Scandinavian Airline Research Paper
The total effect of Sprain hit the books with loss of SEEK 1. 7 billion and resulted in an income before tax and BET of MEEK -1 ,629. Overall the income before tax and nonrecurring items was MEEK 94 during the entire year of 201 1, which still showed an increase of MEEK 538 from 2010 to 2011. The total amount for revenue showed a record high of MEEK 41 ,412 for the Group. Subtracting nonrecurring items and currency effect, revenue increased by MEEK 1,443 or 3. 6%. This increase is mainly due to an increase in transportation volume of 6. 8% (“Market and Income,” 2011, p. 3).
Cost associated with operations, including payroll came to the sum of MEEK -36,833. The biggest factor for the increase in operations cost is increased transportation volume and fuel cost which went up by 31%. 2011 showed two main challenging trends for the group other than the bankruptcy of Sprain. A global weak economy, in particular the continuous discussion about the Euro and the weak to poor performance of southern European countries in the economy. The second factor was the continued high fuel prices and the insecure prediction on how the fuel prices will develop in the next year.
Never the less AS Group was able to show the best cabin load actor in their company history and the best customer satisfaction in a 1 1 year period. The vote for being the most punctual airline in Europe three times in a row show once more the successful strategy the airlines implemented (http://www. Flashlights. Com/go/Airline/ airlessness’s. Do? Airlines=SKY). They continued to invest in the market and launched 22 new routes in the last year including Oslo-New York, which achieved exceptionally high load factors.
The harmonistic of the aircraft fleet and the delivery of the world’s most efficient aircraft, the Airbus AWAY e will help to decrease fuel costs for the company in the years to come. The introduction of the modern aircraft will decrease fuel cost and the emission of carbon. In 2011 the unit cost was lowered by 3. 7% because the Airline and the Airports started the concept of green approaches into the airports in Scandinavia as well as the point merge procedures which allow continuous descents and separation between aircraft without time delays in the approaches. The largest segment in their business operation is Scandinavian Airlines.
They reported positive income before tax and nonrecurring items. They were able to follow the strategy for Core AS, which was introduced in February of 2009 and created savings of SEEK 7. 8 billion (“Core AS successfully concluded,” 2011, par a. 2). Widerёe was capable of producing historical good result as well. Part of Widerёex.’s successes was concentration their operations to Norway as described in the Core AS strategy. Blue was the weakest swimmer and showed significant loss in the year 201 1. AS Group had a financial preparedness of SEEK 9 billion corresponding to 21 % of annual revenue at December 31.
Of this amount, SEEK 3. 8 billion comprised ash and cash equivalents and credit reserves of SEEK 5. 1 billion, which could be used if necessary. This all together shows a strong and stable financial situation. What will be the forecast for the next two years? After positive completion of the AS Core Strategy, the future of AS Group is placed on the excellence Strategy. The implementation started in the fourth quarter of 2011. The idea is to concentrate on four core areas: Commercial Excellence, Sales Excellence, Operational Excellence and People Excellence. The intent is to lower the unit cost by 3-5% per year.
Due to the slower and weaker economical growth as predicted for 2012, the AS Group has issued the intend to accelerate the excellence strategy to achieve the given goals per year. With this strategy the AS Group believes to improve revenue and sales and cutting costs. A total of SEEK 5 billion in savings is expected in the coming two years (“We have ambitious targets,” 2011, Para. 3). Included in these SEEK 5 billion is one SEEK billion contributed by their employees through negotiations with the Unions. This billion in savings is clearly part Of the excellence in the people pillar.
The aim is to make all employees part of this concept and educate them through strong leadership. One other by-product of the excellent Strategy is the reorganization of a multilevel Management of the Group and transferring it into a Management organized by function in accordance with the new strategy. In the Annual Sustainability Report 2011 the focus for the future should rest on ” constantly improving processes and enhancing the efficiency of production in a sustainable manner, value is created, not only for shareholders, but also for stakeholders such as passengers, employees and appliers” (Sustainable development creates value, 2011, p. ). The AS Group places more emphasis on responsibility for the individual as well as the company, which is directly related to their business policies as well as business ethics. The Scandinavian air transport provider was always visionary in how they planned their future business. There were only few instances were the AS was reactive to regulations implied. In order to stay ahead of the regulatory actions of the European Union or the Governments of Scandinavia they have to continue to participate and anticipate the future of IR travel.
They have so far shown instinct for environmental impact of air transportation which has saved them billions of SEEK, because they where ahead of the regulations and therefore able to save. Their best shot in my opinion was to start the green initiative for flying in Europe. The emission trade regulation of Europe will become a battle between airlines because the amount of 15% trade able emissions that can be bought, might become expensive. The AS Group should not have a financial impact, because their modern fleet should allow them to stay below the allowed amounts of carbon emitted.
The next two years could become very successful if the liability will not catch up they are still into with British Midland Airways. If this liability hits, it will create the same problems than the Sprain bankruptcy. The owner of IBM, Lufthansa threatened to close down IBM if the EX. commission will not support the sale of IBM to British Airways for the amount of 206 Emmer (“Lufthansa drought MIT IBM-Schilling’s” 2012, Para. 2). The second largest Airline in the UK suffered continuous losses over the last two years. The AS Group still owns 20% if IBM. If this sales will not happen and
Lufthansa is either forced to close IBM or declare Bankruptcy, again a significant amount in liability could hit the accounts of the AS Group in 2012. The second threat is hidden inside Blue . For that reason AS core strategy measures are being implemented to turn around the negative trend in earnings for Blue . At an operations level, Blue will reduce its capacity on European routes and its operations are being integrated with Scandinavian Airlines to increase synergies. This should help to bring Blue into a positive result for 2012. The AS Group has set the course for success into the next cede with the excellence strategy.
