SWISS reports an operating profit of CHF 61 million for the first six months of 2012 – 53% down on the same period last year. The decline is attributable to a still-difficult economic and business environment, the continuing pressure on yields (especially in Europe), the strength of the Swiss franc and high fuel prices. Total first-half operating income amounted to CHF 2,452 million, a 2% increase on the prior-year period.
Swiss International Air Lines (Group) achieved a further increase in its total income from operating activities for the first six months of 2012. The CHF 2,452 million generated were a 2% improvement on the CHF 2,406 million of January-to-June 2011. At the same time, however, operating profit for the period declined 53% from CHF 129 million to CHF 61 million.
SWISS’s second-quarter results were substantially below expectations. The CHF 65 million operating profit was 42% down on the CHF 113 million recorded for the second quarter of 2011. Second-quarter operating income was up 2.2%, from CHF 1,257 million to CHF 1,284 million.
The declines in operating profit are due primarily to the still-difficult market environment, the continuing pressure on yields (especially in Europe), the strength of the Swiss franc and high fuel prices. “The crisis in our industry is hitting us, too, and we see no sign of any upturn here any time soon,” says SWISS CEO Harry Hohmeister. “We are pleased to report that we did manage to further increase what were already high seat load factors,” he continues. “But this was far from enough to offset the continuing yield declines: air fares are still at very low levels.” In response to these trends, SWISS is currently studying a number of structural adjustments, for its European operations in particular, to restore its business to profitable levels.
Improvements to service patterns and fuel management
SWISS took several actions in early 2012 to bolster its results, including a temporary freeze on all new recruitments to administrative functions. On the revenue side, fares were also raised in spring on both European and intercontinental routes. Modifications have also been made to the service patterns between the home markets of Lufthansa Group member carriers as part of the group’s SCORE earnings enhancement programme, which is focused on effecting long-term structural improvements. Steps have also been taken to optimize fuel management under the same drive; and further group-level synergies are currently being explored in the procurement and administrative fields. “We will be making more structural adjustments in the months ahead,” confirms SWISS Chief Financial Officer Marcel Klaus. “These will include looking at our processes on board and on the ground, at our current aircraft utilizations and at further possible enhancements to our route network.”
Further increases in passenger volumes and seat load factors
Some 7.7 million travellers flew SWISS in the first six months of 2012, 4.5% more than in the prior-year period (2011: 7.37 million). The airline operated a total of 75,269 flights, up 0.9% on the 74,613 of January-to-June 2011. And systemwide seat load factor for the period amounted to 81.3%, a 1.7-percentage-point improvement on the 79.6% of the same period last year.
Systemwide capacity (in available seat-kilometres or ASKs) was raised 3.9% in the first six months of 2012. The increase was fully absorbed by demand: total traffic volume (in revenue passenger-kilometres or RPKs) was 6.0% up on the prior-year period.
SWISS again posted an impressive performance in punctuality terms. Some 82.5% of all flights departed within the permitted 15 minutes of their scheduled departure time during the first-half period.
Total cargo sales for the period were a 3.4% improvement on their prior-year equivalent. Cargo load factor (by volume) remained unchanged at 79.3%.
Tables with detailed figures are available in the attached PDF document.
SWISS remains a key generator of business and jobs, offering young people who are fascinated by flying the chance to pursue their career in the air transport sector. A total of 7,975 persons were employed at SWISS at the end of June 2012 (2011: 7,572), or 6,722 in full-time-equivalent terms (2011: 6,286 FTEs). The fleet expansion planned for 2012 should create some 300 new jobs in the cockpit and cabin alone. SWISS establishing its own line maintenance operation added some 200 further jobs to the company workforce.
Fleet, product and network
SWISS continues to invest in modernizing its product and its aircraft fleet. The eleventh and twelfth of 15 new Airbus A330-300s were delivered in January and February, and a further such transport will follow in October. Two new Airbus A320s also entered service this spring. February saw the addition of a 25th intercontinental destination, Beijing. Load factors on the new Zurich-Beijing route are very high and above expectations. A new Geneva-Nice service has also been introduced, while further frequencies have been added to London, Moscow and Madrid. The new SWISS Arrival Lounge at Zurich Airport was opened in April; July has brought a further new facility in the form of a baggage pick-up service for travellers departing from Zurich; and SWISS has also become the first Swiss company to offer its customers an expanded 24-hour service via its social media channels.
Given the present market environment and the uncertainties over coming economic developments in Europe, SWISS expects its operating result for 2012 as a whole to fall short of the CHF 306 million profit recorded last year. “In view of the continuing negative developments we are seeing, we will also have to revise our investment and growth policy between now and 2020,” Harry Hohmeister adds.