Airlines in a Crisis

SAS should as soon as Omicron rumours started to spread been back to seeing how Cargo could save the winter.  But as usual it is all about passengers in their presentations. In the last reported quarter their cargo income rose more than their charter income went down. That is significant. But since they are not highlighting it in their presentations one would assume its not either on top of the mind of their top brass.  Cargo operations is where SAS has a competitive advantage over their Scandinavian, mainly Norwegian, competitors like Norwegian and Flyr. Either of those have any.  Question is did SAS hire a CEO with the right background to get them through a pandemic that could be severe for as long as the post war econmics. Specially combined with litle abaiting environmental pressure, where any suggestion of governmental supports for the sector immediately meat strong opposition from parties that call themselves green. Or did they go for the avaiable CEO that was most ...

Gei Karlsen, the CEO of Norwegian, learnt his airline craft during a wild expansion and is now looking to recreate that. Just before he announce a 17 mill euro profit for the summer season 2021, he announce 17 more planes for the fleet. At least he didn't pay extra to get the ExMax, for now but did say that that was an option for the future. He is also going to park a large part of the fleet during the winter months and is negotiating hard with the unions for some solution on what to do with the flying crews during that period. Will it be a long vacation or will it be halve the hours for everybody. The need to keep pilots current may play in here. But he didn't stop there. They day after the results he is hinting to that he want to expand further and think Norwegian can handle a fleet of 80 aircraft with the administrative staff they already have on board today. The parking will be helped financiall by some power by the hour deals for the winter season but maintenance will stil...

He recently announced that he had plenty of time before any further 737 orders where forthcoming saying that another world shock disruption would have to come first so he could again get preferential pricing. The ExMax was never such a gamechanger that Ryanair has been spreading about. 10% more seats than the 737-800 and slightly more effective engines do not give enough green credentials that it impresses any politician when everybody is dreaming about electric planes. And for Ryanair shareholders its just a few percentage points more potential profit for an increasingly short timeframe until something more drastically have to happen about the future of flying. Unless transport of people by air is to go into a permanent decline at the hands of the climate change brigade. It could also be that Ryanair has reached the long touted optimum sice of aircrafts, round 200. They are dividing into not only more marketing names but operations to. Or that the current top management have run out o...

Heard immunity and a reduction in inection was supposed to happen at 60% infection/vaccination. Now some countries are there but infection rates continue to rise.  New scenario; We need to be at 90% vaccination rate because the vaccines are at best 90% effective and with the latest virus version only 30% after first dose. And not at all in some that are immuno compromised. This could drag on. When 90% won't do it they will come with the 3'rd injection and what then. Will there be a 4'th and a 5'th and then annual boosters. This is the problem when there is no plan B as an alternative to vaccination. Or maybe vaccination was plan B and a plan C is just to much for politicians to think about.  At some stage we will have to live, or die, with the CoVid19 virus. It's a cold virus just like the 4 others that we have lived with for at least a hundred years. It's just we weren't that well informed when each of them first came around and killed left right and center...

Or rather can he survive without giving up his 11 million bonus. Or should the question be, will he, since it could take him 2 years to make it back. Question is how much does he want to be CEO or is it just the money that drives him. There is surely another company he could rescue from the brink through financial wizardry. Schram, the former CEO of Norwegian lasted 18 months. More because ofthe support of a weak board with litle shareholder backing but at the same time without any shareholder unity or even a strong such. And a chairman without much airline background that maybe of that reason picked a CEO without any at all. As soon as kind of new strong shareholders came in and the chairman that picked him for the CEO role was out, so was he. But is Karlsen what Norwegian needs now. When he came in as CFO he either had any airline background but was a part of the Fredriksen sphere. Fredriksen is again a large shareholder in Norwegian but the time for finanzial wizardry might be vanin...

They picked a non scandinavian person with airline CEO experience and a tiny localisation excuse of having worked in Stockholm but not for a scandinavian company. At least Anko have experience in how to try to refinance airlines that in reality are bust. Even though he is leaving one n the midle of a chapter 11 equivalent.  He is supposed to be on good term with pilots but if that was won by giving in to much in negotiations is another question, see previous paragraph. As a bonus for the board he knows how to wrangle millions out of a bust company for himself and his nearest, while showing lover employees the door, and one would asume the board will think some of that some will say ill gotten gain will fall on them. Wouldn't see im on the barricades demanding that top managment and board stand by their employees in solidarity and take an equivalent pacut inn times of need. But aside from supporting  the culture of greed, a well liked trait by many in the upper echelons of busi...

The board of SAS a traditional networks airline with a service, is about to pick a new CEO and thereby indirectly deciding on what kind of airline they want the company to be in the future.  Al Baker the boss of Qatar airways wich is a 35% investor in IAG the parentcompany of BA commented in an article in the Sunday Times yesterday that the management of BA under Cruz leadership lost sight of what made BA. It became a penny pinching airline that where selling food instead of serving food. Is that what SAS owners wants with their airline. A low fares competitor that instead of competing with route network, connections and non-quareling service sees price as their most important factor. In that case they will get plenty of competition in the Scandinavian market with Wizz, Norwegian, Ryanair and newcomers Flyr and long haul Norse all ready for a race to the bottom. However I doubt all Scandinavians look only to price when it comes to picking their mode of air travel. Plenty of people ...

Can a scandinavian company in unrest be led successfully by a person who has no grasp of any scandinavian language.  Have often witnessed how badly communication in english goes between two people who's mother tongue is not english. This is why outsourcing support for english to India and similar places often go awry. It works as slong as one of the two in a communication are native english speaking. But if they both are not, miscommunications flourish. And that is even when one of them are from India. A country where many schools has english as the primary language, but its indian english. These problems get better with time. If one moves to a pure english speaking country after several years, the problem can be overcome when oneself gain the ability and confidence to internally correct what the other person is saying.   The problem remains though if one goes to a contry like Sweden and expect all communication to happen in english. Even a press release for an internatio...

If SAS is to reach that target they'll better quickly get a new CEO in that brim full of ideas can land running. We need to see skidmarks just like a plane. The cash of the company have in the last quarter reduced with more than halve. And their chances of borrowing more is not getting any better with Moody downgrading them from B3 to Caa1 and hints to an even more negative future.  Worse is they are expecting 20% in April and 30% in May/June. That can be difficult if one compares to last year when Europe didn't really open up before July. Add in the uncertain vaccine supplies and this summer could be a complete wash out. Notice all vaccine forecasts says that most is going to happen in the last month. That is a recipe for disapointment. There is still much to be said for freight. If passenger volumes is only going to be 50% that is a lot of missing belly capacity transcontinentally, and europe wide. Most international post is still at less than halve the speed it was pre-covid...

Norse Atlantic Airways is the new transatalantic then true intercontinental airline where the founder of Norwegian Kjos and his partner Kise are involved.  It might be targeting Low Fares and according to its founder they have learnt the lesson that that have to be combined with Low Cost. Maybe and maybe not. They are going for ex Norwegian 787's wih the same seat configuration. That might save on leasing cost, what they are planning of fundraising do not equal to outright plane purchases, but it is 2 cabin classes again and that is not true Low Cost.  Add in the freight, which have proven crucial and resilient but is still a distraction but you migth as well since 30min turnarounds are out the window, and a new Low Cost concept needs to be invented. With usual pain for first movers, maybe a bit less for what will now be a second mover. Norway might be where this airline will be founded and somewhat hq'd but if they have learnt their lessons from the adventures with Norwegian ...

All airlines should should take charge of their own destiny now and do their utmost to maximise income now instead of hibernating the pandemic and hope for better times. Arilines have massive set costs in the form of either massive leases or fleets of owned assets that rots fast without regular maintence and use. Always remember airline seats spoils as fast as soft fruit. Todays potential income can't be earned in tomorrow instead. And if you can't fly people there is plenty of other stuff that needs transporting.  A christmas present sent from Irleand to Norway in mid November arrived yesterday the 24'th of February. That is over 3 months in the post. Another one sent the same day from Ireland to Greece came back today after the airline contunously refusing to freight it. That is a complete let down by most airlines of their previous commitments to bring post around contributing to a worldwide organized and fast postal service. Every time I bing Cargo up in diverse forums ...

We are now a year into the pandemic and its time to better organise the loading of freight into the cabins of passenger aircraft. There needs to be developed a container that can get in through the passenger door, or the emergency exit door opposite. Preferably in a bit less than 1/2 cabin width size, leaving space for passage down the middle. After all every airport have the equipment to load such containers, daily in use to load the wheeled carts that contains food, drink and duty free to be consumed and sold onboard. In practice they could be seen as small containers. One could also do with a track system that would be fastened to the mounting points normally used for seats, to easily move around and lock in place the cargo.  Maximum weight would be 5 passengers at 70kg each plus the weight of the seat lets say 50 kg wich give a maximum weight for each container of 400 kg. for a 3+4+3 seat width plane and 2 container wide. sample a 787 or A330. That should leave at least 350 kg ...

With Norwegian gone from the Scandinavian long haul market, including its transatlantic connectivity through Gatwick, there should be growth opportunities for SAS. One will assume long haul will come strongly back if not end of 2021 so at least in 2022. And at least in the northern hemisphere markets will be full back by summer 2022. This gives opportunities for they who early prepares after the permanent exit of some airlines from long haul during the pandemic. SAS should now prepare for what it will do when this market returns. Now is when cheap(ish) deals for long haul aircraft can be made for they with a plan, and guts. Insted of going for a strategy of highest prices retrievable with the short term lowering of capacity, one should seriously consider if more profit can't be obtained by increasing ones own capcity, therebye lowering prices slightly. For a payback in the form of increase in demand. In addition to avoid letting potential passengers leak to competitors stuffed with...

How many airline have ben supportive as governments around the world have tried to handle a worldwide pandemic crisis. Today KLM tried to force the retraction of the dutch governments demand of negative tests even for crew by threatening to stop all it's Transcontinental and even european flying that would demand a crew layover to not risk that a crewmember with a postitive test was left behind. A behaviour more akin to O'Leary trying to change tax hikes by dropping all routes from certain airports than a national airline having the word Royal in its name. Even coming with stories how they have to stop trans-shipping vaccines to countries in South America with tremendous Covid19 problems. Apart from the sudden concern over crew, that was lacking before, can't see why KLM couldn't operate flights with double, or treble or quarduple or whatever it takes, sets of crews so no crew leaves the plane or stays over and everybody comes back. To at least bring out the vaccines. M...

Virgin Atlantic got going with it already in March 2020 managing 4000 cargo only flights in the year.. And with the panemic continuing into 2021 they are regularising the service offering 33 flights per week. Why haven't Norwegian managed do even 1, instead parking the whole fleet of 787 's resulting in its complete demise. Did they fall foul of internal resources with an all is difficult attitude. That didn't see how the new cargo market differentiated from that of previous.  Why haven't SAS managed to take advantage of the booming cargo only flight market due to the lack of passenger flights to send cargo with. They do have a sizeable cargo division with a precense in many locations and all the wide body containerised capcity that was needed. Even planes that was being retired/scrapped where seats could have been stripped for extra capacity and nobody would care about some extra cosmetic damage. All they lacked was vision, fantasy and a can-do mentality. Both airlines...

Scandinavian Airline Systems have 3 types of long haul aircraft, 2 types of regional and no less than 6 types of short haul medium size aircraf in their fleets. I know SAS has historically been able to sell used aircraft for more than they bought them due to being early on new types and moving on quickly, but that is many years ago now. Low cost competitors have gone for single type and big orders. Ryanair 's fleet of 340 aircraft are all Boeing 737-800's. Even though SAS is a full service (somewhat) network airline of the hub and spoke model a certain reduction in fleet disparity can only be good. Who these days adjust the aircraft used exactly to load instead of adjusting price to fill the seats available.   Let's take long haul first. A330, A340 and A350. Simple choice. Everybody is getting writh of the 4 engine A340. And SAS have now got the last out of operation. If the market is light and SAS could ramp up cargo maybe a couple of cargo conversions could have been in o...

Accepting the plan for the future Norwegian maangment announced today 14/1-2021 is something creditors and leaseowners should think more than twice about. The key is in the details and the plan for 50 planes now but a rapid expansion to 70 already in 2022 is akin to a landgrab by management and a an asembled consortium of larger new shareholders. Meaning they under-size now before the vaccines has nullified the pandemic and then expand rapidly with significantly better lease deals as the markets recover. Another key sign is that only a very small amount of new shares are available to existing shareholders. If it awas all above board wouldn't they be given a fare share. The difference now is that its not up for another shareowner vote so in reality its a free for all for managment and whoever they are mixed in with. Next year, if profitable, and I can't see why covering maybe a 80% market with a 50% fleetsize, its time for big bonuses to top management and a rapid rice for the s...

The numbers SAS released in December 2020 reveal only 3/5 cargo income in 2020 compared to 2019. That is 700 million lost and probably a lot more since the potential has shot up.  This is leading one to believe SAS could have done a lot more and that the company haven't taken advantage of what ever they could make money on in the pandemic market. Using the assets they are locked into and are paying for. And this failure of flexibility is ultimately the fault of the CEO Gustafson.  Lack of aggressive local suppliers could be the reason Middle Eastern carriers now is moving into the Scandinavian Cargo market. And once they are in they could be difficult to dislocate. Remember exporters are not as sentimental with what airline they pick as local politicians with their travel expenses refunded by the taxpayer, ref some mayors boycott of Wizz.  One can also see from the numbers how having the actual flying of ones regional network outsourced lead to lack of flexibility in time...

Gustafson in SAS has taken his hat and gone, to a different kind of business all together.  He has been controversial in recent years, How he received significant bonuses after getting other employes to reduce their renumeration packages in recent crisis did not help SAS when pilots went on strike a couple of years ago.  Maybe his greed got the better of him and he foresaw that for the coming years his performance bonuses would not mount up to much. Specially since most airline have negotiated multiyear CoVid19 reductions in the pay of staff and therefore will have problems restoring senior managment perks faster or significantly higher in this period. His share options and other renumeration schemes is also probably solidly underwater after the refinancing SAS went through in 2020. Resulting in any financial loss by leaving would be minimized.   What should SAS look for in their next leader.  First someone who can him/herself show moderation and not only demand...

It's a Norwegian trait that if you say you are going to do something that is the plan until you hear something different.  In sample Ireland a plan has to be reconfirmed and preferably every day until it happens or else everone assumes its cancelled. Back last spring Norwegian said they where hibernating their longhaul until March 2021. One would think that after such a long hibernation an official declaration would be made if this was still the plan 9 months later. But not Norwegian. They have started selling longhaul seats both out of London Gatwick and Paris and probably other permutations if you want to check:  Norwegian destinations from Gatwick   However there is no rumour about them having started retraining their 787 pilots at neither London Gatwick nor in Paris. They proably have kept some 787 hopefully training pilots current to do ferry flights. Some of the Dreamliners have gone to Shannon and back to leasers to go to new customers. But its not a good sign if s...

Airlines is hoping a demand for certificate of vaccination for passengers will free up the travel world so people again can fly freely. Ryanair even advertising jab to fly. There are a couple of flies in the oinkment. With more than 7 billion people in the world and wealth extremely unevenly spread, at some stage there will be a cry for fairer distribution of the vaccines produced.  Several countries are already talking about not vaccinating people under 45 with no underlying health issue. We don't want fighting in the queue among all the others because airlines demand vaccination and eager travellers getting in front of they for whom the jab might mean the difference between actual life and death. As in contrast to just the financial health of the travel industry but not actual death for its owners and employers. There are certainly enough squabbling in the queue already with policeforces trying to get vaccinated before the nurses, fishermen before the elderly and doctors grabbing...

There is the overambitious expansion and desire to play in the big league with big orders for brand new planes, of several different types no less. But others have gone big and succeeded, but maybe not so much in the airline industry that is plagued with protection from your creditors and financial rescues. The transition from the enthusiastic well liked entrepenour to the next CEO is important for most companies. It usually happens because the founder have got out of his depth, or simple become to old. In Norwegian Kjos flew a bit too close to the sun . There is also that the airline was built on a belief of continually better market conditions and no savings for a rainy day. So did they choose an individual with a lot of airline experience and a lot of usefull contacts that could come in with own ideas and change things around from day 1. Not at all. They chose somebody that first spent 3 months learning before he took the reins. And then speculated for another 3 months on how he cou...