Where the oxygen comes in
SAS has just delivered the best results in 20 years, inducing the seasoned airline with a well-deserved sense of pride and satisfaction. But among the +10,000 employees and the equal amount of outsourced workers, no one must lean back and revel in the moment for very long. Instead, everyone at SAS is busy realising yet another transformation programme – one in the line of many. In an industry characterised by extreme pressure and few certainties, SAS has found that constant transformation is the only way forward. However, this is sometimes easier said than done when most things are – literally – in the air.
Lars Sandahl Sørensen
COO, SAS Group
Lars loves to be challenged by nature and the elements, especially together with his family and friends. During his many years in the US and Australia, he picked up a passion for surfing and used to be quite a skilled wave-breaker. Today, Lars is not quite as adept, but still enjoys surfing the big waves together with his now grown-up children.
Three million more passengers
The revenue of SAS, Scandinavia’s biggest airline, has been relatively stable at around SEK 42 billion for the past couple of years. However, during the past year, SAS has flown three million more customers than they did 3-4 years ago. Talk about cost efficiency. “We have the same revenue, but we are flying an additional three million people; more than half the population of Denmark. That shows how aggressive the competition in this industry is, and if you can manage that, you will be successful, if you cannot, you will quickly go under”.
The words come from Lars Sandahl Sørensen, COO of the SAS Group. As part of the leadership team, it’s his job to ensure that SAS utilises its resources optimally and constantly drives innovation and change to remain competitive in the harsh European airline industry.
SAS’ native base, Scandinavia, is one of world’s most expensive areas to operate in. On the global aviation market, SAS competes with companies that not only have completely different rule sets, but that also pay salaries, taxes and social benefits that can be 50% lower than those of SAS. According to Lars, this is a huge challenge – but also a constant motivator to stay on top. “We have to find quicker, more flexible and better solutions than competitors all the time, in all areas of our business: in flight operations, maintenance, on the ground and commercially. These must compensate for the higher cost levels in Scandinavia”.
Enormous investments ahead
The current positive macroeconomic environment is beneficial to SAS and the business at large, and has contributed to SAS’ recent slam-dunk financial results. Even so, the 3-4 airlines that have gone bankrupt during the past season prove that even under positive economic circumstances, other factors have the power to cause mayhem.
“This industry is unusual in the sense that it contains extreme competition, but also that it’s both capital and labour intensive. Airplanes require substantial capital investments, but the airlines are also dependent on highly trained employees across several professions – pilots, cabin crew, technicians, and so on. There are enormous costs associated with running an airline”, explains Lars. “In order to stay where we are, and also to grow, we will soon have to place an order of new aircraft in the vicinity of SEK 40-50 billion. I don’t know of any other Scandinavian company that’s facing a one-off investment of that magnitude. It’s enormous”, he continues.
For SAS to make investments of this kind, and get the board to approve them, the overall strategy has to be crystal clear, priorities have to be kept straight and detailed plans must be in place for each function in the huge organisation, explains Lars. To SAS, a current ambitious cost-out programme known as In-Shape is one enabler for the airline to stay in the game and to make the necessary changes to keep up with competitors.
“That’s the vision, without it we have no chance”, says Lars.
With In-Shape, SAS continues a successful history of cost-out programmes, all helping to push SAS forward and transforming the company at a sufficiently high pace in a very turbulent industry. Lars’ role in the programme is to assist his colleagues in making decisions, identify areas where SAS wants to save, create efficiencies or invest – and to orchestrate the totality of the programme to make sure that it’s successful. “As management, we need to communicate that in SAS, change never stops. When one programme is done, there will be something else. Otherwise we are not trustworthy as leaders, but of course, we also need to set specific targets along the way”.
Heart, head and stomach
To Lars and the rest of the leadership team, a crucial part of In-Shape and other transformation initiatives is never to lose focus on the most crucial component of a change process: people. “No company can survive on efficiency and cost-out programmes alone, that’s not where the oxygen comes from. The oxygen comes from our customers and from bringing a safe and good quality airline product to the market”, says Lars.
In order for the airline to continue delivering attractive solutions to customers while keeping the finances in check, the organisation needs to be well-functioning and the SAS crew open to constant change. Everyone must get on board for the transformation to be successful. “All big changes are difficult for people. For us as leaders, it’s very important to describe, honestly and transparently, the situation we’re in; and not just sometimes, but to do it continuously. And also to share the ambition of where we want to be”, says Lars.
In SAS, new destinations, new aircraft, new equipment and new product offerings are what drive people. As an organisation full of travellers, says Lars, people are hooked on the idea of refurbishing aircraft and receiving new “big birds”, flying to new exciting destinations. “SAS is a company that many people have an opinion about, so every time a SAS employee goes to a dinner party or meets friends and family, he or she will automatically be a SAS ambassador”, says Lars. “Then it’s much more fun to be able to say: ‘We are opening this’, ‘We are getting these new aircraft’ or ‘We are the most punctual airline in Europe’. That’s what drives energy. So we all have to find that lever of change, not only in our heads but also in our hearts and stomachs”, he continues.
No off days
In the aviation industry, there is no room for errors. Safety is a top priority and punctuality is a prerequisite for surviving as an airline. At the same time, there are very few constants in this very dynamic business. No products are being produced, which can be put on stock for later times. Instead, what is flown today will go into the revenue. Seats not sold will be lost forever. “Things change all the time. Currency fluctuations, extreme weather events, crime, terrorism and changes in our political environments – these are all aspects we constantly have to evaluate. How will they influence our operations and our business model?”, asks Lars.
Despite, or rather owing to the challenges related to running an airline, Lars finds it a very fascinating business to be in, and is motivated by the combination of constant change and huge responsibilities – for the company, its customers, employees and for society as a whole. “We fly people around 10 kilometres up in the air every day, so everything is planned with great attention to detail and great attention to safety. So on the one hand, this is an extremely formal and disciplined way of running a business, and on the other hand, one that demands a very creative and open-minded approach to be able to create a competitive advantage”.
In his role as COO, Lars’ responsibilities range across the airline, including crew and operations control, support businesses such as ground handling and maintenance as well as wet-lease providers. Also, he is responsible for all of the management control functions necessary for having an airline certificate. Basically all the parts that keep the airline flying.
Lars is glad that his role allows him to witness and execute on the ongoing transformation in SAS at the closest possible range, and he is impressed with the enormous will and flexibility among his colleagues. “The people in these areas, they deal with formal responsibilities, in close cooperation with the authorities, and they are the ones that can really make the changes as well. For me, keeping the team focused on all the details, and at the same time asking them to totally think outside the box and do everything differently from what we did yesterday is quite a challenge. Especially when, at the same time, I have to tell them there can be no mistakes in what we do today”.
Somewhat unexpectedly, the recent successful results from SAS have left the management team in a bit of a pickle. Now that things are going so well, some ask, is there really a reason to keep on driving change?
“From a management perspective, this is a difficult sort of challenge; to harness the energy and pride in what we’re doing at the moment while also saying ‘it’s not good enough, we need to be even better’. I think that the way to solve this is by continuing to move the ambition and continuing to create the transparency of where we stand in our industry”, says Lars.
With SAS’ proud legacy of more than 70 years in the airline industry, Lars believes that a key reason behind the airline’s current success is that customers want SAS to do well. The combination of loyal customers travelling more with SAS, especially in the leisure segment, and the ability to focus investments in the right areas and take out costs at the same time is a good cocktail. “We want to find the balance between giving our customers exactly what they are asking for and a little bit extra. But not by putting in all of those extra bells and whistles that they are not interested in”.
Not only does SAS play an important role to its investors, its employees and the many companies supplying SAS with everything from food to spare parts, but it also plays an important role in bringing the Nordics closer to the rest of the world. “This is the infrastructure that brings Scandinavia to the world; that interlinks Scandinavia. If SAS were not here, would someone else come in and fill their shoes? To some extent, yes, but not with the network we have today. You would not be able to go to and from Scandinavia non-stop into the world”.
To Lars, SAS’ unique position as Scandinavia’s leading airline means that it has a vital role to play in society; an important role for culture, for finance, for commerce, politically and for the quality of life of Scandinavian travellers.
“I think that drives many of my colleagues. It certainly drives me”.