide seat load factor declined accordingly, falling 0.4 percentage points from 81.7% to 81.3%. Airfreight division Swiss WorldCargo saw a 1.7% decline in its revenue tonne-kilometre sales and a 3.1-percentage-point fall in its cargo load factor (by volume).
For the second-quarter period, systemwide ASK capacity was raised 0.8% year-on-year while total RPK traffic volume suffered a slight 0.1% decline. Systemwide seat load factor saw a corresponding 0.8-percentage-point decline to 83.6%. Cargo sales for the quarter fell 5.0%, while cargo load factor was 4.4 percentage points below its prior-year level.
New distribution structure and a more customer-aligned fare concept
SWISS implemented various actions under its ‘Next-Generation Airline of Switzerland’ strategy in the first-half period. As well as adopting the new HUB+ business model for Zurich and adding further attractive destinations to both its Zurich- and its Geneva-based networks, the company announced at the beginning of June that it would be realigning its distribution strategy together with its sister airlines within the Lufthansa Group. The new strategy is intended to achieve a clear and more user-oriented cost differentiation between the various distribution channels.
As part of its overall sales and distribution structure, SWISS also introduced a radically new fare concept for Europe on 23 June. The new concept, which applies to all flights within Europe from Zurich and Geneva, is specifically designed to address changed travellers’ needs. Its four fare options of “Economy Light”, “Economy Classic”, “Economy Flex” and “Business” offer customers greater choice and transparency, by enabling them to select the fare that precisely meets their specific travel requirements and ensure that they only pay for those services that they actually wish to use.
New aircraft for even greater travel comfort
As a further element in its ‘Next-Generation Airline of Switzerland’ strategy, SWISS will be renewing its aircraft fleet from next year onwards. The first of nine new Boeing 777-300ER long-haul twinjets will be delivered in January 2016. The new fleet flagship will seat 340 passengers in SWISS configuration and offer a state-of-the-art cabin product in all three seating classes. Its inflight innovations will also include wireless internet connections.
In mid-2016 SWISS will also begin to take delivery of its new Bombardier CSeries aircraft for its short- and medium-haul networks. SWISS will be the first airline in the world to operate the advanced and efficient new twinjet, which consumes substantially less fuel, is 50% quieter and offers unit costs per seat that are 25% lower than comparable aircraft types. With its larger windows and more ergonomic seats, the CSeries will also provide even greater inflight comfort for SWISS’s guests aloft.
The strong Swiss franc will continue to exert a negative influence on both revenues and business operations. But under present conditions, and in view in particular of the currently low oil prices, SWISS expects to see a positive net impact on overall results for the year, and is confident of posting a full-year EBIT for 2015 that is a tangible improvement on last year.
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