Danish Buyers Fear Maersk-SAS Agreement Results
<B> Danish Buyers Fear Maersk-SAS Agreement Results</B>
By Amon Cohen
A small European carrier long regarded as a champion of the corporate client has shocked local travel managers by signing a cooperation agreement with major rival SAS. They fear the move by Maersk Air of Denmark will severely reduce competition, leading to higher fares.
Travel managers also are saddened at the loss of Maersk's unique status as the one airline in the world to offer frequent flyer rewards only to corporate clients, with no mileage bonuses at all for the traveler. This is therefore a cautionary tale for all travel managers about the pervasiveness of frequent flyer schemes and the danger of independent competition being eradicated by global alliances.
As part of the new agreement, Maersk is joining the SAS frequent flyer program EuroBonus, a move that runs contrary to its earlier principles. In 1996, senior commercial vice president Jorn Eriksen told BTN, ''This is an old-fashioned group and we believe in old-fashioned morals. If a purchasing manager arranged a discount for his company based on volume and asked for an extra discount to be put in his bank account, that is the same as an export manager accepting frequent flyer points. The purchasing manager would be subject to prosecution whereas the export manager would not. To me, it is bribery in both cases.''
This time around, Eriksen refused an interview request from BTN, but the about-face demonstrates that occupying the moral high ground does not necessarily sustain a modern airline. Denmark has high levels of personal taxation, making the appeal of frequent flyer schemes even stronger there than in other countries.
There is unanimous agreement that this is why the privately owned, proudly independent Maersk has become the last Scandinavian carrier to join a major alliance. ''If it had not been for the EuroBonus scheme, Maersk would never have given up,'' said Wiboltt Nielsen, travel manager for Coloplast. ''Maersk offers a very good service, but it was not able to fill its flights. Many companies were not strong enough to control their travelers.''
The deal increases the stranglehold of SAS on the Scandinavian market, already strengthened in recent years by the formation of the Star Alliance, which includes Lufthansa, the dominant player in northern Europe.
The agreement also calls into question an alliance between Maersk and Finnair, which provided almost the only competition in Scandinavia to the Star Alliance. SAS has used its dominance in the region to force through the most dramatic commission cuts yet seen in the world. Although local travel purchasers are accustomed to the restructuring of airline-travel agent-client relationships, they have criticized SAS for not passing on its financial gains to customers.
Now purchasers fear fares will rise as a result of the deal with Maersk, which is expected to hatch similar agreements shortly with other Star Alliance members. ''There is no doubt about it. This is bad news and I am very disappointed,'' said Nielsen. ''Maersk was a very good competitor to SAS. It means that competition will die and prices will rise.''
Lego travel manager Else Marie Madsen fears this latest development will fatally undermine the negotiating power of Danish travel managers. ''In a few years' time, SAS will be telling us what to do and we will have no choice but to comply,'' she said. ''I am afraid prices will go up.''
Soeren Schoedt, managing director of business travel purchasing consortium Danish Travel Pool, noted that Maersk always had been liked by travel managers for its readiness to negotiate corporate deals. Now he too fears rising prices with no prospect of a serious competitor to SAS emerging. ''SAS is so strong that it would need a very big airline to go into the market,'' he said. ''I cannot see at the moment anyone who would be capable of that sort of challenge.''
Schoedt also thinks this will accelerate the widely anticipated progress of SAS to zero commission, with Maersk following suit. Travel agents will suffer as a result, but Schoedt feels they must take responsibility for what has happened. Instead of directing customers towards the smaller airline, he said, they pushed business towards SAS in their anxiety to meet the larger carrier's override targets. ''Agents should have advised customers to use the cheaper airline. Now they have scored on their own goal,'' said Schoedt.
Else Marie Madsen summed up the sadness of Danish travel managers--who hold out little hope of intervention from competition authorities--at news of the partnership. ''Maersk must have found the EuroBonus system so strong that it could not compete any more,'' she said. ''I don't think it wanted this situation. I am sure it was forced into it.