John Dueholm has spent almost his entire career working for Scandinavian carrier SAS. Tom Otley finds out what keeps him enthused about the volatile business of aviation.
JOHN DUEHOLM HAS EVERY REASON to be a little depressed. When SAS chief executive Mats Jansson announced his sudden retirement last year, Dueholm was thrust from the deputy role to the top job.
The ensuing five months were hardly trouble-free for the acting CEO. Dueholm pushed through inevitable cost savings, dealt with the aftermath of the ash cloud, faced record cartel fines imposed by the EU, and fended off questions about a Lufthansa takeover.
Yet when we meet in February, shortly after the Scandinavian airline announced yet another quarterly loss, he is as enthusiastic as ever. Is this because he has handed the chief executive job over to new boy Rickard Gustafson and returned to his deputy role? Apparently not. Dueholm is a long-time SAS man, and knows every inch of the airline. So what does he think he achieved in his five short months at the top?
"In 2009 we defined a core strategy, which was to concentrate on the Nordic countries, on our commercial platform, on our cost platform and on our organisational structure. The aim was to have achieved all of that by 2011. My task was easy, in the sense that I had to continue to implement that strategy according to plan, and we have done that. There is work to do but we have made good progress."
The "core strategy", which is clearly defined on the SAS corporate website, makes plain the airline's focus on the Nordic countries. Yet this is where competition from low-cost carriers is most fierce. So why doesn't SAS focus on long-haul, where the margins are potentially better? Dueholm is forensic in his reasoning.
"In the first place, we don't have the domestic population for that. In Scandinavia we have three hubs: Copenhagen, Stockholm and Oslo. If you look at the capture area for long haul, you could add in Finland, some parts of northern Germany and some parts of Eastern Europe, but even if you aggregate all these opportunities our estimates show that there will be a maximum of 15 long-haul aircraft flying out of Scandinavia.
And we are now offering 11. So we can never reach the same long-haul as, say, British Airways out of London or Lufthansa out of Munich or Frankfurt, or Air France/KLM out of Charles de Gaulle or Schiphol." As for the bigger margins for long-haul, Dueholm readily accepts the point.
"Airlines that have the mix of shorthaul and long-haul...are less affected by low-cost competition, that's true. There is a clear difference in the financial results between carriers which have a system of revenue where 60 or 70 percent is long-haul traffic." Nevertheless, Dueholm believes SAS can be profitable with its home market.
"The population among the Nordic countries is 18 million, but it is interesting that travel frequencies per person are higher than when compared with other European countries, and the average yield is higher. So if you have the right commercial product and the right commercial platforms, you can make some money."
Nevertheless, SAS has formidable problems, not least a cost base where three hubs have to be maintained in each of the three countries with a stake in the airline - Norway, Sweden and Denmark. Dueholm rejects this, however. "From a political or service point of view we can have as many or as few hubs as we want. But it is more dictated by the customer and our competitors. Our customers want to avoid travelling via hubs if they can - they want to go point-to-point, and we can make money if we control cost and focus..."
On the matter of this focus, Dueholm points to the "mix" of SAS business.
"Some 30 per cent is leisure and 70 per cent is business-to-business. But that last figure splits down into three parts. The first is travel companies and tour operators, which is 10 per cent. Then big corporate contracts with Maersk and Nokia amount to 30 per cent, then the SME market makes up 30 per cent.
"For many years most carriers didn't have a tailor-made concept for that final market, but we have developed one and it has been a huge success for us as a growth driver, not only in terms of revenue, but in terms of bottom-line effect. The loyalty is higher, but most importantly when you compare the average yield of contracted and non-contracted travel, you have a higher yield for contracted. You would expect it to be lower because of discounts, but that's not the case as many of them are flying on flexible tickets. Also, even if they are not allowed to fly business class, our effective on-the-ground product and flexibility means they can travel Economy Extra.
"It's one of the main reasons we continue to have three classes. The demand is good for both business and Economy Extra, so it is important to maintain these three classes for both a marketing and business aspect."
The challenge, of course, is that no matter how much SAS trumpets its punctuality record - and it is very punctual - flyers seem to buy tickets on price, though Dueholm believes a corner has been turned. "If you look at the Scandinavian short-haul market, we have arrested the decline in our market share, and our research shows that we can charge a revenue premium of 15 per cent when compared with our competitors. Our challenge is to ensure these extras don't cost more than that so we can maintain our margin.
"We have the best network compared with our competitors, and customers are prepared to pay for that and our Star Alliance connections. Another driver is our on-the-ground concept to reduce time spent by customers in the airport. We have implemented fast track, off-airport concepts, meaning more than 40 per cent of our customers are ready to go to the gate when they arrive at the airport because they have used our mobile services or online check-in."
Dueholm says more than 70 per cent of the airline's customers are using its self-service products. With such a cheerful approach to the thankless task of running a legacy carrier, I have to ask about the ash cloud, a disaster for the entire European travel sector. Surely there can have been no positives from that? On the contrary: "The ash cloud and the terrible weather caused a lot of disruption, but we did a good job of communicating with our passengers.
"Our Facebook page was visited by more than 9,000 passengers on each day [of the crisis]. They used it for information, but also looking for answers to questions. Some 99 per cent of customers who visited the page received a reply within five minutes.
"Furthermore, we used our SMS services to inform more than 900,000 customers during the extreme weather conditions, updating them on the situation, on delays and on cancellations."
He says using social media and mobile communication gives the airline an opportunity to provide a service that satisfies unhappy customers in times of confusion.
"Customers see the difference between SAS and our competitors through interaction with call centres, at check-in, in the lounge, at the gate and on board. Add in the frequent-flyer programme, which is very strong in the Scandinavian market, and this year's new long-haul flights - Oslo to New York Newark and Copenhagen to Shanghai - and I think we have much to be proud of."
And with that Dueholm is off. Not into retirement, despite having previously planned to finish at 60 this year, but back to his old job of deputy president and deputy chief executive responsible for operations and commercial divisions.
JOHN DUEHOLM is deputy president and deputy chief executive of Scandinavian airline SAS. He has been a member of SAS Group Management since September 1, 2002. his wide and varied remit includes responsibilities for the business area of SAS Scandinavian airlines and SAS Technical Services within SAS aviation Services. he also oversees the SAS Group's Emergency response Organization.
From 1996 to 1998 he was chief executive of SAS Data and senior vice president of SAS Technical Division. he was also senior vice president of Group4Falck from 1998 to 2002, and executive vice president for airline support and airline related businesses of the SAS Group between 2002 and 2005.
Dueholm was born in 1951, is married and has one child, born in 1980.