SAS close to bankrupcy

[paparomeodelta]

SAS close to bankruptcy. Long analysis in link, you need to googletranslate it yourself, it´s pretty long. Headline: "Everybody are tired of SAS".

Till slut har alla tröttnat på SAS | Nyheter | Expressen | Senaste nytt - Nyheter Sport Nöje TV (http://www.expressen.se/nyheter/till-slut-har-alla-trottnat-pa-sas/)

[A and C]

I don't think that the scandinavian governments will let SAS go to the wall and leave the market to those with a red nose.

[Stuck_in_an_ATR]

Haven't we heard the same about Belgian and Swiss governments a couple of years ago?

[manfromnorth]

This has nothing to do about "Red Nose" company.....but simply SAS running out of money and unable to make money in its current state....and when Governments (taxpayers) have to bail out the company by promise to pay Bank loans in case of bankruptcy it will not work.....They may have problems with EU with the issue of Government support....and likely have to cut a lot of jobs and change agreements with the unions.

[paparomeodelta]

Leaking from negotiations:

Governments give guarantees to banks for new loans
1.000 have to go
15% salary reduction flat

[linmar]

Analysis? A biased article in a Swedish tabloid, based more on affection rather than facts can hardly be called an analysis.

Most of what is written about the situation is based on what another Swedish paper, Dagens Industri, has published over the last couple of months. DI's reputation has the last couple of years gone down the drain and are referenced as the tabloid among Swedish business newspapers.

No doubt SAS has problems. The figures just doesn't add up these days.

Question is what can be done? Costsaving among staff is usually the first thing that management proposes, always with the same argument that "all other costs are equal to our competitors".

Given the annual reports from the biggest competitors in Scandinavia though, SAS cost structure would still be more than twice of Ryanair and 25% higher than Norwegian even if all of SAS 15,000 employees would be working for free. But of course, blame the staff...

[KBPsen]

Isn't the Expressen newspaper a tabloid known for being more interested in sensationalism than reality?

[Black Pudding]

And look what happened to Spanair

[jackx123]

15% cut will not be enough. A quick and dirty below.

All cost being the same across the industry. i.e. lease, fuel, interest, landing fees etc, the single highest cost is labour.

There is better data from SH&E or BCG, but this one is easy to read:E
Where your airfare really goes - Fortune on CNNMoney.com (http://money.cnn.com/magazines/fortune/storysupplement/airline_costs/)

Labour cost taken from eurostat (or European Commission).
Eurostat Home (http://epp.eurostat.ec.europa.eu/portal/page/portal/eurostat/home/)

Denmark is roughly 40% higher than Sweden and Norway is roughly 30% higher than Sweden.

Compare this to e.g. Poland, which has a highly qualified labour force, and has less than half of Sweden's labour cost. Even Germany has lower labour cost than Sweden.

So, comparatively, roughly 30% of your entire cost is halved in case of LOT, giving more room for fleet renewal and better fuel economy, better customer service (and satisfaction) and thereby can compete more effectively.

This very simple calculation should be easy enough to follow even for the unions.

[DownIn3Green]

Do they still have a stake in Air Baltic?

[FerrypilotDK]

One of the most basic "rules" for keeping costs down, is ONE TYPE! For years SAS was M-D based and the relationship to the factory regarding training, parts, maintenance etc were exemplary. The next generation of MD was killed by SAS' defection to the 737. It entailed a complete revamp of training philosophy, technical staff had to be retrained, all the pilots, even the emergency training of the FAs, parts, tools......hugely expensive.

Then they went and bought Airbus?...so now there are MD 80s and 90s, AB of at least three versions, CJs, Dash 8s, 737......

This matter alone would be enough to kill the company cost-wise. Of course, operating one type might not have covered every route and so one LR type might have been added, but this in such a small company?

Add to that the poor service level, confusion as to whether they will be a regional, international, feeder for LH, sell off of profitable units during earlier crisis times.......

....and that the director of this fiasco earns 8.8 million kr plus 2.2 million in pension, compared to say, Norwegian's director (note, a company that is making money!!!!) who gets 1 million and 233,000 in pension.......that this carries through to all the clowns (mis)managing the company, and you have an idea why they are in the situation they are!

If you read the history of the company, the types who started it and made it a success, then introduced BS psycho-testing which made certain that this type never got hired! Instead they got too many arrogant prima donnas. If you have time to run a farm or a consulting business alongside of your job, then you are not working enough hours.

So cut the salaries of the small fish......it will never be enough, because it is rotten at the top.

A shame, but in a healthy marketplace, the robust and flexible will survive, while the rigid and arrogant will die.....Sabena, Eastern, Swiss........Braniff, NW.........

[up_down_n_out]

SAS has been close to death for years, more is the point they were part share in Estonian air until 2010,- another regional lame duck that has been bailed time and time again by the stupidity of the Estonian government, who are too proud to let it die. That must have sucked out a lot of spare cashflow for years.

SAS sells off Estonian Air shares (http://www.baltictimes.com/news/articles/26342/)

Market forces should be allowed to take their course, AND should be the same for all.
Air Baltic, SAS, EA all should be allowed to go bust, especially as AB don't respect any EU laws, and routinely rely on the Riga-LV government hand outs to keep their shambles that passes for a "budget" airline flying.

Had this happened already, I guess we wouldn't have had the miserable spectacle of Malev, (which was a good AL) the simply abusive dominance of the bucket jobs like Ryan or the messy Wizz taking over, when they simply abuse their way to the top through renamed subsidy.

It seems to me, in northern Europe it's mostly a race to the bottom with "customer service" and reliability placed last priority, with a total inability to work together and do strategic long term planning, rather than "the winner takes all".

High time for a good clean out before the triple dip recession forces them to the wall for good.

[Joetom]

BBC News - Airline SAS to cut jobs and pay (http://www.bbc.co.uk/news/business-20296034)

Big numbers indeed !

[Midland 331]

For ex-SAS people like me, this is a sad sign, but it's not 1985 any more, and as Jan Carlson identified way back then, geography, cost base and population will never be on their side, and the lo-co carriers have come to dominate like no-one would have ever predicted.

Actually, Carlson gave closure/take-over of SAS as one of the possible 21st century outcomes in the mid-eighties, unless costs and productivity issues were addressed. I hope it does not come to this.

[EDMJ]

I read somewhere that SAS has to deal/fight/negotiate with 36 different trade unions!

I worked there briefly 25 years ago; a fantastic working place with a pride and esprit de corps among the employees which I have never seen since.

[Midland 331]

>I worked there briefly 25 years ago; a fantastic working place with a pride and esprit de corps among the employees which I have never seen since.

Oh yes indeed! This cynical and non-corporate Brit was immensely proud to work for them.

[toffeez]

"I worked there briefly 25 years ago"

Was that before Jan Carlzon built his glass palace HQ? I used to go there often and was amazed at the culture. They had a well paid army who would evaluate new planes for months or years, only for it all to be overturned by a quick board decision. Hence the MD/737/Airbus fleet mess.

Plus the cabins seemed to be designed by the unions for the maximum comfort of the cabin crew.

It was obvious then and it still is now that the population of the 3 countries can't support 3 hubs, and deleting long haul from Oslo or Stockholm sends the pax via LHR or AMS, not CPH.

The writing has been on the wall for a very long time.

P.S. for an outsider, they were good honest friendly people to work with. Including their Norwegian jokes. Apparently the Scots are not so tight after all.

[Wadadli]

SAS to cut jobs and sell assets in survival plan | Reuters (http://www.reuters.com/article/2012/11/12/us-sas-idUSBRE8AB0AR20121112)

"Gustafson said the company needed to get the deal with unions in place in a week."

"Staff will take pay cuts of up to 17 percent, depending on what part of the organization they work in. Cabin staff will see their pay reduced on average by 12 percent."

:eek:

[Midland 331]

I did nine years there, never got to STO HO, but attended many courses at the smaller version of the palace you describe, in CPH.

Yes, the style was indeed lavish, but at the time, circa 1986, SAS were the third most profitable airline in the world after AA, plus one other (SQ?), yet were around number twenty two in rank of number of passengers carried, if my memory serves me right. One of their highest yield routes was LHR-ARN, which was around £530 return C-class, and it had some of the highest load factors of the whole network. So they had the money to pay generous per diems, and furnish their offices in solid pine. In fact, I'm sitting at one of their solid pine desks right now. I hope they don't want it back.

When Midland wet-leased a DC9-21 for MME-LHR circa 1994, the cabin crew were astonished that Midland could serve drinks, a hot meal, and hot towels on such a short sector. And it always amused me to baord one of the MD80s and find that the space for the first three rows of seats (at least) was taken up by a huge galley.

And the London town office. Staffed by around 100. I never did figure out what some of the middle-ranking managers actually did. Mr O'Leary would have laughed like a drain.

[SOPS]

I have flown LHR ARN with SAS in J about 20 times. The seat is great..but the service leaves a lot to be desired....I mean for what i payed if i ask for anoher glass of wine, it cant be that hard,without the "look"...

[Doors to Automatic]

I travelled with this outfit a number of times between LHR and CPH/OSL/ARN during the 1990s when I worked in the airlines.

The one memory I had was the C-Class meal, served without fail on EVERY flight. Boiled fish & new potatoes served in 1/2 inch of molten butter - EEEUUURGH!!! :eek:

[Ramrise]

The real purpose of todays plan is union-busting in modern day scandinavia. Aside from the immidiate cost savings it will basically strip the unions of whatever power they still possess. And that will generate alot more money over the long term.

I am starting to feel like I work in a place where unions are not allowed.

[170to5]

I'm sure that the management has plenty to do with the continuing failure of SAS to be profitable, but I don't think that you can explain the current slashing (and it is slashing) entirely upon union-busting.

The financial performance of SAS means that irrdlevant of who is to blame, radical steps have to be taken to stop the company closing down in the very near future, and I think most companies would take the same measures, in aviation or other industries.

Stand by and save the company first, then talk about T&C's and pay. Sorry because that sounds very pro-management but I think it's true in this case. I wouldn't want to be made redundant in the current climate, there are plenty of guys without a drive and the queue is getting longer each week.

[Hotel Tango]

The real purpose of todays plan is union-busting in modern day scandinavia.

Having known several union reps in Scandinavia once upon a time in the past, I observed that their unions got ridiculously powerful during that era. I´m not anti union, far from it, but I do think that as they gain strength many unions get carried away with their power, and their ojectives, demands and expectations became unrealistic and eventually unsustainable. Unfortunately without unions the pendulum will swing completely the other way.

[jackx123]

IMHO. If anyone remotely thinks SAS can compete fairly when labour cost in Denmark and Norway run 30-40% higher than Sweden and even more than the rest of Europe, you need to re-do your medical, with or without unions.

12% average pay cut just ain't doing it in the long run. Good luck

All bets on, SAS will do like the Swiss. Bankrupt the carrier, everyone gets the sack, restructure, rehire with 40% haircut. The model seemed to work for Swiss so it can't be that bad.

[JohnieWalker]

Sadly this is what happens when you run three hub nowadays, have diversified fleet, and have to pay taxes in three different countries with high labour costs... and trying to lower ticket costs to compete with low-costers.

That just doesn't work anymore.

[Wadadli]

http://cphpost.dk/business/employees-resisting-sas-“ultimatum”

"Danish employees showed their dissatisfaction with the plan today in Copenhagen, where members of the 1,400 member strong Cabin Attendants Union (CAU) refused to take part in a meeting with SAS managing director"

:ouch:

Not really surprised.

SAS tops European airline critical list - FT.com (http://www.ft.com/cms/s/0/fa1cbd88-2d87-11e2-9988-00144feabdc0.html)

:oh:

[lexoncd]

Sadly I fear SAS will ultimately fail. As the previous poster has shown the airline is struggling with the Danish pilots union this time but it has also struggled in good times with the competing demands of the various Nationalities involved Union and Government interests.

SAS have a good number of crew who remember the "Good old Days" of C class taking up 21 rows on an evening flight to Oslo from Heathrow. Those days are gone and sadly with it attitudes have to change to give any legacy carrier without a major International network a chance of surviving.

I agree with the complaint that SAS should have conducted initial talks in private but time to wake up and smell the coffee. SAS have 138 aircraft with 10 different makes/models not ideal. Norwegian air shuttle have 67 and 259 on order and moving into long haul.

[Wadadli]

Norwegian Air boss looks beyond ailing SAS | Reuters (http://www.reuters.com/article/2012/11/13/norwegian-ceo-idUSL5E8MCC8M20121113)

[jackx123]

SAS says this is an unfair comparison as Kjos - who controls 27 percent of Norwegian through his investment vehicle - takes far more than his basic salary in the form of dividends.

Incredible comment by SAS. So Kjos is paid by performance i.e. low salary and if norwegian sees profit he gets paid dividend. No profit no dividend. That's how it should be. See Lee Iacocca of Chrysler. US$ 1 in salary and all performance based.

As the saying goes, as you make your bed..... and unfortunately it boiled down to stubborn unions to sink the airline.

[LN-KGL]

No real news in that Reuters article - only a couple of facts that is outdated by let's say 6 months. Norwegian has now 68 Boeing 737s - 11x B733 and 57x B738. At the year end one more of B733 will be leaving the fleet, while this year's last B738 delivery isn't far away. The net growth next year will be 10x B738 + 3x B788 according to what is said in the Norwegian Q3-12 presentation.

SAS on the other hand seems to get in 3x around 12 year old B737, 1x factory new B738 and 3x A320 (2x 12 year old aircraft that flew for Spanair + 1x 6 year old) at the end of this year (provided they still stay afloat the coming Monday).

[hval]

Ramrise,

The real purpose of todays plan is union-busting in modern day scandinavia. Aside from the immidiate cost savings it will basically strip the unions of whatever power they still possess.

A very interesting comment.

You do understand that SAS is just about bankrupt, don't you? If SAS go bankrupt then no one has a job; not a single person. The only ways of not going bankrupt are to borrow more money, if someone will lend the money, or to reduce costs. Borrowing money will not stop SAS going bankrupt, it will just delay the inevitable.

How would you stop SAS from going bankrupt?

Med vennlig hilsen,

Hval

[Swedishflyingkiwi]

One of the problems I have seen as SLF around SAS is they seem to have cut costs already in the wrong places...
They charge similar prices to LH / LX / BA on European routes but give the customers near Ryanair service...
I choose to fly short haul European flights out of Scandinavia on airlines that will at least give me a free snack and a drink. For the same price you get a little extra....

One day airlines might realise that looking after the customer might bring back more business.

Today I got an email from SAS offering me 15% corporate bonus credit points if I actually paid them in advance before buying tickets. Not sure if I want to use them as a bank in these shakey times. Sadly SAS may end up like Swedish SAAB automobiles - a slow and painful demise.

[toffeez]

My experience goes back a few years, but SAS had a tendency to come up with marketing ideas they couldn't live up to:

The "Businessman's Airline", when their 767s had the worst longhaul BC seat.

The "Destination Services": one could fly from e.g. Trondheim to Bangkok via CPH and leave one's heavy winter coat in storage there.
Change of plan: return flight is now via Stockholm. I still wonder what they did with all those coats.

[Midland 331]

Toffeez.

No. Sorry, I don't accept this.

Long-haul was not SAS's strongest product, but Euroclass within Europe had a strong reputation, and much repeat business. I doubt if any other European airline had such a mix of C to Y traffic.

I speak from having been in sales and marketing for SAS for nine years, where I met frequent travellers, their travel managers, and their business travel agents. SAS had an enviable reputation. It wasn't all marketing, but solid, front-line substance. They could more than live up to what they claimed. They were number one in punctuality and won the coveted ATW Airline of the Year award a the end of the eighties.

They had an outstanding product and well-motivated staff. I was proud to work for them, and I'm not normally a "company man"

However, as someone said earlier in the thread, they've simply not moved with the times in respect of costs and product. It's not 1987 any more.

[FullWings]

I don't know why there is so much surprise generated when yet another European national airline becomes insolvent. The business model of "lets buy some aircraft, operate some routes, pay ourselves lots of money then rely on the state to bail us out" has long expired.

Willie Walsh was saying several years ago that he only expected Lufthansa, KLM-AF and BA-IB to stay in existence long-term, plus a few of the bigger lo-co's. Seems like this is coming to pass: the economics of flag carriers operating out of small (population) countries has always been suspect.

[LN-KGL]

No doubt, SAS has stayed in the past. My latest international flight with them was the first Saturday in October - from Frankfurt to Oslo. The Boeing 737-600 was filled to the rim and many passengers didn't get on board at all (heavily overbooked?). The best comparison from the past is an utterly chaotic overbooked late afternoon flight I had with United Shuttle from ORD to EWR in the 1990s. On board the United flight I did get both free drinks and a chicken dinner, but not the same on board the SAS flight. I did buy an expensive dried out turkey sandwich that didn't have any turkey on it and bottle of water. The free tea tasted like hot brown tap water.

Compared with the three other segments I had on this Star Alliance trip to Nice, SAS fell through compared with Lufthansa and Swiss. No doubt, my next trip to Nice will be with Swiss only; flying with them is a real joy.

[Midland 331]

Willie Walsh was saying several years ago that he only expected Lufthansa, KLM-AF and BA-IB to stay in existence long-term, plus a few of the bigger lo-co's. Seems like this is coming to pass: the economics of flag carriers operating out of small (population) countries has always been suspect.

Circa 1987, all SAS staff received a booklet from CEO Jan Carlson restating the core values of the airline and warning them of these very outcomes, namely a few mega-carrier amalgamations, and a drastic increase in competition. And the possible consequent demise of SAS.

The only way to avoid this was for the airline to buy into a carrier more centrally located in the continent to try and achieve hubbing benefits, and cut costs, neither of which have happened.

[jackx123]

i had a brief look at the financial reports of some peer airlines and it's evident SAS will be in trouble even after this rescue package.

I give them 30% chance of longterm survival after this round of cuts.

The cost burden is to high and SAS needs a 35-40% cut in salaries (with associated social benefits) to be on an even playing field.

The unions can jump up and down as much as they wish, but this is reality.

Sad but true.

[His dudeness]

No profit no dividend. That's how it should be

This is exactly what got us all (not just airliners) in the bad spot we are in. Short term profit. Works for while, then the big bang comes. A creative manager can always create profits from year to year, but a healthy company can´t be build without a long term strategy

[The SSK]

Circa 1987, all SAS staff received a booklet from CEO Jan Carlson restating the core values of the airline and warning them of these very outcomes, namely a few mega-carrier amalgamations, and a drastic increase in competition. And the possible consequent demise of SAS.

'One of five in '95'. I remember it well. He was right about the five (or will it be six?), just the year and that SAS would be one of them.

[LS-4]

Short term profit. Works for while, then the big bang comes. A creative manager can always create profits from year to year, but a healthy company can´t be build without a long term strategy

True. A general rule of business management, as far as I know.

[jackx123]

I think you have things mixed up slightly. Business managers get paid salaries, bonuses etc and shareholders dividend.

If a company pays a dividend that cannot be supported by its profits then it is technically insolvent and the Dividend is unlawful.

So Kjos gets paid ONLY when Norwegian can make a profit but the CEO of SAS can technically get paid as much as he likes, or has agreed with the board.

However, SAS will then post a loss and has to go to the board (which gets no dividend, unless shareholder) and ask for support.

[gofer]

What happens if they do go to the wall????

Who provides the future transportation - will Ryan/Easy move further into the market, is there somebody standing in the wings (so to speak) to do a mega expansion??... Those of you in the picture, how's about some "sculpture on clouds" with your best guesses.....

Chears and thanks in advance from a "more southern european"
:D

[The SSK]

Err... Why do you think Norwegian ordered 222 aircraft last January?

Norwegian Air Orders $21.5 Billion in Boeing, Airbus Jets to Squeeze SAS - Bloomberg (http://www.bloomberg.com/news/2012-01-25/norwegian-air-shuttle-places-orders-with-boeing-airbus.html)

SAS' failure is part of their business plan.

[Mr A Tis]

In a recent interview, MoL was asked about Ryanair Transatlantic & he said it would be 3 -4 years before that would happen.......so be warned boys, it's def on the cards.

[captplaystation]

Ref NAS's business plan & Ryanair long-haul. . . . low-cost long haul starts next Spring with Red-nosed Dreamliners.

[BUGS/BEARINGS/BOXES]

It looks just like the sort of opportunity Flybe Nordic are waiting for.

[LN-KGL]

Can't see any opportunity for Flybe Nordic - 16 aircraft, 14 of them ATRs and two E170s. Ah, maybe you think about Flybe buying Widerøe? Hardly not, with their finances they have to concentrate on staying aflot themselves.

[boredcounter]

FlyBe expanded after 9/11 on the strength of the maintenance cash cow of Bombardier aircraft, have (and I dare say I have) missed something here?

My money is Norwegian becoming the new SAS as DAT and Crossair?

[Kristupito]

If Scandinavian airlines goes to the bankruptcy:sad: can you imagine:uhoh: how many pilots enter the market ?:confused:

[Fintip]

We are talking about 1500+ pilots, many with 10 000+ hrs.
Most 737 rating, many A 34/33/32. Worth anything??
Let's hope :sad:

[CargoOne]

Scandinavian governments must let SAS die. It can't drag forever. Also SAS crews and employees need a reality check.

[Rabina]

Maybe Scandi could squeeze a few more years out of their female cabin personnel and up the age of retirement from 85 to 95?:rolleyes:

[RTO]

The real purpose of todays plan is union-busting in modern day scandinavia.
How true, SAS can't be saved if everyone worked for free. They desperately need to do a "Swiss" in order to get on the right track. If the pilots agree to these cuts, it would be like pissing in your pants to keep warm.

[Hotel Tango]

Rabina, you want to try the US airlines. Most are well past the 100 mark :E

[paparomeodelta]

Tomorrow we know if SAS will keep on flying. And for how long...

I will change now! And this time I mean it. This is the addicts repeated promise to everyone. But unless the person is willing to undergo a complete mental metamorphosis the value of these insurances quickly decreases to zero. About the same principle applies to companies.

The difference is that the promises in the corporate world has cool names rather than saying "I will never drink again". SAS Turnaround 2005, Core SAS, the SAS Group Strategy 2011 are examples. This week it was time for yet another vision of the future, the almost Star Trek-sounding: 4Excellence Next Generation.

We have, in other words, heard it before.

Maybe SAS instead an example of a phenomenon called "disruptive innovation". To cut the b/s it could be translated to "a very good idea".

An important reason for the change in the airline industry is that pioneers as Ryanair came to an important insight: airplanes are actually buses that operate at high altitude. No people getting on the regular crowded morning bus to work expects curtains, steaming towels and complimentary champagne for outrageous prices. This observation changed a business model, and the rest is history.

The concept of "disruptive innovation" was coined in the 90s by Harvard professor Clayton Christensen. It's about ideas that change the rules of the game in whole markets.

Clayton Christensen was fascinated by how even apparently successful and well-run companies could be reduced to mediocrity or even eliminated by this concept.

Are you as fascinated?

[Midland 331]

Wise words. I would contest that SAS was a "Disruptive innovator" itself in 1983/4. The guiding principle being "make the customer happy through punctuality, motivated staff, and decent service, and they'll come back for more". Back then, this was a radical concept among the mainly nationalised airlines of Europe. BA borrowed much from the SAS success story.

But times change.

Circa 1987, in one of Jan Carlzon's communications, one of the possible threats he outlined was that of budget carriers serving unusual city pairs, and hence syphoning traffic from a small market base.

Hamar-Aberdeen was one of those quoted. We all thought this was ludicrous and utterly unlikely, added for amusement alone.

Now, as I browse Flightradar 24, I find aircraft serving the most unlikely places. Such as Oslo(?! Rygge) - Liverpool, Billund-Edinburgh, and Stockholm(?! Skavsta)-Dublin.

The whole game has changed, much as SAS's former leader and visionary warned it would.

"I have a feeling that we're not in Kansas any more"

Or, "I have a feeling that we're not in 1988 any more". It's one thing knowing what to do, but it's another doing it.

One of the nicest smells on board in that period was decent fresh coffee from the galley. Sadly, SAS needs to wake up and smell some.

[paparomeodelta]

I remember that, Midland.

I have no interests whatsoever in FR. But I have used them hundreds of times. No problems.

I think they are geniuses. But I still hear the echoing from the caves, RYRbashing, RYRbashing...

[SimCaptain]

SAS ordering FULL TANKS on flights today - crew advised to have money available to get home on their own....

Norwegian news - E24 Næringsliv (try Google Translate) (http://e24.no/naeringsliv/fyller-opp-tanken-i-tilfelle-konkurs/20301228)

[Midland 331]

Some insight into current T and Cs here:-

Danish government prepares for SAS bankruptcy (http://www.ttgnordic.com/news/item/4097-danish-government-prepares-for-sas-bankruptcy)

Very much like what I enjoyed circa 1988. If I went to a team meeting in Manchester from North-East England, I'd get a straight GBP50 per diem for leaving my home patch. You could buy a lot of motorway service area cornish pasties for that. Plus fuel. Plus overtime. Gosh, I miss those days...

[Flightmech]

Doesn't sound good for SAS. Will this be SAS in its entirety or SAS the airline. They have masses of engineering and handling contracts throughout the system.

[LN-KGL]

We are talking about the whole SAS Group - SAS AB is a 100% owner of Scandinavian Airlines, Widerøe's Flyveselskap, SAS Finland (ex. Blue1), SAS Cargo, SAS Ground Handling and SAS Technical Services. SAS Group also own minority share in Air Greenland (37.5%) and Estonian Air (2.66%), but these two companies will not be affected.

[racedo]

The concept of "disruptive innovation" was coined in the 90s by Harvard professor Clayton Christensen. It's about ideas that change the rules of the game in whole markets.

Clayton Christensen was fascinated by how even apparently successful and well-run companies could be reduced to mediocrity or even eliminated by this concept.

Are you as fascinated?

Borders in the US done in by Amazon books and then by Kindle

Travel agents by the internet

Computer sellers by Dell

Newspapers by online news

etc etc

Every industry has a challenge, its seeing it early enough to do it rather than following on.

[akerosid]

Very sad to see; one of the nicest European airlines I have flown with:

SAS Group Management Rejects Offers From Cabin Crew, Pilots - Bloomberg (http://www.bloomberg.com/news/2012-11-18/sas-group-management-rejects-offers-from-cabin-crew-pilots.html)

This could of course be a negotiating ploy to wring more concessions from unions, but it will certainly scare the smorgasbord out of its clientele as well.

JetPhotos.Net Photo » LN-TUJ (CN: 29095) Scandinavian Airlines (SAS) Boeing 737-705 by John Fitzpatrick (http://jetphotos.net/viewphoto.php?id=6938416&nseq=10)

[AdamFrisch]

As a Swede, the failure is entirely a function of bad strategies and bad decisions. Let's look at the specifics:

1. Cutting down almost all intercontinental traffic and concentrating on Europe just when the downturn came, meant they got hammered by the low costs. They should have done the exact opposite.

2. Having a hub in Copenhagen and funneling almost all traffic through there. People fly direct when they can, and especially the Far East services should have been kept in Stockholm - Sweden is the industrial center of Scandinavia, not Denmark. People stayed away in droves, as Sam Goldwyn used to say.

3. Old planes, unhappy staff.

4. The whole notion that a trinity of Norway, Sweden and Denmark should share an airline and then not expect infighting and and angling for positions is nuts.

Honestly, the best thing that can happen SAS is if it goes bankrupt and the carcass is sold out. It's been propped up and subsidised long enough on the tax payers check. Norwegian and Wideröe can fill the Norwegian gap. Denmark and Sweden would have to come up with new airlines, which is good. Start anew, fresh, with new planes and a new approach.

For me as a Swede living abroad, I'd like them to get back to their 60's ethos when they were truly a global airline. Get back to the crisp, clean minimalism that served the world successfully up until the early 90's. I want to see the new SAS buy 787's or 350's and see lines from Stockholm serving San Francisco, Los Angeles, Rio de Janeiro, Johannesburg, Tokyo, Bangkok etc again like they did in the 60's. Unbelievably, SAS used to have no less than 29 DC-8's serving intercontinental lines, 10 747's etc back in the days. How the times have changed.

[safelife]

Past midnight and no news? No news being good news?

[davidjohnson6]

safelife - talks continue

SAS talks set to continue through night | The Copenhagen Post | The Danish News in English (http://cphpost.dk/business/sas-talks-set-continue-through-night)

Agreement reach with Norwegian cabin crew
Airline SAS inks deal with first unions in survival talks | Reuters (http://uk.reuters.com/article/2012/11/19/uk-sas-idUKBRE8AI02820121119)

[F14]

Hopefully there will be a successful negotiation. Meanwhile a very Ryanairesque approach to media management, with another thread talking about a pilot using 6 ltrs of whiskey to de-ice the wing. This will no doubt wing it's way around the globe, allowing the deadlocked union and employer time out of the spotlight.

[SOPS]

Last week I read an article, saying SAS managment denied there was any problem, what happened all of a sudden?

[pee]

The agreements are coming. All three pilot unions have agreed to new conditions (10% pay cut), only Danish and Norwegian cabin crew representatives didn't yet reach the agreement. The negotiations with banks continued overnight, the deadline has shifted until... right now, I think. Very soon we should hear the news.

[fa2fi]

It would be naive to think that merely renegotiating cabin crew terms and pay would sort out this mess. What about the many other problems with this airline?

[Avionker]

It would be naive to think that merely renegotiating cabin crew terms and pay would sort out this mess.

Almost as naive as thinking that all that has happened this week, and that all SAS are planning to do, is to renegotiate cabin crew T's and C's....

[paparomeodelta]

fa2 an Avionker.

See post 58

[pee]

What a tremendous responsibility! Seven out of eight unions did sign a deal, only one opposes, The Danish CC Union. Now if SAS disappear, it will be very easy to point the finger of blame at them. The Swedish unions are said to have always been the most compassionate, Danes are called by some as "troublemakers".

[pee]

Unofficially: with some 90% certainty the agreement will be reached.
Looks much better for SAS now.

[SMT Member]

The Danish CC union has made an agreement with SAS, no details on exact T&C's. Rumours has it the pilots will take a 12% paycut and an 8% increase in productivity.

Next step will be to identify the roughly 1000 redundancies to be made and negotiate the divestment of SAS Ground Handling and Wideroe.

[dusk2dawn]

The dust has settled and reading the "Berlingske Bussines" today sums it up nicely:

The Swedish government wants to get rid of their shares.
The Norwegian government wants to get rid of their shares.
The Danish government don't want to comment....
SAS group chairman is hoping for a take-over, merger or something...

Taking into account that the management team that ran SAS into the ditch is also the team that has to pull it up again, I'll be surprised if they don't come running in two years time asking for more money.

[jackx123]

As predicted the latest cuts has resulted in little.

According to Kjos, after the latest cuts by SAS, Norwegian's cost per seat is still 59% lower.

0.42 vs. 0.71 NOK

[sprite1]

Yes, but some people are happy to pay more for a particular service. Those figures are meaningless. True LCC propaganda.

[toffeez]

jackx123 is not good at maths, but despite that don't kid yourself that the future belongs to High Operating Cost carriers. Those who believed high fares would compensate for their high costs are mostly long gone.
.

[Midland 331]

High yield passengers are a variable.

High costs (especially crew) are more or less a constant.

[LN-KGL]

sprite1:
but some people are happy to pay more for a particular service.



The question is what particular service? For flights to Europe the difference is very little:

Free cup of coffee/tea at SAS
Free newspaper at SAS
Free Internet in flight at Norwegian (SAS has started to roll out WiFi too, but it's only a handfull aircraft that have it installed).
Better quality to some of the BOB products at Norwegian, and no price difference between the two (when you compare prices in NOK).
More new fresh aircraft at Norwegian than at SAS.
Generally better seat comfort at Norwegian (some of the 735/736 at SAS has an awfull pitch in the back).
We can continue to find small differences between the two competitor. Norwegian is different from the two largest European LCCs since they are offering transfer tickets. As an example if you want to fly from BGO to MAN, you can either transfer at SVG (2x weekly from S13) or at OSL (total time 3:00 through SVG and 4:05 through OSL). With SAS it will take 10 minutes more than Norwegian through OSL, only the Mondays and Fridays direct flight BGO-MAN takes less time (1:45).

This comparison is obviously only for tourist class as Norwegian doesn't have any business class. Intercontinetal flights too can't be compared today, but there will be a change on 30 May 2013 as Norwegian start to fly their first B788. It will be interesting to see what destinations Norwegian will add from the third aircraft that will start flying from W13/14.

[jackx123]

Toffeez: not sure which school you attended but try this.

0.71*59%=0.42:ok:

[EDMJ]

Yes, but some people are happy to pay more for a particular service.

I recently flew MUC-CPH-MUC with SAS on Business Class and that cost a whopping €1400,-. Surely that can't be competitive? On monkey class on that route, drinks are free when you fly LH but cost money when you fly SAS, and the former is ultrareliable which the latter isn't (strikes...). There's enough room for improvement if you look for it.

[The SSK]

‘Cost per seat’ is not a standard industry metric and is pretty meaningless. Cost per seat-km makes a lot more sense.

However I was surprised when I looked at the relative seating density on Norwegian and SAS (surely the easiest way to differentiate cost per seat). On their 738s they are exactly the same – 186Y. Of the ‘legacy’ carriers I think only Aer Lingus packs ‘em in like that.

[Avionker]

Well the seat pitch in SAS 738s economy is 31" which is pretty standard I think you'll find. There is no Business class on the 738s which leads to the high seating capacity.

[Hand Solo]

Can't see IAG being interested. SAS don't have any sizeable LH network to bolster them and are in a dogfight against lo-cos. exactly the opposite of what IAG would want!

[M609]

Probably not what the SAS brass wanted this week - SAS A319 goes off road-ing at Copenhagen (http://translate.google.com/translate?sl=auto&tl=en&js=n&prev=_t&hl=en&ie=UTF-8&layout=2&eotf=1&u=http%3A%2F%2Fwww.vg.no%2Freise%2Fartikkel.php%3Fartid%3D10 071183&act=url)

[sprite1]

EDMJ is a case in point. That €1400 will go a long way so to speak. And SAS had to carry only 1 passenger for it.

Some airlines work on this basis. Remember, it actually costs an airline to transport a passenger. By all means, keep your costs low but it's not the be all and end all in making a profit in aviation.

Also, while I see the merits of the existence of airlines like Norwegian, it ends when one airline goes for the others' jugular. Where's the competition then? The low fares for the masses? Multiple departures , etc? Trust me, it would end.

It's all about choice. You'd swear some lads get a hard-on with a carriers demise.

By the way, are the SAS nay-sayers happy with HEL captains on €44,000p.a. who can be fired if they've more than 5 sick days in the year?:ugh:

[jackx123]

‘Cost per seat’ is not a standard industry metric and is pretty meaningless.

This must be some old school deal. Most of the Arab Gulf airlines use this ratio (among others)

It is a very meaningful measure since it tells you what the exact overhead is for an empty seat. If you so wish you can regard it as fixed cost, or the cost of owning an asset/seat.

Now, it's up to management to make a calculated decision to optimize revenue and cost per seat, which obviously include route optimization (seat mile), choice of a/c, cabin config etc.

Kjos pointed at Cost Per Seat, meaning to break even SAS would in round numbers have to make much larger profit, which based on the Cost per Seat, must be a staggering number, and hence, is very unlikely to happen.

Notwithstanding SAS's reputation etc. it can probably get away with a slight premium for similar services (LCC), but there is a threshold that pax is willing to accept. I did a quick and dirty again and SAS needs to cut costs further by 7.5-8.5% to stay in the game providing management can get their socks up.

[The SSK]

Go back to school, mate. When you are operating a mix of Copenhagen-Stockholm/Oslo, Copenhagen-London/Frankfurt, Copenhagen-Rome/Malaga, Copenhagen-New York/Bangkok, a single 'cost per seat' measure means nothing, zilch, the same way as if you are operating a mix of Dubai-Bahrain, Dubai-Islamabad, Dubai-London and Dubai-Sao Paulo.

But hey, what do I know of modern airline economics? I date from the time when SAS flew a DC-7 shuttle between Copenhagen and Malmo.

[swedish]

Airlines need to generate profit, not cost. So if you follow this discussion if follow this i want revenue per seat at a highest revenue vs the cost, therefore I need to shut down all short haul operations and only fly long haul as that's where i get the best ratio. So about 6 aircraft should do it..... DY understood that 2 years ago, so does MOL. Then brand, network, reliability, service is worthless???

[jackx123]

Go back to school, mate

I attended the "0.71*59%=0.42" school, similar to Kjos. Try it you might pick up some ideas, but let me know if there are better ones around.

In any case, the only thing that means something is exactly what "Swedish" mentioned. Revenue vs Cost.

[cockpitvisit]

I attended the "0.71*59%=0.42" school, similar to Kjos.
He said 59% lower than SAS costs, not 59% of SAS costs. In reality it is 41% lower.

0.71 * (100% - 41%) = 0.42

Although I think this is more a case for a language class than a maths class ;)

[jackx123]

I stand corrected. It should be OF. CV remind me to stay away from that stuff that a SAS jock got sacked OF a month ago or so.:E

[captplaystation]

Yep, he was a bit slow to realise that the true purpose of the amber stuff was. . . . de-icing :rolleyes:

[dusk2dawn]

Published: 14:55, 20 november 2012 (http://www.information.dk/telegram/317651)

The Board of Directors of SAS with President Fritz Schur at the head goes 30 percent pay cut as part of SAS 'new savings plan.

Airline SAS Board of Directors with Chairman Fritz Schur in the lead is now 30 percent down in fees as part of the huge savings plan for the company.

All directors adopted on 5 November on its own initiative to reduce the amount that would otherwise have been by the general meeting of the company by 30 percent with immediate effect, according to SAS.

At the General Meeting on 19 April, the Board's remuneration otherwise defined with unchanged amount compared to the previous year.

SAS CEO Rickard Gustafson has also had to accept a pay cut, as he reduces his annual salary by 20 percent.

But rather than take a pay cut would have been better for SAS, if the entire board of directors have taken their clothes and walked out, says aviation analyst Anders Lidman to the Swedish newspaper SvD Näringsliv.

- Chairman Fritz Schur and Vice Jacob Wallenberg has been in SAS's Board since 2001, and they act as if they still do not understand anything he says.

It is the board that bears the greatest responsibility, and the board has not done their job well enough. When you look at the whole board, so there are few - if any - who understand the aviation industry, says Anders Lidman.

According to SvD Näringsliv, Fritz Schur and Jacob Wallenberg respectively get 655,000 and 415,000 Swedish crowns [76,000 / 48,000 Euros] a year for their board work for SAS.

The pilots in SAS has accepted a pay cut equivalent to one month's salary on an annual basis, that is just over eight percent.

Translation by Google and d2d
PS: PPRuNe's bulletin board software thinks this message is too short.