Could miss break-even despite fleet reduction: Regional problems

DAVOS, Switzerland - Swiss International Air Lines is set to reduce its regional fleet but may still miss its target of breaking even this year should a war in Iraq hit travel demand, Andre Dose, chief executive, said yesterday.

"Fact is that in the intercontinental business we're vastly exceeding our expectations, but in the regional sector we will probably have to make some adjustments," said Mr. Dose, while attending the World Economic Forum in Davos, Switzerland.

Asked whether Swiss would make its stated target of breaking even this year, or might in fact end up making a loss, Mr. Dose replied: "I don't know. The goal is a break-even. You have to look at 2004, that's when we have to be in a solid position."

"Nobody knows what will happen with Iraq. That will certainly make it difficult" to break even, he added.

Swiss is desperately trying to avoid the fate of Swissair, which collapsed in October, 2001, with debts of 17 billion Swiss francs (US$12.5-billion). Swiss was created when former regional carrier Crossair took on two-thirds of the Swissair fleet in a national rescue operation.

But a weak global economy and the threat of a war in Iraq that is likely to impact demand for air travel is making life difficult for airlines around the world, including Swiss.

In November, the airline took one long-haul and one medium-haul plane out of its fleet and delayed the delivery schedule of Embraer regional jets.

Swiss now operates a fleet of some 132 planes, 80 of which are regional jets from Crossair. With that fleet, analysts say Swiss is still far too large for the small size of its home market and the large problems facing the industry as a whole.

But Mr. Dose rejected reports that Swiss is mulling cutting its fleet by up to 28 planes and slashing as many as 5,000 jobs.

"This has no basis in fact," he said. "It's nonsense."

"You can't make a company more successful by constantly shrinking it, that won't work. I think our positioning overall is right, even though there may be some adjustments that might be necessary," Mr. Dose added, without being more specific.

Swiss's expansive fleet size has also been a barrier to full membership of the Oneworld alliance led by American Airlines and British Airways Plc.