‘Swiss Air won’t be nice on price alone’

Swiss International Air Lines, like other legacy European carriers, has been facing stiff competition from Gulf airlines like Emirates, Qatar Airways and Etihad Airways over the last one year. It is now taking them on with new a product and by putting in place a sophisticated inventory and cost saving system. Marcel Biedermann, managing director and head of international markets, shares the Swiss carrier’s game plan for reclaiming its position in the market.

Why have you started adding capacity after snipping it?
We have started taking deliveries of A330-300s from April this year and will be adding nine of them by early 2011. Of this, four aircraft have already joined our fleet and have been deployed on JFK (New York), Dubai, Mumbai and Delhi routes. The next one will go to JFK.

The A330-300s will replace our fleet of A330-200s.
This year, we cut our capacity by 6-7% but next year (2010) there will be slight increase because of two reasons. One is because there will be more aircraft to Europe and second because A330-300 is slightly bigger than the A330-200. These two factors will swell our capacity by around 2-2.5%.

Today, on the small Airbus aircraft, we have 196 seats, while on the large Airbus (A330-200) we have 228 seats. The new one (A330-300) has 236 seats but it has fewer first and business class seats.

What pattern of consumer behaviour have you observed during year?
Some companies have slashed their travel budgets by as much as 80%. But these are extreme cases. However, on average, corporate travel budgets are lower by 30-40%. An airline decides configuration of an aircraft based on the demand in a particular segment. Today, we have 40-48 business class seats. We are going to have 45 seats.

Every airline adopts a different strategy to overcome difficult times. Some airlines slash prices just to keep the money going and that changes the behaviour of the customer. Our strategy is to not be nice on price and price alone, but be nice about what we bring to the customers — value. That is why we have come out with the business and first class product that uses pneumatic seat cushion system. This system helps us cut about half the weight of the cushion, reducing operational cost significantly. It brings down our fuel consumption by 13%.

What other cost-cutting steps have you taken?
Apart from cutting seat weight, we have lighter carrier equipments — trolleys, kitchenware, etc. We also try to carry the right amount of food. We are very professional in measuring what is eaten on different routes. We make sure we do not produce too much waste. We have a very sophisticated way of finding out what is need onboard for different flights. For instance, we will not carry ten cans of tomato juice on India-Zurich flights because we know nobody wants it, but on Muscat-Zurich flights, we carry 12 cans of tomato juice. This is how we try to optimise things. We have adopted the Japanese method of Kaizen, by which we are continuously improving. For this, we involve people who do the job because they know what is wrong.

With economy travel proving to be more resistant than business travel, are
the days of pampering corporate travellers over?
Not really, we value customers who fly with us regularly. These customers flying frequently may want to encash their miles. For this to happen, you have to make room by letting go a commercial seat. I personally prefer to sell a seat to a customer than give it against miles. But you have to find a compromise between the two because if your fliers accrue miles and you never give them a chance to redeem them, you lose their loyalty. You have manage that well.

Also, we have very good relationship with some of our clients and we give them preferential treatment. For example, if we have only one seat left on a flight then we prefer to give it someone who deals with throughout the year than a customer who is flying with us for the first time.