The ailing airline Swiss pulled out of a fledgling deal to join the Oneworld alliance with British Airways on Thursday owing to the costs involved, but said it was still looking for a new tie-up with another major airline.
The chairman of Swiss International Airlines, Pieter Bouw, said after the sudden announcement that the airline was still looking intensely for an alliance.
"Participation in an alliance is a priority," Bouw told journalists as the company's move revived speculation about a possible tie-up with the German airline Lufthansa.
Swiss said it will not join the Oneworld alliance with British counterpart British Airways for now owing to the costs involved and "other drawbacks".
The airline pulled back from integrating its frequent flyer programme with that of Oneworld, a key part of the alliance arrangement.
"The sizeable costs of such an integration and the drawbacks it would bring currently outweigh its projected mid- to long-term benefits," Swiss said in a statement. "As the abandonment of the proposed integration also means that the bilateral agreement between Swiss and British Airways cannot be put into practice, Swiss is unable to join the OneWorld alliance at the present time," the airline added.
The company added that bilateral arrangements with other OneWorld members were not affected by the decision to drop the alliance.
In London, BA said certain parts of its commercial pact with Swiss would remain, including the exchange for eight Heathrow daily slots.
BA and Swiss code-sharing between London Heathrow and Geneva will continue for a further three years subject to agreement of commercial terms, but would not be extended further, effectively not covering flights to Zurich.
British Airways chief executive Rod Eddington said: "We are disappointed that Swiss has decided to step back from our agreement but we accept that it is up to Swiss to decide what is in its best interests."
"We are pleased that we have reached an amicable conclusion," he added.
Swiss had staked its revival on joining an alliance in the medium term and tie-up with Oneworld was announced with great fanfare by company bosses and BA chief executive Rod Eddington last September after months of negotiations.
The end of the arrangement has revived speculation that Swiss could now look towards the German airline Lufthansa, which had put forward an offer for a financial tie-up last year rather than a simple alliance arrangement.
Swiss's share price on the Zurich stock exchange rose by 8.3 percent in less than an hour of trading, to reach 12.45 Swiss francs, but later fell back.
In April, Christoph Franz, a former Lufthansa executive, was appointed chief executive at Swiss, taking over from Andre Dose, the architect of the Oneworld deal.
Lufthansa said Thursday there were no discussions underway but that it was still open to the principle of an alliance with Switzerland's top airline.
"Swiss must decide what course it wants to take," a spokeswoman for the German airline said in Frankfurt.
Under the deal with British Airways, Swiss had obtained a guarantee of 50 million Swiss francs (32.2 million euros, 37 million dollars) from Barclays Bank to shore up its finances.
After cutting its staff and services by about one-third, Swiss cut its annual loss by about one-third in 2003 to 687 million Swiss francs.
It also posted better results in the first quarter of 2004 by reducing losses to 78 million Swiss francs.
However, the company was still battling to secure its declining liquidity and has so far failed to obtain a 300 million Swiss franc credit facility from banks despite months of negotiations.