The Lowdown: Snowflake is the SAS chief's hope in long-haul hell

Abigail Townsend talks to Jorgen Lindegaard about his plan to beat the budget boys at their own game, and hears why the airline boss needs that 10-year contract
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The Independent Online

Maybe it's just a northern European trait, but Jorgen Lindegaard, president and chief executive of the regional airline group SAS, is not your run-of-the-mill company boss. He doesn't play golf, thinks football just keeps men from their families - this despite SAS sponsoring the Danish League - and bemoans a lack of free time to enjoy his yacht and his lovingly restored Jaguar MK II.

Judging by what he is trying to achieve, however, it is probably no bad thing that Lindegaard is not distracted by the trappings of executive life. It has been a tough few years for SAS, hit hard by the collapse of the tech boom and the emergence of budget airlines, just a few months after Lindegaard joined in May 2001. The 11 September terrorist attacks later that year set the seal on one of the toughest periods in aviation's history.

All airlines suffered but SAS, as a state-dominated entity (the Swedish, Danish and Norwegian governments own 21 per cent, 14 per cent and 14 per cent respectively), found itself slow to adapt. "Nothing had really happened for the last 10, 15 years," says Lindegaard. "If you are a monopoly, you don't need to. But we were caught in a terrible situation of yields going down and volumes falling, and not being able to do anything about it."

Now, under Lindegaard, SAS is attempting to put its house in order and build a more competitive structure. The group is launching a benchmark study looking at how things are done at rival airlines, and holding negotiations with unions about a cost-cutting programme that will include staff cuts. The carrier wants to take out around 4,600 jobs by the end of this year, as well as upping flying times and freezing wages. The aim is to claw back savings of 14bn Swedish kronor (£1.1bn) by the end of this year.

Lindegaard says the programme is on track: "So far I think we have managed it very well. We have endless discussions about it - the problems are evident. There's a tendency to blame it on everybody else but we're confronting it." He hopes the talks with unions will be concluded by the end of this month.

Changes are already afoot. For a start, the reliance on business class has been reduced: around 60 per cent of revenues had been coming from this at one point and 40 per cent of volume, but both figures are now considerably lower.

SAS also braved an entry into the budget market with its "snowflake" brand, introduced just under a year ago. Lindegaard concedes the airline was slow off the mark: "We simply didn't realise how rapidly budget operations would happen in Scandinavia," he says. "In hindsight, we should have thought about this a year ago. But we have been very busy just surviving."

Despite its delayed launch, snowflake has performed well, says Lindegaard, appealing to recent immigrants into Scandinavia and transient workers who cannot afford to fly home as regularly as they would like. Cheap summer holidays also helped, though that market faded as the Scandinavian winter set in.

A lot of destinations have therefore been cancelled and the plan is to relaunch them in the summer, although whether that will be under the snowflake brand or the SAS banner has yet to be decided. While SAS will not halt long-haul flights, Mr Lindegaard concedes that, rather than carry on with snowflake, one option would be to transform all of SAS's domestic travel (which includes most of northern Europe) into a low-cost model. "We have to decide whether that particular product or service should fly as snowflake or not and how to brand that."

The long-haul element of SAS's offering is provided in two ways: direct services and via the Star Alliance. Established in 1997, Star serves 700 airports in 128 countries and allows members to pool frequent-flyer programmes and share booking and airport facilities. SAS was a founding member, and Lindegaard calls it "the way forward". But he does not believe a merger is the next logical step, despite the prospect of consolidation in the aviation industry. After all, who needs the headache of clearing global regulatory authorities and integrating 15 airlines? And SAS knows only too well the pitfalls of such a move - a decade ago, it tried to merge with KLM, Swissair and Austrian Airlines but the talks failed, leading to the departure of then president, Jan Carlzon.

One thing that is up for change is SAS's Rezidor hotels division, which includes a partnership with the American giant Radisson as well as its own branded hotels. The group makes no secret of wanting to offload this non-core business, and analysts are valuing it at around Skr 5.7bn. Lindegaard says an initial public offering (IPO) is the favoured route but adds: "We haven't decided anything. We can sell, we can IPO, but there's not a big market for hotels right now, and the IPO market is not there either. And you know, when the market is so terribly down, this is not top of the agenda." In the meantime, he says he will run the hotels "as if we will have them for ever - looking at new opportunities, joint ventures, whatever".

A former engineering student, Lindegaard is not one to play down the scale of the job in front of him. But then, he doesn't come across as a man who makes light of much. His office, notable for the lack of clutter that is a hallmark of Scandinavian design, is laid out for someone who evidently does not like being distracted. Big desk, bigger meeting desk, various model aircraft and that's your lot.

Yet the odd personal touch does creep in - a picture of his wife, one of his beloved Jag, a Danish-designed television (Lindegaard is Danish and moved to Sweden to take up the job). He is evidently bedding in for the long haul. For a start, his terms of employment would make Derek Higgs blush; 55 now, he will be 62 when his contract is up. But despite the lack of free time, Lindegaard is evidently dedicated to turning round the company. He deadpans he "didn't know what he was doing" when he took on the job, and can give the impression that running the carrier is far more of an uphill struggle that he expected. But, for the time being at least, he looks set to play out his whole contract: "This is the most interesting and challenging job I've ever had," he says, lapsing briefly into marketing speak. He then pauses before adding: "You just sort of fall in love with the company."