Swiss Fatally Undermined By Staff Pay Problems

by Ulrika Lomas, Tax-News.com, Brussels

01 August 2002

The good news for Swiss, the airline formed from the rubble of Swissair and its regional subsidiary, Crossair, is that it has carried 5.2 million passengers in the first half of this year at an average seat-occupancy rate of 66.1 per cent. The cancellation of 240 flights for technical reasons represents a tiny proportion of the 700 flights the airline puts on every day.

The not-so-good news is that management and former Crossair pilots have failed to settle their differences in an increasingly bitter dispute over pay and benefits. The union representing Crossair pilots failed to turn up for negotiations which were scheduled for Tuesday. Swiss is offering SFr16 million ($10.8 million), which is within the company’s existing business plan.

The pilots however are demanding SFr56m to bring their pay and conditions onto a par with former Swissair pilots, who agreed to a pay reduction package which still left them with far more than the Crossair pilots.

Finance Minister Kaspar Villiger insisted the company’s business plan had to be adhered to if the company was to survive. “It would be incomprehensible if a pilots’ union preferred to put its short-term interests above the long-term viability of the company,” he said.

History is not on his side: in February, the company gave in to pressure from Kapers, Swissair's cabin crew union, and agreed a deal that preserved 90% of inflated Swissair pay levels. Kapers said the accord was a “historic milestone” in the creation of Swiss, which for a union must mean they were delighted.

When the new airline's name was announced in January, Crossair Chief Executive, Andre Dose, said he wanted to cut Swissair's cost levels by as much as a third; but the Kalpers deal delivered savings of a mere 10%, said analysts.

Since then, Swiss shares have fallen from 119 to 43. What is indeed incomprehensible is that the new shareholders, who put up SFr2.2bn to restart the airline, didn't insist on the wholesale dismissal of Swissair personnel. Their weakness has fatally undermined the new venture, and the short-termism of the staff will simply result in the eventual loss of their jobs. Pity.

Recommended