SAS cuts capacity across all three major bases; intercontinental services face uncertain future

Image: SAS - SOS
“The love you gave me, nothing else can save me, S-O-S” (Benny Andersson/Björn Ulvaeus, Abba, 1975)
“The network will be adapted to facilitate profitability by closing unprofitable routes and will be dimensioned according to the needs of business travellers.” (2009 SAS corporate statement)
(Apologies to our friends in SAS for this anna.aero graphic.)

According to figures published by the airline, SAS’ intercontinental (long-haul) services accounted for around 30% of ASKs last year while handling just over 5% of the airline’s total passengers. As the airline responds to weakening demand by cutting capacity across all three of its major bases (Copenhagen, Oslo and Stockholm Arlanda), intercontinental services appear to be under particular threat. Routes to Beijing and Bangkok (both from Stockholm Arlanda), and Delhi and Seattle (both from Copenhagen) will end in the coming months. The Seattle route has been operated for over 40 years.

After handling around 25 million passengers in each of the last five years early indications are that SAS will carry 15-20% fewer passengers this year.

A closer inspection of capacity data reveals that SAS has been most active in cutting capacity at its Swedish operation, with Danish capacity cuts not far behind. So far capacity cuts have been least dramatic in its Norwegian operations. Intercontinental services have also seen relatively few cuts in recent months though this will change shortly.

Chart: SAS demand seasonality
Source: AEA, SAS
Division Pax 2008 (m) Nov 08
ASK vly
Dec 08
ASK vly
Jan 09
ASK vly
Feb 09
ASK vly
SAS Norge 10.001 -0.3% -5.7% -10.8% -9.3%
SAS Danmark 7.770 -11.3% -10.2% -17.4% -18.0%
SAS Sverige 6.218 -13.9% -12.9% -19.8% -19.9%
SAS Intercontinental 1.366 -3.8% -4.2% +3.3% -6.8%
Source: SAS monthly traffic reports

Load factors in the first two months of 2009 have fallen by more than 10 percentage points (from 80.8% to 70.1%) on intercontinental routes resulting in the decision to drop at least four long-haul routes in the coming months.

SAS’ current intercontinental network consists of the following routes and frequencies:

Base Routes (weekly frequency now/weekly frequency in July)
Copenhagen Bangkok (5/6), Beijing (6/7), Chicago O’Hare (6/7), Delhi (1/0), Dubai (3/0), New York Newark (6/7), Seattle (4/7), Tokyo Narita (5/7), Washington Dulles (4/7),
Oslo
Stockholm Arlanda Bangkok (3/0), Beijing (2/0), Chicago O’Hare (4/7), New York Newark (5/7)
Source: OAG Max Online for March 2009 and July 2009 (may be subject to further change)  Bold = being dropped this year. Note: Dubai is a winter-only service

These routes are served by a mix of seven A340s (two owned, five leased) and four A330s (three owned and one leased). Under a recently announced cost reduction programme branded “Core SAS” it was announced that the long-haul fleet would be reduced by two aircraft. SAS suffers from the geographic location of its bases with regard to long-haul routes. They are too far north to be potential intra-European hubs but not far enough east (unlike Helsinki) to be a potential hub for Europe to Asia flights.On short and medium-haul routes the airline has indicated that it expects to cut around 10% of aircraft from its fleet leaving it with about 130. Meanwhile the route network “will be adapted to facilitate profitability by closing unprofitable routes and will be dimensioned according to the needs of business travellers.” To keep track of which routes are being dropped completely as a result of this strategy check anna.aero’s regularly update Route Recycle Bin.

Scandinavian hubs all seeing similar trends

Despite the demise of Sterling in Copenhagen, and the continued growth of Norwegian in Oslo, all three of the region’s major hubs have seen surprisingly similar rates of traffic decline in recent months.

Chart: Scandivanian hubs traffic development
Source: Avinor, Copenhagen Airport, LFV

With Easter moving back into April this year the fall in traffic in March is likely to be significantly less as all three airports are dominated by business traffic.


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