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SAS sliding along the bottom. As the share price heads south, management heads east to Emirates

  • SAS seeks investor interest from Middle East;
  • Austrian Airlines unsuccessful in similar attempts – now looking to join Lufthansa fold;
  • SAS’ prospects of profitability look increasingly gloomy unless it can find a buyer.

It may have been just coincidence. But for SAS’ CEO, Lars Sandahl Sørensen, and his head of international, Per Møller Jensen, to visit Dubai and Emirates Airline’s Chairman, HH Sheikh Ahmed bin Saeed Al Maktoum, merely to reinforce the carrier’s commitment to its three times weekly service to Copenhagen, it does seem like a lot of carbon emissions in the circumstances.

Mr Sørensen was at pains to point out how "vital" Dubai was to SAS' regional network, stressing that this "provides that important link between the two air travel hubs of Copenhagen for Scandinavia and Northern Europe, and Dubai for the Middle East."

SAS in fact does connect with Emirates' services over a number of intermediate hubs, such as Manchester, Athens and Frankfurt/Munich, although Emirates itself does not serve the Scandinavian market non-stop. So the two have something to talk about - at least at network planning level.

But it would be stretching credulity to suggest that the possibility of Emirates investing in the flagging flag carrier was not raised, impliedly or explicitly. Austrian Airlines, before falling into the arms of its neighbour, Lufthansa, had delved unsuccessfully into the Middle East investment market.

Since Lufthansa spurned SAS's overtures, the Scandinavian airline has more or less been cut adrift. With a loss making Spanish subsidiary and little hope of achieving profitability alone, the only interested suitor appears to be the (unwelcome) Finnair.

In the strong market up-current yesterday, its shares did manage a modest 1.8% increase, but the carrier's prospects of profitability look increasingly gloomy unless it can find a buyer.

SAS share price: 01-Sep-08 to 24-Nov-08

This is just the time when foreign operators will be looking to increase service into the Scandinavian market, in anticipation of further cutbacks by SAS. The recent departure of Sterling, which occupied 10% of Copenhagen Airport's passenger headcount, has opened up new opportunities, mostly filled by LCCs.

But the disappearing role of SAS, with 49% of Copenhagen Airport's numbers, will be causing sleepless nights for its owners, including Macquarie Airports. They are not renowned for sitting back and watching money go out of the door and it is a fair chance that they will be marketing their charms very aggressively. The hub role is integral to the airport's future, so it needs network airlines.

Lufthansa will probably be fielding lots of calls, with suggestions of how to increase their market share in the north. Meanwhile, the occasional trip to the Gulf will be for other purposes than simply escaping the chilly northern winter.

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