Any remaining speculation that Swissair could be headed for an alliance with Air France has been brought to an abrupt end, with group chief executive Philippe Bruggisser taking the opportunity of the SAirGroup annual results round to kill the possibility stone dead.

Speculation had rested on the alliance ambitions of Delta Air Lines, Swissair's long-standing Atlantic Excellence partner. It already has a deal with Air France and has been moving to deepen the relationship as the French carrier re-emerges. Delta chairman Leo Mullin had been sounding out Swissair, among others, on the prospects of linking Swissair and its Qualiflyer grouping into a grand coalition. Bruggisser says his answer was an adamant "no".

"Delta has come to the conclusion that Atlantic Excellence by itself is not enough and that is their right. But that doesn't mean that we have to enter into an agreement with Air France," he says. The rejection hangs on three issues. Firstly, Swissair has no intention of being dragged into the kind of regulatory battle that entangled the British Airways/American deal. Secondly, there is too much overlap in services between Air France and the networks of Qualiflyer members, including Austrian Airlines, Sabena and TAP Air Portugal. SAirGroup also has its own recent French acquisitions in Air Littoral and AOM pending approval.

Finally, there is the issue of Air France's ties to its national government. "I've never seen Air France behave on sound economic terms," says Bruggisser. He remains to be convinced that will change, despite the planned partial privatisation.

"We have proposals in place if Delta drops us for Air France, but I don't think they will," he adds. A deal is already being put in place with American from Zürich and Brussels to Chicago. While Bruggisser is keen to stress that this is not a threat to Delta, he argues that it goes to demonstrate that the Qualiflyer alliance is "increasingly attractive" to partners on the Atlantic and beyond.

He remains dismissive of rival "virtual" marketing alliances, pointing to the equity links which bind most of Qualiflyer. A stake in TAP is still expected this year when privatisation finally gets into gear, although THY plans are on hold pending the outcome of Turkey's elections.

The Qualiflyer partners are signed up to a single frequent-flier programme with 1.9 million members. They also have largely the same airliners - except for THY - making possible a harmonised product.

But the core of the strategy is based on three key factors: to offer fastest connection times (aiming at 30min across the hubs); more destinations (now over 300); and greater frequencies, supplemented by lower-cost regional partners. In mid-March they were joined by Swissair Express, a new operation designed to feed passengers into Zürich from London Stansted.

"You should always sell the fastest connection within your system," says Bruggisser, arguing that hubs such as Vienna and Zürich, with their connecting terminals, are small and fast.

Swissair gauges that the Qualiflyer alliance helped generate an additional SFr50 million ($34 million) operating profit last year, with a similar benefit from Atlantic Excellence.

Additional Qualiflyer members are promised and, meanwhile, the SAirGroup is pulling together its expanded charter operations into a sister alliance under the European Leisure Group (ELG) brand. That will include the recently acquired businesses of LTUin Germany and France's Volare, as well as Air Europa, Sabena's Sobelair, SAir's Balair/CTA and a partial involvement from Crossair.

Bruggisser outlines a strategy which would see ELG as a complementary alliance, flying to places uneconomic for the mainline Qualiflyer airlines, but otherwise looking like a scheduled grouping.

If all goes well, Swissair could soon find itself with more freedom to operate within the European single skies market. After years of delay, an outline bilateral is going through the ratification process in the European Union - of which Switzerland is not a part. That is expected to be completed by 2001.

Source: Airline Business