Focus on Scandinavia’s Frequent Travellers is Recipe for Success for SAS

Letting frequent flyers drive product and service decisions, has yielded positive results for SAS.

In his comments to the airline’s Interim Report for November 2014-July 2015, SAS’s CEO, Rickard Gustafson, highlights the success of the airline’s focus on frequent flyers.The airline announced it had reached four million EuroBonus members in August, through a comprehensive initiative to increase the benefits of membership which began two years ago.

The program has grown at a rate of around 50,000 members a month and now contributes around 50% of SAS’ total revenues, according to the airline.

“This shows that customers appreciate what we are doing,” Eivind Roald, Executive Vice President Commercial, SAS.

“We are incredibly proud to have seen such vigorous growth in membership,”says Eivind Roald, Executive Vice President Commercial, SAS. “This shows that customers appreciate what we are doing, both in terms of our flight offers and also the offers we create together with our partner organizations, In the past few years, EuroBonus members have been more satisfied than ever and the program is very popular. There has been a 20 percent increase in the number of trips paid for with bonus points.”

The SAS EuroBonus program has four tiers: Basic, Silver, Gold and Diamond. Gold and Diamond members get access to SAS and Star Alliance lounges, extra baggage allowance, automatic Fast Track, and 24/7 dedicated customer service. SAS reports an increase in the number of members reaching the higher tiers.

“SAS’s clear focus on Scandinavia’s frequent travelers is generating results,” –Rickard Gustafson, SAS President and CEO.

“SAS’s clear focus on Scandinavia’s frequent travelers is generating results,” says Rickard Gustafson, SAS President and CEO. “We have noted substantial demand from our frequent travelers for flights to the US and in 2016 we are expanding with three new routes: Los Angeles – Stockholm, Miami – Oslo and Miami – Copenhagen. At the beginning of September, we are also opening the new direct route between Stockholm and Hong Kong, which will be operated with SAS’s first new Airbus A330E. In parallel with advancing our positions in our target group, we are continuing the implementation of the cost measures that will generate an overall earnings impact of SEK 2.1 billion with full effect in 2017.

“We are looking forward to an exciting fall with preparations for our expansion of the intercontinental routes and a continued high pace of improvement to secure long-term competitiveness and profitability at SAS.”

Of the airline’s financial performance Gustafson states, “SAS posted a positive income before tax and nonrecurring items for the third quarter of MSEK 996, up 30% year-on-year,” and attributes improvements primarily to the airline’s commercial success and the benefits of “systematic efficiency initiatives.”

Highlights of SAS Latest Financial Report (link to full report)

May 2015 – July 2015

  • Income before tax: MSEK 1,031 (756)
  • Income before tax and nonrecurring items: MSEK 996 (759)
  • Revenue: MSEK 10,973 (10,697)
  • Unit revenue (PASK) increased 3.6%[1]
  • Unit cost (CASK) increased 3.4%[2]
  • EBIT margin: 10.4% (8.7)
  • Net income for the period: MSEK 800 (496)
  • Earnings per common share: SEK 2.16 (1.24)
  • The outlook for the full year 2014/2015 remains firm

November 2014 – July 2015

  • Income before tax: MSEK 550 (-468)
  • Income before tax and nonrecurring items: MSEK -164 (-1,486)
  • Revenue: MSEK 28,747 (27,040)
  • Unit revenue (PASK) increased 5.5%1
  • Unit cost (CASK) increased 3.3%2
  • EBIT margin: 3.3% (1.5)
  • Net income for the period: MSEK 439 (-416)
  • Earnings per common share: SEK 0.54 (-1.83)A

[1] Currency adjusted.
[2] Currency adjusted and excluding jet fuel.

SAS also reported on traffic performance for August 2015

  • SAS carried 2.4 million passengers in August, up 0.1%.
  • Scheduled traffic (RPK) was down 1.1% and the capacity (ASK) was reduced by 0.3%.
  • The load factor decreased by 0.7 p.u. to 80.5%.
  • The currency adjusted yield and PASK were up 9.4% and 9.9% respectively in July. The nominal yield and PASK were up 10.4% and 11,0% respectively.

The airline indicates that market conditions “have temporarily stabilised,” but that “competition remains intensive in certain markets.”

Routes

As part of its strategy to focus on Scandinavia’s frequent travellers, the airline adjusted its schedule to follow flyer preferences for the summer toward more leisure destinations. SAS reports that customers “have responded well” to its seasonal service, primarily to destinations in southern Europe, with a corresponding moderate decline in demand for travel within Scandinavia.

U.S. Focus

Going forward with its schedules, the airline will follow frequent flyer preferences again, with several new routes to the U.S. announced this August.

SAS will expand and open three new direct routes to the U.S. in 2016. The new routes are Los Angeles from Stockholm, Miami from Oslo and Miami from Copenhagen.

SAS will also increase departures from Stockholm to New York and Chicago, and between Copenhagen and Shanghai. In all, SAS offer over 330,000 more seats on its intercontinental routes in 2016.

Timetable Stockholm Arlanda – Los Angeles

Daily departures from Arlanda (SK939) at 09.50 arriving in Los Angeles 12.15.
Daily departures from Los Angeles (SK940) at 14.15 arriving at Arlanda 10.00.

Timetable Copenhagen – Miami*
Departures Mondays, Thursdays and Saturdays from Copenhagen (SK953) 09.30 arriving in Miami 13.50.

Departures Wednesdays, Fridays and Sundays from Miami (SK954) 15.50 arriving in Copenhagen 07.10.

Timetable Oslo – Miami*
Departures Tuesdays, Wednesdays, Fridays and Sundays from Oslo(SK955) 09.35 arriving in Miami 13.50.

Departures Mondays, Tuesdays, Thursdays and Saturdays from Miami (SK956) 15.50 arriving in Oslo 07.05.

*Tickets to Miami will go on sale later this Fall.

New direct routes to USA and Asia 2015/2016
Stockholm – Hong Kong, September 2015
Stockholm – Los Angeles, March 2016
Oslo – Miami, during fall 2016
Copenhagen – Miami, during fall 2016

Increased frequencies on existing long haul flights

SAS will offer daily flights on the following routes starting in the Winter:

Copenhagen – Shanghai (two additional departures each week)
Stockholm – Chicago (one additional departure each week)
Stockholm – New York (one additional departure each week)
Oslo – New York (one additional departure each week)
Copenhagen – San Francisco (one additional departure each week)

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