The red ink continued to flow at bankrupt SAS in November even as the airline plans for a strong summer travel season next year.
The Stockholm-based carrier posted a $48 million loss on $270 million in revenue for November, according to a monthly filing with a U.S. bankruptcy court. That was narrower than SAS’s nearly $90 million loss in October, but comparable to its nearly $47 million loss in September. These loss numbers include one-time restructuring expanses.
The continued losses were expected, SAS CEO Anko Van der Werff said at the end of November. Speaking during a quarterly earnings call, he said the airline does not “expect to reach profitability within the next year despite our comprehensive cost-out program.” The “next year” is SAS’s fiscal year that ends in October 2023. Despite that, SAS had narrowed the gap between costs and revenues during the three-months ending in October, Van der Werff said.
Travel demand, Van der Werff said, was at “decent levels” as the airline moved into the weak winter travel season.
SAS filed for Chapter 11 in the U.S. in July after it hit a roadblock implementing its 7.5 billion Swedish kroner ($717 million) cost cutting program, which is known as SAS Forward. Aircraft lessors were named as the key sticking point by SAS Chief Financial Officer Erno Hildén in its bankruptcy filing. It had $1.53 billion in outstanding lease liabilities when it filed, plus $1.35 billion in long-term debt.. SAS has since reached agreements with lessors covering 80-90 percent of its fleet, Hildén said in November. Other needed savings include new labor agreements and other operational improvements.
The airline had shrunk its operating fleet to 108 aircraft in December from 42 aircraft in February 2020, data from Cirium Fleet Analyzer show. SAS has shed almost all of its Boeing 737s, as well as some of its Bombardier CRJ fleet.
But all the cost savings in the world, while needed, fail to address SAS’s biggest strategic weakness: Its network. The airline, based on its history as the national carrier for Denmark, Norway, and Sweden, has three sub-scale hubs in Copenhagen, Oslo, and Stockholm that are not large enough to support a robust intercontinental network. SAS thus sits in an awkward spot; it’s unable to compete with European discounters that win on costs or with intercontinental network competitors, like KLM and Lufthansa, who maintain large fortress hubs in Amsterdam and Frankfurt, respectively.
As yet, Van der Werff and his management team have not presented a plan to address SAS’s network weakness.
But that has not stopped the airline from rolling out ambitious plans for next summer. Rather than buttress its three hubs with lots of intercontinental routes — it is opening a few, for example between Copenhagen and New York JFK — SAS appears more interested in point-to-point services. The carrier will launch new nonstops to Newark from Aalborg, Denmark, and Gothenburg, Sweden, on April 27. Neither city is a hub or base for SAS, so it is betting entirely on the local markets and the ability of Star partner United Airlines to feed the flights at Newark. Both the Aalborg and Gothenburg routes will operate thrice weekly with 157-seat Airbus A321LRs.
“We are now starting planning for ramping up our capacity into next summer,” Van der Werff said in November. The airline planned to add 15 new routes during the period, he added.
In addition to the three New York area routes, other new markets include flights to Haugesund, Norway, from both Copenhagen and Trondheim, Norway, according to Diio by Cirium schedules. SAS is also due to connect Gothenburg and Tenerife.
SAS is trying to attract more leisure flyers with its new routes and lower costs. This strategy is in response to the growth of budget airlines in Scandinavia, as well as a belief that the pandemic has forever changed business travel. SAS’s main Scandinavian competitor, Norwegian Air, has emerged a stronger player — particularly in its namesake Norway market — from its pandemic restructuring and other budget players used SAS’s struggles to expand on its home turf, for example Eurowings in Stockholm.