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The Swiss administration forgoes a fifth of the basic salary in the crisis. Airline chief Thomas Klühr puts obligations to location at the forefront of the conversation and clearly sets himself apart from Ryanair, which comes and goes.
Thomas Klühr, CEO of Swiss, recorded at the Swiss headquarters in Kloten.
Mr. Klühr, the Crown period is a challenge for all of us. His fleet has been largely on land for weeks. How can you keep the morale of the troops high?
It is difficult, but I am happy with what I hear. Because I only see a few employees on the site at the moment. We cannot ignore the difficult situation. We provide information quickly and openly, but the uncertainty can be clearly felt.
The Swiss has been very successful in recent years. Now he had to ask the Federal Council for financial help. Are you not ashamed
It was a very difficult step. The aviation business suddenly stopped worldwide and the profits did not materialize. We could no longer do it alone. We quickly realized that we had to cross a long time due to the pandemic and the resulting travel restrictions.
Zurich CFO Ernst Stocker criticized Swiss for being on the mat after just two weeks with the state. Do you understand his displeasure?
I said in an interview in mid-March that if travel restrictions continued to expand, almost all airlines would need help from the government. This later became the headline that Switzerland expected from state aid. I described an early scenario, which then happened.
Michael O’Leary says his Ryanair has enough liquidity to continue without sales until the end of the year. Why not the Swiss?
Most airlines have requested or received state aid. And I emphasize: we are asking for a loan on which we will pay interest and pay. Unlike Ryanair, we operate a center. Our offer is aimed at the Swiss economy. Ryanair comes and goes. And we aspire to overcome this crisis with the whole team.
They want to cut costs by 20%, but they want to avoid layoffs. Does this still apply, although capacity cuts are inevitable?
We can compensate a lot with hiring freezes, exploiting high fluctuation, especially in the cabin, and retirement.
Swiss receives a short-term grant and has very little to spend on kerosene. Why are running costs still high?
Regarding kerosene, however, there are high costs due to hedging transactions. There are also fixed costs, like rent and IT, and we have to bear some of the personnel costs. Then keeping the plane costs out of commission. At the same time, we have virtually zero income. We lose more than CHF 3 million in liquidity every day. Furthermore, the gradual resumption of flight operations is very costly.
The CHF 300 million number is mentioned as the first payment on the state loan at the end of May. Does this mean that loans are granted in tranches?
Yes, a graduation is planned.
Bern heard that the signing would only take place if Lufthansa had reached an agreement with the German government. Is there this joint?
No, there is no articulation. It was never part of the talks with the federal government. Swiss was recognized as being of great importance to Switzerland, which makes me happy. Over the years, it has become clear that success also occurred because we are part of the Lufthansa Group. And I have great confidence in Lufthansa in Bern.
In early April, federal officials announced the conditions for a loan. The company and its owner must first mobilize all their own resources. What has Swiss done for this?
The Federal Council made it clear from the start what the order was: the Swiss had to deliver first. And the owner has to make contributions. We reduced production very quickly in March. We suspend projects, postpone investments, freeze hiring, and apply for short-term jobs. Lufthansa granted us a loan of CHF 200 million and gave up the dividend of CHF 300 million for the very profitable year 2019.
How much interest does the loan have? Is 2 to 3% a good estimate?
Yes, that is correct.
Does management waive wages and what is expected of employees?
Employee wages remain unchanged until the end of June, despite working for a short time, but pilots and flight attendants lose contributions, which is not entirely irrelevant to them. We are negotiating a reduction from July with our social partners. In addition, all staff groups have shifted salary components backward.
And the managers?
Management and all managers will resign up to 20% of their salary in the coming months. The salary bill, including variable remuneration, will decrease up to 50% in 2020, depending on the level of management.
The government repeatedly points out the great importance of the centers and the long-distance fleet. How can you guarantee a certain connection?
We remembered at first an instrument in the Swiss acquisition in 2005, namely the establishment of an aviation foundation. Their task was to ensure that after the Swiss inauguration, Switzerland and Switzerland were not left behind within the Lufthansa Group. The new foundation, which has not yet been established, will closely monitor how the establishment of the long-haul route in Frankfurt, Munich and Zurich begins so that there are no imbalances.
What will this aviation foundation be like?
The board of directors consists of five members. The Confederation appoints the President and two members, Swiss and Lufthansa appoint one member each.
Finance Minister Ueli Maurer said Lufthansa and Switzerland are ready to recognize climate protection goals. What does that mean?
Climate protection has been pushed into the background due to the Corona crisis, but the debate will return. As of today, there are still no disaggregated aviation climate targets. There are objectives of the Federal Council and we are obliged to follow them.
And what about the ticket fare?
It is not anchored in the contract. The issue is important, but the mitigation of climate change and the location requirements associated with the loan are two different issues.
There is great resentment that Swiss does not immediately pay for canceled flights. Travel agencies fear for its existence. What can customers expect?
The contract with the federal government requires us, the organizers, to refund the money for flights that did not take place under the package travel law by the end of September.
And what about private clients?
I am aware that we put a lot of pressure on our clients. As with many other airlines, the shutdown has also resulted in massive reimbursement volume. If the aviation industry had immediately reimbursed everything, many airlines would have become illiquid. We do not question the claim. But what we cannot meet are the deadlines. With attractive coupon solutions, we also try to persuade customers to forgo the refund.
According to the industry association Iata, tickets for flights that have not yet taken place total $ 35 billion. Shouldn’t the industry think of a solution to keep more cash in such cases?
No crisis plan foresaw that aviation worldwide would be paralyzed. But it is clear that we should think about ensuring liquidity to be better equipped next time.
How long would Swiss’s liquidity have lasted?
From three to four months.
Why can’t a competitor just serve the routes after the bankruptcy of an airline?
Currently, all airlines have greatly reduced their capabilities or have completely suspended flight operations. Everyone knows that there will only be a gradual accumulation. National airlines will initially revive their local market. If the federal government had not given guarantees, the risk of an interruption would have been very high. Currently, no airline is trying to establish a new network in another country. If it started again, Switzerland would have been there without an operational center.
Couldn’t you connect Switzerland from abroad?
You can do it, but the added value has no place in Switzerland. There would also be only a few long-distance flights that are so important to the appeal of the location. Supply would be greatly reduced.
Let’s take a look. Where is the Swiss flying first?
From Zurich we will offer 140 weekly flights to 30 European destinations starting in June. There are also 40 weekly flights from Geneva to 14 European destinations. The Swiss continues to fly three times a week to Newark in the United States. Some non-European destinations will be added in June, but the locations are not yet ready to decide. When it comes to tourist destinations, the islands will be ready first because they are least affected by infections.
Roche chief Severin Schwan has just said there will be far fewer business trips after the crisis. Does that have to hit you?
The recession will slow down accumulation. Furthermore, behavior patterns will change due to the crown crisis. We have to be prepared for the fact that there will be fewer business trips. But that does not change my basic belief, people want to travel again.
What do you have to be prepared for as a passenger?
Flying will change due to travel and hygiene regulations. Although the air quality on board is good, masks will be used. At the same time, there will be no overcrowded airports as before the crisis. Therefore, it will be more complicated, but also more relaxed.
Are the plexiglass partitions drawn between the seats?
This is an exciting idea, but cabin changes require intensive approval procedures by the authorities. Something will develop there, but it will be a long time before we see that.
What is your startup scenario?
In June we expect 15% to 20% of last year’s level. We expect 50% by the end of the year and around 70% in the summer of 2021.
If only a few destinations are served: What are the pilots doing?
Everyone is happy when they are assigned to work. The teams were particularly excited about the repatriation flights. We must also ensure that we maintain licenses for different types of aircraft. That is why we sometimes fly with larger planes than would be necessary. Of course, pilots train on flight simulators. But it is and remains a great challenge.
A calm creator
nz · Thomas Klühr has headed Swiss since February 2016. Right at the start, the 58-year-old German began the process of fleet renewal, which was followed by a sharp rise. With 9,500 employees, 91 aircraft and sales of more than 5 billion Swiss francs, Swiss has grown into a stately company. The Nuremberg native has worked for Lufthansa since 1990. Before moving to Switzerland, he was responsible for the Munich center and finance.
