I would happily take over SK
which isn't even coming close to living up to it's potential.
Step 1- buy Frontier Airlines Holding
Frontier Airlines of the US is losing money. At the same time they have a market capitalization of only $115 million. This despite them having cash on hand of $170 million. Looking further down the balance sheet they have property, plant and equipment worth $737million. There long-term debt however is only $503 million. Add to that a freequent flyer program worth a few million more not reflected on the books.
That means Frontier is worth more dead than alive. SAS gets a shiny new fleet (assuming the leasing agents for that portion of the fleet are amenable to the idea) and don't have to wait five years for new deliveries. That means they get 11 318's, 49 319's and can take over an order for 10 320's. They could replace their MD
-80 fleet over night and the leased aircraft substituting for the Q-400's as well.
They can then sell the freequent flyer program to Star Alliance partner United Airlines which already has a massive hub at Denver were Frontier is based. Not only do they get rid of one pesky competitor but they are much better positioned to battle Sourthwest who are growing their Denver operations. Let's assume United is very much willing to pay an inflated price to increase their market share and profitability in Denver. Let's say SK
gets $25 million for the frequent flyer program.
Look at the equation:
-$150 million -presumed purchase price for Frontier shares
-$500 million-assumption of frontier's long-term debt
+150 million- probable amount of cash on hand now
+150 million- proceeds of the sale of the MD
+25 million-F9's frequent flyer program to United
+175 million-sale of F9
's virtually new Q-400's
-$25 million- severence packages to Frontier's employees.
$175 million is basically what it would cost SK
to get a fleet of 60 fairly new (less than 3 years average) Airbus narrowbodies. 22 of these are owned by Frontier the others are leased. Considering a new Airbus 319 costs about $45 million I'd say that's a heck of a deal. They also get 10 320'a on the way.
In addition you'd have cost savings from operating more fuel efficient aircraft and could probably get something for F9
's operating certificate as well.
Step 2-Pursue merger with Icelandair Group
This merger would be of the holding companies with no cash changing hands in order to not encumber the enterprise with added debt.
Icelandair has a really well placed hub for trans-Atlantic operations with narrowbody aircraft.
Icelandair has a passenger fleet of 17 757-200's and 1 757-300. Rather than using those aircraft to Europe, shorter range aircraft like 737's and Airbus 32x's could be utilized. That would enable the 757's to be used to open up more routes within North America.
I imagine the Icelandic government would be enthusiastic about expanding the Keflavik to handle more operations.
Icelandair will also take delivery of 5 Boeing 737-800 and 4 Boeing 787-8 from 2010.
Step 3- Rebranding
The merged company would consist of the following wholly owned airlines:
Scandinavian Airlines International
Scandinavian Airlines Danmark
Scandinavian Airlines Sverige
Scandinavian Airlines Norge (previously known as SAS Braathens)
SAS Cargo Group
and that doesn't count Spanair which is for sale.
I think that is far too many names. I propose they go with the name Nordic Airways and Nordic Cargo and keep the SAS livery as it is.
Step 4- Rationalization
Sell off non-core assets.
-The already planned sale of Spanair and SAS's BMI
operations should continue.
-Sell Icelandair Hotels
Hubs- Establish Keflavik as the primary trans-Atlantic hub- This will allow the narrow-body fleet to increase it's utilization rate due to increased night flying. Increase the number of destinations served from Iceland, both in North America and Europe. This does not mean SK
/FI will discontinue non-stops from Copenhagen and Stockholm to North America. They will continue, as is.
Stockholm will be established as the gateway to Eastern Asia. Flights to Bangkok, Tokyo, Shanghai and Beijing will be transferred there to combat Finnair which has taken a big chunk of the Swedish market to Asia.
Copenhagen will continue as the hub for flights between the Nordic region and destinations in Europe. It will also retain flights to Dubai and New Delhi.
Oslo will continue unchanged.
Administration: Operating so many entities and brands is bound to cause some inefficiencies. Rhe merged company should have plenty of scope for cost-cutting-
Passenger Fleet: following the take over of F9
's fleet and the sale of the MD
-80's the merged operations fleet would be such:
type Number Seating
Airbus 318 - 11
Airbus 319-100 53 141
Airbus 320-200 (10)
Airbus 321-200 8 198
Airbus 330-300 4 264
Airbus 340-300 7 (1) 245
Boeing 737-400 4 150
Boeing 737-500 13 120
Boeing 737-600 26 112-123
Boeing 737-700 17 131-141
Boeing 737-800 13(7) 186
Boeing 757-200 12 189
Boeing 757-300 1 231
Boeing 787-8 4
Bombardier Dash 8 Q100 18
Bombardier Dash 8 Q300 11
Fokker 50 12 50
Orders: Nordic Airways would use a large portion of it's improved balance sheet and cash flow to rationalize the fleet.
The 737's would be sold to leasing companies and replaced with Airbus narrowbodies.
The Airbus widebodies would gradually be replaced by Boeing 787's
By mid-decade the fleet would be based around three basic jet families. A320, B757 and B787.