The steep rise in fuel costs since the beginning of the year and the absence to date of cost concessions from its prime aircraft maintenance partner have prompted SWISS to adjust its EBIT objective for 2004. Current projections suggest that the company’s business performance for the year could fall short of a breakeven operating result. Additional measures to improve results have already been introduced.
The SWISS Board of Directors noted the revised projections for the year when it met today. The meeting was also informed by Board member André Kudelski that he would be relinquishing his seat, in view of differences of opinion on the alliance issue.
The latest developments in the price of crude oil and the associated steep increase in aviation fuel costs are having an adverse impact on SWISS’s business results. If the price of kerosene remains at its current level of USD 360 per tonne, the company will incur unplanned additional costs of approximately CHF 85 million for this expenditure item.
If SWISS had retained the fuel hedges which it sold earlier in the year, these unplanned additional costs would have amounted to CHF 65 million. SWISS sold these hedges in the first quarter to add CHF 20 million to its liquidity position. The sale, coupled with further actions on the cash management front, has provided the company with sufficient liquidity. This is substantially above the CHF 250 million originally projected, and remains unendangered by the current fuel price situation and excessively high maintenance costs.
SWISS may be unable to achieve its previously-declared EBIT objective for 2004 also in view of its inability to date to achieve cost savings with maintenance, repair and overhaul provider SR Technics, its most important partner in expenditure terms. Under its “Foundation for Winning” restructuring programme, SWISS successfully negotiated cost reductions with all other partners and suppliers. Only with SR Technics has an acceptable result not yet been achieved, despite nine months of tough negotiations.
SWISS is taking appropriate action in the light of these developments; and the company will continue to do its utmost to ensure that, despite these adversities, its operating result for 2004 is as close as possible to breakeven.
Board member resigns
André Kudelski (44) has offered his resignation as member of the SWISS Board of Directors. His resignation follows a divergence on the assessment of the consequences of the entry into oneworld under the conditions imposed by British Airways. The Board of Directors has accepted the resignation with great regret, and thanks André Kudelski for his involvement and contribution in his function as a Board member since December 2001. ÊÊÊ
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