ZURICH (AFP) - Swiss International Air Lines announced its first quarterly profit since its launch in April 2002, but high fuel prices kept the result below target and the company warned that more cost-cutting was on the horizon.
Swiss climbed to a 16-million-Swiss-franc (10.5 million euros, 13.6 million dollars) net profit in the third quarter of 2004, compared to a 276 million Swiss franc loss in the same period last year, the company said in a statement.
Operating profit reached 20 million Swiss francs in the third quarter -- which is traditionally the strongest period because of summer holiday travel -- compared to an operating loss of 62 million in the third quarter of 2003, it added.
"Showing the first operating profit of 20 million Swiss francs for the third quarter confirms our strategy," chief executive Christoph Franz said.
The profit follows nearly a year of cost-cutting that has seen Switzerland's top carrier cut its fleet and staff by one-third, while attempts to join one of the world's major airline alliances have floundered.
"The result for the traditionally strongest third quarter is, despite the operating profit, below our expectations," he added.
The company had targeted breakeven for the full year, although in recent months it had pulled back form that forecast.
Record high jet fuel prices added 35 million Swiss francs to the airline's cost burden in the third quarter despite repeated increases in a fuel surcharge on fares.
The company expects a cost overrun of one-third due to fuel for 2004 as a whole, with fuel costs reaching about 140 million Swiss francs and offsetting "a considerable part" of the gains made from restructuring.
Swiss said long haul passenger levels had developed positively.
However, the airline suffered declining number of passengers per flight compared to the same quarter last year on its European routes, partly due to competition on both price and capacity from budget carriers.
"We will need to further reassess all our internal and external cost generators in order to be an remain competitive in the present structure," Franz said.
"There will be no taboos here. Needless to say, we will also be making every effort to increase our revenues," he added.
Company management is due to meet staff unions to discuss "substantial" improvements in productivity, Swiss said.
Total staff numbers have declined by 1,108 to 6,964 since the beginning of the year.
European flights would also be reviewed, and Swiss said it needed more improvements in its business performance on flights in and out of the Swiss cities of Basel and Geneva, where it faces growing competition from foreign carriers.
Swiss also signalled cost reductions by harmonising its fleet of 81 aircraft, which is mainly supplied by Airbus, 19 of them long haul aircraft used for the more profitable intercontinental services.
The airline was formed out of a national effort, backed by the Swiss federal government -- its top shareholder with an 20.3 percent stake -- to replace the former national carrier Swissair which slid into bankruptcy in 2001.
Swiss has been plagued by financial problems since its launch two and a half years ago, which were amplified by the global travel slump last year.
Franz, a former senior executive at the German airline Lufthansa and German national railways, took over as chief executive in April, inheriting an ongoing restructuring plan that slashed about 3,700 of the previously 10,000-strong workforce.
After courting several airlines, a tentative agreement on closer ties with British Airways and the Onworld alliance fell through earlier this year.
Industry observers regard Swiss as a potential takeover target for Lufthansa once its finances are cleaned up.
11/16/2004 - 12:45 GMT - AFP