Swiss has struggled to cut costs

Rumours have swirled for almost two years that Swiss may merge with Germany's Lufthansa.

But on Friday Christoph Franz said the priority was to complete rebuilding itself from the shell of collapsed predecessor Swissair.

Both firms' shares rose following the comments.

By 1340 GMT, Swiss shares were up 16.7% to 10.15 euros, while Lufthansa's shares rose 1.9% to 11.30 euros.

Back to the black

Mr Franz did not name Lufthansa as its potential partner.

But talking to reporters, he stressed that getting back into the black was the number one priority.

"I have always made clear... that we need to make sure we can become profitable," he said.

The company was formed from the ashes of Swissair in 2002, with the help of some 2.7bn Swiss francs ($3.6bn; �1.9bn) in fresh financing including some money from the state.

The company made a pre-tax profit of 20m euros in the final quarter of 2004, although the full year showed large losses.

Although talk of a partnership was "interesting", Mr Franz insisted that any deal would have to mean Swiss retaining its brand.

Swiss almost joined the Star Alliance group of airlines, of which Lufthansa is a member, in 2003 before backing away. It later repeated the performance with the Oneworld alliance which includes British Airways.

It remains a takeover target in the eyes of many observers, who often portray it as stuck between larger, stronger players and more successful low-cost carriers.