A Nervous Champion: Swiss is one of Europe’s most profitable airlines. So why is it so intent on reform?

You can set your Swiss watch to it: Year in and year out, Swiss International Air Lines—sometimes it just calls itself “Swiss”—emerges as the most profitable airline in the Lufthansa Group. It does better than Austrian Airlines, better than Brussels Airlines, better than Germanwings, better than British Midland (or did when it was still around) and better than the Lufthansa-branded airline itself. Not unlike the Swiss economy relative to the economies of Switzerland’s troubled neighbors, Swiss is a rare legacy airline that consistently thrives. Last year, in fact, its 7% operating margin was its best in three years and even matched that of the high-flying International Airlines Group (IAG)—yes, the same IAG that’s enjoying all sorts of tailwinds: lots of favorable U.S. exposure, low exposure to troubled Asian markets, a strong U.K. economy, the fruits of dramatic cost cutting in Spain, limited threats from Gulf carriers (Qatar Airways is more friend than foe) and limited threats from LCCs (along with British Airways and Iberia, IAG itself owns Vueling, one of the biggest and strongest LCCs).

With a record like this, Lufthansa might be expected to say to Swiss: “Just keep doing what you’re doing.” But that’s not the case at all.

For all its success and all its home market wealth, Swiss is reforming, restructuring and in some respects even downsizing, like an airline that worries about its future. And these worries don’t stem from some unjustified paranoia. Swiss indeed faces some material risks to its good fortune, ones Lufthansa is loath to ignore, lest its crown jewel airline loses its luster.

One of its biggest headaches is easyJet. The LCC has made Switzerland one of its fastest-growing markets this decade, as some simple capacity statistics make clear. Next quarter, easyJet’s seat counts from Switzerland will be up 69% since the same quarter in 2010, according to an Airline Weekly analysis using Diio Mi. That’s more than twice the airline’s overall growth rate during that five-year span, and it comes despite actually slashing Zurich capacity by 31% and letting Swiss have its way there, other than to London. easyJet’s growth, on the other hand, is concentrated at Geneva and especially Basel, which both straddle the Franco-Swiss border. In fact, in easyJet’s entire system, only London Gatwick has seen more growth in its raw number of easyJet seats during the same period (and…

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When Delta lifted the curtain on first quarter earnings season two weeks ago, its results highlighted some key industry trends, including trouble in international markets and sustained health at home. Hidden beneath Delta’s thick layer of hedges, however, was the most dominant trend affecting U.S. airlines last quarter: dramatically lower fuel prices.

Recall that Delta actually paid more for fuel this Q1 than last and still produced great results. Well, most of its peers, as they revealed last week, saw fuel outlays decline by unthinkable amounts, driving unspeakably large profits. One after another paraded margins that were all-time company records for the off-peak quarter—and in some cases all-time company records, period, regardless of what quarter. Put another way, airlines like American and Southwest were more profitable in this year’s slowest period than they were during last year’s busiest period, never mind that last year was one of their best years ever too.

How long will the party last? To be clear, revenue pressures are building, not just abroad but even in some cases at home. Assuming no further oil spikes, however, it will take a massive revenue collapse to neutralize the gargantuan fuel savings U.S. carriers are now enjoying. And although cheaper fuel is indeed triggering more overall capacity growth, the Big Three, in particular, all announced capacity cuts, specifically in international markets.

The fuel bonanza is starting to manifest itself outside the U.S. too, as China Southern and Volaris demonstrated last week, with many more carriers set to join them in unveiling good Q1 results this week.

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