Swiss – on the final straight to significant fleet renewal

The winter in Europe is coming, so the ski and snowboard resorts in Switzerland are finishing their final preparations for the long lasting tourist season. This mountainous country is well known for its impressive sceneries, long slopes and a few of the most prestigious ski areas in the world. Zermatt, St. Moritz, Davos are the most obvious examples but for snow sports enthusiast, the options are almost endless there. Tourism is an important component of Gross Domestic Product of Switzerland. In 2014 it generated 16 billion CHF. Among the visitors the largest group were Germans (nearly 13% of overnight stays) and Dutch (almost 5%). Switzerland has a population of around 8 million and area of 41 thousand square kilometers. It is known for decades as the safest place for rich people to keep their savings. Financial institutions like UBS, Credit Swiss or Zurich are the examples of multinational companies from this sector with headquarters in Switzerland. All of them distinctively care about the secrecy and confidentiality of their customers, becoming a role model of such organizations worldwide.

Lai da Palpuogna Switzerland_ flickr_transformer18_(CC BY 2.0)

Lai da Palpuogna Switzerland, source: transformer18, Flickr, (CC BY 2.0)

The long and snowy winter is eagerly expected as it may further stimulate the country’s effective and successful battle with the results of recent Swiss National Bank decision to stop protecting Swiss franc. Strong appreciation of this currency, which was an outcome of it, is not good both for the foreign skiers and the exported goods which might become less attractive for international buyers being more expensive. Luckily for ski resorts in the country, the number of snow guaranteed areas in Europe is limited. What’s even more important the products of Swiss economy are mainly technology advanced, hardly substitutable and high-margin. Industries like watches production, pharmaceuticals, energy trading, banking, chemicals or other premium goods enable the country to fight successfully with the difficult situation. As a result of those factors, mutual efforts and the strength of the economy, according to various sources the Swiss export will grow by remarkable 1,5% this year instead of falling significantly. The most successful and famous Swiss brands are Nestle (food and beverage), Novartis and Roche (pharmaceuticals), ABB (automation, robotics), Adecco (human resources), Tetra Pak (packaging) or Swatch (watches). Justifiably the country is one of the most competitive economies in the world.

Swiss Airbus A330-300_flick_Aero Icarus_(CC BY-SA 2.0)

Swiss Airbus A330-300, soirce: Aero Icarus, Flickr, (CC BY-SA 2.0)

The coming winter as well as the first half of 2016 will be very important for Swiss International Air Lines (LX). The new Boeing 777-300ER (77W) planes will start arriving early next year replacing the gas guzzling and around 15 years old Airbus A340-300 (A343). 2 engine Boeing airplanes will use 23% less fuel than 4 engine Airbus machines. In combination with the larger capacity both passenger (340 seats versus 219 seats) and cargo, 77W will introduce higher level of comfort and performance helping the LX to win the customers. LX is now part of Lufthansa group but still has a lot of freedom while designing its strategy. As Swiss made products have been known over the years for its unmatched quality and exemplary workmanship while designing and producing it. LX would like to derive from this heritage being the “premium” brand in Lufthansa Group portfolio. According to the CEO of the company Mr Harry Hohemeister only Swiss made by Swiss makes sense. His ambition is to permanently put legendary service quality, punctuality and reliability, for years identified with Switzerland, into the carrier DNA, pleasing even the most refined passengers. The time will tell if Lufthansa ambition of becoming 5-star airlines won’t disrupt LX plans to be the quality leader among the group.

Swiss Airbus A340-300_flickr_Aero Icarus_(CC BY-SA 2.0)

Swiss Airbus A340-300, source: Aero Icarus, Flickr, (CC BY-SA 2.0)

New Boeing’s will be configured in 3 class layout with first, business and economy seats. After short crew familiarization process on European routes, Swiss will fly their new aircrafts initially from Zurich (ZRH) to New York (JFK – March 2016) and a month later to Montreal (YUL) and Hong Kong (HKG). On the direct route from ZRH to New York, Swiss competes with USA big 3 carriers (United, Delta and American). They all use ageing fleet of Boeing 767-300 on this rotation which are on average 20 years old. Currently LX uses modern (about 5 years old) A330-300 (A333) on this flights, offering the best service and luring the premium passengers. 77W will widen the gap between Swiss and the competition even more being the obvious choice for everyone who cherish modernity and style. The link between ZRH and YUL is operated solely by Swiss, flying there with A333, however Air Canada (AC) operates 6 times per week from GVA to YUL with B763. This planes, which are already 24 years old will be substituted by A333 (on average 15 years old) starting from November 2015. Both airlines were rated for 4 stars by prestigious aviation ranking site Skytrax.com. The last among of the initial 77W routes is ZRH to HKG, which is being served by five star Cathay Pacific (CX) and Swiss. Right now CX has a better product (Boeing 777-300ER) than LX which uses the old and worn A343. This is about to change in April when Swiss with its new 77W will try to even the race. It will be hard in economy class as CX has 3-3-3 configuration in its triple seven’s while LX plans to install 10 seats abreast which automatically makes the experience worse. It is hard to blame Swiss for such seat plan when even the best carrier in the world (according to Skytrax) Qatar Airways will take delivery of 3-4-3 configured Boeings 777-300ER’s soon. Big birds from Everett (town near Seattle where 777 family is produced) will not be the only novelty in Swiss fleet. LX is the launch customer of the Bombardier C-series planes which will start arriving in Switzerland in the first half of 2015. CS100 and CS300 aircrafts are the newest narrow body planes in the world being both super efficient (25% less fuel burn then Avro RJ100) and silent (50% of the noise level emitted by Avro RJ100). The CS100 will replace RJ100 which maintenance is barely viable. The CS300 will be delivered in the beginning of 2017 and due to its larger size and economics will give the airline plenty of flexibility and options for further development. It is high time for LX to start modernizing its fleet as only A333 may be called new. A319 are nearly 19 year old, A320, A321 and A343 – 15 year old. The Switzerland is famous for its ability to utilize equipment and machinery up to its limits, being a true masters of keeping it in the good shape, however as LX wants to target premium travelers they must begin fleet renewal process as soon as possible. In any case this is exactly what they will be doing next year. The delay in Cseries introduction was not Swiss fault but caused many problems and frustration among the management team. Right now everything seems back on its track as CS100 certification process reaches 90% mark. Additionally LX may count on some A320neo’s (up to 15 – 10 A320 and 5 A321) ordered by the mother’s company which will replace the oldest Airbus narrow bodies in the future. As mentioned above, Swiss International Air Lines is now a part of Lufthansa group with a revenue of 30 billion EUR and nearly 106 million carried passengers in 2014. Apart from LX the company owns Lufthansa (LH), Austrian Airlines (OS), Eurowings/Germanwings (EW/4U), Brussels Airlines (SN) and SunExpress (XQ). Swiss together with its sister company Edelweiss Air (WK), which is a holiday airline, hosted 17,3 million travelers (Swiss itself 16 million) on boards of their planes with the load factor of 83,7%. Moreover LX seems to be in  a very good financial situation meeting the set targets and improving the operating result by 28%, up to 289 million EUR in 2014.

Zurich Airport_flickr_Michael Coghlan_(CC BY-SA 2.0)

Zurich Airport, source: Michael Coghlan, Flickr, (CC BY-SA 2.0)

From its hub in Zurich Airport Swiss serves 24 long haul destinations (including more distant medium-haul flights, above 4500 km). The only five cites connected directly with ZRH, which are not operated by LX are Seoul (ICN) by Korean Air (KE), Orlando (MCO) by Delta Air Lines (DL), Washington (IAD) by United (UA), Toronto (YYZ) by Air Canada (AC) and Abu Dhabi (AUH) by brand new Boeing 787-9 of Etihad Airways (EY). This shows how strong Swiss is in its primary hub. The airport itself is very well rated both by passengers and experts (press/internet). In top ten airports of 2015 ranking made by Skytrax it was on the 6th place and in ACI survey on 4th place in Europe. This is a clear signal that the strategy of the airline and airport coincide, making it a very good proposition for potential premium passengers. In 2014 ZRH handled 25,5 million passengers and was the 16th busies airport in Europe. It has 3 piers which are called separate terminals A, B and E. Zurich Airport size is compact enough to guarantee 40 minutes’ minimum connecting time making plane transfer efficient and pleasant. Swiss introduced the “HUB+” concept in ZRH which expands the traditional hub and spoke system by adding some point to point destinations.

Geneva airport_flickr_eGuide Travel_(CC BY 2.0)

Geneva Airport, source: eGuide Travel, Flickr, (CC BY 2.0)

Geneva Airport a second hub of Swiss is smaller than ZRH. In 2014 GVA hosted around 15 million passengers which is not bad for the city with a population of 200 thousand inhabitants. Since 2009 GVA is constantly growing each year, becoming 32nd busiest airport in Europe. Swiss has only one long haul route from this city and it is New York (JFK). There are 7 other medium/long-haul routes (above 4500 km) from GVA operated by: Air China (to Beijing-PEK), United Airlines (Washington-IAD), Air Canada (Toronto-YYZ and Montreal-YUL), Etihad Airways (Abu Dhabi-AUH), Emirates (Dubai-DXB) and Qatar (Doha-DOH). GVA has two terminals, however only one of them (Terminal 1) is used whole year round. Terminal 2 serves as a supplementary capacity during winter charter service. Currently its Pier C has been completely reconstructed and extended for the needs of big wide body planes. In combination with one of the longest runways in Europe, Geneva Airport is ready to host even Airbus A380 or Boeing 747.

Fleet modernization which will soon begin in Swiss is a chance to adjust airline product to quality and service standard set down by management and take full advantage of such strategy. The new aircrafts together with more appeling interiors will bring industry leading economy and performance which should put Swiss among the best airlines in the world.

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