Drastic restructuring for SAS Scandinavian Airlines long-haul network

Confronted with economic recession at home and abroad with a sharp decline in business travel, SAS Scandinavian Airlines has taken tough decisions to survive and work out a profit again. Last year, SAS group lost €590 million in sharp contrast with 2007 profit of €59.5 million. After decentralizing its operations into four profit centers a few years ago (SAS Denmark, Norway, Sweden and International), all these units have been merged again in February under one single management unit.

“All independently-managed units have succeed to tremendously to lower costs of operations. However, SAS management believes that only a centralized operation wil be now able to achieve further cost rationalization,” explained Håkan Ollson, SAS director and general manager for the airline in Southeast Asia.

A total of 8,600 employees being laid off or outsourced as the airline sells subsidiaries such as British Midlands, Estonian Air, Air Greenland, Skyways airlines and Spanair. A crash in August 2008 was a serious blow to consumers’ confidence into the Spanish carrier. Spanair was in fact responsible for most of SAS woes in 2008 as it contributed alone for €456 million to the Group total losses. SAS will be left with a workforce of 15,000 employees compared to 24,000 in 2008.

The airline grounded already 18 aircraft and is now restructuring its network with total capacity system-wide being down by 15 percent to 18 percent.

According to Håkan Olsson, two Airbus A340s in the long haul network have been taken out of the fleet forcing SAS to review its intercontinental network. SAS already terminated its Copenhagen-Delhi service and will suspend indefinitely flights between Stockholm and Beijing as well as between Copenhagen and Seattle with the introduction of the summer timetable on March 28th. Furthermore, it will not offer again a service between Stockholm and Bangkok in winter season 2009-10.

“Intercontinental traffic tumbled at the end of last year by 20 percent to 23 percent. We experience a slight recovery since but our passengers’ traffic is still down by 15 percent to 17 percent compared to the previous year,” said Ollson.

SAS intercontinental network is left with flights to Chicago, New York, Washington, Dubai, Bangkok, Beijing and Tokyo. In Europe, SAS adjusts rather frequencies than closing down destinations.

According to the SAS director, business class experiences a severe blow as many Scandinavian companies have issued travel bans or downgrade travel conditions from Business to economy class.

“The only positive aspect is a bigger demand for our Premium Economy product. We will then make more promotion for this product. We continue to target customers looking for good quality offering excellent value for money. We continue to offer a dense network out of Copenhagen and invest further into new technologies to ease travel conditions for our customers,” added Ollson.

SAS Scandinavian Airlines has already an eye into the future when demand will be back. However, not before 2011.