Chris Jasper/ZURICH

Swissair is launching a codeshare deal with Thai Airways International in a move that casts doubt over Thai's long-term future within the Star Alliance.

The Asian carrier is due to be partially privatised through the sale of a 23% stake - with 14% going to a foreign airline partner. Although Swissair parent SAirGroup says that it is too early to say whether it will bid, airline sources suggest that an investment would be strategically desirable.

Thai president Thamnoon Wanglee has indicated that he is unhappy with the entry into Star of rival Singapore Airlines (SIA) from next month. Although the carrier later pledged its allegiance to the group, it is known to fear a major loss of revenue as partner carriers begin codesharing with SIA.

The deal with Swissair will see Thai codeshare on 14 weekly return flights between Zurich and Bangkok from 26 March, with each operating seven of the services.

Swissair chief executive Jeffrey Katz, meanwhile, says a merger between SAir subsidiaries Air Europe and Volare of Italy is under discussion. SAir sources also confirm that talks continue over the merger of its French subsidiary, AOM, with British Airways' Air Liberté.

Katz says the sticking point in Italy is that although SAir holds a 49% stake in both carriers, each is controlled by a different majority owner. On Air Liberté, the source says "there has been wide-ranging contact over the last month", although "there is nothing to announce at the moment". The source adds that "a codeshare would be one possibility, then ranging up from there to a merger".

Katz expects the French and Italian domestic and regional markets to undergo "major consolidation" in the next year and says Swissair and the associated Qualiflyer group are determined not to miss out. A bid for Italy's up-for-sale Meridiana "is a possibility".

Katz adds that Swissair is happy to remain outside a major global alliance and, although he concedes that the carrier has had "lots of contact with BA", he says any loss of autonomy would be unacceptable.

SAir aims instead to strengthen its hand through developing its diversified non-airline subsidiaries, expanding Crossair and Sabena and its Zurich hub, developing the Qualiflyer group and building more route-specific alliances such as that with Thai.

In Portugal, Katz says, TAP Air Portugal and Portugalia will stay separate, partly because of union opposition to a merger, with the latter being developed "as a Crossair to Air Portugal's Swissair".

SAir announced poor results for 1999, when it says it was hard-hit by general market overcapacity, which damaged yields. Fuel price rises were also a factor.

While SAir saw sales rise to SFr13 billion ($7.8 billion), 15% up on 1998, profit before interest and taxes fell 8% to SFr643 million and net profit by nearly a quarter to SFr273 million. The SAirLines and SAirLogistics divisions performed badly, but SairServices and SAirRelations helped to offset the decline.

Source: Flight International