Airlines in a Crisis

So far the new Boeing CEO is not standing out as a problem solver. His first couple of months has more been a deepening of the Boeing rut. Maybe his immediate and well announced (partial) relocation to Seattle was not such a smart move after all. It certainly have given the machinists the guts to demand back stuff they gave up 10 years ago because Boeing then threatened to move more production away from the area. He needs to be careful with letting his division leutenants run the show by playing hardball with the unions at a time when Boeing needs to ramp up production, not let it grind to a halt altogether. They may have more experience from within Boeing and been seen by the previous CEO as leading lights but it is time for a new regime. The previous one created and proeeded with more trouble than it was worth for both customers and the company itself. Boeing might be too critical to the for all practical purposes duopoly in passenger plane making in the western world, but that deepl...

Pandemic started norwegian airline Flyr had a quick change of CEO yesterday as original CEO Tonje Wikstrøm Frislid surprisingly quit and was replaced by another ex-Norwegian Brede Huser previously CFO of Flyr. Flyr has had a torrid time financially this autumn after commiting to more planes and brand new ones to that, last January. Planes they haven't been able to fill or wetlease out this winter, and no summer profit to boot. They are down to only flying 6 of the 12 planes in the fleet, laying off a number of pilots and other staff.. A failed recapitalisation replaced by a speculative investor lead one, with billions of shares at share price 0.01 nkr, didn't help. Share price has fallen to a fraction of even that leaving litle hope of success for future planned capital repairs. Management mostly consisting of ex-Norwegian leaders laid of during the pandemic and reconstruction of that airline. Speculation is they won't be able to handle a nkr 100 million CO2 tax due to the ...

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 ...

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 ...

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...

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...

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...

There is little new and inovative thinking when Norwegian goes hat in hand to the government and asks for money. Its the traditional story of more loans, more shares, business plan and selling stuff other than seats, which is what an airline should live of. What is needed is a new aproach instead of the same as every other business on the planet. Airlines are different. They sell something even civil servants are interested in performing their work, travel. Not that we expected anything innovative or airline related from the newbie to the aviation world that the CEO of the airline Norwegian in reality is. Norwegian should go the the government and say we need 3 to 4 billion Nkr now for forward ticket sales that the civil servants can use for travel over the coming years. Preferably after normal forward sales volumes have been reestablished. As a caveat it should promise to use some of that to refund outstanding claims from customers that didn't travel due to lockdowns. Who will...

What some fresh airline ceo's with no relevant airline background don't seem to get is that airplane seats are fresh produce. When the plane have taken off the unsold seats are no longer sellable so spoilt. Actually even 2 hours before it takes off. That is why hibernation is a bad solution for an airline. You can hibernate the planes, at a cost, but not the potential seat kilometers those planes could have produced. Every day you have a potential for selling so and so many seats based on your resources available and they largely need to be sold before the day begins. It's like preselling strawberries you haven't picked yet. Every day you know there will be so and so many to sell and by the end of the day they are spoilt and thrown out. Even though fruit and veg are easier because some can be sold on sale tomorrow and in worst case sold as animal feed thereafter. Seats not sold and routes not flown, and where the plane haven't been utilized elsewhere, have no valu...

He was on a loose footing during the crew strikes last year when his own milking of the company, shortly after getting his crews agreeing to personal cuts, came to the fore. Now it is clear he neither built up enough buffers in the good years or took action fast enough when the millions started running out seriously much faster than they where coming in. How do you manage to loose all your shareholder funds in a quarter where the pandemic for the  mostly was somewhat absent and only did real damage in the last 2-3 weeks. Qustions need to be asked whether loosing all the funds during the winter and then reestablishing them during the summer has been a regulaire thrait over the years. In that case somebody have been compensated way to well, including the CEO himself. Not at all according to the comapany's real overall results. In general the pandemic learns us that top managment compensations need to be even less concentrated on short term quarterly and yearly goals, and much mo...

The company have been busy reorganizing it's finance side with converting parts of loans and leases to shares to save the company, selling out the existing shareholders in the process. What have been missing is some operational management and ideas. One would think that with only 7 out of 160 planes in the air they would be on top of things, but no. Daily we read new articles about why they can't keep to in Norway mandated social distancing with middle seat free, and ecuses why. Do not say much for either management nor their IT systems or their control on the aircrafts. Since the newish CEO came in we have been waiting for when his operational plan for how Norwegian should be run would be announced. One certainly can't say he hit the ground running in that department. So far everything new is financial and under the former tempe CEO's remit Norwegian could doo so much more out of this crisis. They have 787's that can take air-containerized freight, but have sho...

Have Ryanair's O'Leary lost the ability to ajust. He is complaining left right and center about why not everything is like before. Why should they have to practise distancing, why is there quarantines and why do the airline have to do any changes instead of somebody else like the airports taking care of all the bothersome stuff. Did he completely forget his schoolyear teachings about price unelastic demand. We see every day reports about people who would be willing to pay a bit more if there just was flights. They who want to and/or are desperate to travel will pay what it costs. But many will not travel for any price because they are scared. Either scared because they don't trust airlines to adapt to the new distancing safety standards or hardline practice the masks thing. Or scared they will be on a plane full of ignoramas who not only will not practice it there but do the same everywhere else and therefor be pestilence carriers. Better sit back and wait for better time...