• Sweden's news in English
 

Troubled SAS has 'less than a year' left: expert

Published: 12 Nov 2012 17:33 GMT+01:00

"It's too late now," airline industry consultant Anders Lidman told The Local.

Lidman's comments come following an announcement by SAS on Monday that the company planned to slash 3 billion kronor ($445 million) in costs through salary reductions and other measures which include shedding nearly 6,000 jobs through divestments and staff cuts.

SAS CEO Rickard Gustafson dubbed the plan SAS's "final call" in avoiding bankruptcy.

But Lidman, who runs an aviation consultancy in western Sweden, said there was very little SAS could do to overcome a legacy of bad management and an approach to the airline business which remained stuck in the early 1980s, when national carriers enjoyed monopoly conditions.

"When you have a monopoly you don't have to worry about costs. You can instead focus on service, and SAS was very good at that," he said.

He explained that SAS has been exceedingly slow in responding to changing market conditions which have seen the emergence of several low-cost carriers such as EasyJet, Ryanair, and Norwegian, as well as major advances in internet booking.

"It's sort of like being infected with a virus for a long time and not discovering you are sick until it's too late," said Lidman, who criticized SAS for having "no reaction" to changes that have made it harder for the airline to compete.

"It's taken 25 years and SAS is still weighted down by the legacy of the old days," he said.

According to Lidman, SAS made a strategic error by betting on the European market, rather than focusing on long-haul routes for which there is less competition.

"They can't earn enough in the European market, and that is where they generate 90 percent of their income," he said.

"They will never compete with the low-cost airlines in the bloodbath which is the European market."

Among the many problems with the new savings plan, according to Lidman, was that it failed to address how the airline would generate new revenue.

"For every penny they save, they will end up losing two pennies in income," said Lidman.

One of the airline's biggest obstacles was its inability to invest in a new fleet of aircraft which have much lower operating costs than SAS's current fleet.

"They are caught in a death grip," said Lidman.

He also faulted CEO Gustafson as well as SAS board vice chair Jacob Wallenberg for delivering an ultimatum regarding the savings plan.

"If we don't come to an agreement with staff, then SAS will cease to exist," Wallenberg told the Dagens Industri daily on Monday, adding that the company only had a week to convince staff to accept the changes.

Lidman pointed out that, while SAS had enough cash to continue operations, putting a deadline on when employees and unions must agree to the measures meant the company might have to declare bankruptcy prematurely.

"If one union says no to the measures, the company must then logically declare bankruptcy," he said, agreeing that Wallenberg had essentially "painted the airline into a corner".

Lidman also had a simple explanation for why the Swedish state, which is SAS's largest owner, hadn't been able to sell its stake in the company.

"No one wants to buy it," he said.

He said, however, that there was no shortage of other carriers that would be able to take over both SAS's domestic and international routes should the company go bankrupt.

And while passengers may not need to worry just yet about whether or not to book travel with SAS, Lidman explained that concerns about the airline's future may have already set off a downward spiral.

"Travellers get worried and then refrain from making reservations or paying upfront for annual membership cards and suddenly you have sort of a self-fulfilling prophesy," he explained.

While Lidman stopped short of saying that SAS could go bankrupt by the end of the year, he remained very pessimistic about the airline's long-term future.

"I'm very doubtful" that SAS will be around at this time next year, he said.

David Landes

Follow David Landes on Twitter

Your comments about this article

20:32 November 12, 2012 by B Slick
And year after year the swedish goverment believed that they could save SAS by finding some "big shot" person from the private sector and then pay him BIG MONEY that that was the was the way to make SAS a profitable company. They were only throwing away tax payers money. To invest any more money in SAS is like pumping fresh blood into a dead body!
21:51 November 12, 2012 by cupidcub
I don't know why sometimes it is so hard to understand the simple thing ? Just observe how other competing airlines are making money ? SAS is damn expensive, people need a good reason to pay three times of money.
03:12 November 13, 2012 by Smokebox
I stopped using them a few years ago. The old school airline days are over. Time to move on.
04:24 November 13, 2012 by rolfkrohna
SAS has an internal cultural supremacist problem which goes back a very long time, the staff see themselves as superior to others, and customers only justification is to pay what staff wants. I know people who stopped flying SAS decades ago after being insulted and maltreated. Recently they apparently also grossly insulted the Chinese. Tragically he is probably right, SAS had been digging its own grave for a long time and soon it is finished.
07:19 November 13, 2012 by RobinHood
A 20% shareholding in a half bankrupt airline; this is going to cost the Swedish taxpayer a very large amount of money.

There are those on these forums who argue that the Swedish government ought to buy even more worthless shares in all sorts of even more useless companies - Saab for example. One hopes those people will now have the wisdom, the dignity and the good grace, to shut up.
08:56 November 13, 2012 by djmarko
The managment is certainly to blame, seems they have not moved ahead with times, competition is so fierce in the European route, I believe SAS can turn things around but they certainly need to get rid of the entire management and bring on board younger people with more fresh ideas, quite surprised SAS dont have too many long haul flights, they are certainly losing out to the likes of BA, KLM, Air France, Luthansa who are major players in the long haul market, in a country where some people can keep their jobs for life, there are no incentives to improve, change, re-organize, its basically a case of trying the same formula year in year out without much sucess!
11:22 November 13, 2012 by Great Scott
RobinHood, here speaketh the man with the fake user name. The man who uses the name of a man of the people, is in fact a man who protects greed and condemns people who have lost their jobs and accuses them of being benefit cheats and parasites of society. He speaketh of the word dignity, of which he has none himself.

SAS has had over 10 years to see the writings on the wall and failed to adapt. Part of the management of the airline is the responsibility of the Swedish government, they in turn should resign for their failings and creating further unemployment.

As with SAAB they will neglect they responsibilities and continue with their road to ruin. The airline will probably be sold off with certain moderate politian's making money from the sale as they did with SAAB.

As djmarko quoted, get rid of the management get someone who can do the job and turn this thing around. If Ryanair and Norwegian who have the wisdom to do it, why can't others.
13:46 November 14, 2012 by cogito
Thirty-nine unions.
13:36 November 15, 2012 by Anthony Fishwick
Far to much union control, and the government still don't realise that high tax makes high prices, therefore totally uncompetitive. It is a government problem for losing control to the unions and not acting conservatively. Getting socialist spending under control and reduce taxation would solve it, but it's probably too late. You can't get a tiger to change his stripes!
18:21 November 16, 2012 by jbkulp
Trying the same failed thing over and over is the definition of insanity.
21:27 November 17, 2012 by Attestupa
Come on guys. Stop crying in your milk. Get on with the job. SAS is worth saving.
Today's headlines
Swedish PM faces human rights pressure in China
Sweden's PM Stefan Löfven talks to reporters outside the Swedish Embassy in Beijing. Photo: Karin Olander/TT

Swedish PM faces human rights pressure in China

Swedish Prime Minister Stefan Löfven landed in China on Friday for a two-day visit. But on the home front he has been facing pressure to push more to get human rights on the agenda when he meets with Chinese leaders. READ  

The Local Recipes
How to Make Chocolate Truffles for Easter
Chocolate Truffles. Photo: John Duxbury

How to Make Chocolate Truffles for Easter

If you are looking for a fun alternative to Easter eggs, why not try Swedish chocolate truffles. They are delicious, easy to make and kids can help you make these delightful sweets. Food writer John Duxbury shares his recipe with The Local. READ  

Homeless to 'skip' long rental queues in capital
There is a long queue for housing in Stockholm. Photo: Image Bank Sweden

Homeless to 'skip' long rental queues in capital

Some of Stockholm's homeless population are set to be offered permanent accommodation in the city centre, as part of efforts to help them reintegrate into society. But the move is a highly controversial one in the capital where there is a long queue for first hand rental contracts among tax-paying residents. READ  

Nine more jailed for Stockholm Nazi attack
Police in Kärrtorp in December 2013. Photo: TT

Nine more jailed for Stockholm Nazi attack

Prison sentences of between three and eight months have been handed down to nine men involved in a neo-Nazi demonstration in Stockholm in 2013. Swedish courts have already punished fourteen others for their role in the brutal violence. READ  

'You have to be active, that's the whole point'
Magnus Melander and Linda Krondahl of THINGS. Photo: The Local

'You have to be active, that's the whole point'

What if you took a bunch of exciting start-ups and some of Sweden's biggest companies and put them all in the same place? You would get THINGS, a brand new hub designed to fuse software and hardware and creativity with experience. The Local got an exclusive behind-the-scenes tour ahead of its launch on Thursday evening. READ  

Alcohol becoming more accepted in Sweden
More and more Swedes are going for drinks after work with friends. Friends drinking: Shutterstock

Alcohol becoming more accepted in Sweden

Swedes are renowned for being 'lagom' but a new study on the alcohol habits of the Nordic nation looks set to challenge their reputation for moderation. READ  

Sweden sees Ukrainian asylum seeker boom
The Maidan Square in Kiev, Ukraine. Photo: Gustav Sjöholm/TT

Sweden sees Ukrainian asylum seeker boom

Sweden saw a huge spike in Ukrainians seeking asylum in 2014, with nearly eight times more applicants than the previous year, according to Eurostat data analyzed by The Local. READ  

What's on in Sweden
What's on in Sweden: March 26th - April 2nd
Say Lou Lou perfoms at Debaser Medis on Friday. Photo: TT

What's on in Sweden: March 26th - April 2nd

Alternative duo Say Lou Lou present their new album in Stockholm, and a musical tour of all the great American hits translated into Swedish hits the road. Here are some tips for fun activities over the next seven days. READ  

Thousands to be hit by Easter rail delays
Train delays are expected over Easter weekend in Sweden. Photo: Henrik Montgomery/TT

Thousands to be hit by Easter rail delays

Tens of thousands of Swedish travellers are set for rail chaos over Easter, one of the country's busiest holidays, with delays of up to three hours expected on some lines. READ  

Swedish council outlaws elephants in town centre
Elephants may no longer roam Kalmar's streets. Photo: Björn Larsson Rosvall/SCANPIX

Swedish council outlaws elephants in town centre

You would not normally associate elephants with Sweden. But one town in the Nordic country has decided that it's better to be safe than sorry – so it has created a new bylaw forbidding elephants from parading its streets. READ  

RECEIVE OUR NEWSLETTER AND ALERTS
Society
How to never miss your favourite weekly features on The Local
Gallery
People-watching: March 25th
Sponsored Article
Why Stockholm is the 'Boston of Europe'
National
Which words are changing in Sweden's latest dictionary?
Sponsored Article
'Sweden must embrace openness and diversity'
Blog updates

20 March

 (The Local Sweden) »

"Greetings from Stockholm, where we spent Friday morning getting excited about the first solar eclipse to..." READ »

 

19 March

Fighting for Women & Diversity in Malmo (Stockholm in my American Heart) »

"It takes one person to make noise. This is Muna Mohamud’s mantra as she strives to..." READ »

 
 
 
National
Is this house 'un-Swedish'?
National
Sweden pays tribute to victims of Germanwings Alps crash
National
Neo-Nazi activity rising in Sweden
National
How to make Swedish Waffles
Gallery
Property of the week: Torslanda - Hjuvik
National
Stray dog Arthur moves in with Swedish owners
Sponsored Article
Ten tips for succeeding as a start-up in Sweden
National
Sweden triples maximum limit at asylum centres
Gallery
People-watching: March 21st
National
Why elderly Swedes are among the world's happiest people
National
TIMELINE: Gothenburg shootings
National
Can Sweden's feminist party score success in neighbouring Norway?
National
Why Brits can't get enough of Sweden
Gallery
IN PICTURES: Sweden's solar eclipse
National
What's on in Sweden this week
Royal wedding countdown begins
National
Viking ring reveals Islamic ties
National
TIMELINE: Julian Assange sex allegations in Sweden
Gallery
People-watching: March 18th
National
One in three Russian diplomats are spies, says Sweden's Security Service
National
Hitchcock opera set to hit Gothenburg stage
Gallery
IN PICTURES: Northern Lights on show across Sweden
Technology
Why Swedish pop star Robyn is pushing for more girls in tech
Gallery
Property of the week: Umeå
National
Introducing Sweden's Eurovision 2015 entry Måns Zelmerlöw
Gallery
People-watching: March 13th - 15th
National
Why have Swedish prosecutors made a U-turn in Julian Assange case?
Sponsored Article
How Sweden and India can work together
Politics
Who's the new young leader of the Christian Democrats?
Travel
Why are Swedes so obsessed with Mallorca?
Gallery
Princess Estelle celebrates her mother's name day in Stockholm
National
What's on in Sweden this week
National
Obama's anti-Semitism team heads to Stockholm and Malmö
Gallery
People-watching: March 11th
Technology
How a Swedish app is teaching children to empathize
Swedish grandparents put on disguises to snatch baby
National
Why Sweden may not be as gender equal as you think
Politics
Why does Russia blame Sweden for the crisis in Ukraine?
Gallery
Property of the week: Smögen
National
Listen to the English remix of a Swedish 'genitals' song gone viral
Technology
'Swedish women are strong and ambitious'
National
Why are 11 Roma people suing the Swedish state?
Sponsored Article
Expert US tax preparation for Americans in Sweden
Sponsored Article
Stockholm job fair helps immigrant entrepreneurs
Latest news from The Local in Austria

More news from Austria at thelocal.at

Latest news from The Local in Switzerland

More news from Switzerland at thelocal.ch

Latest news from The Local in Germany

More news from Germany at thelocal.de

Latest news from The Local in Denmark

More news from Denmark at thelocal.dk

Latest news from The Local in Spain

More news from Spain at thelocal.es

Latest news from The Local in France

More news from France at thelocal.fr

Latest news from The Local in Italy

More news from Italy at thelocal.it

Latest news from The Local in Norway

More news from Norway at thelocal.no

3,412
jobs available
PSD Media
PSD Media is marketing company that offers innovative solutions for online retailers. We provide modern solutions that help increase traffic and raise conversion. Visit our site at:
psdmedia.se