SAS going downhill

First they dropped Business Class in Europe in favour of an all-Economy cabin. Now, SAS has quietly moved to downgrade its longhaul Economy service. Alcoholic drinks, which used to be served free with the meal (and are free with most international airlines), are now charged.

Maybe it thinks this is a clever way of getting out of its financial troubles and it can get away with it in a captive market. Non-Scandinavian passengers have plenty of choice and there is now even less reason to fly SAS.

SAS not going bankrupt

Or so they say.

Dealing in the airline’s shares was halted on the Stockholm exchange yesterday due to heavy and unusual activity. There have been rumours about the position of the airline for several weeks. A set of loans is due for renegotiation next Spring and the suggestion is the banks are not keen on any extension.

The airline has been in various forms of crisis for at least the last thirty years and its never-ending series of restructuring programmes must be the envy of management consultants everywhere. Despite odd bursts of profitability, the airline’s problems have got steadily worse. A combination of high labour costs and a desperately complicated management and ownership structure (the airline is owned by three governments with jobs and prestige being allocated across the ownership) makes it more or less impossible for the airline to compete. It might well be time for the governments to wake up and decide that yet another restructuring will not work. The problem is more fundamental – the airline simply cannot operate with three state-owners.

The airline is due to present its quarterly results on 8th November. It is known that the three governments are actively discussing the future of the airline so one would assume some form of announcement will accompany the results – even if it is “business as normal”.

Bankruptcy is not impossible but it would be a very difficult decision for the three Nordic governments. Putting yet more money in is not really an option either. A sale is unlikely (even if accompanied by a huge dowry, it is still an unattractive asset). Maybe the best option would be an orderly downsizing and split of the airline into three. Then each country could decide what to do.

It is pretty clear that the status quo (carrying on as normal plus yet another re-organisation) will not solve anything. A radical solution is needed – but would you expect three governments to be able to agree on a possibly painful plan of action?

More of this please, Ryanair

We aren’t great fans of Ryanair’s marketing operation (see here), but sometimes you have to hand it to them. Denmark’s BT newspaper reports that Ryanair is offering free tickets to SAS managers to help them understand what modern passengers want. Currently Ryanair’s cheapest fare is nine times cheaper than the Scandinavian airline’s, and Ryanair carried 1.1 million more passengers this August compare to August 2008, while SAS was down by 400,000 passengers in the same period. And of course Ryanair is in much better shape financially.

As translated by google:

“SAS has not yet learned that the passengers travel as long as the price is right. By offering SAS management and board for free travel, we will show how modern passenger likes to travel. SAS can hopefully gather some tips up on its travels with Europe’s largest airline.”

says Erik Elmsäter, responsible for Ryanair’s sales and marketing in Scandinavia.

Esoteric route watch – the fourth of an occasional series

On 22nd July Icelandair launches a four-times weekly service from Reykjavik (KEF) to Seattle. Even in good times this might seem a little eccentric, but in the current downturn and with the airline’s home country financially devastated, “bonkers” might seem a better description. However there is a logic to the move which may yet give this route a rosy future.

First, despite the “kreppa” at home. Icelandair has a spring in its step at the moment. Most of its business is in dollars and euros and its exposure to the domestic crisis is limited. What’s more, the collapse of the Icelandic krona has boosted tourism to Iceland by making it a little more affordable. This is partially mitigating the slump in traffic being felt by airlines worldwide, Icelandair included. Further, Icelandair had the good fortune of being sold by the FL Group in 2006 – FL Group was one of the first casualties of last autumn’s collapse, being placed in administration in September 2008.

Most significantly, however, SAS Scandinavian Airlines has just dropped its Copenhagen-Seattle service after 40 years on the route. Despite flying the route for decades it was losing money because of increased competition from other European carriers, and using planes (A340s) that were far too big. Icelandair’s B757s will however provide a much better match to demand, and speedy connections at Reykjavik will actually save time for travellers previously transferring at Copenhagen.