British Airways alliance with Swiss collapses

By Kevin Done, Aerospace Correspondent
Published: June 2 2004 22:05 | Last Updated: June 3 2004 7:43

The commercial alliance between British Airways and Swiss International Airlines collapsed on Thursday after the two airlines failed to agree on how to integrate their frequent flier programmes into the executive club.

Swiss said: “The sizeable cost of such an integration and the drawbacks it would bring currently outweigh its projected mid-to-long-term benefits. As the abandonment of the proposed integration also means that the bilateral agreement between Swiss and British Airways cannot be put into practise, Swiss is unable to join the Oneworld alliance at the present.”

Last September the airlines announced an ambitious accord that was supposed to lead to the struggling Swiss carrier joining the Oneworld global airline alliance led by BA and American Airlines.

But a condition for Swiss’s entry to Oneworld was completion of a bilateral commercial pact with BA and in recent weeks the two have been unable to agree on a key element – the merger of the airlines’ frequent flyer programmes.

As part of the pact with BA, Swiss’s present frequent flyer programme, Swiss TravelClub, was supposed to be integrated into BA’s Executive Club. But since the deal was concluded there has been a shake-up of top management at the Swiss airline.

The new team, led by Christoph Franz, has become increasingly reluctant to hand over to BA the details of its frequent flyers, including key business travellers. A sticking point has been the inability of the sides to agree on the price Swiss would pay BA for picking up the liabilities of unspent frequent flyer miles in the Swiss programme.

Swiss’s failure to enter Oneworld is a setback to its recovery strategy. Membership of one of the world’s three leading alliances – including Star, led by Lufthansa and United Airlines, SkyTeam led by Air France and Delta Air Lines, and Oneworld – has been a long-held goal. The airline said last year that its membership of the Oneworld alliance could bring about SFr100m (£43.6m) in extra annual revenues.

Swiss was formed out of the 2001 collapse of Swissair through a SFr2.7bn rescue by the Swiss government, several cantons and leading industrial groups, banks and private investors. It started flying at the end of March 2002 but struggled from the outset with too much capacity and a network too big for its available market.

It is pushing through a third restructuring package to cut annual costs by SFr1.6bn but it has struggled for many months to reach agreement on extra bank financing of up to SFr500m.

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