SAS is a difficult airline.  Actually, it’s a good airline with a lot of difficult problems in its future.  Formed as a consortium of the flag carriers of Denmark, Sweden and Norway, it continues to be 50% owned by the governments of those three countries.  All three countries have a strong social policy for employment as well.  But despite the relative wealth of its citizens and their desire to travel, it has been losing money regularly.  In part because its clientele also enjoy a good deal and have chosen low fare discounters such as Ryanair and Norwegian Air Shuttle.

The governments have made noise about about selling off their stakes but that’s a tricky business.  Each government needs to agree to that in order for that to work well at all and in order for it to be an attractive sale to potential purchasers.  The airline deals with a huge number of unions and unions with quite a bit of political power. 

This airline needs what many European state owned airlines have needed:  privatization and a merger. 

It’s fleet is rather broad for an airline of this size and that could use some rationalization.  It should be an attractive property for an airline like Lufthansa if a purchase is desired because it could benefit from Lufthansa’s purchasing power and the ability to give it a rational fleet as well as flexibility.  And it’s already a member of the Star Alliance.

If a merger is what’s called for, I think this could be a very attractive deal for British Airways / Iberia Airlines.   While this is a Oneworld group, it is a group that could allow SAS to maintain its identity much easier and offer it some long haul route rationalization but, at the same time, offer SAS the opportunity to continue some long haul flying as well. 

This would be a group that, in Europe, would have Northern Europe, the British Isles/Ireland and Southern Europe covered very well.  The problem is, you would have to pick just one Nordic city for a hub and who gets that?  Stockholm?  Oslo?  Copenhagen?  Each country wants to maintain its links to the world.  Stockholm is the most rational choice for a hub in that area since it offers a large O&D market, strong business ties and quick hops to all of northern Europe.  Oslo could remain a focus city and so could Copenhagen.

But the trick is the unions and the strong socialist social policy in that country.  I don’t see things changing for this airline because of that.  Sadly, those countries political power is based on such ties to labor unions and disrupting those unions or even causing them to lose out on what are exceptionally well paid positions is political suicide. 

It happens over and over again.  Does the airline want to survive?  Or do the owners want to avoid political problems today at the cost of even having an airline tomorrow?

Filed under: Airline News by ajax
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