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.

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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

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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.

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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.

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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.

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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]

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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.

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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.


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

  1. Pingback: Swiss CEO Takes a Swipe at United - View from the Wing

  2. B! says:

    I like your Southern Californian “the 101.” People in Northern California wouldn’t use the “the.” Not that I’m criticizing you…. standard American English is so standard that it’s fun to see these little variations on the rare occasions they do pop up.

    • CF says:

      I know. The use of “the” is a distinctly Southern California thing. I was instantly made fun of in college in DC when I called it “the 95″ and then when I was at Stanford, it took about 5 minutes for someone to call me out as a Southern Californian for calling it the 101. The funny thing is that it’s really just because I grew up off the 101 in Southern California, so it’s just reflex. I would never call it the 280 – it was always just 280, and that’s because we didn’t have that road down south.

      • Dan says:

        When I moved from DC to LA, I thought it was a bit strange… but then I quickly got used to it. I was going to start by rationalizing some sort of explanation related to linguistic speech patterns — because the interstate numbers in SoCal are so low, using the number alone just sounds funny. “Take 5 up to NorCal” or “take 10 east” just sounds a little funny.

        But then, perhaps, because Los Angelinos spend so much time on the freeways, highways, and interstates, that the roads become very prominent elements of their lives, and use of the word “the” indicates that significance.

        By contrast, I take “the toll road” every day, NOT VA-267 (it’s numeric name.) In LA, I never knew the common names of the roads, and always referred to them by the number.

  3. I would have liked to hear his thoughts on how the ‘new’ Swiss compares to the ‘old’ Swissair. That would have been a little interesting I think.

    Hmmm….let’s see if I was in S.F. and needing to go down to San Jose I would go down THE 101. If I need to go to SFO I go across the bridge and then up THE 101. How can you not use ‘the’ when saying that?

    • B! says:

      Clearly you didn’t grow up in the Bay Area.

    • robertol says:

      Nope, you just go down 101. Just like you go down Market St, or Lombard St. You don’t go up THE Howard Street or THE Geary Blvd, do you? The Embarcadero is an acceptable exception :)

      • Correct you would not say “Take the Battery Street and turn left on the Market Street”

        But this little three letter word now has be thinking about all those British shows I’ve seen on BBC America. We would say “He’s in the hospital” but they say “He’s in hospital” which doesn’t sound right.

    • Oliver says:

      I drive on 101 to work every day. 101 is fairly bumpy in some places, but they’ve been resurfacing 101 in many areas. 280 is really not an alternative.

      That’s what I’d say, and I didn’t even grow up here. :)

      Back to Swiss, I assume their “business class” in Europe is standard Euro “business”, ie, a regular economy row near the front of the plane with a blocked middle seat, combined with a shrink-wrapped sandwich? In other words, anyone coming of a $10,000 F flight from SFO still essentially gets the same legroom on the European connection as the guy who slummed it in economy across the pond. Not all that thrilling, frankly.

      So how is Swiss able to offer low cost and high value and their European low-cost competitors supposedly can’t?

      • SKD says:

        The Swiss European business class is much like the US domestic first class. It is not like the other European carriers offereing regular economy seats with the middle seat blocked or folded down. Much of the flying for Swiss in Europe is done by third party carriers – not sure if they have direct investment from Swiss or not.

        • FBKSan says:

          Is it not? I haven’t flown Swiss C intra-Europe, but according to seat guru all of their narrow bodies are 3-3 config, even in ‘Business’. Seems pretty standard to me, though I’m happy to be wrong (first go at these seats coming up this fall).

  4. FBKSan says:

    +1 to Oliver’s comment. I found it a bit ironic when Harry criticized United for sticking people on Ted when every European “business” class flight I’ve flown is glorified coach. As Oliver noted, you get the same seat, usually the same leg room, no separate cabin (save for a temporary curtain or maybe just a plastic marker), and marginally better food. Plus the blocked middle, which is nice but not the same as a standard domestic F seat. I would take US domestic first over all of the European business I’ve flown.

    Don’t get me wrong, I get why they do it this way, but let’s not pretend those getting of the SFO-ZRH flight and onto any intra-European flight aren’t getting a major quality downgrade.

    • Good point and makes me feel better about US domestic F Class. Always a surprise to get off an international biz class flight to connect with a US domestic flight and find the ‘first class’ seat is not so good as the one I just left (even, generally, on the same airline).
      Maybe US airlines should consider renaming their current domestic F Class. It could mean more consistent branding within the airline’s product offerings.
      At least European airlines refer to their ‘up front’ product as Business Class not First.
      And , iirc, some Euro airlines (Swiss may be amongst them), do have separate cabins and different seats.

    • FBKSan….good point, that little curtain is often moved depending on how many seats they need for business or coach on any flight. Into a city they could need more coach, but from a city they move it as they sold more business seats. But its the same seat a coach passenger was sitting in an hour ago. So it’s just a matter of a free drink or a meal. But luxury it will not be.

    • Andrew says:

      “Don’t get me wrong, I get why they do it this way”

      I don’t. I’ve never heard of this before right now, and had no idea this was the case. What on earth is the rationale behind this??

      • FBKSan says:

        Most of these intra-Europe flights are short, maybe an hour or two at most, akin in many cases to routes on which US carriers use regional jets. This faux business class lets the airline adjust capacity to match demand for any particular flight (they just move the velcro curtain). It’s a flexible product for routes that probably have variable demand for F/C, and yet they can still say they offer C on most routes. It makes sense to me so long as you don’t alienate customers by not offering a true F/C product (and since most carriers do this, I assume it’s working).

  5. Pingback: Swiss and Business Class – it isn’t pretty - The Wandering Aramean

  6. Matthew says:

    Excellent interview, as usual.

  7. QRC says:

    Great post, but I struggle to grasp their belief that customers will want a differentiated first class across aircraft types (their first I guess is new on the A330, but they didn’t put it on the A340?). FT denizens aside, average customers generally aren’t factoring in aircraft type into their purchasing decision. What’s the point of having two different long-haul F products (except for the obvious reason that it costs money to refurbish the whole fleet)? Makes no sense to me from the “customer wants it” perspective, assuming they’re doing mid or some long range travel with the A330s. I think your sense was right to follow-up on that, his answer seems like a cop-out.

    • CF says:

      I think the idea is that the products are different enough to justify the expense. Really, the product looks similar with the biggest difference being that the new seat is more of a suite-style with more privacy. But the seats look to have similar comfort. The new airplane has a bigger screen. So it’s not that people want a differentiated between airplanes but it’s that they couldn’t justify upgrading the existing product when the difference was great enough, I believe.

    • Dave says:

      No, the whole A330-200 fleet is being exchanged by brand new A330-300 with a completely new F-class. The first class on the 340-300 is still a good product.

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