SAS president Jan Stenberg has brought a new realism to the airline
Kirean Daly/LONDON
Even in the difficult days of the early 1990s, few airlines saw their fortunes tumble quite so rapidly as did Scandinavian Airlines System (SAS). Under the leadership of Jan Carlzon, the tri-national carrier seemed destined for a leading global role in a coalescing industry. Only British Airways was more aggressive in using hard cash to create the alliances of the future.
One by one, however, things went horribly off-track, leaving a once-confident carrier directionless, and struggling with a battered reputation. Perhaps SAS was ahead of its time, or perhaps Carlzon simply got it wrong. Whatever the explanation, there is a dour new mood of realism at the airline - a mood epitomised by its level-headed president of the past year, Jan Stenberg. If Carlzon's strength was his vision, Stenberg's is perhaps a cold perception of an industry dangerously prone to self-deception.
Like other executives who come to the airline industry from outside - in his case, from the LM Ericsson telecommunications group - this lawyer-turned-manager finds it hard to conceal his irritation with its historic peculiarities. He is particularly scathing of the role of governments, but also points to a well-rehearsed list of structural oddities in the business.
"I don't think governments are honest when they talk about competition in air transport," says the SAS president. "They are hypocrites. They have vested interests in employment, regional policies, even foreign policy, when it comes to supporting businesses - and trade and industry and relations with other countries."
The European Commission's Third Package is, he says, "a limit to competition", because of its constraints on non-European Union ownership. He questions the slot-allocation rules, which play against new entrants, and notes caustically "...the residual tendency among airlines to form cartels". He lambasts bilateral agreements, and continues: "It is basically wrong that governments should own operators in a free-market economy. It is a weakness and a disease when an airline operates not through passenger service, but thanks to the taxpayers."
Stenberg left his position of executive vice-president at Ericsson to accept the challenge of turning round SAS, and he is frank about what he found: "Four years of continuous losses really affects morale in an organisation. The company had had a clear view of what it had to become, but so many of those strategies failed. The Alcazar alliance [with Swissair, Austrian and KLM] is the most obvious example of a failed strategy that would have been a good idea if it had been carried through. The Continental Airlines [investment] and hotel ventures were also unsuccessful and all that gets to the heart of people."
Stenberg embarked on a plan, to take SKr3 billion ($400 million) out of SAS' costs annually and is very close to achieving that. Peripheral subsidiaries were sold off and staffing has been cut by 1,625, to around 19,700. Stenberg has the air of a man presented with a task for which he found the solutions to be regrettable, but very obvious. "I am not out to do spectacular things. Cost cutting is not a spectacular thing. Selling off those companies and trimming the balance sheet was surprisingly easy to do.
"The process of defining a strategy for SAS and with whom to co-operate was not so difficult. Read the SAS charter - and you will see that supporting Scandinavia in Europe was very important. There was good logic behind that - and it is good logic today. To recognise that SAS cannot support daily flights to Latin America and Australia is again obvious. We have to combine our operations with somebody else," Stenberg emphasises.
That somebody else has turned out to be Lufthansa (Flight International, 17-23 May). Stenberg believes that not just SAS, but also its passengers, will benefit through a stronger route-network, and he is "...clearly convinced that we will get competition from third parties". He was, and is, strongly opposed to any suggestion of joint ownership, declaring: "Alliances must be win/win, and if you integrate ownership, then big always comes out on top of small." Even more brusquely, he dismisses the idea of cross-equity-holdings, saying: "I don't believe a bit in that - it is just symbolic."
SAS' own product needs improving, he concedes, but there is much other work to be done. Stenberg explains: "When you are finding things that are lethal and critical, then you must start there. Cutting cost was critical. Once you are back in the black, you can look at other things. We are looking at expanding the network and we have opened up a number of destinations; but we are also looking at the qualitative aspects of our product."
After 28 years at Ericsson, Stenberg, 55, plans to stay at SAS until his contractual retirement-age of 62.
"I tell them also that this is a very competent organisation, and that our competitors fear us - because they tell me that they do. We are really on track to make it - we will be not the biggest, but we will be the best airline in the world," he adds.
Source: Flight International
