Swiss International Air Lines cites lower yields, a weaker cargo business, inflation and higher fuel and personnel costs contributed to lower profit for the first quarter of 2024.
The Zurich-based carrier’s adjusted earnings before interest and tax (EBIT) for the first three months of the year fell 57% to CHF30.7 million ($33.6 million).
That said, Swiss was the only passenger airline in the Lufthansa Group portfolio to report a profit for the period.
“As anticipated, the exceptional market conditions that our industry experienced immediately after the pandemic have continued to fade,” said Swiss’ outgoing chief financial officer Markus Binkert during a first-quarter earnings call. While demand for travel remains high, capacity has increased across the board.
”This is tending to bring yields down from their prior-year levels – at our company, too,” he adds. “Normality has returned on a high level.”
The airline also saw a ”sizeable weakening” of its air cargo business, which had benefited from particularly strong tailwinds during and immediately after the Covid-19 pandemic.
“Given that the first quarter of the year tends to be one of the weaker ones for seasonal reasons, we are satisfied with this earnings result,” he adds.
The strikes at Swiss’ parent Lufthansa and across the German service sector, as well as the war in the Middle East have had a noticeable effect on the airline, Binkert says. Swiss had suspended its flights to Tel Aviv and Beirut, for example, and airspace over Iran and Iraq was closed for a period.
“It shows how volatile the environment is,” he says. “We feel these operational themes – it led to detours, and with that came increased costs and higher fuel consumption.”
The airline says it transported 3.7 million passengers in the first three months of the year, 17% more than in the same period in 2022.
Swiss says the upcoming summer travel season is shaping up to be a busy one, and it is taking measures to make it smooth.
“The annual results of airlines are determined by the second and third quarters, which are traditionally the strongest,” Binkert says. “Following the experience over Easter, we anticipate we will have a very travel-intensive summer ahead of us.”
Even though business travel has stagnated, holding at about 70% of pre-pandemic levels, Binkert says the airline is seeing a bump in “premium leisure” travel, characterised by a “strong demand for first and business class” by non-business travellers.
The company is also working hard on improving its on-time performance. In the full year 2023, Swiss had posted a dismal 60% on-time performance rate. It has begun implementing changes to raise that to 80% in the next two years.
“It’s a wide variety of measures and projects, including increasing staffing at critical points, building-in operational buffers with our aircraft, working with [ground handler] Swissport and the [Zurich] airport and other stakeholders, and shoring up our IT systems,” he says.
The airline has also been adversely affected by the Pratt & Whitney geared turbofan engine problems, which will sideline numerous Airbus narrowbody aircraft during the year.
“The effects will be in the double-digit millions,” Binkert says. “We are working closely with Pratt & Whitney and other stakeholders to mitigate the issues, we are using wet lease aircraft, extending the life of older aircraft, and we will be able to fly our schedule as planned.”
“It will have a certain after-effect, we will feel it into 2026,” he adds.
Compensation has been discussed but full compensation for the losses is “not likely possible”.
It was the final quarterly results conference for Markus Binkert, who will be leaving the carrier at the end of next month following an almost two-decades-long career with the Group.
Earlier this year, Swiss announced that both Binkert and chief executive Dieter Vranckx will be departing in the course of 2024. Binkert will be replaced by Dennis Weber, currently Lufthansa Group head of investor relations.
Swiss has not yet named a successor for Vranckx, who will become chief commercial officer at Lufthansa Group, while remaining deputy chair of Swiss’s board of directors.
Vranckx has led the company since 2021, through its post-Covid restructuring, including paying back all of the airline’s government-guaranteed bank loans as well as those from Lufthansa Group – ahead of schedule – earlier this year.
Also next month, Oliver Buchhofer, currently head of operations at Lufthansa, will join the Swiss management board in the role of chief commercial officer.
