SAS Commission Cut Costs It Hometown Support

<B> SAS Commission Cut Costs It Hometown Support</B>

By Amon Cohen

It's not often that a flag carrier manages to lose the support of its home market, but SAS appears to be in danger of doing just that, as Swedish travel managers and agents plot numerous strategies to avoid their dominant carrier in 1999.

Plans on the front burner include at least two groups of travel managers and agents inviting rival airlines to set up competing services from Stockholm. Agents also are said to be making a concerted effort to cross-sell customers to other carriers and complaining to the European Commission that SAS is abusing its dominant market position.

Meanwhile, agents and one of Sweden's largest purchasers, Ericsson, are taking steps to show travelers the greater cost of flying SAS by printing the amount of commission on each ticket.

The resistance movement stems from the implementation this month of a 4 percent commission plus a cap of Skr250 (US$32) per one-way ticket. With SAS estimated to have 70 percent of the Scandinavian market, the cuts are costing corporate clients dearly--and buyers believe they have been neither consulted nor compensated. "We have done an analysis of how much the cap will cost us and it is quite substantial," said Ericsson corporate travel manager Brigitte Ringdahl. "When I have my next meeting with SAS, I will ask them how they plan to reimburse me."

Other travel managers are adopting a more militant position by opening talks with other airlines about launching rival services. One group is being coordinated by Electrolux global travel manager Jo-Achim Hamburger, BTN's 1998 International Travel Manager of the Year. With about 15 other companies, it has approached various carriers, including British Airways, a member of the Oneworld alliance that recently added Finnair. The Finnish flag carrier already has a small hub at Stockholm.

A senior source at a large travel agency said the idea of a brand new carrier also is being considered, and that "talks about a model similar to Pro Air have been going on."

Another senior travel agent confirmed: "There is a group of buyers getting together to see if they can start an airline or launch a charter service. We have also been talking to some scheduled airlines with a group of our clients."

Stockholm-based Maria Lilja, head of business travel for American Express Europe, declined comment on her company's specific plans but did say: "Clients understand there will be price increases and have to consider how they can meet that, and as travel agents, we have to think about what we are doing. Other airlines will also think about what it means for them and understand that there will be opportunities with dissatisfied people, leaving the door wide open for them."

In addition to Finnair, it is understood that KLM and Norwegian alliance partner Braathens also have been approached by different sources as potential rivals to SAS. Braathens recently purchased regional Swedish carrier Malmo Aviation. EU-owned carriers are permitted to fly any route within the Union.

However, despite the web of intrigue, it is by no means clear that any rival airline plans will succeed. Both Hamburger and Swedish Business Travel Association chairman Catherine Wickerts are among those who believe the lack of slot availability at Stockholm Airport is a major obstacle to success. There is also the difficulty of weaning travelers off the potent SAS EuroBonus frequent flyer program.

"If an airline wants to compete with SAS, it will have to have slots at about the same time and a strong frequent-flyer system," Ringdahl said. "I find it hard to argue with travelers when they say they have to be in a certain place at a certain time. Giving business to another airline would be a good idea, but I am afraid we do not have the strength to do it."

On a simpler level, the same agent who is working with his clients to woo competing airlines also claimed that all the major travel agencies, including his own, are selling away from SAS wherever possible. However, Lilja denied Amex was involved in any sort of boycott of SAS. "We will not go into a boycott. That is not a constructive attitude," she said.

Swedish travel consultant Annika Ortmark said many major companies are planning to shift a lot more business towards their existing agreements with other carriers, although any resulting benefits could be short-lived. She has warned them that these airlines are likely to match SAS's cap in due course but will probably offer more attractive deals overall in what is for them a foreign market.

Ringdahl is adopting a more educational approach in her drive to switch travelers to better-value airlines. Starting this month, she has instructed all her travel agents to spell out the true cost of each airline ticket by attaching an invoice displaying the base fare plus the agency fee for handling the reservation, minus the commission being passed to Ericsson.

In addition to showing the final cost of a ticket, Ringdahl said the up-front charge will save internal administrative headaches with budget holders at a later date.

"Before the cap, there would be some money left over after our agencies took out their management fee and incentive payment from the commission they passed on to us," she said. "If we went on with that arrangement now, we would have red figures and no one in our company is interested in sharing a deficit at the end of the year."

Bennett BTI Nordic this month introduced exactly the same system for all of its clients. Bennett also will vary its service charge according to the work required to issue the ticket and its value to the client. A complex intercontinental itinerary will therefore cost considerably more than a simple point-to-point domestic one.

SAS appeared unruffled by this latest series of local uprisings. Henry Stenson, senior vice president for public relations and external affairs, said SAS is acting no differently than any other major carrier in its home market. "In each country, the major airline is pointed at in this way," he said. Stenson added that 70 percent of the routes SAS flies are flown by at least one other airline, although it is not clear whether this figure includes Star Alliance partners Lufthansa and Maersk Air, both of which are significant forces in Scandinavia.

Stenson also suggested that buyers will have the chance to save in 1999 through Internet purchases and special fare promotions like the Corporate TravelPass, under which a company buys either a fixed or unlimited number of flights each year on specific routes.

At present, however, travel managers regard the Corporate TravelPass as useless because SAS will only accept payment through a monthly invoice. "We don't get invoiced until passengers have flown and it is not possible to link it to our normal payment card transactions, so we have no management information and no control," said the SBTA's Wickerts. Stenson said steps will be taken to remedy this complaint this year.