Swiss reports “substantial loss” for 2020 due to Covid pandemic and considers further cost-cutting measures

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Due to the Covid-19 pandemic, Swiss’ total revenues for 2020 of CHF 1.85 billion were a full 65.2 per cent below their prior-year level, the group has reported.

Adjusted EBIT for the year amounted to CHF -654 million compared to 2019’s CHF 578 million.

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The group said that “the very weak results” for the fourth-quarter period further increased the losses for the year as a whole.

“Radical” actions initiated as early as March 2020 helped stem the losses to a certain degree, but with “ever-clearer” signs since the beginning of 2021 that the airline industry is undergoing major structural change, Swiss is now considering further measures to ensure its future viability.

It reported that the company’s Swiss WorldCargo division made a disproportionately high contribution to its 2020 results, in view of the strong demand for cargo transport services, not least for medicines and further medical items.

Fourth-quarter revenues totalled only CHF 311 million, a 75.7-per-cent decline on the prior-year period. Adjusted EBIT for the period amounted to CHF -239 million.

“The coronavirus pandemic and the resulting travel restrictions have posed a huge challenge for us,” said Swiss CEO, Dieter Vranckx. “And this, combined with the air transport sector’s relatively high fixed costs, has meant that our industry has been hit a lot harder than others. We have radically reduced our costs in response – to preserve our liquidity and ensure that we are in the best possible business shape for the further challenges ahead.”

As soon as the pandemic developed, Swiss initiated numerous actions to maintain its liquidity and lower its costs, adopted short-time working companywide and deferred until further notice any projects and further investments that were not essential to its operations. “

Thanks to these immediate and drastic cost saving measures, and also to the strong contribution from Swiss WorldCargo, we were able to keep our losses for 2020 within reasonable bounds,” concluded Swiss CFO Markus Binkert. “We expected to report annual results of these dimensions, and have incorporated them into our financial and liquidity planning. What we didn’t expect was for the situation to worsen again since the beginning of this year. We are still losing around CHF 2 million a day. So we now have to further intensify our cost saving endeavours.”

Action packages have already been agreed with the company’s social partners for its cabin crew members and its ground personnel. The negotiations with its pilots’ staff association Aeropers on a viable new collective labour agreement suited to the present crisis times have not yet been concluded.

The company also expects to have reduced its workforce by some 1,000 full-time positions by the end of 2021 through a combination of natural turnover, early retirements and new part-time working arrangements. These actions also include a 20 per cent reduction in the numbers of upper management personnel.

Swiss is further reducing its management board from four to three members: Chief operating officer Thomas Frick will step down from his function as planned at the end of March 2021, but will remain active for the company under a project-based arrangement

With renewed lockdowns and additional travel restrictions imposed in response to new coronavirus variants, and with the slow progress of vaccination programmes, the group adds that the market situation has tangibly worsened since the beginning of this year. Swiss’s production for March is at only some 25 per cent of its 2019 levels, and the present minimal flight operations in Geneva have had to be extended until the end of this month.

“The situation has substantially deteriorated since 2021 began,” confirms CEO Dieter Vranckx. “It is now abundantly clear that the entire airline industry will undergo tangible structural change. As a result, we at Swisswill also have to consider a more radical resizing than we have envisaged to date. And any reduction in the size of our aircraft fleet would also impact directly on our route network, our cost structures and our organisational structure. But no decisions have yet been taken here.”

The Covid-19 pandemic has prompted a slump in passenger volumes. Swiss transported a total of 4,790,372 passengers in 2020, some 74.5 per cent fewer than the previous year. A total of 48,069 flights were operated, a 68.2 percent year-on-year decline. Systemwide capacity for the year was 66.4 per cent down on 2019 in available seat-kilometre (ASK) terms. Total traffic volume, measured in revenue passenger-kilometres (RPK), was 76.8 per cent below its prior-year level. Systemwide seat load factor amounted to 57.9 per cent, a year-on-year decline of 26.1 percentage points. Seat load factor for Europe was substantially higher than its long-haul equivalent.

The recovery which the group had been hoped for in the first quarter of 2021 has failed to materialise. But with further progress in Covid vaccinations and with demand likely to have been only deferred, Swiss still expects to have its capacities back to around 65 per cent of their 2019 levels in the course of the third-quarter period. Private travel is likely to recover sooner than business travel here.

“The present pandemic is posing our company its greatest-ever challenges,” Vranckx concludes. “We have every confidence, though, that SWISS can continue to provide Switzerland with an extensive network of direct air services for both passengers and cargo all over the world. If we are to do so, however, we will need to have a set of mobility-promoting parameters in place that are as standardised as possible – which also means, for us, the equal treatment of all transport routes, means and modes.”

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