2008 May

With the oil prices reaching 130 $ per barrel, airlines are forced to cut costs even further to cope with the declining profitability.  American Airlines, Finnair and Scandinavian Airlines have all  declared cutbacks this past week. And even Europe’s leading low fares airline, Ryanair, is having problems with it’s costs and will impose even further fees for their travellers. Not only do you have to pay for the ticket and the taxes, you also have to pay to check-in, to bring bags, to pay with a credit card, for food, for drinks….

SAS have already made severe cut backs, but is planning more initiatives to save money. It has asked it’s suppliers to lower their prices. And 12 aircrafts will not be used, to save money. The airline is even considering flying slower to use less petrol.

The developments in the US is leaning towards bigger entities. Delta and Northwest airlines are merging, and more mergers are to come. This will create new, humongous airlines. It will probably make them more compatible, but probably with the same poor standard or service as is now.

In Europe, it’s a slighly different situation with the old National Flag carriers beeing under heavy pressure from low fares airlines. Sabena and Swissair have already fallen and Alitalia should be the next one out. Silvio Berslusconi is trying to save the airline, but without further subsidies (which the EU won’t allow) the airline is soon to be bankrupt.

SAS previos CEO Janne Carlzon predicted 5 major airlines in Europe and we seem to be heading that way. Air Frances owns KLM and might be purchasing Alitalia. Lufthansa owns most of it’s neighbours’ airlines: LOT, Swiss and Austrian. SAS are selling off most of it’s assetts; the Hotels, it’s share of BMI and Spanair. It is trying to establish itself a the northern European carrier by purchasing airlines in the Baltic states. The question is if it will be enough to make the airline profitable to surivive?