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SAS

Goodbye Scandinavian Airlines System, welcome SAS!

It has been a long and eventful journey for Scandinavia’s premier airline. Now that Norway has sold its remaining shares in the airline, it is the end of an era – and what an era!

Scandinavian Airlines System (SAS) was founded on August 1, 1946, as a consortium between the countries of Norway, Sweden and Denmark to secure flight connections within Scandinavia and to the world.

Pre-1946, each of the three Scandinavian countries had their own national airline – Det Norske Luftfartselskap (DNL) in Norway, Det Danske Luftfartselskab (DDL) in Denmark and Svensk Interkontinental Lufttrafik (SILA) in Sweden.

But on September 17, 1946, the first intercontinental flight departed Stockholm Bromma with New York as its destination, the aircraft being the DC-4 ‘Dan Viking’, which stopped in Copenhagen, Glasgow Prestwick and Gander (Newfoundland) on its maiden flight.

This was the start of Scandinavian Airlines System and the New Yok route became a success with more than 10,000 passengers during the first 18 months.

SAS was the first European airline flying commercial routes to New York, and SAS was not only a pioneer in the air; it also understood that PR was good for business, which has been a mantra for SAS ever since.

Next out were routes to Rio de Janeiro, Montevideo and Buenos Aires in South America, then in 1949 Asia was put on the route map with flights to Bangkok and later Tokyo. Africa came online in 1951 with flights to Nairobi and later Johannesburg.

First over the Pole
SAS has always been known for innovation, quality and service. On November 15, 1954, a SAS DC-6B, Helge Viking, departed Copenhagen destined for Los Angeles, the first commercial airline in history to fly the North Pole route.

To be on the safe side, another SAS DC-6B departed 20 minutes later to follow, just in case something happened up in the Arctic. At the same time another SAS DC-6B departed Los Angeles with the destination Copenhagen.

These westbound and eastbound aircraft met in mid-air over the Arctic and the story hit front-page headlines in more than 100 newspapers worldwide. SAS had understood the value of PR!

After that, the airline’s speedy expansion gave it an advantage as the only airline operating to distant destinations from Europe. But more national airlines began operations too and the competition intensified.

SAS pioneered alliances with other airlines, securing sustainable growth while pioneering cooperation with a large number of airlines worldwide.

Glamour in the air
In the 50s and 60s, SAS became the airline for the rich and famous. Movie stars, musicians and politicians were pictured boarding SAS flights and this was used in further PR by SAS, making it the preferred airline for celebrities.

There are countless photos of famous people boarding or disembarking a SAS aircraft and always the SAS logo was clearly visible on the photo – another clever PR trick! SAS was the pride of Scandinavia.

SAS was also known for its grand Scandinavian-style open sandwiches. In economy class you’d have to buy these sandwiches to start with, but sales were slow and the airline changed to offer them free of charge – which hit the news and created the ‘sandwich war’ over the North Atlantic.

The airlines in the US got mad when SAS ran a marketing campaign showing its grand open Scandinavian sandwiches versus the competitor’s tiny canapés wrapped in plastic! That gave SAS enormous PR and it gladly paid the $16,000 fine it got for serving free meals onboard.

Scandinavia on the map
SAS understood early that it had to attract passengers from around the world to travel to Scandinavia, its home turf. In 1960, it introduced the first jet flight over the Pole by using a DC-8, and this event was marketed in Los Angeles, attracting even Elvis Presley to line up to book tickets for the inaugural flight from LA to Copenhagen – surely hoping to get a glance from or meet the royal princesses of Norway and Sweden who SAS had cleverly arranged to be on the flight.

SAS did a lot of destination marketing around the world to increase the tourism traffic to Scandinavia and was known for making nice posters of its aircraft, logo and famous Nordic landmarks.

The business airline
On November 1, 1981, SAS introduced EuroClass, a new business-class product never seen by its competitors, giving SAS years of a head start before the competition understood businesspeople’s need for some lux in the air and at the airports.

Flying EuroClass became very popular and at the airports you could notice men dressed in suits with the blue and white EuroClass boarding pass clearly visible, while those travelling economy with the green and white boarding card never showed it…

The great idea of EuroClass came from Jan Carlzon who stepped in as head of the airline business for SAS in 1980, after the airline dived fast with heavy losses, and he was given two years to get the airline into profitability. In 1981, he became CEO of SAS.

Carlzon was a visionary and understood that service would always prevail, and that customers were willing to pay extra for it. SAS had always been known to have the highest safety standards in the airline business, while the focus on service and quality for its passengers and customers had over the years been down-prioritized. Carlzon understood this needed to be changed.

He started within the SAS organization and introduced a little red book on service management, popularly called Carlzon’s little red. Next out was to implement this service culture at all points of contact (defined as the moment of truth) with customers, focusing on the business travellers.

Jan Carlzon’s transformation of the service culture and introduction of EuroClass in SAS resulted in the carrier being awarded the prestigious Airline of The Year Award by Air Transport World in 1983, and in 1985 SAS reported for the first time a surplus of more than SEK 1 billion.

One of five
On November 6, 1993, in Stockholm, the top management of SAS, Swissair, KLM and Austrian Airlines signalled that they had agreed to merge the airlines. The top-secret project Alcazar had been going on for a year, and now it was ready to be signed.

But the merger was not signed that evening in Stockholm and two weeks later KLM withdrew from the deal, citing political worries and a possible deal with another airline, US-based.

This stalled Alcazar and the merger was put in the drawer. The plan was that SAS should be one of five airlines in Europe by 1995 – another vision of Carlzon’s. But because of the deregulation of airlines in Europe, his vision failed.

Carlzon had years previously started with diversifying the revenue stream at SAS by buying into credit-card companies, hotel chains and airlines, funding this with capital from the airline’s financial surplus in the 80s. It was not a success and on top the service culture among SAS staff was under pressure. The smiles disappeared.

In 1993, Carlzon left SAS, but he will always be remembered as the man who turned SAS around and made it Airline of The Year!

Geopolitical crisis – and then Norwegian
SAS never returned to its service level in the 80s and when the Gulf War broke out in 1990, resulting in fuel prices skyrocketing by 300%, SAS lost billions of krona and many though it was heading for bankruptcy.

But SAS survived the 90s, and 9/11, but then came Norwegian and changed everything – in Norway, to start with.

In 2001, SAS acquired Braathens SAFE, a Norwegian carrier that was almost bankrupt, all its planes, crew and assets, but soon it became clear that there was a great cultural difference between the SAS and Braathen staff. This did not change despite Braathens being 100% merged into SAS Norge in 2007 and the Braathens name disappearing.

Competition on SAS’s home turf, Scandinavia, had been limited since 1946, but in 2002 the small airline NAS (Norwegian Air Shuttle) began to show its sinewy muscles and announced it would be a low-fare airline and compete with SAS on domestic routes in Norway.

Norwegian continued to grow – and today it’s a larger airline than SAS measured both in annual passengers and enterprise value.

SAS was hit again by severe financial problems and in 2012 it was just hours from going bankrupt. But in the final hours agreements were signed that secured it to continue, with the Scandinavian governments having to inject capital to keep it flying.

Since then, SAS has taken on continuous restructuring and downsizing to get back into profitability and today there are bright lights at the end of the tunnel. It is likely SAS will deliver a surplus for its 2017/18 fiscal year.

Norway sells
Earlier this week, on Tuesday June 26, the Norwegian government sold all of its remaining 37.8 million shares in SAS. This means the end of an era since 1946; SAS is no longer a Scandinavian consortium between Norway, Sweden and Denmark.

Sweden and Denmark still hold shares in SAS, but Sweden has made it clear it plans to sell its shares at some point, though Denmark has stated it will remain a SAS shareholder.

Norway held 9.88% of SAS, but the sale of these shares will not change anything for the airline. It will be business as usual, despite the fact that it can no longer call itself Scandinavian Airlines System, in the context of being owned by the three Scandinavian countries.

Thank you, Scandinavian Airlines System. Job well done! Welcome SAS, the future is yours.

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