Targeting a reduction in unit costs of up to 5% a year until 2015, Gustafson says the carrier is in discussions with unions over whether SAS can achieve the decrease under its 4Excellence strategy. He says the airline is working with the unions to ensure salary increases and labour costs do not rise faster than inflation. In addition to direct cost-cutting by reducing staff wages and benefits, Gustafson does not rule out redundancies and says the reductions needed to create a successful business would come via efficiencies.
Jacob Pedersen, senior aviation analyst at Denmark's Sydbank, says he does not expect direct cost-cutting at SAS to be more than $226 million, while the rest of the unit cost reduction must be facilitated by efficiencies and growth. A stumbling block, Pedersen says, is that SAS is "up against one of the best competitors in Europe in Norwegian, which is growing massively and earning money".
He describes this as a "huge problem" for the airline's new strategy. Pedersen says Norwegian, which is also aiming to reduce its unit costs, is better placed to do so "as it's growing very fast and getting new and larger aircraft".
 |
|---|
©SAS |
However, Gustafson feels SAS can take the fight to its neighbour and other low-cost carriers by attracting more leisure traffic in addition to the business passengers that provide the core of its custom. He believes the SAS network and slots alongside competitive pricing will help it win a larger share of the leisure market.
Pedersen says it is "hard to ascertain the chance of success" of 4Excellence, describing it as "lacking in detail" and adding that "a lot of the wording in the strategy is not very concrete".
While he remains sceptical over whether SAS can achieve the unit cost reduction, Pederson is certain that if it fails to do so, then by 2015 it will be "in an even more difficult position than it is today".
Source: Airline Business
