Scandinavian Airlines (SAS)’ arch rival Norwegian Air, which reported a huge first-quarter loss on Thursday, has raised many of its fares for flights through Monday and made them non-refundable. The hikes will enable financially challenged Norwegian Air to fend off losses and even make money if SAS pilots go out on strike Friday.
There’s been little if any information about the status of mediation between SAS and the unions representing around 1,500 of SAS’ pilots in the Scandinavian countries. The pilots are threatening to strike from Friday morning if their demands for more predictable work schedules and higher pay aren’t met.
They faced a midnight deadline on Thursday, but that may well be extended. If a strike is called, most of SAS’ flights are likely to be cancelled or delayed, at least through the weekend.
Meanwhile, anxious SAS passengers ticketed on flights from Friday and seeking alternatives in the event of a strike have been met by expensive options. Newspaper Dagens Næringsliv (DN) reported Thursday on how Norwegian Air has quickly jacked up airfares and made even its high-priced “Flex” tickets much more restrictive. As of yesterday afternoon, the short flight between Oslo and Bergen was costing more than NOK 2,500 (USD 294) one way with no refunds available on departures from Friday to Monday. Only Norwegian’s most expensive category of tickets was available for flights between Norway’s biggest cities.
Hedging their bets
While some might accuse Norwegian Air of gouging passengers and trying to cash in on SAS’ labour troubles, Norwegian Air spokesman Lasse Sandaker-Nilsen claims the airline is only trying to make it possible for travelers to actually do so during the weekend. He noted how SAS passengers fearing earlier strikes have reserved “Flex” tickets, only to cancel them if a strike ends or is averted.
“We of course welcome everyone on board, but don’t want to function as a travel guarantor for SAS customers,” Sandaker-Nilsen told DN. “We can risk being left with empty seats, lost revenues and disappointed customers who weren’t able to book a ticket.”
Travel agency Berg-Hansen supported Norwegian Air’s position: “I don’t see this as pure speculation on Norwegian Air’s part,” Arne Villadsen, CEO at Berg-Hansen, told DN. “They want to avoid being put in position where they can lose large amounts of money.”
Big loss but share price rose
Norwegian Air needs to avoid losing more money, after reporting a first-quarter loss of NOK 1.5 billion. The airline has been caught in severe turbulence following its rapid intercontinental expansion, higher fuel prices and, not least, the grounding of all its Boeing 737 MAX jets following two fatal crashes. The airline has been both selling off aircraft and delaying delivery of others, while also launching a major cost-cutting program that’s critical for longer-term profitability.
Airline analysts had expected a large first-quarter loss and Norwegian Air’s heavily battered share price actually rose, on the theory that the loss could have been even worse. More than 8 million passengers flew on Norwegian Air during the first quarter, up 9 percent over the same period last year and a sign that the market remains strong for the airline that’s expanded rapidly from its roots as an air shuttle on Norway’s West Coast.
Norwegian Air has also experienced some personnel changes at the top of the company, which also can signal the looming end of an era under the airline’s founder Bjørn Kjos. The 72-year-old former fighter jet pilot has already said himself that he’s been “working on overtime” for several years, and his hand-picked chairman Bjørn Kise will be stepping down later this spring.
New faces coming on board
Kise has been replaced by Niels Smedegaard, a 57-year-old Dane who’s stepping down himself as CEO at Danish cruise-ferry company DFDS after holding several top management jobs at Swissair, SAS and Gate Gourmet Group. Stock market commentator Thor Christian Jensen noted in DN that Norwegian Air will finally have a board leader who’s independent of Kjos and the airline’s administration in general. Other changes on the board and its election committee also suggest a new era at the airline that may be good for shareholders outside Kjos’ sphere.
A strike at rival SAS can also boost Norwegian Air’s fortunes, just after it had to raise more capital and share prices nosedived. While it started demanding high fares within and from Scandinavia this week, ticket sales at SAS crashed as its pilots’ strike threat heated up. DN reported that passengers didn’t dare book and pay for tickets on SAS this week, indicating that the strike threat alone was already costing the airline dearly.
“Right now there are very many who are choosing other alternatives than SAS from Friday and for the week ahead,” Bernt Roger Eliassen of BCD Travel told DN. SAS itself confirmed that around 70 percent of its flights would be grounded by a strike by all its Scandinavian pilots.
“We understand our customers’ reaction and offer free changes for everyone who has tickets with SAS on Friday, Saturday and Sunday,” SAS spokesman Knut Morten Johansen told DN. “If the flight is cancelled, the tickets will be refunded.”