Press
Airline Swiss struggles with image as fares fall. - 10/10/2003
By Annika Breidthardt and Jason Neely
10 October 2003
Reuters News
ZURICH/LONDON, Oct 10 (Reuters) - When Switzerland's flagship airline sought an image makeover to go with its $2 billion bailout last year, it turned to the London advertising man behind the trendy Wallpaper lifestyle magazine.
With "quality" and "Swissness" as buzzwords, Tyler Brule aimed for premium service, high style and full fares, but a year and a half on, Swiss International Air Lines (SWIn.S) is suffering a bit of an identity crisis.
Amid mounting losses, it has slashed fares in a battle with no-frills carriers, cut its schedule to the dismay of business travellers and is now charging some passengers for sandwiches.
Analysts are wondering if Swiss' budget behaviour risks alienating its core customers.
"An important precondition (for turning Swiss around) is that Swiss can win back clients' trust," said Zuercher Kantonalbank analyst Patrik Schwendimann.
Data from the first full month of its low-fares gamble show it is struggling to do that.
Despite cheaper fares and fewer flights, the percentage of seats Swiss filled in September fell to 75, off 2.3 percentage points from a year earlier.
"The September seat load factor is sobering and raises questions about the further course of the turnaround," said Schwendimann.
LOWER ALTITUDE
Its critics say the problem is passengers accustomed to premium quality are uncomfortable with Swiss adopting the tactics of the low-fares game - especially those who bought their tickets before prices were cut on early bookings.
All economy passengers now pay for food on board, charged as much as nine Swiss francs ($6.88) for a sandwich and four francs for a soft drink.
A spokeswoman for Swiss said resistance to the change was normal during the airline's transition.
"It's like when you go and buy a pair of jeans and you go back the next day and see it's cheaper," she said. "You are going to be disappointed, but that's normal."
Small upstarts are banking that long-time customers of the country's flag carrier will set aside their loyalties in search of lower prices.
Helvetic Airways, which plans to launch on November 28 from Zurich, will offer a 99-euro flat fare, for example.
"We have one big advantage, we don't have the ...legacy with Swissair and Crossair ...there's no pre-judgement," said Julian Cook, founder of one-plane newcomer Baboo Airways, which is set to start service from Geneva on October 27.
Swiss was formed last year by grafting parts of defunct Swissair on to regional carrier Crossair.
Passengers seeking the lowest fares may bypass Swiss for the no-frills carriers. On the Geneva-Lugano route, Baboo will offer a lowest fare of 49 euros compared to about 125 euros for a Swiss flight booked online and some weeks in advance.
Booked close to departure, prices would be upwards of 230 euros on both airlines.
BOOKINGS UP
Eyeing a profit by 2005, Swiss' gamble with lower fares comes as it cuts back flights, increasing the need to fill every seat it flies.
It flew 18 percent fewer passengers in September than it did in the same month a year earlier.
A Swiss spokesman said low-price bookings would be a bigger factor in coming months, with October passenger numbers already showing an upward trend.
With a long-waited alliance deal with British Airways (BAY.L) to enter the "oneworld" group of airlines clinched last month, Swiss' next job is to raise funds.
It has asked creditors for an additional cash cushion of up to 500 million Swiss francs ($382 million) ahead of an expected seasonal fall in winter bookings and mounting restructuring costs.
Its banks are confident a deal will be reached but say it is unlikely before Swiss general elections on October 19.
The government was instrumental in the bailout that created Swiss and remains the company's top shareholder.
By Annika Breidthardt and Jason Neely
10 October 2003
Reuters News
ZURICH/LONDON, Oct 10 (Reuters) - When Switzerland's flagship airline sought an image makeover to go with its $2 billion bailout last year, it turned to the London advertising man behind the trendy Wallpaper lifestyle magazine.
With "quality" and "Swissness" as buzzwords, Tyler Brule aimed for premium service, high style and full fares, but a year and a half on, Swiss International Air Lines (SWIn.S) is suffering a bit of an identity crisis.
Amid mounting losses, it has slashed fares in a battle with no-frills carriers, cut its schedule to the dismay of business travellers and is now charging some passengers for sandwiches.
Analysts are wondering if Swiss' budget behaviour risks alienating its core customers.
"An important precondition (for turning Swiss around) is that Swiss can win back clients' trust," said Zuercher Kantonalbank analyst Patrik Schwendimann.
Data from the first full month of its low-fares gamble show it is struggling to do that.
Despite cheaper fares and fewer flights, the percentage of seats Swiss filled in September fell to 75, off 2.3 percentage points from a year earlier.
"The September seat load factor is sobering and raises questions about the further course of the turnaround," said Schwendimann.
LOWER ALTITUDE
Its critics say the problem is passengers accustomed to premium quality are uncomfortable with Swiss adopting the tactics of the low-fares game - especially those who bought their tickets before prices were cut on early bookings.
All economy passengers now pay for food on board, charged as much as nine Swiss francs ($6.88) for a sandwich and four francs for a soft drink.
A spokeswoman for Swiss said resistance to the change was normal during the airline's transition.
"It's like when you go and buy a pair of jeans and you go back the next day and see it's cheaper," she said. "You are going to be disappointed, but that's normal."
Small upstarts are banking that long-time customers of the country's flag carrier will set aside their loyalties in search of lower prices.
Helvetic Airways, which plans to launch on November 28 from Zurich, will offer a 99-euro flat fare, for example.
"We have one big advantage, we don't have the ...legacy with Swissair and Crossair ...there's no pre-judgement," said Julian Cook, founder of one-plane newcomer Baboo Airways, which is set to start service from Geneva on October 27.
Swiss was formed last year by grafting parts of defunct Swissair on to regional carrier Crossair.
Passengers seeking the lowest fares may bypass Swiss for the no-frills carriers. On the Geneva-Lugano route, Baboo will offer a lowest fare of 49 euros compared to about 125 euros for a Swiss flight booked online and some weeks in advance.
Booked close to departure, prices would be upwards of 230 euros on both airlines.
BOOKINGS UP
Eyeing a profit by 2005, Swiss' gamble with lower fares comes as it cuts back flights, increasing the need to fill every seat it flies.
It flew 18 percent fewer passengers in September than it did in the same month a year earlier.
A Swiss spokesman said low-price bookings would be a bigger factor in coming months, with October passenger numbers already showing an upward trend.
With a long-waited alliance deal with British Airways (BAY.L) to enter the "oneworld" group of airlines clinched last month, Swiss' next job is to raise funds.
It has asked creditors for an additional cash cushion of up to 500 million Swiss francs ($382 million) ahead of an expected seasonal fall in winter bookings and mounting restructuring costs.
Its banks are confident a deal will be reached but say it is unlikely before Swiss general elections on October 19.
The government was instrumental in the bailout that created Swiss and remains the company's top shareholder.
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