Photo credit: Swiss will cut its workforce by 20 percent, and its fleet by 15 percent amid slow business travel recovery. Flickr / Aero Icarus
Swiss is moving forward with significant cuts to its workforce and fleet as it prepares for an expected structural change to the the airline’s bread-and-butter business traffic.
On Thursday, the Lufthansa Group carrier unveiled plans to slash its staff by 1,700 full-time equivalent employees and shrink its fleet of 90 aircraft by 15 planes in response to these structural changes. The cuts will see Swiss operate fewer frequencies in Europe and likely end some intercontinental routes as it recovers from the Covid-19 crisis, though it plans to retain its dual Geneva and Zurich hubs.
“It has grown increasingly clear that our market is undergoing structural change, and that despite the actions which we were swift to take in response, a restructuring of our company now sadly seems unavoidable,” said Swiss CEO Dieter Vranckx in a statement.
The cuts come as European airlines prepare for some leisure travel recovery this summer. While it is as yet unclear how many countries in the bloc will reopen to travelers, carriers are gearing up to quickly add flights if Covid-19 restrictions are eased. Last week, Lufthansa Group CEO Carsten Spohr said the group’s five carriers could ramp up to as much as 70 percent of pre-crisis schedules if demand recovers.
However, the leisure-first recovery creates significant challenges for business-travel focused airlines like Swiss. Speaking at the Routes Reconnected conference in April, Vranckx described Swiss as a “business airline” prior to the crisis and said its focus was how to manage a slow, multi-year recovery in the corporate travel it relies on.
“How do we manage and take the most out of say the next two- to five-years?” he said, calling the period “critical.” “I don’t believe the people who say everything will be digital … I think the balance will be in the middle, but still there will be in the near future less business travel.”
Swiss’ latest forecast is that business travel will remain down at least 20 percent compared to before the crisis for the medium term. At the group level, Lufthansa expects overall business travel will recover to to only 90 percent of 2019 levels by 2025.
The reductions to Swiss’ workforce will save the carrier roughly 500 million Swiss francs ($551 million) annually, according to the carrier. However, to achieve the 20 percent reduction outlined it warns that up to 780 staff could be involuntarily let go.
The staffing reductions come a week after Lufthansa Group Chief Financial Officer Remco Steenbergen said the group had achieved needed personnel reductions of 16,000 full-time equivalents in businesses outside of Germany. Cuts of another roughly 10,000 equivalents were still needed within Germany, he added, indicating that they would likely occur at the group’s namesake Lufthansa operation.
In terms of fleet, Swiss will remove 10 of its 69 Airbus A320 family aircraft plus five widebodies, which are understood to be Airbus A340s. The Lufthansa Group aims to remove all of its A340s — the group had 43 of the four-engined aircraft at the end of December — over the next few years.
Swiss posted an earnings before interest and taxes loss of €211 million ($255 million) on a 71 percent year-over-year drop in revenues in the first quarter. Passenger traffic was down 87 percent on a 73 percent cut in capacity.