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Norwegian737
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Joined: Thu Mar 24, 2011 8:49 pm

SAS Vs Finnair; Why Doesn't SAS Use Same Strategy?

Fri May 18, 2012 7:53 am

I know this has been discussed before, but, as a Norwegian, I think it's a very interesting topic:

Norwegian is growing rapidly, and has, as we know, plans to start flying to both New York and Bangkok next year. SAS says they do not want to become a low-cost airline, but want to focus on quality instead.

Finnair has done really well with focusing on the Asian market. With their 'The fasest way between Europe and Asia'-strategy, they have gotten a big piece of the Scandinavian and European market for these routes. They fly to several destinations in Asia, and outside of that, they just have their one North American flight to New York.

SAS is 'focusing' on both Asia and North America. I was therefore thinking, why doesn't SAS develop a similar strategy, just for a different market? Why not JUST focus on North America? Is SAS too small of an airline to 'satisfy' the market to both Asia and North America? Scandinavia is conveniently located when flying to North America (a lot of planes fly over my house every day, from Europe and the Middle East, on their way to Canada and the US) Would SAS be able to take some of this market, by feeding a lot of passengers through Copenhagen or Oslo?

SAS says they will re-new its long-haul fleet in the next years, as well as serving more/new destinations, so obviously they have a plan. My question is just: is it a good and sustainable one?

Any thoughts?

[Edited 2012-05-18 01:29:48]
 
CXfirst
Posts: 3022
Joined: Tue Jan 30, 2007 8:13 pm

RE: SAS Vs. Finnar; Why Doesn't SAS Use Same Strategy?

Fri May 18, 2012 8:09 am

I don't think the problem is lack of focus on either North America or Asia. Rather, lack of focus on one hub in Europe, either CPH, ARN or OSL.

Although they fly mostly to CPH, it is not a 100% focus. This is not resolvable in the current condition of SK. Norwegians want more flights to OSL, Swedes more to ARN and Danes want focus on CPH.

Not saying that 3 hubs won't work, but 3 hubs cannot work like HEL does for AY.

The reason AY focuses on Asia is simply because for Europe, North America via HEL is a major back track, while Asia via HEL is on the way. As for Scandinavia, they are far enough west that the airports (possibly not ARN) could be used as hubs for North America without much backtracking for most of Europe.

-CXfirst
 
IndianicWorld
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RE: SAS Vs. Finnar; Why Doesn't SAS Use Same Strategy?

Fri May 18, 2012 8:20 am

SAS has had too many political barriers to overcome internally to actually progress. Unless they sort those issues out, not too sure anything they try will make any difference.

As for their network, people are right to suggest they have too many hubs to be viable. Trying to feed services through CPH, ARN and OSL is always going to spread them too thin. A very difficult situation.
 
Joost
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RE: SAS Vs. Finnar; Why Doesn't SAS Use Same Strategy?

Fri May 18, 2012 8:24 am

Quoting Norwegian737 (Thread starter):
Finnair has done really well with focusing on the Asian market.

Finnairs financial results (before taxes, in EUR):
2012 Q1: -26M
2011: -111.5M
2010: -33M
2009: -125M
2008: -62M
2007: +139M

Although AY might look very stable from the outside (the follow the same strategy for years, they don't suffer from strikes or extraordinary operational problems), they have been accumulating losses for over 4 years now.

Quoting Norwegian737 (Thread starter):
SAS says they do not want to become a low-cost airline, but want to focus on quality instead.

That's a nice way of saying that a company is simply unable to it's cost base.

Quoting Norwegian737 (Thread starter):
Why not JUST focus on North America? Is SAS too small of an airline to 'satisfy' the market to both Asia and North America?

For North America, competition from BA-AA, KL-AF-DL and LH-UA is fierce, and local markets LHR, CDG, FRA and AMS are all considerably bigger than OSL, ARN and CPH, so it's quite though. Actually to satisfy the needs for their home market, the strategy of feeding StarAlliance hubs on both sides of the world (EWR, ORD, IAD; PEK, BKK, NRT) doesn't sound too bad.
 
sankaps
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RE: SAS Vs. Finnar; Why Doesn't SAS Use Same Strategy?

Fri May 18, 2012 8:25 am

Finnair's strategy is focused on sixth-freedom rights, connecting pax from Asia thru HEL onto various European cities. Sixth freedom connecting pax (ie pax travelling between two countries via a third country) typically are lower yield than non-connecting pax for various good reasons.

To build a strategy around connecting sixth-freedom flights, one needs to have a correspondingly low cost base and lean/ efficient structure. Finnair has a shot at this thru their single hub at HEL, relatively low headcount, low labour costs (achieved via higher productivity, not necessarily lower wages), and streamilined ops with fast connection times.

SAS in comparison has a complex operation (three hubs), higher costs, highly unionised labour (lower productivity), and lower efficiency. To compensate for these structural constraints and higher costs structure that results, SAS cannot just copy the Finnair strategy, they need to target higher-yield traffic (ie N America instead of Asia).

Whether either of them succeed or not in following their chosen strategies remains to be seen.

[Edited 2012-05-18 01:34:03]
 
FlyingAY
Posts: 416
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RE: SAS Vs Finnair; Why Doesn't SAS Use Same Strategy?

Fri May 18, 2012 8:38 am

Quoting joost (Reply 3):
Although AY might look very stable from the outside (the follow the same strategy for years, they don't suffer from strikes or extraordinary operational problems)

To be fair, we actually do have our almost-yearly pilot strikes and cabin crew strikes.

Quoting sankaps (Reply 4):
SAS in comparison has a complex operation (three hubs), higher costs, highly unionised labour (lower productivity), and lower efficiency.

Finnair's workforce is heavily unionised as well. Two major unions there are Finnish Air Line Pilot's Association and Finnish Cabin Crew Union (SLSY).

As mentioned AY is making plenty of loss and being a shareholder hasn't been that rewarding in the last years. Most of the losses are coming from the European traffic, but on the other hand there would not be Asian flights without feeding traffic. AY is actually looking for a partner for the European traffic - Maybe AB could play a role there. AY also owns a small part of DY, so who knows.
 
sankaps
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RE: SAS Vs Finnair; Why Doesn't SAS Use Same Strategy?

Fri May 18, 2012 8:43 am

Quoting flyingAY (Reply 5):
Finnair's workforce is heavily unionised as well. Two major unions there are Finnish Air Line Pilot's Association and Finnish Cabin Crew Union (SLSY).

Are the unions as "militant" as those at SAS? My impression is SAS' unions make it hard for the airline to reduce unit costs through productivity gains. Is the same true at AY? I didn't have that impression...
 
IndianicWorld
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Joined: Mon Jun 04, 2001 11:32 am

RE: SAS Vs Finnair; Why Doesn't SAS Use Same Strategy?

Fri May 18, 2012 8:47 am

Why do unions seem so hell bent on causing so much disruption? At times like these, every union seems to think it's an opportunity to profit, whilst carriers see nothing but red ink. It makes no sense.
 
CXfirst
Posts: 3022
Joined: Tue Jan 30, 2007 8:13 pm

RE: SAS Vs Finnair; Why Doesn't SAS Use Same Strategy?

Fri May 18, 2012 9:15 am

Quoting flyingAY (Reply 5):
AY also owns a small part of DY, so who knows.

I think DY and AY could work well together. DY could feed into HEL with a European network and operate flights to North America. Allow AY to do most of the Asia flying (DY might keep BKK due to the very high traffic from scandinavia).

DY has the cost base to operate short-haul efficiently, so if they are allowed to grow their HEL base and start taking over AY routes (AY might want to keep their best routes), then I think they will have a winning formula. DY will have enough aircraft to cover OSL, CPH, ARN and HEL well.

-CXfirst
 
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teme82
Posts: 1346
Joined: Fri Mar 23, 2007 6:38 am

RE: SAS Vs Finnair; Why Doesn't SAS Use Same Strategy?

Fri May 18, 2012 9:34 am

Quoting flyingAY (Reply 5):
As mentioned AY is making plenty of loss and being a shareholder hasn't been that rewarding in the last years

Yeah I'll agree on that one.

Quoting sankaps (Reply 6):

Are the unions as "militant" as those at SAS? My impression is SAS' unions make it hard for the airline to reduce unit costs through productivity gains. Is the same true at AY? I didn't have that impression...

Yeah they are. Their way to see things is back in the "golden age" when there were no competition. For shareholders point of view the EU ops are bleeding money. Even with the new cost cutting measures.
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