Although earnings from the extensive handling, catering and engineering businesses are likely to keep SAir in profit for 2000, losses have been growing within the SAirLines division, which groups together the core airline holdings of Swissair, Crossair and Balair. The financial performance of SAir's European airline investments - Sabena, Air Liberté, Air Littoral and AOM - also worsened in the second half of the year.
As other major carriers saw profits improve over the summer, SAir continued to suffer. According to investment bank Schroder Salomon Smith Barney, its shares underperformed against the rest of the European airline sector by 22% for most of the year.
SAirGroup chief executive Philippe Bruggisser was forced to quash speculation over an impending sale of the airline businesses. Financial analysts generally agree that there is little immediate need for a fire sale, quite apart from the likely political fall-out which would accompany the disposal of the Swiss flag carrier.
However, SAir may have more innovative options centring on the Airline Management Partnership (AMP), the umbrella organisation which already runs the combined Swissair/Sabena. Andrew Barker, air transport analyst at UBS Warburg, believes that SAir may seek to sell a stake in AMP rather than an individual carrier. Others too agree that the long-term strategy remains centred on giving AMPa critical mass, potentially to stand alone in future. SAir now holds key but minority stakes in a range of flag carriers around the world including South African Airways and LOT Polish Airlines.
Sabena is a major problem for SAir, with operating losses expected to rise to SFr230 million ($133 million) for the year. However, Barker comments that the Sabena and Swissair operations have been too closely entwined to make divorce an attractive proposition.
Barker also believes that SAir will give itself more time to work on the performance of its loss-making French airlines. "It is only at the beginning with these carriers, and it is too soon to get out of them," he says. SAir and its partner, Taitbout Antibes, plan to inject a further $270 million into the French holdings.
Chris Tarry, analyst at Commerzbank, argues that SAir has been here before in facing questions over the future of Swissair. He believes that the management should hold its nerve and continue with the strategy of building mass in each of the group's businesses, including a broader base in the airline sector from which to negotiate future deals.
Source: Airline Business
