Swiss CEO Harry Hohmeister on Onboard Product, Europe, and Labor (Across the Aisle)

And we’re back with part two of my interview. By this point, we were furiously bouncing down the 101 on our way to SFO, so I had to work hard to fit all my questions in.


Cranky: Talking about the onboard product. I saw the new seats yesterday in Business, but nothing is changing in First Across the Aisle From SwissClass, right?
Harry: On the A340-300 it’s not changing. On the A330-300 we have a completely new redesigned first class. The reason for this on the A340 is that we did a customer survey that said, “should we do something with First Class” and customers were saying that we didn’t need to do anything. We will do some slight modifications there, but why should we reinvest in something which is not bringing real added value for the customers? Maybe in five years, we’ll learn that the next cycle of product innovation is there that we really should do something. But the product innovation from where we are now with the A340-300 is not that big.

Cranky: So there’s no concern that the product on the A330s is different than the A340s?
Harry: No


Cranky: In economy, it’s a coach seat, big screen. But what are the trends in economy? Do you need to address the product or is it just price?
Harry: Price is very much an issue and that’s why I think the trend is to have a high density economy, with 30 inch pitch and that’s it. We differentiate by having 32 to 33 inch pitch and better service.

Cranky: What about premium economy? Would you consider that?
Harry: No. I don’t think that will ever be a successful product. You have business which is high value and people are willing to pay for it and you have economy which is based on price.

Cranky: But I think we’ve seen business class go upmarket and economy go down.
Harry: Actually, we haven’t seen economy go down. It’s stayed about the same but the price has gone way down, so the value is better now. I remember when we first started offering 999 euro fares to North America and people said that was going to bankrupt us.

Cranky: Now you wish you could get that.
Harry: That’s right. [Laughs] We should all be so lucky.

Cranky: So you don’t see a gap between the two?
Harry: No. People who care about the product will pay for business class and those who care about price will pay for economy.


Cranky: What about connectivity? Are you looking at internet? I know Lufthansa is bringing back internet. Is that something you’re looking to do?
Harry: Not now. We will wait and see how it works for Lufthansa. The question is, how successful will it be? Then we will evaluate again later on.

Cranky: What about mobile phones, people making calls on airplanes?
Harry: No. Our customers have clearly told us that they do not want to hear people talking on the phone.


Cranky: Now, you used to be with Lufthansa, right?
Harry: Yes

Cranky: So how much influence does Lufthansa have on Swiss? What sort of cooperation is there and what about the cultures?
Harry: They’re actually very similar but very different. We’re a smaller company and Lufthansa is very big. For example, Lufthansa comes to us looking for rules and regulations and we don’t have them. We haven’t created them. But we do work together and that’s a good thing.


Cranky: I’d like to go back to Europe for a minute. You were at Thomas Cook, right?
Harry: Yes, that’s right.

Cranky: So what do you see for the European market? Some have said that the premium market is in structural decline in Europe. You have the low cost carriers, and you have the tour operators. It’s a very crowded place. Where do you see the Swiss European operation going?
Harry: Our European business is doing very well. We are trying to provide high value at a good price. The low cost carriers provide a low price but not high value. We provide value to our customers. So I can fly Swiss for an attractive price, which is based on the low cost structure we have, while getting the full service package.

Cranky: And what about the premium cabin?
Harry: It’s very much under pressure, so we have to rethink it. But, business class has an important value with hub connecting itineraries. You can’t fly someone in business class from San Francisco to Zurich in business class and then within Europe in coach.

Cranky: United did that when they had Ted
Harry: Maybe not a good idea
Cranky: Yeah, well it’s gone now fortunately. You could fly over the Pond in business class and then you’d have to fly coach for the 4+ hours to Las Vegas on Ted.
Harry: [Shakes his head]


Cranky: Now, you were talking about cost structure, people naturally start talking about labor. I believe you’re the only airline in Europe to not have had a strike this year, right?
Harry: I think that might be true. [Laughs]

Cranky: As you’re working to reduce your cost structure, are the employee groups helpful with you on that?
Harry: Unions are always complicated. Unions have a very simple approach and this makes it complicated. The approach of the unions is to promise more money for less work and more vacation. The thing you have to do is make them understand the situation. What we’ve been doing is saying, “this is the development of the market and this is what we have to do.” Then we have a discussion where we also get good feedback. They can find a different way to meet the same targets and that’s good. Some of the unions are a little bit stuck in the ’90s which can be a problem. But the overall relation, and this has to do with being a small entity, the overall relation between let’s say the workforce and the bosses is much closer than at a big company. This is positive.

Cranky: Looks like we’re at the airport. I appreciate you taking the time to speak with me.
Harry: Thanks for your creativity of doing this on the ride to the airport.


So there you have it. I apologize that some pieces were edited down a bit, primarily the Lufthansa discussion, because bumps along the road made my recording inaudible.

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