Switzerland’s national airline SWISS will celebrate a bittersweet anniversary in April when it will be 10 years since former incarnation Swissair declared bankruptcy and was bought out by current owner Lufthansa.
In this period, the company has been rebuilding its business and re-evaluating its brand positioning, looking at how it can compete against low-cost carriers.
SWISS chief commercial officer Holger Haetty has announced bold plans for the firm he joined in 2009 from parent company Lufthansa to get profit margins back up from nearly 7% in 2011 to the pre-2008 levels of 11%.
The growth strategy includes a shake-up of the ecommerce operations to meet the standard expected by what Haetty calls the “Facebook generation”. Service levels are also on the agenda, with ambitions to emulate the standard that Asian carriers are renowned for.
“We want to be the leading European airline,” Haetty tells Marketing Week. “There are many industry measures we can use, combined with feedback from our customers, to determine when we achieve this.”
SWISS is already taking strides towards achieving this goal. In 2011, it was named best Western European airline at the Skytrax World Airline Awards, and won the best business class airline category at the World Travel Awards.
Our core target is the upper customer segment, a group that can always afford to travel
However, competition from low-cost carriers targeting business customers, including easyJet, is the driving force behind a new strategy to differentiate itself further from budget alternatives for both short and longhaul flights. Instead of trying to compete on price, it is aiming to appeal to a wealthier customer, with cabin refurbishments across all passenger levels, particularly in first and business class.
This is the kind of luxury that will appeal to a certain business traveller, argues Haetty. He says: “Our core target is the upper customer segment, a group that can always afford to travel.”
To further distance itself from budget competitors, Haetty says, “the battleground has now moved to longhaul”. New routes to China and the Middle East were added this year and last year respectively to complement its cabin revamp. The kind of business customers it is hoping to attract are the ones with an interest in these emerging markets.
Comfort and convenience
All elements of the newly designed planes aim to persuade customers that paying a premium is worth the comfort and convenience, says Haetty. The dark wood fittings in first and business class cabins give them the ambience of a hotel, in addition to bigger television screens and adjustable seat thickness and pressure.
In first class, retractable dividers around individual seats have been introduced to give passengers control over how much privacy they have. The new cabins are currently present on some longhaul aircraft and will be available on all SWISS longhaul planes within the next two years.
Sustainability has also played its part in the cabin redevelopment. Air mattresses have been introduced because they are about 4kg per seat lighter and save around 2,000 tonnes in carbon emissions and 650 tonnes of fuel per year, compared with foam mattresses otherwise used.
Considering the needs of the ‘always on’ business executive, enhanced connectivity is now a feature on SWISS cabins. In first and business class, iPhone and USB connections that support video on the passenger’s television screen will now be available. In economy, a USB connection that supports photo only is on offer. SWISS is also considering options for installing internet connectivity, which would mean it could support live TV entertainment.
Further catering to the needs of the business customer, the smooth executive journey will begin before they get on board a flight. In Zurich airport, first and business class passengers can speed up their departures process through a priority entrance and spend their waiting time in an exclusive lounge with complementary refreshments. It’s this type of elevated service that wealthy flyers expect as standard for the price they are paying.
But to give a bit more personality to the airline, a Swiss twist has been incorporated into the brand experience. The carrier’s Taste of Switzerland menu, which features tie-ups with renowned Swiss chefs and has been running on first and business since 2002, is being boosted by a new Swiss Traditions concept where dishes are crafted around regional events.
For example, February menus have been developed around the city of Basel’s Fasnacht carnival, featuring local specialties such as flour soup and cheese tart. In April, the Zurich Sechselauten festival will be the theme running through the menu.
Showcasing not just food but local culture accentuates the Swiss nature of the airline’s brand, which is key to developing customer empathy and standout, claims Haetty. “Our food has certain characteristics, and being true to ourselves and our culture is one of our brand values. This is how we become the airline of Switzerland,” he says.
All of these customer-facing developments are underpinned by a renewed focus on marketing, following an overhaul of the brand identity last year. SWISS chief executive Harry Hohmeister said in a statement in August last year: “With our stronger brand profile, we will be better able to survive and thrive in a competitive market that is growing tougher each year.”
But the business has taken risks in order to make the brand stand out from the competition, including the introduction of a new logo, which Haetty claims has been very successful.
“The red cross logo now represents the brand,” he says. “When we were doing our brand repositioning I knew the logo needed redesigning because it did not represent our brand or our ‘Swissness’. There were three different versions of it – a cube, a double square, and a red cross on the tailfin,” he recalls.
“When I approached the board of directors and told them I believed we didn’t have the right logo, I was told that it was too risky and expensive to touch the logo. But if I was going to ask people what the SWISS logo was they would never mention the cube or the double square, only the red cross.”
To go with the new logo, SWISS now has three new brand mantras that Haetty repeats: “We are true to ourselves and don’t pretend to be something we aren’t; we do things properly or we don’t do them at all; and it’s the small things that bring us closer to our guests.”
While these may not be original phrases, Haetty claims they have refocused the business. One of the small things that he believes makes a difference are the personal touches. Instead of pre-takeoff tannoy messages, pilots stand in front of customers to greet them, as well as apologise for any delays.
Other anecdotes from frequent flyers at the highest ranks are highlighted by Haetty to stress that the business sees customers as people rather than simply a route to fat profits. Flight attendants have been praised for remembering how an individual customer liked his beef to be cooked, how many pillows and what newspaper another customer preferred, he claims, adding that passengers who have experienced such attention to detail have expressed their delight at having been personally remembered.
“Developing customer intimacy is a long-term programme,” says Haetty. “The smarter you are the closer you can be to customers. In the service industry you have many customer touchpoints. Consistency is key so that is why it’s hard to build a brand in this sector.”
With flight attendants being responsible for many of these personal touches that create such positive reactions, the SWISS product development team brings them in to participate in surveys, workshops and cabin crew training.
Regular customer workshops, monthly surveys and VIP customer tasting events are also a way of getting regular audience feedback. Passenger trials of about 400 people have been key to the recent cabin refurbishment, uncovering insights such as first class passengers didn’t want to be too shut away and wanted a more open environment, and that 60% of business class passengers don’t travel alone. Both have had an impact on the seating structure of SWISS aircraft.
Research helps to uncover the things that really matter to passengers, but Haetty is careful not to rely on external feedback, preferring to strike a balance with using his own personal instinct. “Many managers need customer research to prove the things we already know. Sometimes you’re in doubt and you want to know the customer’s opinion,” Haetty explains.
“I personally don’t believe that much in customer research because you have to know your company and its culture. Of course you need to have a feel for your customer and observe how they behave, but I don’t believe you always need research.”
In the UK, the business is aware that it needs to raise its brand’s profile and plans to do this by increasing its marketing in Heathrow and Birmingham airports.
Strategic events using the London Olympics will also help raise the SWISS profile. The airline’s UK country manager Felix Rodel reveals that the House of Switzerland in central London will be used as a hospitality base throughout the Olympics, ensuring the brand can get involved in the event while keeping clear of any non-sponsor breaches. SWISS will also be looking to leverage promotional partnerships across Europe with Swiss Tourism and the Swiss Chamber of Commerce.
Rodel adds: “Zurich is our home airport and we have the home carrier position here in Switzerland, which is always something to play on. I think the image of our ‘Swissness’ is very strong and clear. It isn’t difficult for us to evoke our Swiss identity and values when promoting travel to Switzerland. But we do have to work on the messages that promote the fact we travel to Europe and other destinations to put us ahead of our competitors.”
SWISS may have grand plans in place to increase the presence of the brand, but Haetty claims that it is also in a good position to deal with economic uncertainty. The business has already had to deal with the 2008 economic upheaval, where it chose to ground aircraft and make some staff part-time.
But even he admits that economic uncertainties cannot be fully planned for, considering that the airline and travel industry is always subject to natural incidents, such as volcanic ash clouds, earthquakes and blizzards.
“Some say the financial crisis is over and others say we are going to be in a 10-year depression. Who knows where things will end up?” Haetty muses.
He is, however, confident that history will not repeat itself, and the events of 10 years ago that saw the old Swissair collapse because of poor financial management will remain in the past.
Holger Haetty CV
Chief commercial officer and a member of the management board of Swiss International Air Lines. He has responsibility for all SWISS marketing, product and sales activities.
Head of group strategy at Lufthansa German Airlines, appointed to the executive board of Lufthansa Passenger Airlines in 2003.
Head of product manager at Lufthansa.
Head of marketing at car rental firm Sixt.
On the executive board of Germany’s Committee on Eastern European Economic Relations, holds a doctorate from the University of Erlangen-Nuremberg and completed a management programme at Harvard Business School.
Chief commercial officer
Marketing Week (MW): Can you take us back 10 years to the Swissair breakdown and the circumstances surrounding that?
Holger Haetty (HH): It was a very different time compared with now. There were three major airlines in Europe – British Airways, Air France, and Lufthansa. The thinking at Swissair was that it had to get big or it would get bought out by one of its competitors.
Swissair was known as the flying Swiss bank because it was a very rich company. It started to buy different airlines and paid incredibly high prices for 25% stakes. But if you have a 25% stake you have nothing to say [because of the limits of having a minority stake]. The business also bought a lot of ailing airlines. Swissair in its core was solid but all its money was going on these other airlines. So eventually it went bankrupt.
Perhaps the strategy wasn’t that wrong but the implementation was lousy. It was a shock because it was the largest ever bankruptcy in Switzerland. It was a national tragedy as nearly everybody in Switzerland had shares in the airline.
Lufthansa now has full ownership. Of course you can always learn from mistakes but the situation is different now.
MW: You have recently added the Middle East and China to the route list. Will you complete your coverage of the whole world by adding true longhaul destinations such as Australia and New Zealand?
HH: Just because we don’t fly to Australia doesn’t mean we are not a real longhaul airline. To fly to Australia doesn’t make sense for a European airline. An aircraft takes about eight hours to get to Asia, then you have two hours ground time and then it comes back. If you fly to Australia it takes another 12 hours, another two hours ground time, and then it goes back. It’s double the aircraft time but only a 1.2 return on revenue. So I don’t think this will be in our future plans.
MW: How does the marketing function work at SWISS?
HH: We have a central marketing function and a sales department in each country with one marketing representative. They refer to material they get from headquarters.
However, I encourage local creativity. Our central team isn’t able, for example, to write advertisements for the British market because we couldn’t translate a sentence to make it sound as amusing as something the tabloid press in Britain might write.
There is a renewed focus on marketing in the company, whereas previously it was more about engineering and flying. In the past, Swissair chief executives were engineers and pilots.
Lufthansa chief executive, Christoph Franz, is the first who is a real business person. So, we are going to see more marketing people join us as a result.
Marketer 2 marketer
Laurence Bresh, marketing director at VisitBritain, asks: When do you think you will start to trial social commerce through your social media channels?
Holger Haetty (HH): I sometimes feel our websites are very boring but we have conservative clientele. However, the customers of tomorrow are the Facebook generation, so I’ve asked the business to bring me these guys who are inventing the websites for this generation – ‘the geeks’. I would like to hire them and produce a website that brings together both worlds, keeping the conservative way but making it modern. But I don’t yet have the solution.
Andrew Warner, marketing director at Expedia, asks: Where do you see SWISS fitting into the Lufthansa brand portfolio in the mid- to long-term?
HH: We are totally independent in terms of marketing as our brands are very different. However, we are always checking with our Lufthansa colleagues about what we can do jointly, and what would be the benefits and disadvantages of that. We are competitors because we fly to similar destinations, such as Warsaw and Milan, but competition makes you better.
Swissair is formed out of a merger between Balair and Ad Astra Zero
Swissair signs a partnership with Delta Air Lines and Singapore Airlines to form the Global Excellence alliance. The European Quality Alliance is then formed in 1990 with SAS, Austrian Airlines and Finnair.
Swissair begins losing money because of a weak economy and rising fuel costs linked to the Gulf War. The airline then initiates its Hunter Strategy expansion programme to grow market share through acquiring and taking stakes in small airlines such as Sabena, Air Liberté, AOM, Air Littoral, Volare and South African Airways. Operating costs of these place strains on Swissair cashflow.
Swissair is heavily in debt. The airline is liquidated and ceases operating.
Swiss International Airlines is formed by former employees with agreements to take on some former routes and aircraft.
The new incarnation of Swissair is taken over by the larger and more stable Lufthansa group. The takeover is completed in 2007, when the new SWISS brand joins the Star Alliance airline group as well as Lufthansa’s Miles and More frequent flier programme.
SWISS posts CHF159m (£110.3m) in profits in its Q3 results, lower than the record CHF171m (£118.6m) the airline achieved in the same quarter the previous year.
SWISS embarks on a new brand alignment strategy, cabin overhaul across all classes, and introduces new routes to the Middle East and China.