Same parent, different paths: Swiss, Austrian face unique challenges

Lufthansa subsidiary Swiss International Air Lines reported a €47 million ($69.4 million) third-quarter operating result, a 60.5% decrease from the €119 million earned in the year-ago period, and expects to post a full-year profit, while newly acquired neighbor Austrian Airlines faces deepening deficits and a cloudier future.

LX carried 3.7 million passengers in the quarter, up 1.8% year-over-year, although it suffered a 3.5-point fall in load factor to 69.5%. Still, CEO Harry Hohmeister believes the carrier is well positioned compared to its competitors. "We see now the positive results of our tight and strict cost management," he told ATWOnline at last week's Star Alliance event in Newark. "Swiss is not a paper tiger anymore. It has become a real tiger."

The airline's nine-month operating profit of €113 million compared to a €373 million surplus in the year-ago period. It will continue to focus on operating with a lean cost structure. "For 2010, we have to be even better than this year," Hohmeister said. "I do not see a light at the end of the tunnel. Our airplanes are full, but the yields are down."

Swiss will not, however, implement a la carte charges like new checked baggage fees or charges for booking with a credit card. "We will not change our philosophy. I would not have a good feeling if passengers had to pay CHF15 ($14.66), for example, to check in their luggage," he said. Change will come on the cost side, and perhaps with new destinations in China, India or North America.

Austrian, which became fully consolidated into LH Group on Sept. 3, remains in survival mode. It posted a €75.7 million third-quarter loss and said its restructuring will include a greater focus "on expanding service to volume markets with high passenger traffic. . .by offering high-quality service at attractive prices."

The result compared to a €16.4 million loss in the 2008 third quarter and was driven by a 20% year-over-year fall in revenue to €557.7 million. OS's operating loss widened to €63.8 million from €12.1 million. It said the aforementioned strategy will require it "to significantly reduce our unit costs. . .by deploying larger aircraft, making adjustments to our route network and increasing the number of seats in our aircraft." It intends to reduce its workforce from 7,500 employees to 6,000 by the end of 2010, saving €150 million.

It said synergies with LH will include the merging of foreign sales offices and certain ground operations, as well as combined purchasing power. Nine-month loss of €242.3 million deepened from a €65.1 million deficit in the first nine months of 2008.