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Berne bright

It’s a tough time to be a small, start-up airline. But SkyWork is determined to succeed, discovers Martin Roebuck

Switzerland-based regional operator SkyWork Airlines is moving closer to break even after implementing a rigorous cost-cutting programme, according to chief executive officer Tomislav Lang.


Speaking during the Routes Europe exhibition in Budapest, Lang said he had reluctantly made several employees redundant, reducing SkyWork’s workforce to 180 personnel. Vacancies among ground personnel are not being filled.


Management took a haircut on their salaries at the start of this year and the company cars are but a memory. Meanwhile, flight crews were offered a “voluntary” hours-related pay structure to reduce the carrier’s fixed costs during low season. Lang hopes this will help with the winter cash flow, when traffic falls to 55 to 60% of peak season levels.


SkyWork has also renegotiated its ground handling and catering contracts, which has contributed to an overall reduction of more than 40% of its costs.


“A lot of airlines our size are vanishing from the market. We were close to failure and we’re still not totally out of it,” Lang admits.


“In the start-up phase, a large number of inefficient processes had crept in. As well as process streamlining, we have increased the average operating times of our aircraft, with a positive impact on unit costs.”


Lang took a 40% stake in SkyWork earlier this year after a partial buyout from previous majority owner and aircraft lessor Daniel Borer.


The carrier describes itself as a “best cost” rather than a low-cost airline. “We fly at a realistic price. We ask the passenger for a little more but [they] get a lot more,” Lang says. The airline offers onboard salads rather than sandwiches – more cost-effective and better appreciated by passengers, he claims – and is developing a wifi service.


After originally budgeting to move into the black this year, SkyWork now accepts it will not get there until 2014, despite more than doubling its annual passenger numbers to 212,000. Average seat occupancy rose from 50 to 55% and yield is also improving. Bookings were 32% higher in the first three months of this year against Q1 2012, and revenues increased by 50%.


The airline is fulfilling a summer flight schedule of 29 destinations from its Berne hub with five Dornier 328s and one Bombardier Dash 8. Two additional Dash 8 aircraft remain with the lessor and can be leased back at short notice as needed.


In May, SkyWork launched a twice-daily service from the Swiss capital to Munich. The route achieved a load factor of 50% in its first month. “The big problem is when you start with a 20% load factor in the first weeks,” Lang says.


The frequency of flights to Vienna was reduced to daily to accommodate the morning and evening Munich flights. Three rotations per day can be accomplished on a sector length of 90 minutes using the 33-seat Dornier 328, he pointed out. SkyWork’s aircraft fly 3,500 block hours per year, the most that turboprops can effectively do.


Brussels and Paris are on Lang’s radar for twice-daily services, and he hopes to see an increase in passenger numbers on the existing Berne-Amsterdam route after signing an interline agreement with KLM at the beginning of May.


SkyWork should have its IOSA certificate in place by June or July, paving the way for IATA membership. Lang also has plans to establish a second base and is talking with a number of airports in Germany – “one in particular” he tells Low Cost & Regional Airline Business cryptically. Lang expects to announce a deal by September.


This will not necessarily mean adding to the fleet in the short-term. “We will drop routes from Berne as necessary,” Lang said.


An outside investor will be sought to help fund expansion and Lang believes SkyWork could ultimately expand by 20 to 30 aircraft without departing from its core strengths of operating 90-minute to two-hour sectors. 

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