European carriers are warning of falling yields and the need for more cutbacks as signs of economic recovery fail to materialise.
Swiss International Air Lines is blaming "a worsening economic situation" for falling load factors, and will cut 27 routes and 20 aircraft - as well as 700 jobs. UK low-cost carrier EasyJet is also complaining of sinking yields, admitting that its attempts to keep load factors high by cutting fares as its capacity expands have hit its bottom line.
EasyJet shares plunged after the airline revealed its average fare was 6% lower in the four months to the end of January compared with the same period a year earlier. It warns that yields are set to fall further. Swiss is complaining that many of its business travellers are shifting from premium cabins to economy class.
EasyJet's attempts to differentiate itself from Ryanair by concentrating on more business-friendly frequencies and destinations has seen it hit by fare-cutting retaliation by established airlines.
Smaller European network carriers such as Swiss face growing competition and falling yields from low-cost competitors on their regional routes. Swiss is responding by cutting 17 regional jets and 27 European routes, but without a strong regional network it risks jeopardising the viability of its long-haul operation.
Analyst Chris Avery of JP Morgan says business travellers are now faced with low-cost alternatives that did not exist five years ago and may never return to high-cost, short-haul travel.
"Without an alliance, Swiss is too large for its hub...the Zurich population does not justify 24 long-haul jets," says Avery.
Source: Flight International
