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A Very Bumpy Takeoff

4 minute read

Talk about turbulence. First Switzerland’s air-traffic-control system was blamed for last month’s collision between a Russian passenger jet and a cargo plane that killed 71 people. Now air pockets of labor disputes, technical difficulties and a conflict among pilots have hit Swiss, the country’s newly renamed national airline. Still smarting from the bankruptcy last fall of their old flag carrier, Swissair, the Swiss hope the recent glitches do not signal another disaster.

Swiss was born four months ago of a hasty merger between the defunct national airline — crippled by a failed expansion plan and the post-Sept. 11 travel drought — and its regional subsidiary Crossair. Banks, private industry and the government chipped in 1 billion to launch the company. To signal a new era while capitalizing on Swissair’s traditional image of quality, the name and logo were changed only slightly. The fleet of 128 planes serves 126 cities in 60 countries, 30% fewer destinations than before the merger. “Some people expect this airline to follow Swissair’s model,” says Stephane Garelli, professor of international business policy at Lausanne University. “But this is a new company, and it will make mistakes.”

The airline is expected to lose an estimated 800 million this year since it is filling only 60% of its seats. Yet some industry experts say the results are not bad for a start-up, and the airline is expecting to turn a profit in 2004. But there are other storms as well. One is an increasingly bitter dispute with former Crossair pilots. Their union has rejected a proposed 16% salary increase on top of last year’s 28% raise, saying that former Swissair pilots were offered a better deal. Industry insiders say long-standing animosity between Swissair and Crossair pilots is at the root of the bickering. Different corporate cultures pitted the young and ambitious Crossair crew against the better-paid Swissair pilots, who, says aviation expert Sepp Moser, sometimes projected an arrogance that did not sit well with the regional carrier’s staff. “The new company was formed from the ashes of two former enemies,” he says. “A forced marriage can’t work.”

François Clavadetscher, a newly retired Swiss captain who came from the Swissair side, says the conflict has been fueled by jealousy. “We are better trained, have higher qualifications and undergo stricter selection criteria,” he says. “It is normal that our salaries are higher. No airline will pay the same to long-haul pilots and those flying commuter planes.” If the union persists in its demands, Swiss spokesman Markus Baumgartner warns, the company would have to restructure its route network in order to save money for the payout, a move that could cripple the fledgling airline. Meanwhile, management is trying to put old hostilities to rest by organizing training sessions and social events that bring pilots from the two sides together, though there are no immediate plans for them to share a cockpit. “Reconciliation may take some time,” Baumgartner concedes.

On top of labor pains, a series of technical mishaps, reportedly caused in part by corrosive hydraulic fluid, grounded 240 short-haul flights in recent weeks. They constitute a small percentage of Swiss’ traffic, but this is not the kind of publicity an emerging airline needs. A hastily convened task force is investigating the glitches.

Is Swiss facing a rough ride? “In its present format, yes,” Moser says. “This airline was created on a purely emotional wave of nationalism, with no sound business plan. One key shortcoming is that with 41 long-haul destinations, Swiss is too big for a small country.” But Garelli says Swiss chose the right strategy. “There is no future for a small country if it cannot guarantee a certain number of international point-to-point routes,” he says.

Swiss, which has a codeshare agreement with American Airlines for the lucrative U.S. market, is pushing for membership in OneWorld, a global alliance of eight airlines that includes American and British Airways. If regulatory approvals are not granted, Baumgartner says, Swiss will negotiate agreements with individual carriers.

The airline has at least one edge in the competitive market. “Switzerland’s image and reputation sell well overseas,” Garelli says. And the Swiss, who took the demise of Swissair as an affront to their national identity, have an emotional stake in the new carrier’s success. “If we created an airline and called it Cuckoo Air, maybe we wouldn’t care as much,” Garelli says. “But we put our flag on its tail, so we have a collective responsibility to make sure it flies.”

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