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Swissair Group Loses US$140 million - Cuts 1,250 Jobs

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Swissair Group Loses US$140 million - Cuts 1,250 Jobs

Old 31st Aug 2001, 11:00
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The Guvnor
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Exclamation Swissair Group Loses US$140 million - Cuts 1,250 Jobs

From today's ATW Online:

Swissair Group posts loss of $140 million, to cut 1,250 positions
Dateline: Friday August 31, 2001

Swissair Group announced that it will eliminate 1,000 positions through integration of its Balair charter subsidiary into Swissair and Crossair next year, with a further goal of cutting worldwide management staff by 5% or 250 positions.

Swissair disclosed the planned workforce reductions as it reported a first-half net loss of Sfr234 million ($140 million) for the period to June 30. In the year-ago period it had a profit of Sfr3 million. Current-period results were net of a Sfr251 million provision related to its money-losing German charter airline LTU. Group revenues rose 8% to Sfr8.14 billion and earnings before interest and taxes excluding LTU totaled Sfr208 million.

The company said its goal is to return LTU to profitability by 2003 as it moves to cut group debt by Sfr2 billion through the end of 2002 and Sfr3 billion by year end 2003, largely by selling off noncore assets. Yesterday it announced the signing of an MOU with Candover Partners covering the sale of a majority stake in its Swissport ground-handling operation. It will maintain a small holding in Swissport, which had first-half sales of Sfr557 million and a loss before interest and taxes of Sfr39 million. Passenger-handling operations at Zurich are not included in the sale and will be reintegrated into Swissair. Candover is a provider of equity for European buyouts, the airline said.

Simultaneously, Swissair Group said it hired Schroder Salomon Smith Barney to advise it in the sale of Nuance Group, an airport retailing entity with first-half EBIT of Sfr22 million. Nuance will be sold via an auction to be concluded by early 2002.
 
Old 31st Aug 2001, 11:44
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Does anybody know how much interest per day in $US this should add to?
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Old 31st Aug 2001, 23:48
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Do you know how many pilots will be affected?
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Old 1st Sep 2001, 01:11
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Bokomo - I can't see any reference to the specifics in this expanded report from Speednews, but it looks like they are going to be dropping a number of aircraft and routes:

First half 2001 results: Swissair Group generates operating profits and announces disposal plans for Swissport and Nuance

In July of this year, the Swissair Group announced its five point restructuring plan: deal with legacy problems, ensure financial
stabilization, focus on core businesses, substantially improve operating performance and enhance staff motivation.

Half year results

The Group's audited results for six months to 30 June 2001, are available on the Swissair Group's website (http://www.swissairgroup.com).

Highlights of the half-year results include:

1. Group revenues grew by 8% versus the prior period reported figure from CHF7,512m to CHF8,138m;

2. Group EBIT was generated as follows:

Group EBIT before disposals of business and associates: CHF88m Disposals of businesses: CHF89m Group EBIT before associates: CHF177m
Associates (excluding LTU): CHF31m

Group EBIT (excluding LTU): CHF208m Increase in provision for LTU: (CHF251m)

Group EBIT after all associates: (CHF43m)

3. The net after tax Group result is negative, because of the additional provision for LTU, which drives the decline in equity from a restated CHF716m at 31 December 2000 to CHF555m at 30 June 2001.

Financing and disposals
As also announced in July, in order to reduce net debt and fund its exit costs from the minority airline participations, the Group has commenced a CHF3bn disposal and asset refinancing program, to be completed over the
next 18 months. These measures target a reduction of net debt by CHF2b by the end of 2002, and by a further CHF1b by the end of 2003. The Group also announced that it was reviewing options to unlock the value for
shareholders in some of its core businesses.

The Group will continue to repay all unsecured bank debt upon normal maturity. Nevertheless, the management of the Group's diverse body of lenders has been complex and time consuming. Therefore, the Group has
decided to accelerate its target net debt reduction schedule. To achieve this acceleration in debt reduction and improve the equity position, the Group has decided to dispose of a majority stake in Swissport in 2001 and either its entire holding or a majority share in The Nuance Group in early
2002. These actions, which together with those already announced should total over CHF4.5b of disposals and asset financing over the next 18 months, will enhance the liquidity position of the Group and strengthen its equity base in a significant manner.

In addition to repaying all facilities upon normal maturity, the Group will use the proceeds of the disposal program (as and when received and at its discretion) to execute early repayment of unsecured banks that no longer want to support the Group. In the future, it will work with a small number of banks that support the Group and its strategy.

Audit
As announced in July, the Group commissioned a full audit of the results for the six months to 30 June 2001, as well as the opening balance sheet.
This audit was undertaken by KPMG. Two key points came out of the audit:

-The adequacy of provisions taken to cover obligations related to the French and Belgian airline participations was confirmed;
-A significant number of adjustments were made to the opening balance sheet at 31 December 2000, in compliance with International Accounting Standards, providing full transparency for shareholders in accordance with industry best practice. An important effect of these restatements is that the equity was reduced to CHF716m at 31 December 2000. These restatements are detailed in the half-year report and the analyst presentation.


Trading review
The audited results for the first half of 2001 are prepared under IAS and the segmental analysis of EBIT includes profits on disposals of assets and discontinued activities. Group revenues rose 8% to CHF8,138m from the reported 2000 figure of CHF7,512m. The net loss of CHF234m is after
charging the CHF251m provision for LTU and compares to a reported profit of CHF3m for 2000. The economic slowdown in the US, which is impacting Europe, high fuel prices and a strong dollar (affecting non-US airlines) has
severely affected the sector and related industry profitability, with US
and European airlines reporting significant decreases in their six month results. This downturn has affected the Group's performance, both in airlines and airline related activities.

The audited figures for Swissair and Crossair include a reassessment of the deferred income associated with open passenger tickets. This has resulted in an increase to revenue in this period of CHF251m. Excluding this amount
their operating results were broadly in line with the prior year.

Swissport's EBIT reflects a number of one-off items in 2001, rather than any significant decline in underlying operational performance. Disposal of SwissGlobalCargo and the severe downturn in the worldwide cargo sector has impacted Swisscargo's results. Further contraction within the cargo industry during the second half of 2001 is likely. The effect of this will be partially offset by the active management of fixed costs.

SR Technics suffered from a decline in business from the Qualiflyer group and a general slowing in the sector.

A decline in Gate Gourmet's EBIT has been caused by three negatively impacting factors:

-Poor trading conditions - downturn in airline business and resulting downward pricing pressures for the airline catering businesses;
-Continuing investment in e-gatematrix (Gate Gourmet's electronic supply platform); and · Write-off of bad debts in Aerolineas Argentinas. The effect of these factors has been partially offset by improved cost and
efficiency measures.

Nuance's performance continued to improve, including a significant new contract win in Singapore.

As previously announced, Balair's operations will be terminated in Spring 2002 and are planned to be integrated into Swissair and Crossair (As reported in SPEEDNEWS in April 2001). This should eliminate ongoing losses
from mid 2002 onwards.

Summary
The Swissair Group has started on the road to recovery. Tangible progress has been made and management is fully committed to turning the Group around. However, the pace of change needs to be accelerated further. In order to make a major step in this direction, the Group has decided to trim 5% of its worldwide management staff by year-end, in line with its objective to create a flatter and more efficient decision making structure. Changes in network structures and fleet compositions of Swissair and Crossair will, in addition, entail a near-term reduction in the Group's
workforce of about 1,000 people.
 
Old 1st Sep 2001, 17:30
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Yep - looks like there are a few more skeletons in the cupboard too - big problems with trying to present a budget for 2000 - looks as though the previous board of directors had involved their shares in the company budget, with undisclosed buy back options. It is an unbelievable mess and the court cases may well start soon - as the share holders refused to recognise the 2000 figures - well advisedly, as it seems.

Looks almost as though Jeff Katz saw it coming before he did his runner, er retirement (the Katz now being out of the Sack - so to speak).

More to come with other losing part owned airlines in the pipeline and the swingeing movement restrictions which the Germans are trying to impose on ZRH airport...
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Old 2nd Sep 2001, 13:03
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- 200 pilots
- 600 F/As
- 350 management positions
more to come...
Pilots and F/As number will be reduced thru natural fluctuations. SR has already had too many pilots, rumors of a few to fly for LH or even LX.

Definitely some interesting times ahead
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Old 2nd Sep 2001, 15:25
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Well EZS - easyJet Switzerland could use some pilots in GVA - maybe closer than LH.
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Old 2nd Sep 2001, 20:51
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Very surprised our popular PrIcK poster hasn't pinned this one on the greedy SAir Group's pilots.

Amazing how pilots MUST continually be masters of their domain but management's continual blunders are excused with a golden handshake/parachute (Seinfeld irony in case you don't get it!).

I'm with Kramer on this one,

dd.
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Old 3rd Sep 2001, 19:16
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Read that 500 mangement positions would go....
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Old 4th Sep 2001, 12:49
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Yep, and waiting in the wings is more bad news from the Polish connection.

All the employees who have to leave have been blameless in this disaster - caused by the sharks on the board, in between their golfing activities - criminal is the most appropriate word. Thank goodness for shareholders - who won't take this lying down...
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Old 5th Sep 2001, 04:15
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Dallas Dude
PPrick's signature should be now what is he doing?
IRAPYLOT
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Old 7th Sep 2001, 12:20
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Few Cloudy - here's the bad news from Warsaw...

LOT Polish Airlines reported its first-half net loss tripled over the same period last year to 251.7 million zlotys ($59.5 million) as a 22% increase in operating costs wiped out a revenue gain of 10% to 1.56 billion zlotys. Passenger numbers increased 19% to 1.5 million. The airline announced at the end of Aug. that it plans to cut operating costs 20% by reducing by "several hundred" its payroll of 4,200 employees beginning early next year.
 
Old 7th Sep 2001, 12:49
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And the Italian connection?
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