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Planes, trains and alliances: Swiss International bets on convergence

Passengers walk on a platform to enter a Swiss Federal Railways train at the main station in Zurich, on May 24, 2012.

Michael Buholzer/Reuters

Like most airlines, Swiss International uses code-share agreements with other carriers to boost passenger traffic and expand its global reach. Unlike most airlines, the agreements extend to the country's rail system.

The plane-and-train convergence strategy is part of an ambitious, two-part program to make its short-haul European network profitable. It started in 2009, when Swiss became the launch customer for Bombardier's C Series jet, a twin-engine plane that will be much cheaper to fly than the old Avro RJ100s that dominate its European fleet. Swiss is scheduled to take delivery of the first of its 20 C Series jets, which is due to make its maiden flight at the end of June, in late 2014.

Swiss is now busy forging alliances with SBB, the Swiss national railway company, in recognition that it's better to join your enemy than fight him. Rail, especially of the high-speed variety, is making life miserable for many airlines on short-haul routes such as Paris-London and Madrid-Seville. Swiss's view is that trains can be just as useful as regional jets at filling the hub airports in Geneva and Zurich for profitable long-haul flights.

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"The C Series will make more routes viable for us," said Gieri Hinnen, Swiss's senior manager of political and environmental affairs. "And we would like to see more [train] integration because it gives us more business opportunities."

Swiss emerged from the wreckage of Swissair, which went bankrupt in 2002. Its operations were gradually merged with Lufthansa's in the middle part of the last decade and it became a subsidiary of the German flag carrier in 2007. Today it flies 87 aircraft to 74 destinations and has about 8,100 employees.

Since then, Swiss has been renewing its fleet to bring down operating costs. It is replacing its Airbus A340 long-range aircraft with Boeing 777-300ERs. The company says the Bombardier C Series, with a 125-seat layout, will be 25 per cent more fuel efficient than the four-engine Avros, reduce carbon dioxide output by the same amount and will be 40 per cent quieter.

Jean-Pierre Tappy, Swiss's head of external affairs and the airline's former flight operations head, said he is "rather optimistic" that the airline will take delivery of the C Series next year even though the plane's first flight is six months behind schedule.

While Swiss is trying to make itself more competitive in the air, it is doing the same on the ground. Air travel still dominates long-distance European travel but faces a lot of competition from rail routes of 500 kilometres or less. That competition is heating up as Switzerland and the countries that surround it – France, Germany, Italy – roll out ever faster trains, making short-haul air travel less attractive (Bombardier's new Italian Zefiro trains, arriving next year, will travel at 360 kilometres an hour, approaching aircraft speeds.)

According to a 2006 report by transportation consultants Steer Davis Gleave, the market share for airlines plummets when high-speed trains are put into service on the same route. On the Madrid-Seville route, the airlines' market share went to 15 per cent from 70 per cent; on the Paris-Brussels route, air travel went to 2 per cent from 22 per cent.

High-speed trains are even becoming a threat on some of the longer routes. On the 580-km Rome-Milan run, airlines' share went to 45 per cent from 65 per cent. Airlines have probably lost even more business in the seven years since the report's publication because train speeds have increased.

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Swiss is no longer trying to compete on the shortest routes. "Below 500 kilometres, it make sense to take the train," said Mr. Hinnen.

But instead of treating trains simply as profit-killing competitors, it is trying to turn them into another source of passengers for long-haul flights. In that scenario, trains become land-bound Bombardier jets.

Code sharing with train operators is the start of the integration process. A passenger who lives in Basel, in northern Switzerland, 75 kilometres from Zurich, does not need to buy two tickets to get to his Swiss flight to, say, London. The train and air ticket are a single item. Similarly, a passenger from London who wants to ski in the Alps can do a "Fly & Rail" combo that will see her luggage delivered from the airport in Switzerland to the railway station closest to her ski resort.

Mr. Hinnen said other forms of air-rail co-operation could range from mutual marketing and shared used of lounges at rail stations to code sharing for foreign cities near the Swiss border and integration of railroad and airport security. A few other European rail and airline operators are working on similar ventures. Lufthansa's Frankfurt airport passengers can buy a single air-rail ticket that allows bags to be checked in at rail stations.

There are obstacles. For instance, the rail company and the airline may not have compatible information technology systems. Determining a fair revenue split between the two is bound to be an issue if integration proceeds.

Bombardier is delighted by the attempts at rail-airline integration. Since it makes regional jets and trains, it can only benefit as the two forms of technology join forces, as they are at Swiss, to stuff more passengers into airports.

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