SAS Buys Airbus A330/A340 - Year 2000 Analysis

In December 1999, after a thorough and long-lasting evaluation process, SAS decided to aquire new long range aircraft to succeed the Boeing 767-300ER, which is now flying the intercontinental routes to Tokyo, Bangkok, Beijing, Singapore and New Delhi in Asia, and to New York, Chicago, Seattle and Washington in the USA.

This is an important decision for SAS in several ways. Not only for the obvious objective to fullfill the requirement of introducing larger airplanes with improved range-payload performance to fly the longest routes without the restrictions which prevail today primarily on (the longer) Asian routes. More importantly, the move will also assure SAS to continue being an important player in the future intercontinental routes arena. It shows SAS' determination to contiune flying their own international routes from their hubs at Copenhagen, Stockholm and Oslo. The alternative would have been to shrink back to a European regional airline feeding the bigger Star- alliance partners at their hubs in Frankfurt, London, and Munich.

In the following, this historical and important fleet decision will be analysed. But first, a brief historical look at SAS long haul operations.

History

Post-war attempts

During the second world-war, numberous wounded Boeing B17 Flying Fortresses were making their way into Sweden, fleeing from German fighters. Many B17:s were abandonned in Sweden. But, instead of going to the the scrap yard, some were bought at very favourable prices. They were then converted by Saab into civil airliners and put into service primarily by ABA, the Swedish short haul operator.

The type was also flown by SILA (Svensk Interkontinental Lufttrafik AB) on the long flights to the US, thereby introducing intercontinental traffic for what would later become SAS. In 1946, just at the time of creation of SAS, the first DC-4 flight from Bromma in Sweden to New York took place. This flight should be seen as the start of SAS intercontinental operations.

The Prop-Era - first to LA and Tokyo via the Pole

SAS have always been strong on the inter- continental routes from Scandinavia. It flew DC-4, DC-6 and DC-7 in the post-war, pre-jet era to many places around the world. The age of the propliners was the 1950s, and the big Douglas airplanes dominated the SAS fleet.

On November 15th, 1954 SAS introduced the "first new commercial route in a thousand years" when it started the new direct (including technical stops) polar route between Copenhagen and Los Angeles flying the DC-6B.

In 1957, another pioneering route was introduced, the transpolar route between Copenhagen and Tokyo. Thanks to the long range capability of the DC-7C it cut 18 hours off the schedule.

DC-8 and the new jet-age

SAS was one of the first airlines to introduce the Douglas DC-8, in 1960. This magnificent airplane could fly most intercontinental routes nonstop, to places like New York, Seattle, and Bangkok. SAS operated many versions of the DC-8, including the early DC-8-55, the ultra-long range DC-8-62, and the high capacity, stretched DC-8-63, as well as cargo versions.

As an extra note, SAS also operated Convair CV-990s, leased from Swissair, for a couple of years during the 1960s. These had similar configuration and design with the DC-8, but lacked the range and were operated on short to medium haul routes.

Douglas DC-8-63 OY-KTF in hangar at Stockholm-Arlanda in June 1983.

The Widebody era - the SAS Golden Age

In the early 1970s, with the widebody era just around the corner, to be competitive (?), SAS had to buy the new jumbojets like all other big airlines. The Boeing 747 was introduced in 1971, going into the heavy routes to New York and Tokyo. The three-engined McDonnell Douglas DC-10-30 followed suite in 1974. For most of the 1970s, and wellinto the 1980s, SAS operated three different longrange aircraft types, and this period must be seen as the GOLDEN AGE for SAS.

Between 1985-1990 all three types disappeared from the SAS-colors (some remained in Scanair). They were succeeded by the much more modern and cost-efficient Boeing 767-300ER, which also had a better (smaller) size compared to the earlier widebodies.

SAS McDonnell Douglas DC-10-30 SE-DFD Dag Viking taking off from Kastrup airport Copenhagen

Boeing 767 - the present situation

When SAS started looking for new longrange aircraft in the latter part of the 1980s, the main competition was between the McDonnell Douglas MD-11 and the Boeing 767-300ER. SAS actually ordered (optioned) 12 MD-11s, but that commitment was later cancelled in favour of the Boeing 767-300ER. One can speculate that the MD-11 was probably a bit too large for the Scandinavian market at the time. It was later shown that the MD-11 did not meet the performance specification (the range was 6-7% short of expectations).

The Boeing 767-300ER was a good fit for SAS´ needs at theend of 1980s and the beginning of the 1990s. It was then chosen as the standard longrange aircraft. Unfortunately, neither the 767 fullfilled the specifications, mainly due to less efficient PW4060-enginges than anticipated. This caused payload- restrictions on the longest routes to Asia.

SAS also ordered a couple of 767-200ER for the long nonstop routes to South America and Singapore, but these operations were soon abandonned due to lack of profitability. The South American routes were taken over by VARIG, and Singapore was routed via Bangkok.

SAS Boeing 767-300ER

After a long and thorough evaluation, SAS in December 1999 announced its choice of a new long range fleet to fulfill the needs discussed above. The choice fell on the Airbus A330/A340-famlily of large capacity airplanes. Even though SAS did operate some Airbus A300B4 in the early -80s, which were too big for SAS' needs at the time, the general feeling is that Airbus has added a "new" customer, and this can be called a break through for Airbus at "fortress SAS".

This choice was soon followed by another airplane buy. The Airbus A321 was chosen as the "big" airplane for the European and shorter haul routes. This choice could theoretically lead to Airbus taking over the show at SAS, selling more members of the Airbus A320-family, utilising the family-concept to its full potential, eliminating the Boeing 737s from the fleet. However, no indication so far has been given of such a scenario.

The Route Network

During the golden age, SAS operated an extensive network around the world, including Santiago, Buenos Aires, Montivedo, Sao Paulo, Rio De Janeiro in South America, Nairobi, Khartoum and Johannesburg in mid/southern Africa, Karachi, Calcutta, Bangkok, Singapore, Manilla, Hong Kong and Tokyo in Asia, as well as Montreal, Chicago, Los Angeles, Seattle and New York in North America.
Some of these destinations were no more than technical stops due to the limited range of the Douglas propliners, but it does give an impressive indication of the width of SAS longhaul operations in those days.

Todays route structure, based purely on commercial considerations, includes New York, Chicago, Seattle, Washington, Tokyo, Bangkok, Singapore, Bejing and New Dehli, as well as code-shareflights with Air Canada to Toronto, and to Brazil with VARIG. San Fransisco is comming online in May 2002. It does not include such important cities as Hong Kong, Osaka, Johannesburg, Los Angeles and Miami.
Speaking to people within SAS, there have been indications and suggestions from time to time of new routes such as Shanghai in China, Atlanta and Boston in the USA, and maybe a re-opening of the Hong Kong route. These developments have yet to be seen, though.

Why a new Longrange Aircraft?

All market forecasts show a very bright future demand for air travel. The Boeing 767-300ER is alreday too small on many intercontinental routes, especially to the USA where load factors over 90% are not uncommon. SAS will thus require larger airplanes on these routes.
To Asia, the (lack of) payload-range give sometime severe restrictions which directly affect the bottom-line. Something has to be done and SAS was standing at the crossroads.
Either...... to choose leaving the long range business all togehter. This would certainly be possible, feeding the traffic into Frankfurt and onto the Lufthansa jumbojets flying all over the world, completed with code-share agreements with other STAR-alliance members like THAI, Singapore Airlines, VARIG, Air Canada and United Airlines.

OR...... to choose exploiting and expanding its own intercontinental network by investing in a new large widebody, long range aircraft capable of handling the projected growth in traffic for many years to come. It should better match the payload-range demands on the longest destinations, especially the Far East in all weather conditions year around.

It is also a fact that SAS can't operate the relatively small Boeing 767-300 profitable on several routes despite an impressive load factor in the high 80%-range.

SAS chose the latter. This is a good indication that SAS is here to stay in the intercontinental arena, which is a prerequisite for claiming to be a major world class airline.

SAS decides on a new long range Aircraft

At a monthly meeting in Linköping of the local branch of the Swedish Aeronautical Society (FTF, Flygtekniska Föreningen), Mr. Bengt-Olov Näs, Director, Aircraft and Engine Analysis, was invited to talk about the evaluation process which preceeded the decision of new long range aircraft at SAS. In the following, a summary of his speech is given:

Economy

Unfortunately, SAS has not made any money on their long range operations, despite an 80%+ cabin load factor in recent years on many routes. This is mainly due to the (lack of) size of the Boeing 767-300. It has simply become small, with too few seats to be economically viable for the SAS cost structure. A typical seat-arrangement for the 767 is 66 seats in business-class and 122 seats in tourist-class for a total of 188 seats. That is at least 40% less than SAS´ main competitors aircraft. And, when you reach a 70-80% load factors, the economics of scale starts to bite. SAS is then at a clear disadvantage. The Boeing 767-300 also gives SAS payload-range restrictions on many long-distance routes, like Tokyo, Bangkok and Hong Kong (now postponed). This is directly translated into less profit.

The new aircraft to be bought though, will have a 40% larger seat capacity. Even though the (net) trip-cost will be 20-25% higher for the new larger aircraft, it all ends up with a cost-per-seat reduction of 15-20%. As long as SAS can fill the airplanes with a reasonably high load factor of 70% or more (the calculated break-even load factor), the airline will make a profit. It is estimated that the intercontinental operations will produce a profit of 300 MSEK (30-35 MUSD) per year.

Competing equipment

Looking at some merits of the competitors for the SAS order,

The Boeing 777:

- Higher cruising speed (Mach 0.84)
- Better ground handling characteristics

The Airbus A330/A340:

- Lower cabin noise level
- Better technical documentation
- Better cabin seat arrangement

It seems that the Airbus-family is a better fit for SAS.The Boeing 777 also plays on its family concept, but the Airbuses have a little bit smaller size which is better for SAS´ route structure. The smaller Airbus A330-200, which has not been ordered at present, could be a very good "route opener" to start, and build traffic, on new routes. Also the stretched A340-600 is available should market conditions require a bigger aircraft.

As for engines, there is a monopoly on the Airbus A340 with the CFM56-5C4, which always gives a disadvantage for the airline negotiating. On the Airbus A330, there is a much wider choice of engines, with three different manufacturers. The choice of engine for the A330 was decided in spring 2001 and it fell on the Rolls Royce Trent 772.

Present long range Aircraft Order status

At present, the Airbus-order comprises firm orders for eleven Airbus A330-300 (4) and A340-300 (7), plus options on another seven aircraft (the mix of numbers of each type is yet not defined).

The first Airbus A340 will be delivered in July 2001, followed by the first A330 in August 2002. All (firmly ordered) airplanes should be delivered by 2004.
The total value of the firmly ordered aircraft is about 1.2 billion dollars.

Airbus A340-300 in house-colors coming in to land at Le Bourget in June, 1993

Airbus A330-300 in house-colors coming in to land at Le Bourget in June, 1993

/ Hans Norman, October 2000