Snowflake (airline)

History

During 2003 SAS was undergoing a major restructuring program, which largely focused on reducing unit costs. As part of this work, the company's management in cooperation with McKinsey & Company devised a scheme to better target the leisure market. Inspiration was both gathered from Ryanair and SAS' partner airline Lufthansa's low-cost subsidiary Germanwings. SAS had just bought its main Norwegian competitor, Braathens, and had also cleared out most of the Swedish domestic competition through the purchase of Linjeflyg. The airline was worried about new entrants in these markets, and was especially concerned with Ryanair and EasyJet.

The SAS Group announced the airline plans on 10 December 2002, at the time giving it the temporary name Scandinavian Light. The company stated that they would create a low-cost airline which would focus on the leisure holiday market with focus on Mediterranean destinations. SAS hoped that the new airline would target a different market than Scandinavian Airlines and that the latter would instead focus on the business. A challenge for the company was at the time that it had overcapacity after a recent drop in ridership.

The Snowflake brand was announced on 19 March 2003 and services commenced on 30 MArch. Four Boeing 737-800 were keyed to the new airline and painted in a new livery. Two were stationed at Stockholm Arlanda Airport and two at Copenhagen Airport. SAS chose not to launch the service in Norway. It considered the newly formed SAS Braathens to be a lost-cost carried and did not see the need for a differentiation in the Norwegian market. Snowflake launched ticket prices starting at 279 Swedish krona (SEK) and 295 Danish kroner (DKK) plus taxes. About ten seats per departure were sold at this level, and there were additional pricing levels.

The first services were provided from Stockholm to Alicante, Athens, Barcelona, Bologna, Budapest, Dublin, Istanbul, Málaga, Nice, Prague and Rome. From Copenhagen the airline inaugurated with flights to Alicante, Athens, Bologna, Lisbon, Málaga, Palma de Mallorca, Pristina and Sarajevo. The latter two were particularly aimed at expatriates, rather than tourists. By May the airline had achieved a load factor of seventy percent, increasing to eighty-two percent by September. Snowflake then announced two new destinations from Stockholm from the start of the winter program in October: Lyon, Beograd and Beirut. The latter two were mainly aimed at Lebanese expatriates. A new fare scheme was introduced from 1 October, whereby there were eight price levels, ranging from €58 to €228. Meanwhile, it started with discounted booking fees when tickets were ordered online. In November Snowflake announced that it would bull out of the Dubline and Barcelona services, stating low profitability. Scandinavian Airlines instead started to serve the Dublin route.

Snowflake was hit by a strike in the SAS Group starting on 1 February 2004 amongst ground handlers. From February Snowflake introduced services from Stockholm to Bilbao and Olbia. Starting with the 2004 summer schedules, commencing 28 March, SAS introduced additional services. From Copenhagen the airline started flights to Ankara, Beirut, Skopje, Split and Valletta. From Stockholm services were introduced to Ankara, Inverness, Lisbon, Palma de Mallorca, Split, Skope and Valletta. At the same time two more aircraft, 156-seat McDonnell Douglas MD-82s, were introduce with Snowflake.

In May 2004 the load factor had dropped to forty percent. Snowflake announced large cut-backs for the following winter program, and planned to only operate four services, to Athens, Istanbul, Nice and Rome. This was down from thirteen the previous winter season. With two flights each per week, this would give a very low fleet utilization rate. Snowflake had originally had success with their expatriate routes, but from 2004 patronage had fluctuated significantly on those routes. Similar cuts were carried out in Copenhagen, reducing to ten services per week. This included the announcement of a new destination – Cairo. Two services, to Dublin and Prague, were taken over from Stockholm by Scandinavian Airlines. A further four destinations were cut with the winter program. All services to Spain were taken over by Spanair, also owned by the SAS Group.

The load factor increased to eighty percent during the summer months. SAS announced on 18 August 2004 that it would terminate services with Snowflake with effect 30 October. Snowflake would be carried on in the Swedish and Danish market as a brand name for discount tickets on European destinations.

Operations

Snowflake was a low-cost airline which had a deviating business model to Scandinavian Airlines. Snowflake was organized as a business unit with in SAS Group, in the same manner as Scandinavian Airlines. The airline was thereby just a brand employed for particular services. The aircraft operated with Scandinavian Airlines' aircraft, crew and codes. The two also shared an administration. Snowflake was organized to become an internal customer within the group, for instance purchasing ground services from SAS Ground Services.

A key component to the operations was that the Snowflake services would be able to operate at a lower cost than the main airline. However, it soon proved that the company was not able to achieve the internal prices that were used in calculating costs. For instance, Snowflake incurred the same ground handling costs as Scandinavian Airlines. No discounts were therefore granted from SAS Ground Services or external ground handling providers. Similarly, if a Snowflake aircraft became sufficiently delayed, a conventional SAS aircraft would be dispatched instead.

Snowflake was able to avoid many of the costs related to operating a network system. To begin with it operated only a single type of aircraft. These started and ended each day at their home base, avoiding accommodation costs for crews. The Snowflake business unit employed only five people.

Snowflake incurred the same overhead costs as Scandinavian; the lack of a clear separation between the airlines at an operational level meant that Snowflake never succeeded in lowering unit costs below that of Scandinavian Airlines. Finally, operating only four aircraft was too small a fleet to achieve the necessary economy of scale. With the ticket prices based on cost savings which never materialized, the airline failed to operate with a profit.

Service

Tickets were aimed at being sold online or by telephone. They had a lower base price, but surcharges were charged to additional services, including in-flight meals. Surcharges were also charged by travel agencies who booked flights during an interim period. After this the tickets were not available via travel agents. The airline only operated point-to-point services, rather than the network model by Scandinavian Airline. Tickets were sold one-way and did not require a round trip and staying away over a Saturday to claim discounts. However, they did not support interlining.

Standard fare included one piece of checked-in luggage. The airline had a selection of in-flight meals, food and beverages for sale. Customers could redeem miles earned through SAS' loyalty program Eurobonus, but miles could not be earned on flights with Snowflake. Snowflake services were popular for redemption because of the concentration of leisure destinations.

Fleet

The airline initially operated a fleet of four Boeing 737-800, with two aircraft based in Stockholm and two in Copenhagen. From March 2004 the two 737s in Copenhagen were replaced with two McDonnell Douglas MD-82. All aircraft were owned and operated by Scandinavian Airlines, but retained a distinctive livery with a lemon-colored vertical stabilizer and otherwise white body. They had single-class seating in a more dense configuration than in SAS' conventional aircraft. All the aircraft were registered in Norway.

Destinations

Snowflake operated a series of destinations from its two bases in Copenhagen and Stockholm. They flew out of Terminal 2 at Copenhagen and Terminal 5 at Stockholm. Most flights had a limited frequency, typically one to four times per week. Flights operated to primary airports and not remote airports. To avoid cannibalizing customers from Scandinavian Airlines, Snowflake only flew to destinations not served by the other part of the group. This included several popular tourist destinations, such as London and Paris, which also attracted a large share of business travelers.