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The landscape over which the airline industry operates has changed dramatically in the last year. The global economic slowdown that started in the second quarter of 2001 was exacerbated by the terrorist attacks in the US of September 11th. All this has significantly dampened demand and confidence in the industry. However, even before 2001, change had already been in the making for several years. Last year's events only worsened what was already an extremely fragile state within the industry. Change is coming, with the European airline industry in particular set to face upheaval within the coming year or two. What has long been standard - the notion of a 'national flag carrier' - is seemingly no longer a viable business model. Sabena and Swissair are examples of how national pride was put before economics, with unhappy results. Today, there is virtually one flag carrier for every single nation in Europe, which suggests that there will be more consolidation to come. The question is which ones will survive as viable and profitable while maintaining their independence. It must also be asked if independence for its own sake should really be pursued at all.
The man who is steering the group through today's turbulence is its CEO Jorgen Lindegaard. Lindegaard, formerly CEO of the GN Great Nordic group - a large industrial conglomerate based in Denmark - also has extensive international executive experience outside the airline industry. This outside perspective may be especially necessary today in an industry and company where the traditional business models need urgent reassessment. Lindegaard's first priority is to change the old industry perspective of flying and to make it suit the real needs of customers today. "There is a move from business class to economy class," he points out. "Flying in Europe is going to become more focused on economy class. We have been used to having 40 percent of the people flying business class, and that is going to change. In the future, on certain routes, there are going to be only five or six seats in first class." Refocusing does not mean losing core values, however. SAS Group plans on maintaining its unique characteristics that differentiate it from its competitors. "Our motto is still 'It's Scandinavian'," he comments. "This is a big difference from the other airlines. We want to tell people about the Scandinavian way in design, in working together, and in how we treat people. That's what we want to present." "While our customers may downgrade from business to economy class, they still want to fly SAS," he points out. "In order to increase the customer experience of economy class we are enhancing our electronic ticketing and our Euro Bonus frequent travel program. We have huge equity in our customer base. We want to keep our customers happy, and there are a lot of new things we can do." The strategic landscape of the industry is what has been attracting the most news recently. All airlines, including SAS, have had a difficult 2001. The airline has acknowledged these difficulties and made changes. It has both taken out capacity and laid off over 3,000 staff. Grim as this may be, there is a ray of light at the company. Lindegaard forecasts that 2002 will not be a loss-making year. Also, SAS Group has a strong and healthy balance sheet, hugely important in an industry that is going to face more consolidation in the near future. Lindegaard points out two things about SAS Group and the industry. "We will not get out of this market for economic reasons, unlike some of the recently publicized examples," he explains. "We will never jeopardize our freedom for economic reasons. This is an important point." "What is happening to the industry now is another thing entirely," Lindegaard comments. "The national flag carrier is no longer a certainty. We have to act in the interests of our shareholders. It is not a question of governments being proud of the flag on the airline. If SAS is to survive we should be able to justify this to our shareholders and say this is a better solution than any other solution." Lindegaard emphasizes the strength of the region as a hub. "We have been building up around the Nordic area in the Baltic, in northern Poland, and in the Hamburg - Bremen area," he says. "There is a home market of around 100 million people here. That should be enough basis for a major airline. When you talk about consolidation you have to talk about the three major airlines (BA, Lufthansa and Air France)." "We have to look at the best way to build value in our different operations," he continues. "Our SAS Radisson hotel business is doing very well. In this division we have over145 hotels. This gives us economies of scale. We are also considering an IPO to get the value out." "In our cargo division, which we made into an independent company, we do not have the same sort of scale, so we have looked for partners," Lindegaard says. "We have a very strong brand and we haven't really utilized it," he notes. "When I imagine how the future may look, I see possibilities that we may team up with others one day, but Scandinavians will still want to fly SAS! We have this dream of a growing company that can leverage our strong brand." For Lindegaard one more item must be emphasized: "The most important thing is that SAS has to be a profitable airline. We will never ever jeopardize that."
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CEO Jorgen Lindegaard has brought an outsider's perspective to the current reassessment of the airline industry.