Finn Øelund, President and CEO of Greenlandair, aims at transforming the carrier into a ‘profitable and respected airline’, which can stand on its own legs regardless who the owners are
NUUK: Finn Øelund (50) is the man, who shall change the image of Greenlandair (Grønlandsfly) into a profitable and respected airline. If not impossible, the task is far from being easy. However, already now, after only a year at the helms, the former SAS employee is approaching a situation, where the airline will work on normal business conditions. The first sign of an improved situation will be seen, when the Annual Report of this year is presented. Compared with a DKK 30 million loss last year, Øelund can already now look forward to a profit close to DKK 7 million this year. That figure would have been doubled, had the strike in Greenland this summer not influenced the result negatively!
Finn Øelund, an educated carpenter, who later supplemented his education with a Bachelor of Commerce degree, entered the airline business as a controller with SAS financial department. However, that job turned out to be too boring for Øelund, and already after half a year he changed to sales, and became later on Boss of SAS Danish routes, including the domestic traffic as well as the Greenland services. He was also Construction Supervisor for SAS, when Terminal 3 in Copenhagen Airport was built, and worked with SAS for totally 17 years, before he decided to try something else:
‘I felt that I had spent enough time in aviation, and consequently quit my job,’ he relates. ‘The idea was to try something completely different, without having made clear myself what that might be.’
However, when the Board of Greenlandair offered him the job as Head of Greenlandair, it was an offer he could not refuse. He was familiar with Greenlandair, having been on its Board of Directors as SAS’s representative for 10 years. (SAS owns 37.5 per cent of Greenlandair.) And the authorities and politicians in Greenland were equally familiar with Øelund.
20 per cent return on investment
For many years, Greenlandair has been criticised by the public, the press, and many politicians. The criticism has included lack of capacity, incompetent route planning, and too high fares. Only traffic irregularities caused by the weather have escaped criticism ….
The financial result of Greenlandair in year 2000 was a DKK 30 million loss (USD 3.7 million). Øelund’s predecessor, Peter Fich, was responsible for that.
When Øelund was asked in spring about his ambitions for the result of this year, his answer was:
‘DKK 30 million again – but in black figures!’
In other words, Øelund’s ambition was to improve the result of the company by no less than DKK 60 million. Today it is clear, however, that his ambition will not be reached – not only because of the strike this summer, but even more because it has proved impossible in practice to implement the necessary traffic programme alterations. Greenlandair was contractually committed to certain operations, which did not yield the same revenue, as an intensified traffic programme could have yielded.
Last but not least, Greenlandair has suffered a loss, caused by the Greenland postal authority – Post Greenland – that cancelled an agreement about transport of mail to South Greenland. Instead, this business went to Odense-based Alpha Air, and reduced the bottom line result of Greenlandair some DKK 14 to 15 million.
Øelund now expects the result of this year to be DKK 7 million.
He has in view, however, that the result in 2002 will be around DKK 30 million, corresponding to a return on investment at a little more than 20 per cent – a result he will find fully acceptable to present to his Board of Directors.
How is it possible at all to change the
development as significantly as turning a DKK 30 million loss into a several
Finn Øelund says in no uncertain terms:
‘First and foremost, the fleet must be operated efficiently. That has not been the case so far. If you can generate more traffic by means of the existing capacity, you can obtain a better efficiency, and thereby make more money.’
Øelund is even able to manage with a smaller staff than his predecessor. No less than 54 employees have been dismissed – equal to 11 per cent of the total staff.
The eternal questions about the domestic traffic are still prevailing:
* The question of traffic volume to the most sparsely populated areas of the country.
* Need the fares be as high as the case is?
* How to secure sufficient capacity during the summer for both the population of the country and the tourists?
Finn Øelund has his answers to the questions ready. First and foremost, he has the opinion that Greenlandair in principle shall operate as a sound business, and have the clear goal of presenting a reasonable return on investment each year.
Consequently, he has informed his Board of Directors that he finds it unsatisfactory to be forced to operate non-profitable services. If the authorities want such services to be maintained, it has, in his opinion, to be on their own account. As a matter of fact that is the principle also today, however, not fully implemented.
Øelund admits that the domestic fares are higher than they ought to be seen in an international perspective. To a large extend he blames the Greenland authorities for causing that situation by claiming unrealistically high fees.
In that connection, Øelund points to the fact that the structure in Greenland itself causes a high cost-level:
‘All local areas advocate for their own airports, which cost large amounts of money to construct. With a minimal traffic on such airports, the costs of each single operation are, of course, very high, considering the construction costs.’
Finn Øelund admits that supplying enough capacity for the population of the country as well as the tourist trade can be a problem in the tourist season:
‘It goes without saying that we cannot provide double the number of available seats during the summer season. If that were the case, it would mean a substantial over-capacity during the winter.’
The bookings must be on a first-come-first-served basis, and both the Greenlanders and the tourists will have to accept that fact.
However, this year Greenlandair has introduced a new booking system, whereby seats can be reserved many months before the actual flights, and as flights are sold out along the way, supplementary flights will be inserted whenever possible.
Three years ago, Greenlandair engaged itself in the Atlantic traffic, as the airline acquired a Boeing B-757-200 aircraft with 200 seats in all tourist class configuration, or, alternatively, 40 Business Class seats and 140 Tourist Class seats.
That stake also came as a result of criticism of the airline traffic – in this case SAS that had a monopoly-like situation in the traffic between Greenland and Denmark. The criticism focussed on the service, the passenger capacity in the peak season, and the cargo capacity.
The politicians in Greenland moreover had the opinion that SAS made a multi-million profit on its Greenland traffic, and felt that Greenland was entitled to some of that profit.
How is the situation today for Greenlandair’s Atlantic traffic?
‘Greenlandair has got a nice peace of the cake, and has no immediate reason for dissatisfaction. When the winter timetable takes effect 29 October, we will be operating five weekly roundtrips between Greenland and Denmark, whilst SAS operate only three!
For the first time, we will market more seats than SAS in respect of traffic to Denmark!!’
The passengers on Greenlandair’s flights Kangerlussuaq-Copenhagen and Narsarsuaq-Copenhagen are entitled to SAS EuroBonus points – however with the exception that these points do not qualify for SAS Gold Card, which is quite irritating to Greenlandair.
In Finn Øelund’s words, ‘however, of course we cannot force SAS into a business relation, which the airline does not want to be part of ….’
Despite the lack of SAS Gold Card qualification, Øelund is approaching his goal, to concur 20 per cent of SAS’s Business Class passengers; and he notes with satisfaction that Greenlandair’s Business Class has not only been accepted, but also approved, by the frequent flyer passengers – although the planned new type of chairs have not yet been installed. However, there is ample space between the present seats, and the service is in top.
In Finn Øelund’s opinion, the present number of tourists visiting Greenland will remain stable for some years ahead. Very well aware of the fact that the tourism trade all the time speaks about an increased tourism, he points out that the visitors necessarily need a place to stay, and to be able to move around in the country no matter whether they arrive at Kangerlussuaq, Narsarsuaq in the south, or Kulusuk on the east coast.
‘The way I see it, the infrastructure is not capable of handling more tourists than the present number in the summer season,’ he says, and adds that he fully respects the efforts of Greenland Tourism during the past few years:
‘Greenland Tourism has made Greenland as a tourist destination known in several countries, where Greenland previously was believed to be a giant lump of ice; and we have through the last few years seen tourists from countries, from where we had no visitors before.’
The fleet of Greenlandair is in for renewal, which is going to take place over the next seven to eight years.
Such a renewal is going to cost around DKK 1,000 million, and a cash investment at about DKK 200 million will be necessary. Not least for that reason it is necessary for the airline to start making money at a reasonable rate.
The present fleet includes, apart from the previously mentioned Boeing B-757, eight
Fixed-wing aircraft, and 10 helicopters.
In order to optimise the positive financial development, Greenlandair has discontinued the pool agreement with First Air of Canada, concerning flights between Greenland and Canada, and at the same time various expansion possibilities are being investigated.
One of these is a possible intermediate landing in Akureyri on the north coast of Iceland on the Narsarsuaq-Copenhagen service. Icelandair has a positive attitude to such a routing, provided that there will be only one weekly flight in each direction.
Greenlandair is owned by the Home Rule of Greenland (37.5 per cent), by SAS, likewise 37.5 per cent. The Danish Government owns the remaining 25 per cent.
The new SAS President, Jørgen Lindegaard, recently said that SAS is willing to sell its Greenlandair shares.
At the same time, the question is, whether the Danish Government is still interested in being a co-owner of Greenlandair.
With totally 62.5 per cent owned by the Home Rule and the Danish Government, Greenlandair is virtually a Government owned airline, and the general global trend towards privatisation, not least in aviation, of course give food for thoughts.
Icelandair seem to be the only strategic partner for Greenlandair, but the present financial situation of the Icelandic carrier seem to be of such a character that the carrier hardly will enter into new obligations of any kind.
Who else might be interested in taking over the shares belonging to SAS and the Government respectively, is what Finn Øelund calls ‘an outstanding 64,000 dollar question’. (NTR)