SAS is facing a double challenge as Norwegian carrier Braathens Safe prepares to enter one of the Scandinavian carrier's most lucrative routes and the Swedish government finalises plans to tax frequent flyer points.
Braathens will enter the Oslo-Stockholm market with six daily frequencies from the winter timetable, rising to nine per day next summer. The move follows the private Norwegian operator's move to buy a 50 per cent stake in scheduled carrier Transwede Airways from holding company Transpool. Under the deal, Braathens and Transpool will each put up SKr35 million ($5 million) in loans 'to ensure Transwede stays liquid until 31 December 1997,' explains Per Oedegaard, executive vice president of Braathens and Transwede's president-in-waiting. Braathens has an option to buy the remaining 50 per cent by this date.
The deal, due to be completed this month, is the key to Braathens challenging SAS on one side of the 'Golden Triangle' formed by Oslo, Stockholm and SAS' main hub at Copenhagen. 'We needed to establish a marketing presence in Stockholm and knew that Transwede was up for sale,' says Oedegaard. He says the two carriers will retain separate identities, while admitting 'the Swedish home market is of interest.'
This is the first time a carrier has seriously challenged SAS' near-monopoly on the 'triangle' and Oedegaard has opted for Oslo-Stockholm because 'the yields are much better,' but he does not exclude 'the possibility of operating the whole triangle.' Harald Rosen, Transwede's director of marketing, estimates average yield on the route as SKr1,400 ($210). Almost 90 per cent of the 600,000 annual passenger market between Oslo and Stockholm is point-to-point, while Copenhagen pulls in 90 per cent connecting traffic with yields 20-30 per cent lower.
Slot restrictions at Oslo and Stockholm airports have kept would-be competitors off the 'Golden Triangle' in the past, but Rosen says Braathens has new entrant status at Stockholm and could juggle slots at Oslo.
Yields are unlikely to suffer from competition, however, as neither carrier is prepared to use pricing as a competitive tool. 'A price war is out of the question,' says Oedegaard. Peter Forrsman, SVP corporate relations at SAS, agrees, pointing to how both carriers held a stable price regime after deregulation in the Norwegian market in 1994.
The fight for market share will almost certainly centre on the two carriers' frequent flyer programmes and should provide an interesting insight into the effectiveness of marketing alliances. SAS has some 200,000 EuroBonus members in Sweden and has a link with Lufthansa's programme. But Braathens has a link to British Airways' loyalty programme.
Moreover, SAS could find its FFP weapon undermined by Swedish government plans to tax loyalty points from January 1997. Forssman admits it is a worrying development but one Swedish aviation source suggests it could be difficult assessing individual FFP members. 'If Swedish companies state that no employee can collect points on official business, it will fall on the individual to declare those to the tax authorities honestly.' Indeed, it is not certain how seriously the tax authorities will try to collect the tax. One tax official observes: 'It's not a question of getting more money in, it's a matter of principle.'
Mark Odell
Source: Airline Business
