Swiss International Air Lines (SWISS) generated total income from operating activities of CHF 4.95 billion in 2017, a 3.2% increase on the CHF 4.80 billion of the previous year. The improvement was primarily achieved through the deployment of larger aircraft and higher load factors on both the passenger and the cargo front. Earnings before interest and taxes (EBIT) for the year were raised 31%, from CHF 429 million to CHF 561 million. In addition to the higher revenues, the substantial EBIT improvement is attributable largely to consistent cost management and operating a more efficient aircraft fleet. SWISS will continue to invest in its premium product and offer its customers even more opportunities to individualize their air travel experience. For 2018 SWISS expects to report an earnings result that is slightly below its 2017 level, in view of the continuing competitive pressures and the substantial renewed rise in oil prices. And for the years ahead it will be crucial that prospects be created at Zurich Airport for further growth in response to demand, to ensure that SWISS and Swiss aviation can continue to hold their own in the global air transport market and thereby help Switzerland, too, to retain its competitive credentials.
SWISS increased its total income from operating activities by 3.2% in the 2017 business year, from the CHF 4.80 billion of 2016 to CHF 4.95 billion. The rise is primarily attributable to the deployment of larger aircraft. Encouragingly, the additional capacities were also extensively sold on both the passenger and the cargo front. Traffic and revenue volumes were further buoyed by favourable economic trends and a weaker Swiss franc. The operation of not only bigger but also more efficient aircraft, consistent cost management and the low price of jet fuel all combined to boost annual earnings before interest and taxes (EBIT), which, at CHF 561 million, were a 31% improvement on the CHF 429 million of the previous year. Adjusted EBIT (EBIT excluding non-recurring items such as profits from fixed asset sales) amounted to CHF 553 million (2016: CHF 429 million). These 2017 earnings results are among the best in the company’s history.
Fleet renewal bears fruit
The fleet renewal which was initiated in 2016 was continued throughout the past year. Two further long-haul Boeing 777-300ERs were delivered to replace two Airbus A340-300s. And on the short- and medium-haul front, three Bombardier CS100s and seven CS300s joined the SWISS fleet, replacing the remaining Avro RJ100s. “Our investments in our premium product are reaping their rewards,” says CEO Thomas Klühr. “I am very pleased that, for the third year running, we have exceeded our target EBIT margin of eight per cent. This enables us to maintain our investment capability in the longer term and to further grow in response to demand.”
Total income from operating activities for the fourth quarter of 2017 amounted to CHF 1.24 billion, up 1% on the CHF 1.23 billion of the previous year. Fourth-quarter EBIT was raised 24%, from CHF 82 million to CHF 101 million.
Continuous investments in the premium product
SWISS will continue to invest in its premium air travel product throughout 2018. March saw the opening of the new First Class Lounge in Zurich Airport’s Terminal A, which also features its own security check. The terminal’s modernized Business and Senator Lounges will also open this summer. Summer will further see the commencement of the cabin refurbishment programme for SWISS’s five long-haul Airbus A340s in all seating classes. Once this is complete, all SWISS long-haul aircraft will feature internet facilities on board. The SWISS short- and medium-haul fleet will also be progressively equipped with internet connectivity aloft from 2019 to give the company one of the most advanced fleets in Europe and a consistent product both on the ground and in the air.
“SWISS Saveurs”: a new food and beverage concept for Geneva
To meet customers’ changed and changing needs, SWISS plans to offer its guests more opportunities in future to shape their own individual air travel experience. To take one example, from the end of May onwards travellers on short- and medium-haul services from and to Geneva (excluding New York and Zurich) will be able to enjoy an expanded inflight culinary concept known as “SWISS Saveurs”. The new approach will enable all SWISS travellers to design their personal inflight food and drink experience beyond the basic product included in their fare. Business Class passengers will be able to choose from the full “SWISS Saveurs” range free of charge. Economy Classic and Economy Flex travellers will continue to have a free snack and drink included in their fare, while Economy Light travellers will receive free mineral water under their fare category. All Economy Class travellers are free to supplement these basic food and drink features with quality items from the extensive “SWISS Saveurs” range (including many traditional Swiss brand names) for an additional fee. The wide range of fresh “SWISS Saveurs” products is being developed and produced by the Geneva arm of Globus, the Swiss retailer.
SWISS expects to report an Adjusted EBIT result for 2018 that is slightly below its prior-year level. Efficiency gains from the fleet renewal should have a beneficial impact on earnings; but this is likely to be more than offset by adverse trends in the form of higher oil prices and intensified competition.
Prospects needed for demand-based further growth
For the years ahead it is vitally important that prospects be created at Zurich Airport for further business growth in response to growing demand. Hub Zurich is already operating at its absolute capacity limits in peak hours. So any additional limitations – such as the further restriction of the airport’s operating hours – would be particularly severe, and would jeopardize SWISS’s entire Hub Zurich business model. The present arrangement under which certain flights are permitted to depart after the official night curfew of 23:00 enables SWISS to accommodate delays that have accumulated during the day on its feeder services, allowing connections to still be made onto these late-evening departures to Asia, Africa and South America. Any actions to abolish or curtail this post-23:00 departure facility would mean the abandonment of some of SWISS’s present attractive long-haul routes, since these would no longer be economically viable without the connecting traffic concerned. And this in turn would have wide-ranging consequences for other services throughout the SWISS network.
“Zurich Airport already has more operating restrictions than any comparable airport in Europe,” says SWISS CEO Thomas Klühr. “With all these limitations, the airport and its users simply cannot provide the growth needed to respond to the growing demand for air travel in the mid-to-long term. So we must work together with our system partners and all relevant further stakeholders to design today the Hub Zurich of tomorrow, provide SWISS and Swiss aviation with the parameters they need to hold their own in the global market arena and ensure that Switzerland, too, retains its competitive credentials.”