Scandinavian Airlines (SAS) reported major improvements in its third-quarter results but admits it’s struggling with the economic downturn in Norway caused by the dive in oil prices. Business travel has plummeted, and it has traditionally made up SAS’ most important market.
The improved results (external link) were warmly welcomed, after years of losses, but prospects for SAS’ business in Norway have dimmed. Not only has international traffic fueled by the oil industry to and from Norway declined, but so has its business traffic on domestic routes within Norway. SAS’ chief executive, Rickard Gustafson, admitted to newspaper Dagens Næringsliv (DN) that he was “worried about developments in Norway, because the economy is very dependent on developments in the oil industry.”
SAS also suffered a severe case of bad timing when it launched new, non-stop service between Norway’s oil capital of Stavanger and Houston, on an aircraft designed with only 44 business-class seats, in August of last year. Oil prices fell below USD 100 a barrel just a few days later and the market for the exclusive flights all but collapsed.
“It clearly was unfortunate,” Gustafson told DN on Wednesday. SAS had launched the flight on the wishes of the oil industry itself, and after oil prices had been stable at high levels for several years. The flight did well in the beginning, but demand has since fallen off and SAS admitted that it’s now losing money on the route.
“We’ll soon have to decide whether it can continue,” Gustafson told DN. It’s served by an aircraft and crew that have been hired in until summer 2017, and now may be put into service on other routes.