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Market Analysis

NAP – Former SAS Director’s Vision Of A Consolidated Nordic Airlines Bloc



Nordic Airline Platform Cover

The Norwegian government on the 19th March agreed to save struggling airlines in the country with a loan guarantee of NOK 6 billion. Norwegian aviation is in crisis as a result of the COVID-19 virus outbreak. SAS, Norwegian and Widerøe have all cancelled thousands of departures and laid off over 18,000 employees. The loan guarantees come with a number of conditions and are distributed to airlines as follows:

  • Norwegian can access 3 billion
  • SAS 1.5 billion
  • Other companies NOK 1.5 billion
Norwegian B737 SE-RRY

However, the former managing director of SAS – Eivind Roald, whose current position is an adviser to Altor Equity Partners shared an interesting post 18th March on Dagens Næringsliv, a Norwegian newspaper specialising in business news, which suggested on the possibility of a consolidated Nordic airline bloc that can potentially prevent future business cycle downturns which could require government bailouts again.

The former SAS director envisioned a new Nordic airline group – NAP(Nordic Airline Platform), which should include Icelandair, SAS, Finnair and Norwegian, ” […] at least parts of Norwegian.” said by Eivind Roald.

NAP, Nordic Airline Platform, which should include Icelandair, SAS, Finnair and Norwegian, ” […] at least parts of Norwegian.” said by Eivind Roald.

” I read with amazement that some are advocating that the Norwegian state should buy shares in Norwegian in order to save the company. It is important to maintain the infrastructure was used as an argument.

Eight years ago, I sat on the SAS Group Management during the crisis in 2012. We received a clear message from all Norwegian politicians that it was not appropriate to invest one krone in SAS. If SAS were to go bankrupt, Norwegian could help maintain the infrastructure until new competition is established, it was said as a political point of view.

Now obviously this is different.

Norwegian is an international airline group which is built by a Norwegian and is headquartered in Norway. Thanks to Norway’s development and tough competition, SAS has actually survived – and all of us who have worked at SAS should thank Norwegian for putting pressure on renewing SAS.

On the other hand, there is not a good enough answer to save Norwegian in the structure the company has today. Norwegian’s owners and board of directors, well-praised by the Norwegian financial industry, have taken quite a conscious risk through a major expansion in recent years, with the result that the company has high debt and low earnings.

The company is an international group with a significant number of employees outside Norway, and most flights outside Norway’s borders. The question we then have to ask is whether it is right then to use the Norwegian taxpayers’ money to buy an international airline that primarily has its air operations in Europe and between Europe and the US.

Norwegian politicians have a responsibility to maintain the infrastructure in Norway. Airplanes are part of the infrastructure for an elongated country like Norway, no matter what some politicians may think. Competition is another important principle politicians must ensure. Today, both of these conditions require us to rethink.

The short-term solution is most likely to give all airlines – Norwegian, SAS and Widerøe – a credit access, it is only breathing aid in a difficult time. The situation should be used to look at a more long-term fundamental solution for all aviation, not only in Norway but throughout the Nordic region.

We are five small countries with four airlines of some decent size. Norwegian politicians should now approach their Nordic counterparts and take the initiative to establish a new Nordic aviation group.

The company should be structured as a holding company – Nordic Airline Platform – NAP. The Group should be established on the same principle as IAG (International Airline Group – which owns, among others, British Airways, Iberia and others) and listed on the Nordic stock exchanges.

These should be included in NAP: Icelandair, SAS, Finnair and Norwegian – at least parts of Norwegian.

NAP can be owned 51% by the Nordic states and 49% by private investors. In NAP, the individual airlines are to be organised as independent airlines – potentially also have different ownership fractions – and continue to fly under their own brand names, but “pointed” to different target groups and destinations.

The companies will also continue to be able to compete within the Nordic region as they do today.

Norway’s incorporation into such a constellation is important, but in order to achieve such a constellation, the balance in Norwegian must be restructured. No one wants to bring the debt or obligation to Norwegian into a new company.

There are probably several models for this, but to bankrupt the company could possibly be a forced way.

Knowing that a bankruptcy estate sells to the highest bidder, NAP should position itself to buy the brand Norwegian, the short-haul fleet and the respective airline slots they have at critical destinations in Europe.

Norwegian 2.0 should then be refined within NAP as a Nordic low-price competitor to companies such as Eurowings, Ryanair, Easyjet, Vueling.

SAS, Finnair and Icelandair can respectively focus on flights to the US and Asia either directly or via Iceland. In addition, they can offer a more refined business or premium concept for domestic, international and European flights.

Over time, countries can commit to selling down in NAP without losing control of aircraft as a carrier infrastructure for the countries.

In light of the green shift, such a large constellation will also have a completely different prerequisite for achieving the “electrification” of the industry than the individual companies will succeed individually.

Such ideas certainly face hundreds of questions and legal issues regarding ownership, competition and, not least, the principle that states should have ownership in airlines. But politicians and state leaders with the ability to lead in times of crisis should think outside the box.

The solution now is not to give SAS or Norwegian money – without demanding a significant restructuring of the entire industry.

We need both Norwegian and SAS, but now they are worth more together than individually.

It is in times of crisis that innovation can occur. We just have to dare to think.”

Translated from DN “Gi dem ikke penger – lag et nytt, nordisk flykonsern”

SAS & Norwegian Fleet Parked
SAS & Norwegian Fleet Parked. Image:Per Thrana

This is the most exciting industry analysis I’ve read in a long time, in difficult times like this, while most carriers are trying to survive, maybe more airlines need to think of using the circumstances as an oppotunity to innovate, to think bigger. Although how to maintain the right balance between competition and market size can be trivial to answer, I would say this could be a better future for SAS and Norwegian than letting Lufthansa to acquire SAS and IAG to acquire Norwegian. The Scandinavian aviation market is definitely the biggest, but we’ve seen the most robust activities in terms of startups based on non-conventional business modells and being successful to prove it in the Nordic regions.

SAS A350
SAS A350



  1. Eivinddad

    March 21, 2020 at 4:36 pm

    What, he’s crazy though

  2. Da now

    March 21, 2020 at 4:56 pm

    More like NOPE, said by Finnair and Icelandic Air hahahahaha nice idea ihverfall


    March 22, 2020 at 12:26 pm

    It’s never gonna happened, SAS & Norwegian are rivals

  4. Jon Lenon

    March 24, 2020 at 11:39 am

    I am glad that not all airline bloggers are trying to steal traffic by spamming on corona virus. hahahaha good job on quality over quantity.

    • Junior Dep

      April 16, 2020 at 4:45 pm

      Hahaha does this matter 😅

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Market Analysis

Lessons Learned From Thai Airways’ Application for Bankruptcy & Reorganisation



Thai Airways Fleet
According to a report on May 19, Thai Airways International’s largest shareholder, the Thai government, has submitted a reorganisation plan to the Thai Central Bankruptcy Court. Thai Airways will implement the reorganisation plan under the supervision of the Bankruptcy Court while maintaining normal operations.

Note: Thai Bankruptcy Law

Similar to Chapter 11 of the US Bankruptcy Law, the Thai Bankruptcy Law also allows companies to apply for bankruptcy protection in the event of financial difficulties, temporarily stop paying debts and perform reorganisation procedures to prevent the company from directly entering the bankruptcy liquidation process.

This year coincides with the 60th anniversary of the establishment of Thai Airways, but it has ushered in this huge test of survival. As a large country in Southeast Asia, Thailand has a large population, a relatively developed economy, and tourism is a pillar industry. The development of the aviation industry has very favourable external conditions. Thai Airways is known for its high-quality services and is a Skytrax four-star airline. As a state-owned airline with considerable international prestige, it has become the first mainstream airline in Southeast Asia that cannot be sustained. It is indeed somewhat unexpected. Analysing the reasons for this should serve as a warning.

Let us first look at the market position of Thai Airways.

Market share of Thailand’s domestic route

In the domestic market, Thai Airways’ share of air capacity is only 8%, which is constrained by many low-cost airlines. In the domestic Thai aviation market, Thai AirAsia has the highest share, with a share of 32%; Nok Air accounts for 18%, Thai Lion Air accounts for 16%, and Bangkok Airways accounts for 12%, and Thai Smile Airways accounts for 9%. Among the airlines whose domestic market share is higher than that of Thai Airways, only Bangkok Airways is a full-service airline, and the rest are low-cost airlines. In recent years, the growth of Thailand’s domestic aviation market is more than 70% driven by low-cost airlines. Therefore, it is difficult for Thai Airways, a full-service airline, to “take their fists” in the domestic aviation market.

International route market share

Of the two airports in Bangkok, Thai Airways operates from Bangkok Suvarnabhumi International Apt. In the international route market of the airport, Thai Airways has an absolute leading position with a capacity of 30%; Bangkok Airways, which ranks second in capacity, has only a 4% capacity share; Emirates and Thai Smile Airlines each holds 3%, ranking third in place; the remaining 60% is occupied by airlines worldwide with a share of less than 3%.

How big is the impact of the pandemic?

Similar to most airlines, Thai Airways has also been severely affected by the pandemic, and its operations are close to be fully suspended. Since the spread of the pandemic in Asia, Thai Airways has successively grounded flights to many countries in Asia (including China, Japan, etc.); and after the pandemic escalated globally, it has successively canceled flights to Europe, the Middle East, and Australia. Subsequently, few domestic routes (including routes to Chiang Mai, Phuket, and Krabi) were also operated by its subsidiary Thai Smile Airways, leaving only cargo routes intact. As of the end of March, 69 of the 82 Thai Airways aircraft were parked, amounting to 84% of the entire fleet. If calculated based on the fixed cost in the Thai Airways financial report in 2019, in the case of no income from grounding, Thai Airways’ daily expenditure accounts to about 300 million baht (about 9.64 million dollar). Some analysts believe that Thai Airways may lose 66 billion baht (about 2.12 billion dollar) due to the pandemic.

Thai Airways Boeing-777
Thai Airways Boeing-777

Although the Thai government has also provided assistance loans to Thai Airways, it is only a shortfall. According to a report on April 30, Thai Airways has sought approval from the government for an emergency loan of 58.1 billion baht (approximately 1.87 billion dollar), and it will be distributed in instalments according to operational needs. However, Banyong Pongpanich, a former board member of Thai Airways, told the media that the government’s aid loan can only allow the company to maintain its operation for another six months, and cannot solve the fundamental problem. It turned out that before the outbreak of the pandemic, Thai Airways had been losing money for consecutive years. When applying for reorganisation, Thai Airways’ total debt reached 92 billion baht (2.96 billion dollar), and government assistance was far from enough to cover the debt.

Affected by the 2008 global financial crisis and the Thai political violence campaign, Thai Airways had a net loss of 21.38 billion baht (about 687 million dollar) that year, ending its profit record of more than 40 years. Subsequent 2009 and 2010 ‘s return to profit by 7.42 billion baht (about 238 million dollar) and 14.79 billion baht (about 475 million dollar), but the good times are not long. In the past ten years since 2011, Thai Airways was hardly profitable. In 2012 and 2016, the profit was 6.51 billion baht (about 209 million dollar) and the district’s 50 million baht (about 1.61 million dollar). Most of the remaining eight years of losses exceeded 10 billion baht (about 321 million yuan).

It can be seen that, similar to the situation of many other airlines that suffered misfortune under this impact, the pandemic is only overwhelming the “last straw” to breakThai Airways’ back, and the internal cause is the main reason. These airlines have either poor business models or poor business decisions that have been losing money year after year. When market demand is strong on normal days, they can still rely on the stability of their accumulated resources. Once a huge shock occurs, they will immediately exposed the problem of insufficient ability to resist risks.

So, for Thai Airways, what caused it to never return to pre-2008, the glorious era of profitability for forty consecutive years?

The bitter fruit of aimless expansion

Affected by the grounding caused by the pandemic, most Thai Airways employees have been forced to take vacations since April and cut their salaries by 10%-40%. On May 9th, The Thai Airways Workers Union published an article on Facebook rebuking the management and government for “wrong decisions” over the years, which caused Thai Airways to change from year-to-year profit to year-to-year loss. These “wrong decisions” include the introduction of different aircrafts models, the adjustment of shareholding structure, and the introduction of new sales distribution systems. Because Thai Airways and trade unions may have labor conflicts, these accusations may be biased. We have analysed the above-mentioned “accusations” and believe that the main reasons may be the following two points:

  • Aimless introduction of unsuitable aircraft types, the fleet composition is too complicated. The Thai Airways Trade Union mentioned that Thai Airways insisted on introducing Airbus A340 aircraft more than ten years ago. Although the Thai National Economic and Social Development Committee Office at that time repeatedly reminded it to consider carefully, Thai Airways still introduced four Airbus A340-500 during 2004-2005. The union believes that this is the beginning of Thai Airways’ decline.

Thai Airways A340
Thai Airways A340

Our analysis found that after introducing the Airbus A340 aircraft, Thai Airways used its characteristics of the longest range at that time to open direct flights from Bangkok to New York, aiming to expand the North American market. However, the result turned out to be unsatisfactory. Due to the lack of direct flights, the route changed to have a stopover at Tokyo. Although the flight was the farthest at the time, the 300-seat dual-aisle airliner used a four-engine design, which resulted in a huge fuel consumption for the A340. Soon after, Boeing launched the 777-200LR twin-engine super long-range passenger aircraft, which has lower fuel consumption and longer range capabilities, which quickly made the A340 lose its competitive advantage. In the end, Thai Airways finally grounded the route in 2008 due to the high fuel cost and the economic crisis.

Thai Airways also tried to use A340 to fly other routes, but they were not profitable. In 2017, Thai Airways planned to withdraw A340 from the company’s fleet, but this model is unpopular in the used aircraft market, it is difficult to resell, so it can only be sealed for a long time. These parked Airbus A340 bring additional losses to Thai Airways which amounted to 30-50 billion baht (approximately 965 million -1.62 billion dollar).

Thai Airways Boeing-747
Thai Airways Boeing-747

In addition to the problems caused by the introduction of the A340, from the perspective of the Thai Airways fleet structure, the Thai Airways fleet has been very complex in the past 20 years. In 2019, Thai Airways has a fleet of 80 aircraft, and there are 6 main types of aircraft, including Boeing 777, Airbus A330, Airbus A350, Boeing 787, Boeing 747 and Airbus A380. It can be seen that Thai Airways is using Boeing 777 as its main fleet combination evolved. But at the same time, we have also seen the composition of the past fleet at Thai Airways, the number of aircraft types is scattered, and the main aircraft types have not been highlighted. Moreover, after the change of multiple aircraft types, the economies of scale of the fleet are low.

Aircraft Type200120082019

Composition of Thai Airways fleet over the years

  • Aggressive external investment, relative low brand coordination. The Thai Airways Trade Union pointed out that three consecutive external investments after 2010 have made Thai Airways’ financial situation worse and worse:
    • In 2010, the company’s management established Thai Tiger Airways with the loss-making Singapore Tiger Airways without careful consideration. However, under the strong resistance of many parties, the joint venture project ended in failure in 2011. Thai Airways invested 100 million (about 3.22 million dollar) baht falls on the deaf ears.
    • Only 5 months after the Thai Tiger Airways joint venture planned abortion, Thai Airways management decided to invest huge capital to build a low-cost airline brand, Thai Smile Airways, resulting in a loss of 10.16 billion baht (about 327 million dollar) in 2011. Thai Airways expected that Thai Smile Airways would be able to make a total profit of about 5.056 billion baht (about 163 million dollar) from 2014 to 2016, but actually lost 4.485 billion baht (about 144 million dollar).
    • Against the backdrop of meager profits in 2012 and huge losses in 2013, Thai Airways in 2014 promoted the joint venture of its new subsidiary, Nok Air with Singapore Scoot to establish NokScoot, which cost about 983 million baht (about 32 million dollar).
    • In recent years, the operating conditions of the joint ventures and subsidiaries established by Thai Airways are all not very good. Thai Smile Airlines (100% shareholding), Nok Air (16% shareholding), NokScoot Airlines (NokAir 49% shareholding) are in a state of consecutive years of losses.

After careful analysis, we found that the purpose of Thai Airways’ external investment is to form a multi-brand strategy and broaden the market, but in fact, the benefits brought by their multi-brands are far from making up for the high capital investment.

Although in the domestic market of Thailand, the total size of the three airlines of Thai Airways, Nok Air and Thai Smile Airlines has reached a 35% capacity share, it seems to be comparable to its rival AirAsia Thailand. But in fact, Thai Airways, which holds only 16% of the Nok Air’s shares, has a weaker binding capability on the company, and the company basically maintains independent operations and even directly competes with Thai Airways on some routes. According to the Thai Airways Trade Union, the company has even ignored the requirements and recommendations of Thai Airways. Thai Smile Airlines is a wholly-owned subsidiary of Thai Airways, but its brand positioning has fluctuated between low cost and regional full-service. It also operates two bases at Suvarnabhumi Airport and Don Mueang Airport in Bangkok. Thai Airways operated solely at Suvarnabhumi Airport cannot be effectively connected, and the coordination is low. However, NokScoot, which is controlled by Nok Air, only uses Don Mueang Airport as its operating base in Bangkok and cannot assist Thai Airways in transporting passengers. It can be said that the multi-brand strategy development of Thai Airways lacks consistency, and it is difficult to form a joint effort against a stronger competitor such as Thai AirAsia.

In addition to the above problems, the corruption history of Thai Airways has also made people lose confidence in it. The bribery case of British aircraft engine manufacturer Rolls Royce caused widespread concern in 2017. The investigation found that it had paid bribes to Thai Airways employees in order to maintain T800 engine orders for Boeing 777-200s models of Thai Airways, and Thai Airways took bribes. The total amount is up to 36.38 million US dollars. Therefore, when the government is preparing to provide assistance loans to Thai Airways, many Thais believe that this state-owned airline company with a history of corruption should not be rescued.

Faced with large consecutive losses, the management has also made many efforts to save the current company. In order to boost the company’s revenue, the management proposed a six-point development strategy:

First, to reduce costs without affecting the company’s service level; second, to reduce waste, and implement the “Circular Economy” strategy; third, to develop new markets with profit potential; fourth, increase revenue from main operations, including digital transformation and development of auxiliary revenue; fifth, in-depth cooperation with partners to expand sales channels; sixth, enhance transit experience and attract more passengers.

Thai Airways A350
Thai Airways A350

Where is the future for Thai Airways?

After many years of glorious history, Thai Airways has to face reorganisation as a result of a combination of factors. Thai Airways has already come to this point where at this stage, Thai Airways should look into the future and think about how to survive.

Thai Airways is currently implementing restructuring, and initially plans to reduce the size of the fleet, reduce the number of leased aircraft, and will lay off 6,000 personnels (about 30% of the employees) to reduce labor costs.

The Thai government, as a shareholder, is still working hard to help Thai Airways recover. The Thai government has sold about 3.2% of its 51% Thai Airways shares to the Vayupak 1 mutual fund operated by Krung Thai Bank. After the transaction, the Thai government’s shareholding in Thai Airways fell to 47.86%. Although the Thai government is still the largest shareholder of Thai Airways, according to the Thai company division rules, Thai Airways is no longer a majority-owned state enterprise. The government’s move is to help Thai Airways get rid of some of the legal obstacles for major state-owned enterprises to obtain protection under the bankruptcy law, so that Thai Airways can better obtain the protection of the provisions of the bankruptcy law.

Thai Airways enlightenment to us

The deep foundation accumulated by Thai Airways’ forty years of profit has been exhausted in ten years, and because of the excessive development of the plan, the debts are entangled. It is a pity that the “Black Swan” event caused the airline to be on the verge of bankruptcy.

In fact, what is more horrible for the airline than the “Black Swan” event is the “Gray Rhino” event. The “Gray Rhino” incident is a large probability crisis that usually occurs during the business development of the enterprise. The signs were already showing before the outbreak, but it is often overlooked by managers with fluke, and eventually has devastating consequences. As far as Thai Airways is concerned, the loss caused by the initial wrong decision is a sign of decline, but Thai Airways has not been alert and failed to stop the loss in time.

It can be said that every large airline company that has applied for bankruptcy or reorganisation since the outbreak has had its own development problems before the outbreak, and thus fell first among the hits of the “grey rhino” and “black swan” events. Such a crisis also makes us think about what the meaning of “steady development” means for airline companies.

<strong>Institute For Aviation Research</strong>
Institute For Aviation Research

This article is authorised and translated from IAR’s research publication, the Institute for Aviation Research is an independent think tank that promotes research into aviation. For more info please go to their website below.

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