The low-cost airline Norwegian Air Shuttle intends to take over the regional airline Widerøe. However, Norway's competition authority is critical of the project and is even considering banning the merger.
Widerøe has a strong presence in domestic traffic and connects many rural regions with each other or with larger cities and/or the capital Oslo. Norwegian also operates some domestic routes, but they are not present at particularly small airports. This is the core business of Widerøe, which they want to take over. Apart from a few small providers, there is only SAS left in domestic transport, but it has been slowly on the decline for many years.
The Norwegian competition authority is concerned that a takeover of Widerøe by Norwegian would lead to a de facto merger and that the diversity of providers would be reduced again. Specifically, it is said that only Norwegian (including Widerøe) and SAS would remain. The few niche routes served by small providers would be almost insignificant.
Authorities expect ticket prices to rise
The competition watchdogs assume that such consolidation could lead to fewer flights, which are then sold at a higher price, particularly on those routes on which there are currently different providers. There is an explicit fear that the price screw could be increased significantly after the takeover. This idea is not unreasonable, because compared to Europe, many takeovers and mergers, but not all, have led to higher ticket prices in the medium term. Needless to say, the main areas affected were routes on which there is no competition, but only one sole provider.
Authority head Tina Soereide said, among other things, that the planned takeover of Widerøe by Norwegian Air Shuttle could lead to weakening competition. As a result, passengers would then be confronted with less choice and higher prices. If only one competitor, SAS, remained as a significant competitor, then it would be very easy to impose higher prices on the market. One is inclined to believe that the transaction could be prohibited. The two airlines could then sue, which would result in a lengthy process.
In July 2023, Norwegian Air Shuttle communicated that it was will buy the competitor Widerøe. The project was submitted for review to the competition authority, which has now expressed serious concerns. It was announced a few weeks ago that... an in-depth review procedure was initiated. Norwegian is still confident that it will hopefully get the green light before the end of 2023. The preliminary decision may still have put a damper on the carrier.
Airlines want to address concerns
In an initial reaction, Widerøe explained that the takeover by Norwegian would be important in order to be able to ensure the long-term connection of rural areas. Although both companies are disappointed with the preliminary decision, they are confident that approval can be achieved with the help of concessions.
It is also argued that Norwegian in recent years initially shrunk significantly due to the insolvency proceedings. The company is back on a growth path, but in direct comparison with other airline groups it is a relatively small player on the European market. The regional airline Widerøe, which the company wants to take over, is even smaller. The argument is also that the "joint" route network would comprise 107 routes and that the company would only be in competition on five of them. Due to the different business models to date, there would be no further overlaps.
Widerøe and Norwegian Air Shuttle now have until December 8, 2023 to submit statements to the Norwegian competition authority. They can also provide evidence to support the point of view. However, competitors can also submit written submissions. Other airlines repeatedly make use of this in comparable procedures. The office has announced that the final decision, against which legal action can be taken if necessary, should be announced by January 3, 2024.
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