The SAS Group needed ideas as fresh as the snow on the ground in its home region if it was to remain a competitive player both within Europe and on a global scale. Although a member of the successful Star Alliance, the Group was faced with Scandinavia's above average costs and the declining yields affecting every airline as a result of low-cost competition.
The Group had also become aware that it had perhaps 'grown fat' over the years, developing comfort layers of bureaucracy and management that prevented it from reacting quickly to market dynamics.
The solution to these problems came in the form of a structural decentralization plan that should allow the different SAS companies to forge closer relationships with their clients and market, allowing a speedier and more cost-effective response.
"SAS Ground Services (SGS) has actually been run as a separate business unit within the SAS Group since 2001, but on October 1, 2004 we became a completely separate entity," says Hans-Otto Halvorsen, president, SAS Ground Services. "And as we are no longer part of an airline, our focus is now on running a professional business and competing in the ground services market. Being separate gives us a much clearer role as a supplier, both internally and on the market."
SAS Ground Services is now a wholly owned subsidiary of the SAS Group and is actually split into five distinct organizations. There is a company each for the three main countries -- Denmark, Norway and Sweden -- an international division and a Ground Equipment unit. SGS has 8,500 employees, and serves almost 150 airports in 37 countries. Each year it handles approximately 35 million travelers and 365,000 tons of cargo and mail.
The company hopes that by concentrating on its core mission it will be able to shape a more efficient travel experience. Focusing on the basics in this manner should help reduce not only its own costs but also those of its customers, enabling a more profitable experience all round.
Equipment breaks away
An important part of the decentralization process was forming a separate ground equipment business unit. Explains Halvorsen: "Managing ground equipment is not a core business for a ground handler. By letting this unit maintain a degree of independence, SAS Ground Equipment (SGE) is given the opportunity to focus and expand on its own market."
Previously, SAS Ground Equipment specialized purely in ground equipment maintenance but with the formation of a separate business unit under the auspices of SGS, this task has been expanded. Now, it also deals with the ownership and leasing contracts of the equipment, a job transferred from the old SAS Ground Services unit and SAS Technical Services (STS).
"By doing this we have created a body that is responsible for the purchasing, financing, administration and selling of all our equipment," Halvorsen notes. "Through increased purchasing power and an increased overview, SGE will be able to standardize and also optimize the use of the equipment and thereby lessen the need for purchases."
The reporting process for equipment requirements will work in a straightforward manner. The regions will inform SAS Ground Equipment about their needs and, over time, should expect to pay lower prices for a more cost-effective service. "Since this is just being set up we can't point to experience in the matter, but we believe the process will be efficient," adds the President.
Although not directly related to the SAS Group's decentralization strategy, another fundamental element in SGS's future sustainability will be the company's relationship with workers' unions.
For example, difficulties with the Swedish Transport Workers' Union had led to that particular union threatening a strike on October 11, 2004. It was only an agreement that resulted in higher personnel costs that saved the day.
As a first step, both parties intend to establish a joint venture company to which the business and operations of SAS ground handling and Spirit (cargo handling) will be transferred.
1,200 departures have been cancelled and 90,000 passengers have been affected by Salaried Employees' Union strike