Swiss regionals stare down the recession

 - October 1, 2009, 8:36 AM

Switzerland’s regional scheduled airlines seem relatively well prepared to face a passenger slump expected to last through next year. After a frantic build-up period in the early years of the current decade, followed by a shakeout, the four majors appear entrenched in their respective markets. Analysts expect leisure traffic to take the hardest hit from the ongoing recession, but Swiss regionals have relatively high shares of business passengers as well as expatriates regularly returning to their countries of origin.

Swiss European Air Lines, a subsidiary of Swiss International Airlines and part of the Lufthansa group since 2005, stands as the market leader, with a single-type fleet of 20 Avro RJ100s. After a historic peak year last year, the Swiss parent airline has managed to further increase its revenue passenger miles in Europe by 5.8 percent during this year’s first half while available seat miles rose 4.6 percent. Swiss European does not have its own network but flies exclusively on wet-lease contracts on behalf of its parent company. Swiss split it into an independent business unit in 2005 to create a cost structure compatible with regional flying. The subsidiary has since signed new contracts with its flight and cabin crews, as well as with ground staff.

As part of its cost-control efforts, Swiss has phased out all of its smaller 50-seat Embraer jets. Its current 97-seat Avros average more than 11 years of age and the company plans to replace them with 20 Bombardier C Series CS100s between 2014 and 2016. Meanwhile, Italian subsidiary Air Dolomite recently took delivery of the first of five Embraer E195s, another of which just went to Lufthansa CityLine, which stands to receive 20 E190s/195s by 2011.

The Swiss parent company also maintains wet-lease contracts with other regional airlines to serve links where its own Avros would prove too large, such as on the Zurich-Lugano leg, flown by Darwin Airlines. Darwin operates a fleet of five 50-seat Saab 2000s, and just added its latest aircraft in September. It remains the only airline to serve Lugano, in southern Switzerland, from where it offers scheduled flights to Geneva and Rome, plus seasonal flights to Italian islands. It has lately expanded outside of Switzerland, offering rotations within Italy from Foggia to Milan, Turin and Palermo.

In the past, Darwin had to give up several city pairs, including Lugano-Bern for lack of regular demand. Prospective passengers on short flights within Switzerland tend to prefer lower-cost rail links, which don’t require advanced booking and lengthy security checks. The Lugano-Geneva link stands as a notable exception, because rail and road travel across the Alps takes more than five hours, compared with only 45 minutes flight time.

Meanwhile, Baboo, the flashy Geneva-based regional, has become well established after a slow start, with several links started and later abandoned. The company’s current scheduled network includes links between Geneva and 10 destinations in southern and Eastern Europe, plus several summer destinations.

Helvetic Airways, formerly Odette, also is firmly installed since its founding in the early 2000s in the niche market from Zurich to nine destinations in the former Yugoslavia and southern Italy, appealing to both holidaymakers and expatriates. Helvetic operates a single-type fleet of four Fokker 100s. It also maintains a wet-lease agreement with Swiss for flights from Zurich to Budapest, Prague and Birmingham, and offers charter flights to tour operators.

Despite a traffic slump of 20 percent and more on some links, Swiss regional managers remain optimistic and believe that an increasing number of travelers will yet discover the time savings and convenience they offer in their respective markets.