Some Nordic airlines may have to merge to survive
“The spotlight in Europe is currently on the Nordic Three”, the CAPA Centre for Aviation says (http://centreforaviation.com/analysis). Among other research points, CAPA plots a chart to show the differences in unit costs – cost per ASK – at the three big Nordic airlines. Using Ryanair as a benchmark, the chart shows unit costs, with and without fuel, against the average stage length for SAS, Norwegian and Finnair over the last three years.
It reveals that “SAS is moving in the right direction but is still a long way above the unit cost curve line of best fit. Norwegian is the clear cost leader in the Nordic region, but Ryanair has a very significant cost advantage over all three.” Despite Norwegian’s strong position, “its unit costs are higher than those of Ryanair, which may make it difficult for it to challenge Europe’s leading LCC if it goes through with ambitious plans to establish elsewhere in the continent, and it must take action to halt the recent increase in CASK.”
CAPA questions whether the Nordic region is a sufficiently large market to sustain the big aircraft orders that Norwegian has placed. Norwegian “must be betting on the demise” of either SAS or Finnair as it prepares to launch long-haul operations.
With its focused niche connecting secondary cities in Europe with Asia, Finnair’s unit costs are “similar to what is typical in Europe”. But “it needs feed for its long-haul network and its cost base remains high”.
At SAS, unit costs have fallen by 22% since 2009, but “it remains a relatively high cost carrier and it no longer enjoys strong market shares in any of its three home countries”. The fall in its unit revenues will be difficult to reverse, CAPA says.
CAPA concludes its analysis by saying “there is a distinct flavour of merger in the air” in the Nordic airline market.
[photo courtesy Finnair]