A year ago, when Swissair first presented Philippe Bruggisser as the incoming chief executive, he promised to take a firm hand with the group's costs and inject a touch more pragmatism to its alliance strategy. Twelve months later, Bruggisser appears to be making headway on both fronts.
His chance to show a new resolve came swiftly. One of his first tasks was to defend the controversial decision to move a block of intercontinental services from Geneva into the main hub at Zürich - a test of resolve if ever there was one, given the tense politics between Switzerland's French- and German-speaking capitals.
The commercial sense of concentrating flights in Zürich is hard to question in a country barely big enough to support a single international hub, but the political fall-out has been fierce and lingering.
Geneva still refuses to fill its seat on the Swissair board, and there has been recent talk of setting up a rival airline in the city. Few details have emerged about the proposed venture, but there are clear political overtones to the talk of challenging Swissair, presumably on the remaining profitable services to New York.
Despite the recriminations, Bruggisser has hard figures to support the decision to move. The African routes were the first to be transferred to Zürich in October, and in the three months since the airport showed a 55%rise in transfer traffic.
Bruggisser's crusade on costs is also beginning to show through. Airline unit costs fell by 9%in 1996, reaching the equivalent of around c7 per available seat kilometre(ASK), and the aim is to keep the momentum rolling in 1997. Bruggisser, who argues that Swissair need not be a high-cost airline, is targeting a figure of below ó5/ASK by 1999, which would take the airline down to the sort of levels being achieved in the USA by carriers such as Southwest Airlines.
Backing up the drive is a new agreement with flightcrews which effectively lowers fixed wages by around 5%, but allows employees to recoup the difference through profit-sharing if financial targets are met. "We want to make staff more dependent on our results," says Bruggisser. The programme to shed 2,000 existing jobs across the group, largely through early retirement and attrition, should also be completed in June. Productivity has mushroomed, with fewer people handling a rise of some 9% in traffic and capacity in 1996, an improvement which is due to gather pace this year as capacity again increases by nearly 12%.
Bruggisser says that the battle is not yet won, warning of a "shake out still to come" as liberalisation in Europe causes the same upheavals which hit the US industry in the wake of deregulation. "We must improve our cost base and, perhaps, may have to take further tough measures to stay competitive," he adds.
To gain some further leeway, the group set aside SFr300 million ($205 million) in the 1996 results to hedge against the pitfalls of liberalisation. Speculation has been rife about secret agendas for the provision, but Bruggisser insists that no decisions have been taken. The provision came on top of the SFr276 million write-down of the group's 49.5% holding in Sabena, and Bruggisser admits that it seemed prudent to bundle up all the bad news into a single year.
A further drive towards commercialising the Swiss group came towards the end of 1996, when Bruggisser also unveiled a new holding-company structure, creating the SAir holding company heading four independent businesses: SAirLines, covering Swissair and Crossair; SAirLogistics for cargo: SAirServices for airport and engineering services; and SAirRelations taking in the growing catering and hotel businesses. The aim is to free each of the units to make the necessary acquisitions or alliances, he says.
In another controversial move, Bruggisser has outlined plans to hand over direct control of SAirLines to Jeffrey Katz, a Californian and former senior manager at American Airlines. Two other top jobs will go to British Airways managers. Again, the aim is to give Swissair a sharper commercial sense and a more international outlook.
There are some signs that the long-running talks over a deal to bring Switzerland into the European Union's single air-market may begin to yield a solution. Previous attempts have foundered over Swiss penalties on road haulage, but fresh talks, due to take place in June, come amid signs that a deal on the issue could be close. Bruggisser plays down expectations, although he admits that a deal looks more likely than it did in 1996. "Better access to the European Union has an impact, but it's not a solution that makes everything else possible," he says, Even if talks are successful, it would take until 1999 before the legislation passes through Switzerland's labyrinthine legislative process.
If there are clouds on the horizon for Bruggisser, then they come in the form of the alliance strategy which he has inherited.
Sabena's finances remain in a critical state and Bruggisser admits that Swissair is standing back to see if the Belgian carrier can achieve its target of break-even by 1998 and profits by 1999. If not, the Swiss group warns that it may have to think again.
The alliance with US carrier Delta Air Lines continues to develop, backed by the Swiss-US open- skies deal, but Swissair's transatlantic partner has also been in discussions with Air France. Swissair's long-standing European partner, Austrian Airlines, is also in a process of restructuring after effectively taking control of Lauda Air and Tyrolean Airways.
Bruggisser, however, shows few signs of losing sleep strategising, preferring to concentrate on the more immediate pragmatic task of getting Swissair into shape.
Source: Flight International
