Swiss International Air Lines (SWISS) achieved adjusted earnings before interest and taxes of CHF 245 million for the first six months of 2019, a 24-per-cent decline on the prior-year period (first half of 2018: CHF 322 million1)). Total revenues for the period were broadly in line with last year’s level at CHF 2.58 billion.
First-half earnings were substantially reduced by higher expenditure on fuel. Maintenance costs also increased over their 2018 levels as the recent additions to the aircraft fleet became due for the first of their periodic C Check maintenance visits. Overcapacities in Europe put sizeable pressure on fares, with a resulting fall in unit revenues; and the first-half earnings result was also affected by a lasting decline in demand in the cargo segment, especially on Far East routes.
“While our first-half earnings for 2019 fell short of the record levels we achieved last year, we can still be satisfied with this Adjusted EBIT result, especially in view of the challenging market situation,” says SWISS CFO Michael Niggemann. “We had already factored in the higher fuel and maintenance costs, so this first-half earnings trend is in line with our expectations.”
A strong second quarter
SWISS saw a slight easing of the revenue and earnings pressures in the second-quarter period. Operating revenue for the period was raised one per cent to CHF 1.42 billion (Q2 2018: CHF 1.40 billion). Adjusted EBIT for the period declined 10 per cent, however, to CHF 197 million (Q2 2018: CHF 218 million1)). While below the level seen in the record year of 2018, this is still the second-best second-quarter earnings result in SWISS’s history, and was buoyed among other things by enhanced production management, especially on European routes.
Full-year forecast unchanged
While the overall business parameters are expected to remain challenging, SWISS still aims to achieve a double-digit Adjusted EBIT margin for 2019 as a whole.
The company will further pursue its fleet modernization in the second half of the year, receiving the two additional Boeing 777-300ERs which were ordered in May 2018.
“Thanks to our billions in investments, we now have one of Europe’s most advanced aircraft fleets,” says SWISS CEO Thomas Klühr. “That’s not only good news for our guests: it’s good for the environment, too. Operating efficient aircraft is by far the greatest contribution that an airline can make to reducing the environmental impact of air transport activities.”
1) SWISS adopted new accounting principles at the end of 2018 in compliance with those of the Lufthansa Group. An Adjusted EBIT of CHF 224 million for the second quarter and of CHF 330 million for the first half of 2018 were previously reported in July 2018.
