Associated Press
Swiss International Air Lines ends alliance deal with British Airways
Thursday June 3, 7:00 am ET
By Guido Schaetti, Associated Press Writer
ZURICH, Switzerland (AP) -- Swiss International Air Lines said Thursday it was dropping its attempt to enter the OneWorld alliance of global air carriers headed by British Airways and American Airlines.
BA said it regretted the Swiss decision, but said the other cooperative agreements between the two carriers, including the British carrier's takeover of valuable Swiss slots at London's Heathrow Airport, remain in effect.
However, the move revived speculation that Switzerland's struggling carrier could tie up with German airline Lufthansa.
Swiss airline cited problems integrating the Swiss Travel Club, its frequent flyer program, into British Airway's Executive Club program.
"The sizable costs of such an integration and the drawbacks it would bring currently outweigh its projected mid- to long-term benefits," the airline said in a statement. It did not give financial details.
"As the abandonment of the proposed integration also means that the bilateral agreement between Swiss and British Airways cannot be put into practice, Swiss is unable to join the OneWorld alliance at the present time."
In a separate statement, British Airways Chief Executive Rod Eddington said, "We are disappointed that Swiss has decided to step back from our agreement, but we accept that it is up to Swiss to decide what is in its best interests."
Both companies said they had reached an "amicable agreement" in recent negotiations, but gave few details.
In September, Swiss and British Airways signed a memorandum of understanding which -- in addition to the planned frequent flyer program tie up -- also gave the British carrier rights to eight of Swiss' 14 prized daily slots at London's Heathrow Airport.
"British Airways remains fully committed to the Swiss market," Eddington said.
Under the September agreement, British Airways said it would support a 50-million Swiss franc (then US$37 million) credit facility for its new partner, with five of the Heathrow slots used as collateral. Swiss drew the credit in February.
The agreement also launched codesharing between London and Geneva, Basel and Zurich. The Geneva codeshare will continue for three years, Swiss and BA said, but the Basel and Zurich agreement will end in the fall.
Last year, Swiss said it expected membership in OneWorld to produce a direct commercial benefit of some 100 million francs (then US$74 million) a year. The alliance's eight members have jointly generated US$2 billion in the past three years through their membership in OneWorld.
Besides British Airways and American Airlines, the OneWorld alliance includes Australia's Qantas, Cathay Pacific of Hong Kong, Spanish carrier Iberia, Chile's LanChile, Finnish carrier Finnair and Ireland's Aer Lingus.
The alliance's network covers 570 destinations and 136 countries.
Swiss' announcement Thursday fueled renewed speculation over a possible deal with Lufthansa, which would put Swiss into the Star Alliance, a network that consists of 16 carriers, including Air Canada and United Airlines.
Rumors of a deal with Lufthansa dominated Switzerland's media for much of last year and surfaced again in April, when Swiss appointed Christoph Franz as its new chief executive officer.
Franz, who moved from the German national railway company Deutsche Bahn AG, was with Lufthansa from 1990 to 1994.
Swiss has suffered massive financial problems since it was created out of the defunct Swissair in March 2002.
However, a restructuring program involving eliminating routes and cutting jobs has helped the company reduce losses.
In the first quarter of this year, Swiss said it lost it lost 78 million francs (then US$61 million), compared with a net loss of 200 million francs (US$157 million) in the same period last year.