Rickard Gustafson, CEO SAS Group

Rickard Gustafson, CEO SAS Group
Bodø, January 29, 2015
Improved availability has made air travel more attractive
than ever for Scandinavians…
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…and ticket prices are falling in real terms, despite cost
increases
• Oil price +150% since 2001
• Avinor security cost tripled
since 2004
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While airlines struggle, many players in the aviation value
chain are profitable
Average EBIT margins in the European aviation value chain
Note: Five year average EBIT (2009-13) where available
Source: Capital IQ
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European aviation industry developing towards a new
norm
Old norm
New norm
• All crew employed by the
airline
• Flexible crew set-ups, incl.
outsourcing to staffing agencies
• Salary model automatically
increased by tenure
• No tenure based salary models
• No scope clauses
• Low flexibility, e.g. scope
clauses
• Outsourced Ground and Tech
• Inhouse Ground and Tech
• Focus on one aircraft type per
operating platform
• Multiple aircraft types operated
inhouse
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Rapid development towards new norm – 90% of
Scandinavian growth from production companies and
LCCs
Source: Innovata schedule data
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Network carriers moving towards more flexible models at
lower cost
Germanwings has taken
over 115 routes from
Lufthansa
LCC currently taking over
leisure routes and
domestic point-to-point
LCC successful,
expansion continues
• Germanwings used for
short haul outside
Frankfurt and Munich
• Transfers short haul
services to Hop! Air
France
• Vueling acquired by IAG
in 2013
• Production companies,
e.g. Eurowings, Tyrolean
used
• Transavia acquired as
fully owned LCC
Source: Press clippings
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• Some routes transferred
to low-cost subsidiaries
Low cost carriers utilize low cost and flexible crew set ups
Large flexibility to scale
up or down by using
contract pilots
External providers enable
flexibility at a lower cost
Flexibility between
different crew groups
allows for lower costs
• Cabin-crew outsourced to
staffing agencies
• Multiple internal/external
suppliers sourced in
many countries
• Employs pilots and cabin
crew in low cost countries
• Pilots “self employed”
through staffing agencies
• Long haul crew hired
from low cost countries
Source: Press clippings
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• Leverages flexi-crew set
up with zero hours
contracts
Outsourcing of crew and production is becoming
necessary in order to stay competitive…
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…however, some airlines have started to use tax driven
multinational production set-ups to reduce cost
(Example setup)
 Scandinavian
pilot, operating
on
Scandinavian
routes
 Home base in
low cost EU
country
Taxation?
Local labor laws?
 Employed by
employment
agency
Control and followup?
 Operated by
production
company
 Tickets sold by
Scandinavian
airline
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The industry needs predictability and a holistic view
Need to clarify regulatory framework to maintain
industry competitiveness
1.
Clear rules regarding multinational crew employment
models and aircraft “flags of convenience”
2.
Holistic view for the whole transportation industry on
compensation levels in case of delays and
cancellations
3.
Reasonable rate of return on infrastructure from
providers
4.
Predictable and harmonized set of rules regarding
charges, fees and taxes.
5.
Single European Sky
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OUR VISION IS TO MAKE LIFE EASIER FOR
SCANDINAVIA’S FREQUENT TRAVELERS.
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SAS has made significant improvements to the operating
platform
Restructuring program ongoing
 Reduced administration and sales
 Divestment of non-core
businesses, incl. outsourcing of
Ground handling
 Improved union agreements, new
pension schemes
 Optimization of technical
maintenance
 Improved steering of external
spend
 Increased utilization of premises
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Structural changes of SAS production platform – deliver on
long term short haul fleet strategy
Flexibility
 Blue1will be a wetlease provider of flexible 737 capacity,
B717 will be phased-out
Low complexity
 Scandinavian Airlines focus on A320 and 737 operation
Rightsizing
 All “small” aircraft operated by production companies
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We are building a strong product offering for Scandinavia’s
frequent travelers
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New intercontinental route and more product
improvements in pipeline
New Stockholm–Hong Kong route in September
2015
Continued development of service concepts, e.g.
 New SAS Café lounges in Trondheim and Tromsø
 Expansion of Oslo international lounge
First renovated long haul aircraft in traffic in
February
 Complete interior upgrade incl. new seats
 New entertainment system and WiFi
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SAS will continue to be a vital part of Scandinavian
infrastructure
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