SAS Scandinavian Airlines is reportedly close to bankruptcy with staff set to be advised to take salary cuts or risk losing their jobs, according to reports by The Local Sweden, Expressen, Dagens Industri and YLE. Danish, Norwegian and Swedish governments reportedly sought EU approval for state guarantees to secure an extension to a EUR550 million credit facility with six banks including Nordea, SEB, Swedbank, Danske Bank, DNB, and Royal Bank of Scotland. EU competition and state aid spokesman Antoine Colombani said it has had informal contact with the Scandinavian governments but has not received a formal request to permit state aid. Mr Colombani said, “Of course, any state aid must be notified through and approved by the European Commission. Once we receive a notification of course we will examine what these governments want to do, but I cannot give you any indication on timing at this stage.” SAS, which currently employs approximately 20,000 staff, is to release its interim report on 12-Nov-2012.
SAS Scandinavian Airlines reportedly close to bankruptcy: local media
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Airport pairs: Western Europe-US shows the value of open skies as routes and new entry proliferate
For Western Europe there is no bigger long haul market than North America. In terms of the number of airport pairs between the countries of Western Europe and long haul destination countries, connectivity to the United States dominates. There are more direct routes between Western Europe and the US than there are between Western Europe and the whole of Asia Pacific.
This report presents high level data on the numbers of airport pairs between each Western European country and the US and how these number have changed. EU-US liberalisation in 2008 has stimulated growth in the number of direct connections, although the global economic downturn impeded this for a while. However, the additional routes have not been spread evenly across Western European countries.
Since 2010, additional route numbers from Western Europe to the US have been greatest from the largest markets – the UK and the US – and from the smaller countries, particularly Ireland, Iceland and Norway. Countries in between, including France, Italy, Spain and the Netherlands, have hardly added any new US routes at all.
SAS eyes lower labour cost bases outside Scandinavia as the airline's margin starts to fall again
A harsh truth for SAS is that improvements to its network and product, and its focus on Scandinavia's frequent travellers, have not isolated it from unit revenue weakness. Moreover, in spite of very creditable progress with unit cost reduction, it still has a high cost base. In FY2016 its operating margin started to turn down again. In addition to further targeted cost savings SAS is now considering further, more radical, changes to its production model.
In particular, it is assessing whether or not to establish operations outside Scandinavia for some of its European traffic. The European airline market includes a fast-growing and price-sensitive leisure segment, where SAS tries to compete against much lower cost operators that are not weighed down by Scandinavia's very high labour costs.
Even Scandinavia's most significant LCC, Norwegian, has established bases in the UK and Spain, and many other LCC competitors have bases across the continent. Indeed, it would seem that SAS, once an opponent of Norwegian's plans to use Ireland as a trans-Atlantic base in search of lower labour costs, has borrowed a page from its rival's book on how to re-write airline strategy.