Scandinavian Airlines' (SAS) low- fares division Snowflake has been given a deadline of the end of the year to return a profit or risk being shut down.
The management of the Stockholm-based carrier, which celebrated its first anniversary last week, has agreed a deal with SAS Group president J¿rgen Lindegaard, that a failure to enter the black will lead to SAS either divesting or closing the no-frills operation, says Snowflake director Ludmilla Lindecrantz. Snowflake performed "better than expected" last year, but still operated at a loss, she says.
The airline inherited the Scandinavian Direkt charter division of SAS airline operations, and uses Boeing 737-800s and MD-80s seconded from its parent company. Although there are four aircraft dedicated to the Snowflake bases in Copenhagen and Stockholm Arlanda, the division uses additional capacity from the SAS mainline fleet - up to a theoretical maximum of 5.5 aircraft.
Lindecrantz says that although the management has been able to cut some costs at Snowflake, much is still out of its control. "By changing the booking platform, these costs were reduced from 9.6% to 2.2% of total costs," says Lindecrantz. Pilot labour contracts, maintenance costs and fleet decisions, however, are controlled centrally by the SAS Group, she adds.
Snowflake sold 750,000 one-way segments last year, which it plans to double this year. Lindecrantz says the agreement by Scandinavian pilots' unions last month should lead to Snowflake's crewing costs being reduced. The airline may be split into a separate business unit within the SAS Group, unlike today, where it sits within the central portfolio of SAS airline operations.
JUSTIN WASTNAGE / STOCKHOLM
Source: Flight International
