Swiss International Air Lines unveiled the foundation for a solid future at today’s Annual Results Press Conference. ÊSWISS reported a better-than-expected financial position thanks to progress in restructuring, the gradual recovery in the markets it serves, and careful cash management. The operating loss for 2003 amounted to CHF 498 million, a sharp improvement over the CHF 909 million loss reported for the previous year. ÊLiquid assets of CHF 503 million at the end of 2003 also exceeded expectations. Detailed figures for the 2003 business year are presented in the separate media release about financial results.
Liquidity of CHF 503 million
Active cash management is playing a key role in SWISS’s turnaround. Liquidity-improving measures implemented in the course of 2003 are having a positive effect. The consolidated balance sheet at December 31, 2003 showed liquid funds (cash and cash equivalents, fixed-term deposits and marketable securities) of CHF 503 million. The actions taken helped limit the net outflow of liquid funds during the fourth quarter to CHF 152 million, despite the negative effect of restructuring costs and the delivery of five new Airbus A340s.
Within the overall framework of its imminent membership of oneworld, SWISS entered into a strategic alliance with British Airways. In addition to commercial considerations, the terms of the alliance included British Airways’ provision of a CHF 50 million financial guarantee. This guarantee permitted the conclusion of a credit agreement for this amount with Barclays Bank plc on March 12, 2004. SWISS drew the full credit amount on March 16, 2004.
Independently of liquidity trends in the light of business operations, SWISS is striving to create a liquidity buffer to cushion the impact of any unforeseen events. To this end, the company has been involved in intensive negotiations for several months with the major Swiss banks and international financial institutions abroad. As the negotiations also involve the refinancing of part of the SWISS aircraft fleet (these assets will serve as collateral on the loan amount), the discussions are extremely complex and are taking more time than was originally envisaged. With the company’s liquidity developing better than expected, the loan from Barclays Bank already in place, the summer months with their stronger revenue flows coming up and substantial cost reductions effected, the time pressure on concluding these negotiations has been significantly reduced, compared to the time of launch of the restructuring programme. According to current planning the liquidity level is expected to stay above CHF 250 million, even at its lowest point in the second quarter of 2004, with expectations of a further increase thereafter.
Restructuring is 60 per cent complete
In the middle of 2003 SWISS decided on a new direction for the company. Today’s airline is smaller, more efficient and more dynamic. The company was able to initiate the turnaround in less than a year with good prospects of success. At this point some 60 per cent of all the measures intended have been implemented. SWISS expects to push ahead with the final third of the possible improvements. The full impact of these measures will only become apparent next year because of restructuring costs and the longer time factor of the processes involved.
Route network capacity was reduced by 21 per cent and the fleet downsized from 111 to 83 aircraft (2004 summer timetable: 82 aircraft incl. 3 Charter). The streamlining of the route network and further measures are taking effect. Capacity utilisation on SWISS aircraft in December 2003, measured in terms of average seat load factor (SLF), rose to 74.6 per cent. This is an improvement of almost six percentage points compared to the level of 68.7 per cent for the same period a year earlier. The proportion of transfer passengers of total passenger volume fell significantly, which had a positive impact on average yield per passenger.
The workforce was reduced by 2530 full-time positions by the end of 2003, with an additional 670 trimmed in the first quarter of 2004. More favourable contract terms were negotiated with the five major suppliers, which reduced unit costs by 20 per cent. Administrative and personnel costs were also reduced decisively. Once all measures have been implemented these will be 50 per cent lower, generating repeating annual savings potential of CHF 600 million.
The Board of Directors will propose a capital reduction at the Shareholders’ Meeting on May 6, 2004 in order to prevent net equity from falling below half of the share capital. The proposal is to reduce the nominal share value from CHF 32 to CHF 18. This measure would also have tax benefits for the company.
Board of Directors election
At the Shareholders’ Assembly of May 6, 2004, the Board of Directors will propose the extension of membership on the board for Pieter Bouw, Claudio Generali, Jacques Aigrain, André Kudelski, Michael Pieper, Urs Rohner and Peter Siegenthaler, who were elected in December 2001 for a period of three years. This extension would run until the next ordinary Shareholders’ Meeting in 2005.
The period in office for board members Walter Bosch and Audun Reinas runs Êuntil the ordinary 2006 Shareholders’ Meeting.
Head Flight Crews and Training
The Board of Directors has promoted Gaudenz Ambühl, currently Vice President Flight Crews and Training, to the position of Executive Vice President Flight Crews and Training. In this function Ambühl is responsible for fleet operations and is head of the SWISS pilot corps. The Executive Vice President Flight Crews and Training reports directly to Head of Operations, Managing Director Manfred Brennwald.