Leisure travel is the driving force for the recovery of the airline industry. SAS – the flag carrier for Denmark, Norway, and Sweden - has traditionally been particularly strong in the corporate sector so is now adapting to the changing landscape.
Earlier this month, SAS celebrated its inaugural flights connecting Copenhagen and Stockholm with Toronto. It has been three decades since SAS flew directly to Canada.
SAS returns to Canada - launching two new routes on the same day
BusinessClass.com was invited onto this flight and met with SAS CEO, Anko Van der Werff. He has held various senior positions in airlines including Avianca, Aeroméxico, Qatar Airways and Air France KLM. He discussed future plans for SAS, its new A321LR aircraft and his thoughts on premium travel.
With private travel recovering faster than business travel, how is this impacting premium cabin demand for SAS?
“Leisure travel is recovering faster than corporate travel, but we are also seeing more and more corporate travellers back onboard our flights. Demand for the upcoming summer season is encouraging with everyone wanting to fly again, so the challenge is how the market will look once we get into October and November. We are seeing good demand for SAS Plus and SAS Business, with many leisure customers booking premium cabins not only for the more comfortable journey and better inflight experience. Airports these days are so busy that benefits such as priority check-in, fast track security and lounge access become even more attractive than before.
SAS first introduced Premium Economy in 2001, making it one of the first airlines in the world to launch the new cabin class, positioned between Business Class and Economy Class. SAS is one of few airlines to include fast track and lounge access for premium economy passengers.
Which role does SAS Plus as a premium economy product play in the leisure market?
“SAS Plus seems to hit the sweet spot by combining a better travel experience with an attractive price point. On our long-haul fleet where seats are larger than regular economy class and the size of the cabin is fixed, demand indicates that we could potentially have even more seats than we have today. Once customers book SAS Plus, they do not want to go back to regular economy class. For our longer European routes from Scandinavia to destinations in the Mediterranean and the Canary Islands, demand is even larger. The flexible size of SAS Plus on European flights works well, and we regularly see as much as 12-14 rows of SAS Plus.”
With Asia still largely closed and leisure demand growing more than corporate demand, what consequences does this have for SAS long-haul operations?
“Demand is becoming “peakier” than we have seen in the past, and with Asia remaining a challenge we must be even more agile than before. As an example, we currently have too many wide body aircraft. The new A321LR on the other hand is proving to be a great fit for SAS as it lets us operate routes that would not be financially viable with larger aircraft. The aircraft are also small enough that if we do not need them for long-haul operations during certain parts of the year, we could justify flying them to medium haul destinations in the Mediterranean or the Canary Islands. We are not doing so now, but we can be flexible if needed. With large aircraft such as the A330s and A350s, they can only be flown profitably on long-haul routes.”
Are you comfortable with just three A321LRs, or could we see more of these smaller long-haul aircraft flying for SAS in the future?
“These A321LR are new to us, but first impressions are certainly very good, and we could potentially fly more such aircraft in the future. With Scandinavia as a strong home market but of limited size, it makes a lot of sense for us to operate aircraft of this size. I would rather fill 157 seats profitably on an A321LR than having to fill a larger aircraft at deeply discounted fares. The A321LR uses 50-60% less fuel on a Transatlantic flight than an A330-300, and even though the cargo capacity is limited on the smaller aircraft it still makes more sense both from a financial and sustainability perspective.
When SAS first ordered the A321LR aircraft back in January 2019, the airline lauded the new aircraft as a game-changer due to its compact size yet long reach, hinting at new routes from secondary markets. Media quickly speculated that the airline might open new routes such as Bergen, Billund or Gothenburg to New York.
Does the A321LR give SAS the opportunity to launch new routes that you could not launch profitably with larger aircraft?
“It certainly does. We have just launched our new routes connecting Copenhagen and Stockholm with Toronto. The aircraft can operate flights of up to about 8.5 hours, so we could potentially use it to fly more routes into the West coast of North America or South-East to destinations in the Middle East or India. We are constantly considering new routes, and the A321LR is likely to play a key role in this. It also allows us to add more flights to existing SAS destinations such as New York."
With the A321LR as the new “rising star” of the SAS fleet, where does this leave larger aircraft such as the A330s or A350s?
“It is all about using the right aircraft for the right route at the right time, while maintaining a consistent passenger experience. We are very happy with the A350 which we need for our longest routes such as San Francisco, Los Angeles, or Tokyo, and the A330 for other long-haul routes with significant demand. Our focus now is on getting the fleet mix right, both for long-haul and short-haul."
Faced with fierce competition from low-cost carriers, legacy carriers around the world have been on a long cost-cutting journey since before the pandemic. For economy class passengers in particular, the gap between low cost and full service seems to be constantly narrowing.
With so much focus on cost-cutting initiatives, can you still have focus on the premium passenger experience?
“The passenger experience is very important to us as we know it is one of the reasons why customers stay loyal to SAS. In particular for SAS Plus and SAS Business on long-haul routes, we have no plans to cut costs or make changes that have a negative impact. In fact, we are very happy to just recently have reinstated our full inflight dining experience in Business Class, just like before the pandemic. We have also recently tested a new Champagne initiative featuring “Special Club” limited edition Champagne. The same applies for EuroBonus and for technology, two other areas of great importance for us and which we want to protect and invest in. We do our best to cut costs behind the scenes, in ways that will not impact the passenger experience.”
SAS upgrades Champagne offering to “Special Club”
Some airlines have started “unbundling” their Business Class product, offering fares that exclude benefits such as checked bags, pre-selection of seats, fast track security or lounge access. Does SAS have any such plans?
“We believe very strongly in our premium products and feedback from our customers that they enjoy the overall value proposition. We always monitor the market and have introduced unbundled fares in SAS Go (economy class), but our position for now remains that we want to keep SAS Plus and SAS Business as they are – benefits included. Looking at the other end of the scale and add-ons to SAS Go, we did considered offering fast-track as an optional paid add-on to SAS Go tickets. In the end, we decided against it to protect the value of our premium products. Fast-track needs to remain fast, so we should not overcrowd it. Similarly, while we do allow paid access to our lounges, we limit sales to make sure we have space for our premium customers.”
What is your vision for SAS in 3-5 years from now, when the world and the airline industry has hopefully recovered from the pandemic?
“I have several things on my mind. Most importantly, SAS needs to be a competitive and profitable business for the sake of all our stakeholders including customers, employees, and owners. A key to this is making sure we adapt the fleet to our needs, both for long-haul and short-haul. EuroBonus is also very important to us and the members and it is something we want to continue developing. The program is much appreciated by many people in Scandinavia, and we believe it deserves continuous improvement both for airline and non-airline content, benefits, and partners. Technology is another area where we know further development can benefit both our customers and our business, including more and better opportunities for self-service. Lastly, we at SAS are very proud of our achievements so far in sustainability and it remains a key focus for us also going forward.”
As the first non-Scandinavian CEO of SAS, what have you noticed about Scandinavia now that you have settled in?
“I had lived and worked in Stockholm earlier in my career, so in many ways joining SAS and moving back to Stockholm felt like moving back home. One thing that has however become very clear to me is that while many foreigners think of Scandinavia as being one, it really is three different countries. There are differences in culture, nature and business that make it a very interesting region to live, work and travel in. It is also impressive how green Scandinavians are and how far Scandinavia has come in terms of making sustainability part of everyday life.”
SAS flies three of the single-aisle A321LR aircraft. The rest of the SAS long-haul fleet consists of wide-body Airbus A330-300 and A350-900 jets – its long-haul fleet has 17 aircraft.
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