Air Transport World

SAS: playing partners. (SAS airlines partnerships with other airlines)

Two steps forward and 1 1/2 back, or so it seems, in the worldwide footrace otherwise known as airline alliances. Even SAS, the most vocal proponent of alliances, has had to change tactics recently.

In 1985, jan Carlzon, president and chief executive of SAS, looked at a map of the world and didn't like what he saw. SAS was the flag carrier for three countries in far northern Europe whose population together totaled 18 million. If SAS was to continue as an independent entity in the face of rising competition, Carlzon concluded, it must offer a distinguishing product and a bigger market in which to sell it.

The result was twofold: (1) a focus on business travelers on the ground and in the air and (2) an almost frantic chase for airline partners who were in the same boat. "It's an unsound business," Carlzon declares. "The profits of the 1980s were wiped out in one year, 1990. The business needs a natural, structural change," especially in Europe, "where 30 airlines are competing."

The first step, agreement to develop a Bangkok hub with Thai Airways International in 1987, was easy, because of an already-close relationship. A mindboggling list of other deals followed: Two separate purchases of Continental Airlines stock; a 24.9% investment in Airlines of Britain Holdings; an agreement with All Nippon Airways; purchase of 40% of Saison Holdings, which owned Intercontinental Hotels; agreements first with Swissair and then Austrian and Finnair to form the European Quality Alliance (EQA); purchase of 30% and then 5% more of LAN-Chile; a marketing deal with Canadian Airlines International and a 49% investment in Spanair, a Spanish charter carrier that flies some domestic schedules.

To an outsider, the results look disappointing. For example, Continental is bankrupt. Even so and despite its own cash crunch, SAS is considering another investment on top of $100 million it wrote off after the bankruptcy (ATW, 10/91). …

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