Swiss International Air Lines (SWISS) has reported earnings before interest and taxes (EBIT) of CHF 194 million for the third quarter of 2016, a 4.0% increase on the same period last year. EBIT for the first nine months of the year amounted to CHF 348 million. The 13.2% decline on January-to-September 2015 is due primarily to non-recurring items which boosted the prior-year earnings: the beneficial effects of new collective labour agreements for cockpit and cabin personnel and a more favourable currency hedging result.
SWISS achieved earnings before interest and taxes (EBIT) of CHF 194 million for the third quarter of 2016, a 4.0% improvement on the CHF 187 million of the prior-year period. EBIT for the first nine months of 2016 was 13.2% down, however, at CHF 348 million (Q1-3 2015: CHF 401 million). The decline is mainly attributable to last year’s conclusion of new collective labour agreements for cockpit and cabin personnel and its more favourable currency hedging result, which both impacted positively on earnings for the period.
Total income from operating activities amounted to CHF 3,571 million for the first nine months of 2016, a 2.6% decline from the CHF 3,666 million of the same period last year. Third-quarter operating income stood at CHF 1,293 million, a 1.3% decline (Q3 2015: CHF 1,310 million). The lower revenues are largely the result of a strong Swiss franc, which enables competitors to lower their prices and thus put pressure on SWISS’s revenue flows.
“2016 has always been a year of implementation for us,” says SWISS CEO Thomas Klühr. “In introducing the new Boeing 777-300ER on our long-haul network, putting our first Bombardier C Series aircraft into service on our short- and medium-haul routes and migrating to a new central reservation and departure control system, we have given ourselves several sizeable challenges. I am pleased to say that we have met and mastered much of these already, and remain on a very good track. At the same time, the present strength of the Swiss franc does substantially affect our revenue and earnings results. So it’s all the more heartening that our intensified collaboration within the Lufthansa Group is bearing its first fruits.”
Key figures from the income statement
1st to 3rd Quarter
3rd Quarter
in CHF million
2016
2015
Change
2016
2015
Change
Total income from operating activities
3,571
3,666*
-2.6%
1,293
1,310*
-1.3%
EBIT
348
401
-13.2%
194
187
+4.0%
* The total nine-month and third-quarter operating incomes communicated in 2015 were CHF 3,823 million and CHF 1,382 million respectively. Their restatement here is due to a change in the income-statement accounting of single-seat revenues from Edelweiss, in accordance with IFRS 15.
Outlook
SWISS will continue with its present fleet renewal programme as planned. A total of 30 new Bombardier C Series short- and medium-haul aircraft and ten new Boeing 777-300ER long-haul twinjets will have been put into service by the end of 2018, giving SWISS one of Europe’s youngest aircraft fleets. And the acquisition of the ten Boeing 777s alone will result in the creation of 400 new cabin crew positions.
SWISS also plans to equip the remaining five Airbus A340-300s in its fleet with a totally new cabin product, including a new inflight entertainment system and the provision of internet connectivity on board. As a result, the entire SWISS long-haul fleet will offer wireless internet facilities in all three seating classes by the end of 2018.
The persistent strength of the Swiss franc and the competitive disadvantage this entails will continue to weigh on revenue and earnings results. And in view of this, and (particularly) the absence this year of 2015’s beneficial non-recurring items, SWISS expects to post an annual EBIT result for 2016 that is below last year’s level.
More passengers in the first nine months
SWISS transported 12.495 million passengers in the first nine months of 2016, some 0.2% more than in the same period last year. The airline operated 111,116 flights in the period, 1.0% more than a year ago (Q1-3 2015: 110,027 flights). Total systemwide capacity was increased 6.2% in available seat-kilometre (ASK) terms, while total traffic volume, measured in revenue passenger-kilometres (RPKs), was raised 3.0%. Systemwide seat load factor for the first nine months amounted to 81.3%, down from the 83.9% of the prior-year period.
Total nine-month cargo sales were up 4.0% in revenue tonne-kilometre terms. Cargo load factor (by volume) amounted to 73.7%, a decline of 1.5 percentage points (Q1-3 2015: 75.2%).
New products and services
SWISS continues to consistently pursue its ‘Next-Generation Airline of Switzerland’ strategy. Six new Boeing 777-300ERs have been assimilated into the long-haul fleet, while its first new Bombardier C Series aircraft have also been delivered and put into service. The Boeing 777s offer passengers the further SWISS ‘first’ of internet connectivity and telephony on board.
SWISS has expanded its services for its customers elsewhere, too. The innovations here include a new à la carte meal option for Economy Class travellers on long-haul flights from Switzerland: in addition to the existing range of food and drink on board, passengers can now also pre-order from a range of exclusive further meals for an additional fee.
Customers also enjoy new features and benefits on the ground, following the opening of the new SWISS First Class, Business Class and Senator Lounges in Zurich Airport’s Terminal E. The new facilities bring even greater comfort and convenience to the air travel experience.
SWISS has also launched a new SWISS Holidays travel portal which enables customers to compile and book their own individual vacation package including the flights and the hotel. The new portal boasts a wide range of offers at highly attractive prices and at appealing tourist destinations all over the world.
To give further expression to its keen alignment to its customers and their wishes and needs, SWISS has also launched a new brand identity which is centred on the creative concept of ‘The little big differences’ and a new ‘Made of Switzerland’ claim. The new claim encapsulates all the key characteristics that distinguish the SWISS brand: Swissness, emotion and putting the customer centrestage.
