Swiss posts significantly lower profit despite good load factor
Published: Tuesday, Oct 29th 2024, 14:10
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The mix of rising costs and low fares, particularly on long-haul routes, is putting pressure on the aviation industry. This is also being felt by the Swiss airline Swiss, which is expecting lower profits this year after a record year in 2023. The drop in profits is even more pronounced at parent company Lufthansa.
Swiss generated an operating profit of CHF 505.0 million in the first nine months of 2024, the company announced on Tuesday. This represented a decline of 18 percent, after revenue had even fallen by more than a fifth in the first half of the year. Falling ticket prices and rising costs were the reasons for this, it said.
In particular, personnel costs, aircraft maintenance costs and ground handling fees at airports and in air traffic control have risen significantly, explained Swiss CFO Dennis Weber in a conference call. "We assume that the cost pressure will continue in the coming quarters."
At the same time, the flight capacities offered by airlines around the world increased, which put pressure on prices, particularly on long-haul routes. Average prices for Swiss flights alone fell by around 4 percent in the third quarter, said Weber. And in view of the increased capacity offered by Chinese airlines, for example between Asia and Europe, the ticket price situation is unlikely to ease for the time being.
However, Swiss still made by far the highest profit in the Lufthansa Group, followed by the low-cost airline Eurowings. The Group's problem child is the Group airline Lufthansa, which even suffered a loss of 36 million euros in the first nine months.
High demand for air travel
Despite persistently low prices, Swiss is maintaining its wide range of flights. It has even expanded it due to the expected high demand during the summer vacations and beyond. In the first nine months, Swiss operated more than 108,000 flights, compared with a good 97,000 in the same period last year, and offered 12% more seat kilometers on its own route network.
Swiss managed to fill its aircraft well. The aircraft were filled to capacity with an average seat load factor of 84.5%. Swiss transported a total of 13.7 million passengers. This was 11 percent more than a year ago. Operating income climbed by 5.7% to CHF 4.2 billion, to which the growing cargo business, particularly in Asia, made an important contribution.
However, demand for air travel remains high despite wars and economic concerns. This was evident, for example, during the fall vacations from the end of September to mid-October for tourist trips to the Mediterranean, said the CFO. And with Christmas, business will pick up again towards the end of the year. However, Swiss is unlikely to match last year's record operating profit.
Lufthansa will sparen
Swiss is not alone in the aviation industry in this respect. The Lufthansa Group, which in addition to Swiss and Lufthansa also includes Austrian, Brussels and Eurowings, increased its revenue by 5 percent to 28.1 billion euros in the first nine months of 2024. At the same time, however, Group profit halved to 830 million euros.
This is another reason why CEO Carsten Spohr is taking action at the main Lufthansa Airlines brand: A savings program is to improve the adjusted operating profit by 1.5 billion euros gross by 2026. To achieve this, Spohr wants to shift more flights to airlines with lower operating costs within and outside the Group. What this will mean for the workforce is not yet known. Ticket prices are also set to rise.
Swiss is also hoping for rising market prices and wants to make its processes more efficient in order to counteract the rise in costs. To this end, it is investing in the modernization of its fleet, with further A320Neo aircraft and two new long-haul A350s being added in the coming year. Additional money is being invested in improving catering and seats, while the airline continues to work on its punctuality.
©Keystone/SDA
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