SAS is in positive spirits. The struggling airline, which narrowly escaped bankruptcy in November, today announced a major overhaul and expansion of its widebody fleet with eight Airbus A350 XWBs and four new A330-300 Enhanced.
The airline made the announcement in Oslo, and this is not coincidental. Oslo is the home base of its main competitor, Norwegian Air Shuttle. The LCC has been growing at a very high rate and it has been biting, slowly but surely, into SAS’s market. Until now, the damage was limited to SAS’s short and medium-haul market, but on Thursday Norwegian is taking delivery of is first Boeing 787-8. It will use the fuel-efficient aircraft on routes from Copenhagen, Stockholm and Oslo to the U.S. and Asia.
SAS argues that the new widebodies will give it an improved cost platform to be more competitive with low-cost rival Norwegian. But the timeframe is not very compelling. Norwegian has eight Dreamliners on order, three of which will be delivered this year, four in 2014 and one in 2015. SAS’s first new A330 will arrive in 2015 and its first A350 only in 2018. In the meantime, it will continue operating its fuel gobbling A340-300s and older A330s.
There is potentially more damaging news for SAS. Competition authorities last week opened an investigation into the airline’s latest restructuring plan because they doubt that the credit facility offered by the government of Denmark, Sweden and Norway was carried out on market conditions. If the competition watchdog concludes that the credit facility involves illegal state aid, SAS is in trouble – and insolvency might loom once again.
Until the verdict is delivered, SAS is putting up a brave face and going ahead with a $3.3 billion order for new long-haul aircraft (excluding another $1 billion for engines).
Is the Scandinavian airline investing in a future it might not have?