Kevin O'Toole/GENEVA

SWISSAIR PRESIDENT-elect Phillippe Bruggisser has put some steel behind a new campaign to drive down costs at the airline group, including plans to shed at least another 1,600 jobs.

He also expresses determination, echoed throughout the management team, to press ahead with the controversial decision to scale down long-haul operations at Geneva, in favour of Zurich.

Bruggisser, speaking at the group's annual press conference in Zurich on 18 April, issued a stark warning that Swissair could not survive the fierce competition of a deregulated Europe unless further heavy cuts are made in its traditionally high cost base.

Swissair has already shaved around one-third off costs, over the past five years, but the group is still grappling with falling yields and the strength of the Swiss franc.

The latest drive, outlined earlier this year, is designed to add around SFr500 million ($415 million) to the bottom line by 1998. The underlining financial goal is to achieve a 12% return on capital, more than double the group's present performance.

Bruggisser says that this will include the loss of some 5% of the group's 33,000-strong workforce, but believes that the bulk of these will be achieved through an early-retirement programme being launched by the group. Workers who take up the offer will receive 70% of existing salaries.

Among the immediate actions being taken is the decision to pull 15 intercontinental services out of Geneva, leaving Switzerland's French-speaking capital with daily US services to New York and Washington as its only long-haul Swissair services.

The move has come under fierce attack from the local community, forcing the Swiss Government to step in to ask for a compromise. Swissair has until the beginning of May to present new proposals, but managers appear to rule out a major reversal of their decision.

Bruggisser brushes aside any suggestion of seeking Government subsidies to maintain unprofitable services. He also warns against efforts to boost services at Geneva by giving free access to outside carriers, although some within the airline believe that this is a growing political possibility.

Financial analysts have long been looking for signs of a new resolve within Swissair to drive down costs. The robust performance from Bruggisser, who is now the group's chief operating officer, but takes over the top job from Otto Loepfe at the start of 1997, appears to be sending out the right signals.

The results of previous restructuring efforts have already begun to show through in the 1995 financial results. At group level, including the fast-growing airline catering business, pre-tax profits were at their best for five years, at SFr200 million. That was more than wiped out by a SFr365 million provision to cover the airline's retirement scheme and other measures.

The core airline operation also managed to push operating profits above SFr100 million, having achieved little better than break-even the year before. Yields fell by more than 7%, however, leaving revenues marginally down, while the strength of the Swiss franc wiped an estimated SFr34 million off profits.

Over the next three years the airline's target is to achieve a 20% cut in seat costs and to raise average load factors from 65% to 70%.

An early chance for productivity improvements comes from the current round of pilots negotiations which managers believe could now be completed before July.

By 1998, Swissair also aims to turn around the losses at its partner, Belgian flag carrier Sabena, in which it holds a 49% stake, representing the Belgian carrier's first profit for around two decades.

Bruggisser says that Sabena's turnaround is largely on course, although profits had been hit by 1995's series of strikes.

Source: Flight International