Air Transport World

Small is beautiful. (Finnair plans for cabotage after 1992) (Company Profile)

sharp difference of opinion exists between Scandinavia's two major airlines, SAS and Finnair, about the course that smaller intemational carriers must follow in order to survive in post-1992 Western Europe. For some years now, Jan Carlzon, chairman will narrow down to five megacarriers and that smaller carriers must forge strong links with other carriers-even marriage and cross-ownership-if they are to be numbered among this handful of survivors.

Antti Potila, CEO and president of Finnair, disagrees. He is convinced that small is not all that bad. An airline such as Finnair can survive as an independent and profitable operator, if it recognizes limitations placed by geography and the strengths of competitors, tailors its strategy to mesh with potential markets, delivers a high-quality product and controls costs, he says. This is Finnair's course. None of this is to suggest that Potila equates independence with isolation. Finnair has signed cooperation agreements with Japan Air System and Aeroflot-though the latter is nebulous in view of the unsettled state of the U.S.S.R.-has been discussing with St. Petersburg, Aeroflot and Intourist authorities establishment of a jointly owned airline to be based in St. Petersburg. It would be trained Finnair and use Finnair aircraft, and has offered to Estonia set up its own airline, which could feed passengers from Talfinn to Heisinki for journeys to the U.S. and elsewhere.

Hottest cooperation prospect at this time is a pact under discussion with Lufthansa. This could do a lot more for Finnair than could the European Quality Alliance, from which Finnair recently withdrew, says Potila.

The EQA, formed by SAS and Swissair in 1989 and joined by Finnair and then Austrian Airlines, provided, among other features, for joint check-through to final destination on partners' flights, hotel check-in at airports prior to departure, access to partners' business-class lounges and closer meshing of connecting flight schedules. When this friendly embrace turned rather smothering, Finnair bowed out. At a meeting in Vienna in September, SAS, Swissair and Austrian agreed to a more intense relationship-"as se to a merger as you can get without merging," says Potila-involving marketing/sales, product, coordinated timetables and a considerable increase in the number of flights between partners' hubs. According to one informant, Finnair was asked to drop its flights to Copenhagen in favor of SAS.

Finnair saw more minuses than pluses in the new arrangement, especially vis-a-vis SAS, whose route system overlaps the smaller Finnair system. In Potila's view, traffic would be diverted to SAS at its Stockholm and Copenhagen hubs from Finnair's Helsinki hub, which the airline is resolved to grow as part of its strategy for survival. Rather than work within EQA, Finnair will deal with the EQA partners individually through of lateral agreements.

But an even stronger reason for slipping out of the now tightened EQA embrace is related to Finland's geographical location. Says Potila: "Being on the upper edge of Europe and with a national population of only 5 million to draw on, we need to cooperate with all airlines and not tie ourselves too closely to one group, which would antagonize the others."

The Lufthansa deal, if it goes through as expected, promises only pluses. Lufthansa's Frankfurt hub is not a competitive threat to Helsinki and the two airlines' routes are compatible. …

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