Transatlantic start-up Swiss World has been forced to suspend operations at the start of December, only three months after inaugurating its low-fare Geneva-New York route. The airline blames the collapse on its inability to raise capital in the current economic climate, although sources close to the carrier talk of mistakes having been made in areas such as US marketing.
Chief executive Peter Leishman says he was trying to raise another $20 million to enable it to remain afloat until the airline could reach break-even point. "In hindsight, had we raised the whole of the required capital a year ago when the situation was more favourable, we would still be operating," he remarks.
He dismisses suggestions that low load factors were to blame. The airline started off with aircraft only 25% full, then gradually built it up to 33%, with December's figures looking to reach 55%, Leishman says. A break-even level of around 60% on average within one year of operations would, therefore, have been entirely feasible. But he agrees that the Geneva market was small and needed developing.
The drive to launch Swiss World came two years ago after Swissair's decision to move the bulk of its intercontinental flights out of Geneva and concentrate at its Zürich hub. After repeated delays, the new Swiss competitor eventually launched services on 10 September with a leased Boeing 767-200ER. Analysts identify the cost of the aircraft as part of the problem, pointing out that the lease of a nearly-new widebody to an untried start-up is rare.
Leishman says that he has not given up. Talks are continuing with potential investors, but he cannot put a realistic timeframe on a restart of the service. For the people of Geneva and its airport, the failure of Swiss World is yet another blow which will further alienate the French speaking city from its larger neighbour.
By way of contrast, another of Europe's recent transatlantic start-ups, Belgium's unashamedly low-cost CityBird, turned in its first profits in the third quarter of 1998. Unlike Swiss World, CityBird had signed up an interline agreement with its local flag carrier Sabena, a move which it says helped raise public awareness and took summer load factors to above 80%. It equally took the opportunity of charter work to fill its aircraft.
CityBird also had cash, including funds from an early public offering, allowing it to stay in business long enough to mature. The airline, which launched in March 1997, says that the "maturity reached" by the September quarter has allowed it to hit costs of only ó3.4 per available seat kilometre (ó5.4 per mile).
A cargo business is also being developed as another sideline. Alease has been signed with Airbus for two A300-600 dedicated freighters to arrive by June and contracts are in hand with "major cargo companies"to sell the whole capacity leaving little risk.
Source: Airline Business
