SAS to Set Up Ireland Division in New Push to Tap Leisure Marketby
London, Spain tourist services planned in next winter schedule
Start-up costs for the operations will weigh on earnings
Scandinavian Airlines parent SAS AB will register planes in Ireland and set up bases in London and Spain to serve more leisure travelers at lower cost to compete with expanding discount carriers including Norwegian Air Shuttle ASA.
SAS is seeking an air-operator certificate in Ireland with sites in London and Spain that will initially provide a small number of departures to complement existing services starting next winter, the Stockholm-based company said Wednesday in a statement.
The airline has been contending with Norwegian Air’s strategy of offering a similar mix of European and trans-Atlantic routes. SAS said it will continue to focus on frequent travelers and the bulk of its operations will remain in Scandinavia, while trying to gain from rising demand for leisure travel. With “intense” price pressure in that segment, SAS must address its cost base, which it estimates to be 20 percent to 25 percent higher than at rivals.
The Irish unit will hire locally, while its cost advantage is more likely to come from lower social security expenses and taxes rather than from reduced wages, spokesman Fredrik Henriksson said. Services will begin with “a handful of aircraft,” with the same livery and service offering as SAS’s existing fleet.
SAS said on Jan. 24 that it’s selling Danish unit Cimber A/S along with some regional jets to contract out more services on routes with lower traffic.
Startup costs for the certificate and the new bases will hold back earnings, SAS said, without specifying figures. SAS also reiterated that it will scale back operations elsewhere. The company said on Dec. 15 that job cuts are planned.