Switzerland's new airline, Swiss, has raised hopes of a speedy return to profit after reporting a smaller loss than expected for the first half of the year.

The airline made a loss 447m Swiss francs ($295.8m) in the first six months of 2002.

Sales were also higher than expected at 1.75bn Swiss francs compared to a target of 1.21bn francs.

Swiss Chairman Pieter Bouw said the results were "less red than expected, but still red and that cannot remain that way".

A combination of tough cost controls and a faster-than-expected recovery in passenger numbers helped to trim Swiss' losses.

The airline said it is on course to break even in 2003, and is aiming to make a profit in 2004.

Troubled past

Swiss was formed after Swissair went bankrupt in October 2001.

A consortium of major Swiss firms agreed to refinance the national carrier and the new airline combined two thirds of Swissair's routes with those of Crossair, a former short-haul subsidiary.

The company admits it still has some customer services weaknesses.

Reliability and passenger comfort levels are still not meeting its desired standard.

And personnel problems remain from differences in pay and conditions between former Crossair and Swissair staff.