SAS Looks to Lower Costs by Opening Irish Subsidiary

Feb. 02, 2017

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2 min read

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In order to keep up with increased competition for international travel, Scandinavian Airlines (SAS) is planning to open a new air operator certificate (AOC), but not to open a new low-cost carrier. The triple-flag carrier announced that the new AOC would be based in Ireland, with operating bases in London and a to-be-determined location in Spain.

The new AOC would not operate as a low-cost carrier for SAS, and would not directly compete with Norwegian Air or other carriers on international routes. Instead, the airline noted that the new AOC will allow the carrier to lower its internal costs, while maintaining the current safety standards and passenger experience. Using a similar strategy as Norwegian Air and other low-cost carriers, by opening the Irish company SAS will enjoy the advantage of lower labor and international flying costs between Europe and Scandinavia.

Using its 20 daily departures from Great Britain as an example, SAS noted in an interview with The Points Guy that it could reduce overall costs while retaining a high level of service. Operations would begin with up to eight new Airbus A320neo aircraft split between the two air bases. SAS currently has 30 A320neo aircraft on order.

"We are always offering competitive prices… and our customers are expecting really good prices, while expecting a really good network and time schedule," Fredrik Henriksson, head of media operations for SAS, told TPG. "We need to offer that to our Scandinavian customers… this is one way to keep growing SAS and building a stronger SAS for the future and continue our expansion for the next few years."

This is a calculated move for the carrier. At the end of 2016, FlightGlobal reported SAS would consider opening operating bases outside of the Scandinavian countries in order to take advantage of savings opportunities that would put its costs on par with competitors'. Although the lower operational costs may not necessarily be passed on to customers in the beginning, the internal moves allows SAS to work toward a path of higher profitability.

The new operations for SAS are expected to be fully implemented by the winter of 2018. SAS noted to The Points Guy that passengers would not see a difference in their experience on aircraft operating under the Irish AOC and those flying under the traditional SAS AOC issued by Denmark, Sweden and Norway.