The airline Swiss will be forced out of business if it is not able to cut costs by 20 per cent on European flights, according to its chief executive, Mr Andre Dose.

His comments came a day after he announced the launch of a new low-cost brand, Swiss Express, to operate Swiss's regional flights from next winter and a 10 per cent across-the-board wage cut.

"Our costs on the regional business are about 20 per cent too high to be compatible with the European competition," he said.

"If we do not bring down our costs here by 20 per cent, then we'll have to say goodbye to this business," Mr Dose added.

Swiss was set up after national carrier Swissair collapsed in 2001. It combines some of Swissair's intercontinental operations with the operations of the more successful European regional airline Crossair.

Mr Dose said there were "productivity problems" with flight crew on Swiss's regional operations and he wanted to boost their efficiency.

Former Crossair regional staff have protested that their pay and conditions at Swiss are worse than those of their former Swissair counterparts.

An arbitration court is due to issue a ruling tomorrow on their dispute with the company's management.

Swiss Pilots, the union representing Swiss's regional pilots, on Friday described the airline's shift in strategy as "completely mad".

Swiss, which made a 980-million-Swiss-franc (€668 million) net loss in 2002, cut staff numbers and services during its first year of operations.

Executives have warned that the airline is suffering severely from the slump in global air travel caused by the economic slowdown and the outbreak of the pneumonia-like virus SARS. - (AFP)