SAS EuroBonus - SAS releases H1 2012 financials

http://www.bloomberg.com/news/2012-08-08/sas-net-drops-42-on-fuel-bill-after-analysts-predict-gain-1-.html

Barely made some profit in Q2... this year is going to be tough :o

This is just a bad combo if you do not have any control over this:

“Passenger revenue isn’t increasing, while fuel costs are”

/HerrO

This is just a bad combo if you do not have any control over this:

“Passenger revenue isn’t increasing, while fuel costs are”

/HerrO

Looking at what US carriers are doing, the easiest way would be to add more ancillary revenue (charge for bags etc.) - but they have to differentiate from Norwegian, so this might NOT be the best thing for them... I am obviously not an airline exec and airline expert, but maybe they should look at Virgin Australia and their ways of doing business. Actually they go from strength to strength and are able to increase revenue by IMPROVING service to the traveling public. They have not published results for this year (they publish it every 6 months), but for last year (half year ended 31Dec 2011) their net profit after tax increased by about 110%. And SAS actions like 100% mileage for all classes and re-reinstatement of basic service in Economy on short-haul flights suggest that maybe SK really goes this way... But again - I am not an airline exec...

I agree that SK has taken a few positive steps to recreate a modicum of difference with Norwegian et al. But really, if you do not check a bag and are not particularly bothered about frequent flier benefits, it really isn't an edge at all. I still see the FAs on European flights draw the curtains and disappear after a quick run through the Economy cabin. For an airline that charges for everything except coffee, meaning most passengers have zero interaction with the FAs, they are still ridiculously overstaffed. They need to take on the unions to save themselves - like OS. I can't believe I am writing this, but it's true.

I agree that SK has taken a few positive steps to recreate a modicum of difference with Norwegian et al. But really, if you do not check a bag and are not particularly bothered about frequent flier benefits, it really isn't an edge at all. I still see the FAs on European flights draw the curtains and disappear after a quick run through the Economy cabin. For an airline that charges for everything except coffee, meaning most passengers have zero interaction with the FAs, they are still ridiculously overstaffed. They need to take on the unions to save themselves - like OS. I can't believe I am writing this, but it's true.

Just heard on danish news that the cabin attendants union have agreed on paycuts. Didn't hear exactly what the deal was, but think they would only be getting 50% pay in november and no raises for 2 years..

Overstaffed..perhaps but isn't there a rule that there has to be a certain number of cabin crew depending on number of passengers ?

Staffing is mandated at 1 FA per 50 pax, not much you can do there, someone needs to be there to open the exits :) That said, LH flies minimum crew on medium haul operated by A32S, don't know about SK.

It doesn't help that SK is staffed with mostly very senior crew, at least from ARN.

Staffing is mandated at 1 FA per 50 pax, not much you can do there, someone needs to be there to open the exits :) That said, LH flies minimum crew on medium haul operated by A32S, don't know about SK.

Indeed. So their narrow bodies seem to be staffed with one FA more than necessary - for example, four in an MD80 where three would do nicely for the mandated staffing levels and be plenty for the level of onboard service required.

I don't follow SK news on a very regular basis so I may have missed something. But to me it seems almost nothing has been done in the last few years to get the finances in order? The owners had to add more capital in 2009 and 2010 in the order of 10+ billion SEK. (For 2013 there is a need for 10 billion more, which is more of a book keeping demand, not so much SK's own fault)

But as I see other airlines in this region have been doing things, it seems SK has not? Besides from selling their office buildings and such, what has been done lately?

I don't follow SK news on a very regular basis so I may have missed something. But to me it seems almost nothing has been done in the last few years to get the finances in order? The owners had to add more capital in 2009 and 2010 in the order of 10+ billion SEK. (For 2013 there is a need for 10 billion more, which is more of a book keeping demand, not so much SK's own fault)

But as I see other airlines in this region have been doing things, it seems SK has not? Besides from selling their office buildings and such, what has been done lately?

Well given that they had already cut the inflight service to the bone and frittered away the savings (whilst decreasing their goodwill and their passenger base as other so-called full-service carriers did not follow suit), what could they do other than sell the family silver?

My mind goes to stuff like cutting capacity on unprofitable routes and such.

I am just trying to understand what strategy, if any, they are following.

Well they did divest themselves of BD and JK, at least.

Besides from selling their office buildings and such, what has been done lately?


Well, they were really in the dumps a few years ago and then saw a good few years starting 2009 and let their guard down again. The past few quarters show that folks don't drop everything they are doing and book SK for their travel the moment coffee is free and you get more points. SAS needs to make some painful decisions to survive. DY is growing and has much grander plans, this will be a death by a thousand cuts :(

The reform of the eurobonus program may prove to be successful, IMO. The 25% earnings were much hated. The common perception is that the program is better now.

I am trying to understand SK strategy in the light of the strategy chosen by AY (which is fighting the same fight). SK want to "increase its presence in the leisure segment" (that is, cutting into DY core market) and is opening new low earning routes resulting in a decline in yield.
AY is stripping away anything they think they can live without, and can raise capacity and revenue quicker than costs. AY is subsequently seeing rapidly increasing yield.

SK want to "increase its presence in the leisure segment" (that is, cutting into DY core market) and is opening new low earning routes resulting in a decline in yield.


Hmm... I would say its the other way around: DY took away their 'back of the bus' crowd that used to fill the planes and pay the fuel and enable SK to offer a decent network. Now they want it back and are trying to offer the legacy service (c:rolleyes:ffee, luggage, miles, ASR etc) at LCC cost. Sadly that is not working. The sun & sand destinations are few and far between, and more meant to fill the aircraft that would otherwise be parked over the weekend.

Hmm... I would say its the other way around: DY took away their 'back of the bus' crowd that used to fill the planes and pay the fuel and enable SK to offer a decent network. Now they want it back and are trying to offer the legacy service (c:rolleyes:ffee, luggage, miles, ASR etc) at LCC cost. Sadly that is not working. The sun & sand destinations are few and far between, and more meant to fill the aircraft that would otherwise be parked over the weekend.

You may be right.

But if this qoute is correct, there is also a strategy of network growth
SAS is opening 38 new routes in 2012. This includes 29 new leisure routes during summer-2012 including Barcelona, Dubrovnik, Palma, Keflavik and Nice.

The reform of the eurobonus program may prove to be successful, IMO. The 25% earnings were much hated. The common perception is that the program is better now.

I am trying to understand SK strategy in the light of the strategy chosen by AY (which is fighting the same fight). SK want to "increase its presence in the leisure segment" (that is, cutting into DY core market) and is opening new low earning routes resulting in a decline in yield.
AY is stripping away anything they think they can live without, and can raise capacity and revenue quicker than costs. AY is subsequently seeing rapidly increasing yield.

Good point. I think AY is in a better situation, in that they still have a business model beyond point-to-point traffic - convenient non-stop connections from anywhere in Europe to the Far East.

SAS did well so long as Scandinavians behaved like a captive audience. Now most travellers are sophisticated enough to know that they don't need to fly with a flag carrier to be safe, and that the offering in terms of material comforts isn't better than the competition. "It's Scandinavian" doesn't cut the mustard anymore and they haven't come up with another raison d'être.

Read this statement about AMR/AA's management policy this morning:

“kick[ing] the can” down the road to permit the Company to “limp along” until sometime in the future when there might be increased demand, a benign fuel environment, and a convergence in American’s labor costs vis-à-vis other carriers.

This sounds an awful lot like the SAS Group right now... no real fleet plans, no attempt to remedy the tri-nation/hub/union situation... :confused::(