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SAS close to bankrupcy

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SAS close to bankrupcy

Old 20th Nov 2012, 20:15
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sprite1

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.
.

Last edited by toffeez; 20th Nov 2012 at 20:17.
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Old 20th Nov 2012, 21:37
  #82 (permalink)  
 
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High yield passengers are a variable.

High costs (especially crew) are more or less a constant.
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Old 20th Nov 2012, 21:46
  #83 (permalink)  
 
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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.

Last edited by LN-KGL; 20th Nov 2012 at 21:48.
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Old 21st Nov 2012, 05:31
  #84 (permalink)  
 
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Toffeez: not sure which school you attended but try this.

0.71*59%=0.42
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Old 21st Nov 2012, 06:32
  #85 (permalink)  
 
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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.
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Old 21st Nov 2012, 08:20
  #86 (permalink)  

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‘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.
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Old 21st Nov 2012, 09:32
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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.
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Old 21st Nov 2012, 11:44
  #88 (permalink)  
 
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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!
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Old 21st Nov 2012, 11:54
  #89 (permalink)  
 
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Probably not what the SAS brass wanted this week - SAS A319 goes off road-ing at Copenhagen
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Old 21st Nov 2012, 15:01
  #90 (permalink)  
 
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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?
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Old 21st Nov 2012, 17:30
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‘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.
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Old 21st Nov 2012, 21:15
  #92 (permalink)  

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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.
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Old 21st Nov 2012, 21:39
  #93 (permalink)  
 
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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???
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Old 22nd Nov 2012, 00:40
  #94 (permalink)  
 
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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.
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Old 22nd Nov 2012, 02:44
  #95 (permalink)  
 
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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

Last edited by cockpitvisit; 22nd Nov 2012 at 02:45.
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Old 22nd Nov 2012, 14:12
  #96 (permalink)  
 
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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.
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Old 22nd Nov 2012, 16:34
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Yep, he was a bit slow to realise that the true purpose of the amber stuff was. . . . de-icing
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Old 23rd Nov 2012, 10:15
  #98 (permalink)  
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Aviation analyst Anders Lidman nails it

Originally Posted by Ritzau / Information.dk
Published: 14:55, 20 november 2012

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.
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