SAS Wisely Ditches Star Alliance and Realigns with Air France-KLM


The news broke early this month that SAS had a bankruptcy exit plan that would reshape the airline’s network and partner strategy. Now, one of the five founding members of the Star Alliance will bolt for the open arms of Air France-KLM. I like this move.

The bankruptcy exit plan is somewhat complex, but once the dust settles, Air France-KLM will own 19.9 percent of the company plus some additional convertible debt. (It has an option to acquire more in a couple years.) Denmark will have 25.8 percent of the company plus a lot more convertible debt while Sweden is now out of the company entirely. (Norway got out in 2018.) The rest will be owned by investment funds and some will be held back to distribute to existing creditors. All in, this will bring the airline $1.175 billion in new invested money.

The inclusion of Air France-KLM in the deal means a big shift is coming. This is certainly a notable change for the airline which joined Air Canada, Lufthansa, Thai, and United to form Star Alliance 25 years ago. Everybody remember that iconic gathering of members when it was announced?

Twenty five years in, SAS has realized that being a part of Star isn’t such a big deal. The bigger deal is that SAS is NOT a member of the transatlantic joint venture that includes Air Canada, Lufthansa Group, and United. Instead, SAS has become one of those Star members in limbo — along with LOT Polish, TAP Air Portugal, and others — that are staying in the same hotel as the other guys but aren’t allowed into the club lounge.

Sure there is a benefit to be had by being a member of an alliance, but the real money is in the joint venture, and apparently SAS was just not going to be invited by Lufthansa to join the party despite long-standing rumors that it would eventually buy the airline.

By switching, SAS will be invited to join the Air France-KLM joint venture with Delta and Virgin Atlantic. This is going to be a huge boost for the flailing airline.

Looking at route coverage between the two groups is actually rather interesting. On the surface, Lufthansa Group would appear to be a more appealing choice.

2023 Seat Share From Scandinavia to Outside Scandinavia

Data via Cirium, Scandinavia includes Denmark/Norway/Sweden

Lufthansa Group is larger than Air France-KLM by 50 percent in Scandinavia. Meanwhile, Star provides additional options on other carriers while the rest of SkyTeam is virtually non-existent. But we have to go deeper.

Let’s start with a map showing what European Star Alliance members operate into the three countries.

Lufthansa Group (Dark Blue)/Croatia (Light Blue)/Aegean (Purple)/TAP (Green)/LOT Polish (Orange)/Turkish (Red) Scandinavia July 2023 Route Map via Cirium

The ones that really stand out are Lufthansa Group in dark blue, TAP in green, and Turkish in red. It looks like significant coverage of Scandinavia from a variety of hubs, which is great. But then look at SkyTeam.

Air France (Red)/KLM (Blue) Scandinavia July 2023 Route Map via Cirium

Best I can tell, Air France-KLM are the only European airlines that serve Scandinavia in SkyTeam. This map looks a lot more anemic… but really… does it?

This past summer, Lufthansa Group served 2 airports in Denmark, 3 in Sweden, and 4 in Norway. Sure, it had a lot of flights, but the spread was fairly concentrated. Meanwhile, Air France-KLM had 3 in both Denmark and Sweden along with 7 in Norway. And it should be noted that Lufthansa Group has 2 airports serving Stockholm whereas Air France-KLM actually has 3 distinct cities it serves in Sweden.

The point is that while Air France-KLM may have less heft in terms of seats, it serves more cities. It’s really not Air France, to be fair. It’s KLM with its Amsterdam hub that does the same thing in Scandinavia it does for smaller towns in the UK. It connects them to the world efficiently.

Of course, actually being welcome to join the transatlantic joint venture makes this far, far better anyway. But you can imagine how this comes together. A combination of the three airlines makes single stop options from around Scandinavia easier when it comes to getting outside Europe. Travelers will be able to go via Amsterdam, Paris to a lesser extent, or Copenhagen.

I assume that with Denmark being the only country remaining invested in the airline, more long-haul will likely shift to Copenhagen from Stockholm. With those three hubs, the joint venture will be able to achieve better coverage through northern Europe, and SAS will be able to actually be seen as a partner instead of a secondary member of an alliance.

This, of course, does not guarantee SAS will be successful. That airline is an absolute mess from years and years of government intervention and bloat. But Chapter 11 will help, and maybe it will eventually become the third large airline in the Air France-KLM (Air France-KLM-SAS?) group. That probably gives SAS a better chance to survive than anything else out there.

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18 comments on “SAS Wisely Ditches Star Alliance and Realigns with Air France-KLM

  1. SAS is a mess. It has been struggling for decades. It has continued to operate on the same blueprint from which it was created, which is noble, but doesn’t work for the industry of today. The AF/KL strategy here is to create an alternative to AMS, which is challenged by efforts to reduce noise by curbing growth there and AF/KL needs an alternative (and efficient) transit point as CDG can’t absorb it all. VS does nothing for SkyTeam, as LHR is an O&D market. SK will bring a viable, but smaller gateway that can grow (CPH) and a strong domestic market (OSL). ARN will be reduced to a spoke, retaining the token long haul service it has now, and not much more.

    1. Yeah, guessing if AMS goes through with the service reductions KL will push connecting traffic over to CPH. As I mentioned in another comment, SAS has no 321neos that aren’t LR, but has orders for 320neos. Apparently KL already has 100 320neo/321neos ordered, and Airbus would probably be happy to switch the 320neo orders to 321neo, as well as paint them in SAS colors rather than KLM or Transavia, so by the time KLM/AF is ready to flow traffic over CPH they’ll have the planes to do it. For long-haul, KL/AF have A350-1000s on order to upgauge there if they want to flow long-haul traffic over CPH.

  2. My link to Star Alliance is via Aeroplan. Prior to AC taking it back over, there was TONS of award availability on partner airlines in all classes. Today, Biz class is RARE, except on EgyptAir and AC (which is expensive)……Definitely a change in the business model there.

  3. Is there a pilot shortage in the EU, similar to that in the US? US airlines said with the buyouts during covid, they could hire cheaper employees when operations restarted. Instead you got a pilot shortage with large contracts. I dont see SAS being able to reduce costs significantly. You are not getting planes, fuel, or employees ar a discount.

    1. Thing is, SAS has plenty of room to upgauge; they flat-out don’t run eurobusiness-configured A321s, and they can likely convert 320neo orders to 321neo to get some. Betwen that and densifying from 320ceo to 320neo, if KL/AF want to flow more traffic over CPH with comparable frequencies, SAS could handle it.

  4. Perhaps my memory is wrong, but I seem to recall that SAS was originally part of the Star Alliance JV. They were kicked out when Lufthansa wanted to add brussels airlines to the mix after they took full ownership of that airline.

    1. My memory is US/EU anti-trust authorities blocked SAS/United code-sharing and cooperation as they were the only airlines operating USA-Scandinavia at the time.
      In any event, it was a regulatory issue of some kind that prevented SAS from fully participating in the Star Alliance transatlantic joint venture, not that it was a second class citizen as the author implies.

  5. While this plan was likely underway for quite some time, I wonder if Lufthansa’s decision to invest in ITA (worst airline forever) had any influence in bring urgency to the Skyteam deal. While the coverage overlap would be limited, Star Alliance’s attention would definitely be focused on all that FCO has to offer to leisure travel, likely to the detriment of the SAS restructuring.

    1. Yeah, the ITA realignment plus this pushes *A south and SkyTeam north, while consolidating both. Question is which alliance wins: the one that will push for a JV more quickly and doesn’t include ITA, or the one that has leisure traffic?

      1. I think they can both “win” as the respective deals address a strategic priority for each JV. LH covets Italy leisure traffic while AF/KL/DL need pressure relief for their AMS capacity problem.

  6. “wisely” is indeed the correct term to describe SAS’ decision to go to an alliance where they can be part of a joint venture and not on the sidelines.
    Lots of people want to trash SAS’ business model but let’s not underestimate how much capacity Norwegian dumped into the market and hurt SAS; add in that they weren’t part of a JV and they had to bear the full brunt of Norwegian’s failed model on SAS’ books.
    AF/KL did not invest in SK just for the local market so clearly has designs on enhancing the ability to connect traffic through CPH and perhaps ARN but just being able to better penetrate Scandinavia and northern Europe will be big for Skyteam.
    It also is possible that KL will shift some European flying to CPH and DL and SK will push some more traffic into and beyond ARN/CPH. Let’s not forget that DL had to bless the decision to open up the JV so they clearly see benefit.
    Given that TAP and LOT are both still in play and perhaps for the same reasons as SK bolted from Star, we could see some significant alliance rearrangement. If Star primarily is left w/ the LH Group and Skyteam even gets one more of LOT or TAP, the implications could be very significant. AMS and CDG are already two of the best geographically positioned continental Europe hubs while AMS/CDG/CPH and ARN creates quite the “wall” between N. America and LH’s Central Europe strength.
    And it is possible that oneworld could pick up one or both or that Star will elevate LOT or TAP to JV status.

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