Crossair AG took off yesterday as Switzerland's new flag carrier after adding 52 planes to its fleet from Swissair Group, the former national airline that filed for bankruptcy protection in October.
The airline is backed by the country's biggest companies including UBS AG, Nestle SA and Novartis AG, federal and regional governments and wealthy individuals, who together invested SF4.2 billion (US$3.3 billion) in the project. Switzerland's biggest-ever corporate failure had threatened tens of thousands of jobs and the country's reputation for quality and reliability.
PHOTO: AP
In six months, Chief Executive Officer Andre Dose, 44, has doubled the size of Crossair's staff, renegotiated cheaper leases for the planes and cut Swissair pilots' pay by a third to increase the airline's chances of making a profit. Even so, the Basel-based carrier will struggle to make money, analysts said.
"There's a reasonable chance it will survive over the next 12 to 24 months," said Anthony Bor, an analyst at Merrill Lynch & Co. "The chances of survival beyond the medium term in its current form are limited. This is not a business I'd invest in."
Crossair's plan to operate 26 long-haul and 102 short-haul aircraft from Switzerland, with a domestic market of only 7.2 million people, means the airline is too dependent on transfer passengers to fill the planes, Bor said.
To overcome that handicap, Dose wants to join the Oneworld alliance to sell tickets to other airlines' passengers. The size of Crossair's fleet is holding up negotiations as potential partners fear Crossair may steal too many customers.
The fleet includes Boeing Co MD-11 and Airbus SAS A330 planes from Swissair, adding to its own mix of 76 Boeing, Saab AB, BAE Systems Plc and Empresa Brasileira de Aeronautica SA jets. It will be simplified to 52 Airbus and 82 Embraer by 2005.
The carrier, whose planes will fly under the brand name "Swiss," also has a marketing problem linked to Swissair's collapse, analysts said. At the time, the airline grounded its fleet for two days, leaving tens of thousands of passengers stranded at airports around the world. Zurich airport opened nuclear-war fallout shelters as makeshift hotel rooms.
It's a particular risk given the airline's ambition of running the best first, business and economy classes in the industry, analysts said.
The brand concept is based on the idea that Swiss is "accepted shorthand for excellence around the world," said Tyler Brule, editor of London-based lifestyle magazine Wallpaper, who was hired to oversee the redesign.
"The challenge is to create a quality airline and make it profitable," said Patrik Schwendimann, an analyst at Zuercher Kantonalbank. "Often these are opposites. The critical question is what premium passengers are willing to pay for a quality airline ticket."
Crossair expects to post a loss of SF1.1 billion this year on the cost of taking over Swissair's planes, renaming itself Swiss Air Lines Ltd later in the year and changing its corporate identity. It aims to be profitable in 2003.
The loss could be smaller if business continues as it has in the first two months of the year, Dose said in an interview, because Crossair has been carrying more passengers than set out in the business plan approved by its investors.
Air traffic has recovered faster than expected after the terrorist hijackings Sept. 11. European airlines' international traffic fell 3.8 percent in the week through March 17, after falling by as much as a third after the attacks.
Even so, Dose, who became CEO a year ago after a decade as deputy head of flight operations, said he never doubted the validity of the plan to take two-thirds of Swissair's fleet. He drafted it in May after the national carrier that controlled Crossair posted its worst-ever loss in the previous month.
"It's the ideal size," he said. "If you don't do it, then you'd have to stop flying in Switzerland altogether because this is what makes the most sense economically."
The success of the plan so far has made Dose into a public figure in Switzerland. He can't buy a newspaper or eat out without being accosted by people, and receives phone calls and letters at home, he said.
It's an unusual status in a country where film stars and royalty can spend their holidays without drawing a crowd, and government ministers walk unaccompanied to their offices in Bern.
Dose said he's worked 16 to 18-hour days for five months to prove his plan will work. The same determination marked the start of his career, when he worked night shifts as a 16-year-old schoolboy to pay for flying lessons.
"I'm by nature someone who doesn't get overstressed," he said. "Actually, the more problems I have on my back, the quieter and the more focused I get."
The US dollar was trading at NT$29.7 at 10am today on the Taipei Foreign Exchange, as the New Taiwan dollar gained NT$1.364 from the previous close last week. The NT dollar continued to rise today, after surging 3.07 percent on Friday. After opening at NT$30.91, the NT dollar gained more than NT$1 in just 15 minutes, briefly passing the NT$30 mark. Before the US Department of the Treasury's semi-annual currency report came out, expectations that the NT dollar would keep rising were already building. The NT dollar on Friday closed at NT$31.064, up by NT$0.953 — a 3.07 percent single-day gain. Today,
‘SHORT TERM’: The local currency would likely remain strong in the near term, driven by anticipated US trade pressure, capital inflows and expectations of a US Fed rate cut The US dollar is expected to fall below NT$30 in the near term, as traders anticipate increased pressure from Washington for Taiwan to allow the New Taiwan dollar to appreciate, Cathay United Bank (國泰世華銀行) chief economist Lin Chi-chao (林啟超) said. Following a sharp drop in the greenback against the NT dollar on Friday, Lin told the Central News Agency that the local currency is likely to remain strong in the short term, driven in part by market psychology surrounding anticipated US policy pressure. On Friday, the US dollar fell NT$0.953, or 3.07 percent, closing at NT$31.064 — its lowest level since Jan.
The New Taiwan dollar and Taiwanese stocks surged on signs that trade tensions between the world’s top two economies might start easing and as US tech earnings boosted the outlook of the nation’s semiconductor exports. The NT dollar strengthened as much as 3.8 percent versus the US dollar to 30.815, the biggest intraday gain since January 2011, closing at NT$31.064. The benchmark TAIEX jumped 2.73 percent to outperform the region’s equity gauges. Outlook for global trade improved after China said it is assessing possible trade talks with the US, providing a boost for the nation’s currency and shares. As the NT dollar
PRESSURE EXPECTED: The appreciation of the NT dollar reflected expectations that Washington would press Taiwan to boost its currency against the US dollar, dealers said Taiwan’s export-oriented semiconductor and auto part manufacturers are expecting their margins to be affected by large foreign exchange losses as the New Taiwan dollar continued to appreciate sharply against the US dollar yesterday. Among major semiconductor manufacturers, ASE Technology Holding Co (日月光), the world’s largest integrated circuit (IC) packaging and testing services provider, said that whenever the NT dollar rises NT$1 against the greenback, its gross margin is cut by about 1.5 percent. The NT dollar traded as strong as NT$29.59 per US dollar before trimming gains to close NT$0.919, or 2.96 percent, higher at NT$30.145 yesterday in Taipei trading