Air Transport World

There's no place like home.(Scandinavian Airlines System)(includes related articles)(Company Profile)

A museum here is dedicated to a famous A 17th century Swedish warship, the VASA. In fact, the ship itself is displayed inside, having been recovered from the bottom of the harbor in the l950s and painstakingly restored to its former glory. Gigantic by the standards of the time and impressive even today, VASA was intended to be the most powerful warship in Europe and a testament to the might and shipbuilding skills of 17th-century Scandinavia.

But VASA never actually, um, fought a battle. It capsized on its maiden voyage, having sailed the grand distance of 300 m from its launch site. Not surprising that, really: Even to the untrained eye, VASA's fatal flaw is obvious. It is top-heavy. The builders, in their determination to make VASA the most magnificent fighting vessel of its day, overlooked the necessity of first creating a solid foundation upon which to build. They had a vision, but no structure to support it.

Maybe that's what went wrong at Scandinavian Airlines System. Under the leadership of former President and CEO Jan Carlzon, SAS embarked on a strategy of diversification intended to make it both a global airline and a broader travel company. But Carlzon neglected the fundamentals in the race to achieve his vision. While his dream grew in grandeur, SAS sank deeper and deeper into the red, piling up losses of 2.8 billion kronor ($400 million) between 1990 and 1993. Long-term debt nearly doubled to 19.6 billion kronor.

Carlzon's most daring project, the attempt to merge KLM, Swissair, Austrian and SAS into a new European megacarrier, occupied him through most of 1993, even as SAS entered crisis. Ultimately, the board could not accede to Carlzon's vision and he was replaced by an interim CEO that fall.

The collapse of the so-called Alcazar Project in November, 1993, led to Carlzon's departure. Simultaneously, SAS launched a major restructuring aimed at cutting Sek2.9 billion in costs by the end of 1994. Unlike a previous shakeup, this was a top-to-bottom makeover encompassing all aspects of its operation. Henceforth, the focus would be on the airline. Noncore operations were sold (see "Returning to the core,"). The company's management structure was reorganized along functional lines, with control residing in Stockholm. Regional bureaucracies in Stockholm, Copenhagen and Oslo were eliminated, ending a long period of politically palatable but operationally undesirable management compromises (see "We are one company,").

Furthermore, SAS introduced new procedures and practices to boost productivity. As a result, jobs were eliminated--roughly 1,500 SAS airline employees took severance or leave-of-absence packages, or were laid off, the firs. such occurrence since 1961 (see "The right thing to do,").

With renewed focus on the airline came the tough decision to end service on a dozen unprofitable routes, including the Copenhagen-Los Angeles service that had been a fixture for most of the airline's existence. Additionally, SAS decided to put more resources into Norway, where it is second behind Branthens SAFE, and to reduce capacity in the Swedish domestic market.

Carlzon's permanent replacement, Jan Stenberg, joined SAS in April, 1994, from the Ericsson telecommunications group, and upon him devolved the responsibility of maintaining the momentum of the restructuring launched the preceding winter.

Today, Stenberg can take satisfaction in the achievements of the past 19 months. …

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