Swissair certainly has its plate full. While the carrier is making forays into neighbouring Italy competition from lower cost operators is growing at home.

After a string of false starts, Swiss World Airways (SWA) has got off the ground at Geneva, following Swissair's decision 16 months ago to move most of its services from the French-speaking city to its German-speaking rival Zurich.

SWA started flying on 10 September, with a daily service from under-served Geneva to New York/Newark. The company has plans to add Zurich-Newark to its schedule on 1 November. Services from Basle to Washington and Montreal are planned by early next year.

The company is the latest in a string of budding independent start-ups on the transatlantic market. But chief executive Peter Leisham appears determined that his company will follow in the footsteps of London-based Virgin Atlantic, rather than Belguim's low-cost City Bird. Belgian flag carrier Sabena holds an 11% equity stake in City Bird with which it began a codesharing and wet-leasing arrangement between Brussels and the Americas in May. "I do not envisage an agreement with Swissair," says Leisham.

SWA is concentrating on business traffic and claims to offer similar economy class fares to Swissair, but a competitively priced business product. Leisham, a former easyJet and Debonair employee, says his company "-doesn't need to be much lower cost than Swissair to be competitive". With low overheads and a non-union workforce, he expects to turn a profit by the end of the second year of operations, a goal which will require a minimum 60% load factor.

Despite Leisham's claim that SWA will be "-stimulating the market and does not pose a threat to Swissair", there is no doubt that the airline"s launch will put unwanted pressure on Swissair's transatlantic operations at a time when the company also has to contend with a short haul challenge from easyJet's TEA venture.

Launched last December, the no-frills carrier's new acquisition is running at 75% load factors. Over the next two to three months it will be boosting frequencies to London Luton out of Geneva, and also Zurich, from where it begins flights in November.

Frank Wade of aviation consultants SH&E, believes that Swissair's lower cost short-haul subsidiary, Crossair, is well placed to respond to easyJet's challenge. Swissair's biggest problem, he says, is the KLM/Alitalia alliance, based around Amsterdam and Milan's new Malpensa hub.

To cope with this, Swissair, whose nationality prevents it from taking advantage of the liberalisation of the European Union air travel market, is trying to gain a foothold in Italy. Following the start up earlier this year of Basle Euroairport-based ECA, in which Crossair holds a minority stake, Swissair bought in September a 34% stake in Volare, an Italian short haul charter operator. Volare launched in April with two Airbus A320s.

The Volare investment, which will complement Swissair's existing long-haul charter operator Balair/CLA, does not affect Swissair's drive to buy into ltalian low-cost operator Air One, the company says. The drawn-out nature of the talks, however, suggests that Air One may be biding its time in the hope that more attractive partners may arrive.

Source: Airline Business