“If you can’t beat ’em, join ’em.” That seems to be the airline industry mantra as of late. For example, Lufthansa spent years talking about how Etihad and other subsidized Gulf carriers are bad for the aviation industry, but now they’re partnering with them.
Norwegian’s success in Europe
In Northern Europe, SAS’ biggest competition is Norwegian, which is an ultra low cost carrier with incredibly low fares that are shaking up the transatlantic market. Norwegian isn’t just flying out of Northern Europe, but also operating transatlantic flights out of other markets.
The airline is named after Norway, is registered in Ireland, and has crews based all over the place, including Thailand. They’re international, to say the least, and know how to find all the loopholes to achieve the lowest possible cost structure.
SAS simply can’t compete with Norwegian on price under their current conditions, though they’re trying to.
However, it looks like SAS now has a new strategy for trying to compete with Norwegian — they can’t beat them, so they’ll join them. 😉
SAS is starting a new Irish airline!
SAS put out a press release yesterday with the headline “SAS complements its production with a new air operator certificate (AOC) and bases outside Scandinavia.” That’s certainly a nice way to describe the fact that they’re going to be outsourcing just like Norwegian.
The announcement starts with the following explanation:
The air travel market in Europe is experiencing intense price pressure and rising demand for leisure travel. To secure the company’s long-term competitiveness and to take an active role in the growing leisure market, SAS is now taking a further step to reduce the cost differential to newly established competitors.
If SAS is to secure the long-term profitability of key traffic flows and actively participate in the growing leisure market, SAS must have the same preconditions as other market participants.
So, what exactly is SAS doing? SAS will establish a new air operator certificate in Ireland, and will open bases in London and Spain. They plan to have the new operations up and running starting this coming winter. The long term goal is to complement their existing route network, and create an even broader network.
We don’t yet know how many planes SAS will dedicate to this operation, what routes they’ll operate (they could operate short-haul flights, longhaul flights, or both), if they’ll remove business class on these flights, etc. However, it seems that they’re basically trying to replicate Norwegian’s business model, so I’m guessing we’ll start seeing SAS transatlantic flights from cities like London and Madrid.
Historically major carriers haven’t been especially successful with launching low cost subsidiaries, though that’s not to say this won’t work. It’s certainly interesting to see SAS try to replicate what Norwegian has done, almost to a “T.”
What do you make of SAS’ plan for a new low cost Irish operation based in London and Spain?
Supposedly they will place 4 of their new A320neo's there on taking delivery of the planes. London and Spain are the biggest tourist destinations for SAS, so my guess is that it is for certain European routes. The hourly staff cost in the UK is currently 1/3 lower than in Scandinavia, and even lower yet in Spain.
For the long haul you need a feeder network, which SAS has towards Stockholm and Copenhagen, and...
Supposedly they will place 4 of their new A320neo's there on taking delivery of the planes. London and Spain are the biggest tourist destinations for SAS, so my guess is that it is for certain European routes. The hourly staff cost in the UK is currently 1/3 lower than in Scandinavia, and even lower yet in Spain.
For the long haul you need a feeder network, which SAS has towards Stockholm and Copenhagen, and to an extent Oslo. So it would be difficult for them to fill up transatlantic flights from London, and it would weaken their domestic market.
So you'll have heard that Norwegian are opening up in Argentina, right?
I was wondering what SAS would do long term to compete with Norwegian.
The press release reads like something written in Swedish and run through Google translate.
Norwegian needed an Irish base to be in the EU. SAS already is in the EU in Denmark, unless they know something we dont
Bring it on. More competition means lower fares and more choice for the consumer. Look at how BA is scrambling to compete with Norwegian from LGW.
As long as they provide the same service as their Scandinavian colleagues I couldn't care less where crews are based. In my experience crew from places like Thailand will give much better service than European crew anyway because they're a lot more interested in keeping their jobs.
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Bring it on. More competition means lower fares and more choice for the consumer. Look at how BA is scrambling to compete with Norwegian from LGW.
As long as they provide the same service as their Scandinavian colleagues I couldn't care less where crews are based. In my experience crew from places like Thailand will give much better service than European crew anyway because they're a lot more interested in keeping their jobs.
Jetstar long-haul crew are almost entirely Indonesian or Thai based, regardless of the route. They do these insanely long rosters where they swing out of their home base, crew routes between Australia and other other countries that are not their base (i.e. DPS-SYD-HNL-SYD-OOL-NRT-CNS-SYD-HKT-SYD-HNL-MEL-SIN-MEL-DPS) over the course of several weeks and then eventually get back to their home base. They give much better service than the lazy, bitter, heavily unionised Australian crew who wished they worked for QF but don't.
So they are adopting norwegian business, well it is going to help them in the long run. But expect the service to be lower than it already is.
My guess is that they want to take advantage of lower taxes that Ireland provides over anywhere in Scandinavia. Then they can pair that with a non-EU post Brexit base in London. Not sure why Spain is attractive. I assume it has to do with routes and labor cost which should be cheaper. I would of put a base in Ireland and used it to connect into London to reduce tax costs for passengers. But...
My guess is that they want to take advantage of lower taxes that Ireland provides over anywhere in Scandinavia. Then they can pair that with a non-EU post Brexit base in London. Not sure why Spain is attractive. I assume it has to do with routes and labor cost which should be cheaper. I would of put a base in Ireland and used it to connect into London to reduce tax costs for passengers. But I'm no expert on that.
I like the idea of this. It's better than sitting still and being driven our of business.
I like how they mention that this is all due to "leasure" travel. It's like code for the business clients not to fly LCC's :)
How Scandinavian of them.