Scandinavian Airlines Case Essay

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Scandinavian Airlines: The Green Engine Decision Scandinavian Airlines serves 32 million people and is the largest airline in Scandinavia. It has been a first-mover in many areas and has built a positive reputation for corporate responsibility. Having decided to update its fleet with 55 Boeing 737s, SAS now has to decide whether to purchase DAC green engines. Arguments for and against purchasing the green engine – Director of Aircraft & Engine analysis Having spent almost five years on the decision to purchase a new fleet of airplanes, Nas the director of aircraft and engine analysis, was fully involved and committed to researching and presenting the best option to SAS’s management team. The arguments for purchasing the DAC…show more content…
Arguments against purchasing the engines include the significant cost requirement, the opportunity costs, and the uncertainty of the operating effectiveness of the new engine technology. The cost of the engines is significant, adding about $21 million dollars to the whole fleet. This money could be spent on other features on the planes, such as a different engine, individual entertainment options, more comfortable seats, or ‘forward air stairs’. These are the opportunity costs of purchasing the engines and must also be considered in the decision. Finally, the engines use a technology that, although developed in the 70s, has not been used on 737s and thus may result in additional costs to ensure the engines operate properly and are delivered on time. Arguments for and against purchasing the green engines –SA S management team The management team at SAS has many of the same arguments for purchasing the green engines, but has a primary focus of establishing a clear financial cost-benefit analysis. SAS’s management team will argue that purchasing the engines will have a strong impact on its brand image and will allow the company to compete in the industry through its customer’s loyalty. Ultimately this loyalty will drive revenues and will determine if the company can remain in operations. Another argument will be the benefit of curtailing the expected
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