SAS, Norwegian and Finnair. The Nordic three continue to carve out separate niches


Three years ago, CAPA suggested in an analysis report that the Nordic region might be ripe for airline consolidation. This has not happened. The region – Finland, Sweden, Norway and Denmark – remains the only corner of Europe to be home to three significant airlines that are not owned by one of Europe's three major legacy airline groups. SAS, Finnair and Norwegian Air Shuttle have all grown over the past three years and have sharpened the differences between them.

This report analyses seat capacity growth in the Nordic region over the past 10 years. In that time, SAS has retained its capacity leadership in the region, while LCC Norwegian has usurped Finnair's second position. However, overall share of seats in the Nordic region operated by LCCs has been falling since 2013.

Ryanair, in particular, has cut Nordic capacity in recent years although it is growing once more in Denmark, and easyJet has never made a big impression on the region (although Wizz Air is enjoying strong growth in Nordic markets from a low starting point). Norwegian is growing more rapidly in markets elsewhere.

See related report: Finnair, SAS and Norwegian, The Nordic Three: is consolidation on the way?

Note: In this analysis 'intra-Nordic' is used for markets within the region, and 'extra-Nordic' is used for markets outside the region.

Among the Nordic three SAS has greatest exposure to the Nordic region

Focusing on the four principal countries of the Nordic region, Norway, Sweden, Denmark and Finland, the three leading airlines are SAS, Norwegian and Finnair. By seat capacity in the four countries, they are approximately in the ratio 3:2:1, respectively. SAS's size advantage versus Norwegian and Finnair, in terms of seat numbers, is mainly based on its presence within the Nordic region. This comprises the domestic markets and the international markets between the four countries in the region.

According to data from OAG Schedules Analyser, in 2016 SAS will only operate 10% more seats than Norwegian in international markets from the region to destinations outside the region, and less than twice Finnair's seat numbers in extra-Nordic international markets (markets outside the Nordic region). These more far-flung markets account for around one quarter of SAS seats, one third of Norwegian's seats and almost one half of Finnair's in 2016.

Note that this analysis is based on each airline's seats in the region and not on their total seats across their entire network. For SAS and Finnair, there is no distinction since they do not have bases outside the region. For Norwegian, however, there is significant capacity operating from bases outside the region, in London and Spain.

See related report: Norwegian Air back in profit, signals aggressive long haul expansion. DoT help would be welcome

SAS, Norwegian and Finnair scheduled seats in Nordic countries* 2016

*Norway, Sweden, Denmark, Finland
Source: CAPA -Centre for Aviation, OAG Schedules Analyser

Nordic seat numbers up nearly one third over 10 years, mainly due to international growth

The total number of scheduled airline seats in the four countries will be 31% higher in 2016 than in 2006, according to data from OAG Schedules Analyser. This is a modest compound average annual rate of just less than 3% pa. Almost all the growth in 2007 and 2008 was reversed in 2009, since when the total is up by 30% (CAGR 4% pa).

This growth has been largely driven by international markets, where seat capacity is up 50% in 2016 versus 2006, while domestic seat numbers have grown by only 10%, and have stagnated since 2011.

Nordic countries* scheduled airline seats (one way) 2006 to 2016

SAS is still number one in the Nordic region, but others have grown faster

SAS has remained the largest airline by seat numbers in the Nordic market throughout the 10 year period, in spite of heavy capacity cuts during the global financial crisis and the strong rise of Norwegian. From 2006 to 2016, SAS seat numbers are up by only 7%, compared with a rise of 373% for Norwegian. Finnair has grown by 32% over the 10 years, Widerøe by 30% and Ryanair by 27%.

Among the smaller players' shares in the region, Malmö Aviation's seat capacity has more than doubled (up 108%) and Wizz Air's has increased more than sevenfold (up 635%) from 2006 to 2016.

Nordic countries* scheduled airline seats (one way) by airline 2006 to 2016

Norwegian's growth has levelled off

Norwegian's strong growth in the region over the past 10 years was all achieved by 2014, since when its capacity has been flat and its market share has fallen slightly from 23% to 22%.

SAS' share of seats has remained at 33% for the past four years. In 2016, Finnair has a 10% share, Widerøe 6%, Ryanair 3% (down from 5% in 2013) and Malmö Aviation also now has 3%.

Nordic countries* share of scheduled airline seats (one way) by airline 2016

LCCs' share peaked in 2013 and has fallen since

The leading LCC in the region is Norwegian, followed by Ryanair. Norwegian's capacity stagnation and Ryanair's capacity cuts (its seat numbers in 2016 will be 28% below their 2013 level) mean that the total share of seats held by LCCs will fall to 30% in 2016, down from its peak of 32% in 2013.

Nordic countries* share of scheduled airline seats (one way) by LCCs 2006 to 2016

SAS has not regained 2006 capacity in domestic markets

In domestic markets over the 10 years 2006 to 2016 the seat capacity added by Norwegian (which has grown by 258%) has more than offset capacity cuts by SAS (-7%), Finnair (-8%) and the aggregate of a large number of smaller players in the region (-81%). Malmö Aviation (+115%) and Widerøe (+38%) have also grown over the 10 years.

However, in spite of Norwegian's growth over the 10 years, its domestic capacity has fallen more recently: its 2016 seat numbers will be down by 3% from 2012, and by 5% from 2014. This has been the main reason for its overall flattening of capacity in the region.

Concurrently, SAS has grown its domestic capacity by 22% since 2010, although this has not been enough to make up for cuts before then.

In market share terms, SAS has a bigger lead in the combined domestic markets than in the region as a whole. Its 40% share compares with second placed Norwegian's 28%, and has increased by 2ppts since 2012. Widerøe has a 12% share and Finnair 8%. Malmö Aviation's share of Nordic domestic seats will also be 8% in 2016, up from 4% in 2014.

Nordic countries* scheduled domestic airline seats (one way) by airline 2006 to 2016

SAS' growth has been outpaced by others on international markets

In international markets, SAS' growth in seat numbers since 2009 has more than offset previous cuts, so that its 2016 capacity will be 26% above its 2006 level. However, SAS' growth has been outpaced by every other sizeable player in these markets.

Norwegian's international seat numbers to/from the four Nordic countries has grown more than sevenfold (up 620%) over the 10 years. Moreover, unlike in domestic markets, Norwegian has continued to increase its international capacity throughout the period, although its growth has slowed in more recent years (up only 4% since 2014).

Finnair's international seat numbers are up 67% in 2016 compared with 2006. None of the other larger airlines in the Nordic international markets operate domestically, and so, their international capacity growth has been the same as their total capacity growth in the Nordic region.

Ryanair has grown by 27%, KLM by 57%, British Airways by 44% and Wizz Air has grown more than sevenfold from 2006 to 2016. Airberlin has increased its seat numbers almost sevenfold and the Thomas Cook Group plans growth of 45% in 2016 after only re-entering in 2015.

SAS has a 27% share of international seats to/from the Nordic region, followed by Norwegian on 18%, Finnair on 12% and Ryanair on 6%. Lufthansa and KLM have 4% each, and BA has 3%, a share now matched by Wizz Air. Thomas Cook Group and airberlin both have 2% in 2016.

Nordic countries* scheduled international airline seats (one way) by airline 2006 to 2016

SAS is more dominant in intra-Nordic international markets, where growth has been slower

The international markets can be sub-divided between intra-Nordic (within the region) and extra-Nordic markets (outside the region). SAS is more dominant in the intra-Nordic international markets, with a market share of 56% of seats, ahead of Norwegian's 24% and Finnair's 14%. Widerøe has 3% of this market and all other operators have less than 4%.

Seat capacity in intra-Nordic international markets is up by only 23% since 2006, less than the 50% growth in all international markets involving the four countries. SAS has grown faster (up 37%) than it has in international markets overall. Norwegian (up 474%) and Finnair (up 52%) have growth faster than SAS, but more slowly than they have on international markets overall.

Widerøe has cut its intra-Nordic international seat numbers by 20% over the 10 years since 2006. As in the domestic markets, Norwegian's growth in intra-Nordic international markets has levelled off in recent years (seat numbers are up just 4% since 2013).

Nordic countries* scheduled intra-Nordic international airline seats (one way) by airline 2006 to 2016

Extra-Nordic international capacity has grown fastest, led by Norwegian

International seat numbers to countries outside the region will be 62% higher in 2016 than in 2006, making this the fastest growing segment over the past 10 years. SAS cuts in 2009 have been more than offset by a 36% increase in capacity since 2010. SAS has increased its seat numbers by 17%, while Norwegian has grown by 712%, Finnair by 74% and Ryanair by 22% over the 10 years.

Norwegian's growth in these markets has continued through the period, although at a slower pace since 2014 (up 17% from 2014 to 2016). Ryanair's 2016 seat capacity on international markets between the four Nordic countries and the rest of Europe is down by 30% relative to 2013, reversing much (but not all) of its previous growth since 2006.

Since 2013, Ryanair's seat numbers are down 43% to/from Sweden and down 33% to/from Norway. Ryanair's only recent growth market is Denmark, where it has increased seat numbers by 135% since 2014 (and more than sixfold since 2006).

SAS and Norwegian are closer in market share in extra-Nordic international markets than in the other segments. SAS is the leader with 18% of seats, but Norwegian has almost 17% in 2016. Finnair has 11% and Ryanair has 7% (down from 12% in 2012). Lufthansa and KLM each have 5%, while Wizz Air has 4% (up from 2% in 2012). BA has 3%, a figure matched in 2016 by Thomas Cook, and airberlin has 2% of extra-Nordic international seats.

Nordic countries* scheduled extra-Nordic international airline seats (one way) by airline 2006 to 2016

SAS leads in international markets from Denmark & Sweden, Norwegian leads from Norway, Finnair from Finland

SAS is the leading airline by seats on international markets from two of the four countries, namely Denmark and Sweden. Norwegian is number two and Ryanair number three in both of these countries. Denmark is the only Nordic market where easyJet ranks in the top 10 by seats on international markets (it is number four in 2016).

In Norway, which is the third of SAS' home markets, the Scandinavian airline is second to Norwegian and Ryanair is third on international markets. Finnair is number one on international markets from Finland, with Norwegian second and SAS third.

The Nordic three have different niches

Much of SAS' strength in the region is built on its high market share in the domestic and intra-Nordic markets.

Norwegian's contraction within the region has helped SAS to consolidate this position, giving it some respite in which to recover from the global financial crisis. SAS is also still the leader on extra-Nordic markets, but Norwegian is now pushing it close.

See related reports:

SAS: capacity discipline helps it to best margin for many years; plans double digit growth in 2016

SAS & Norwegian Air set to take market share in Scandinavia-US market as United and Delta pull out

Norwegian's plans to grow at double digit rates led by long haul growth, at least until 2020, may well make it larger than SAS on international markets to/from the Nordic region within a few years, and this could also make Norwegian the largest airline overall in Nordic markets some time thereafter.

Finnair continues to focus on its niche on long haul markets to Asia, where it will resume capacity growth in 2016, and is also growing on the North Atlantic. It is currently proportionately more long haul than either SAS or Norwegian.

See related reports:

Finnair: back in profit and set to reap benefits of A350-led fleet upgrade and labour productivity

Finnair’s A350 delivery brings more growth to Helsinki-Vantaa Airport. Now to attract other airlines

SAS Scandinavian Airlines vs Finnair: the original Europe-Asia Nordic leader tries to fight back

Overall, both of the region's two main legacy airlines have been surprisingly successful at holding their market share in recent years. The LCC onslaught, led by Norwegian within the Nordic region and by Ryanair from outside, has retreated somewhat since 2013. Norwegian has focused on markets outside the region and Ryanair has followed a typically opportunistic approach.

Ironically, the high costs of operating in the Nordic countries may have helped SAS and Finnair by encouraging LCCs to consider moving elsewhere. However, like water flowing downhill, success tends to seek out the most cost-efficient operators.

SAS and Finnair have made good progress with restructuring, but they cannot afford to relax. Nor can Norwegian rest on its laurels if ultra-LCC Ryanair decides to replicate its return to growth in Denmark across the rest of the region.

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