SAS defies bonus ban, under probe

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After Scandinavian Airlines (SAS) defied a domestic ban and reinstated its bonus program for business travellers this week, competition authorities opened an immediate investigation and Norway’s consumer protection council urged the government to nip SAS’ defiance in the bud. The government said it remains firm in its decision to uphold the ban, but an ongoing case with the EU may eventually change the rules anyway.

SAS decided this week to challenge a ban on frequent flyer programs on domestic routes in Norway. The government and regulators responded quickly, in an effort to enforce the ban. PHOTO: SAS

SAS decided this week to challenge a ban on frequent flyer programs on domestic routes in Norway. The government and regulators moved quickly to enforce the ban. PHOTO: SAS

Offering bonus points to frequent flyers on domestic flights has been illegal in Norway since 2001, when the government decided that since SAS was the dominant airline in the market at the time, a bonus program was likely to prevent new players from entering the market and hinder competition. Norway is the only country in the world where SAS is present, though, where offering bonus points for domestic travel is against the law.

The airline thus found a loophole in the law and believes that since its new bonus offer is linked directly to corporate deals struck between SAS and various companies, they’re operating within current regulations. “Our legal opinion is that the terms of business agreements are not subject to the provision that bans bonus points being earned on domestic flights in Norway,” Eivind Roald, executive vice president for sales and marketing at SAS, said in a press release.

“We don’t believe authorities should allow this,” responded Gry Nergård, consumer ombudsman at the consumer protection council Forbrukerrådet, to newspaper Dagens Næringsliv (DN). “There is a ban and SAS should follow the rules.”

Christine Meyer, head of competition authority Konkurransetilsynet, said her agency would immediately take a close look at the airline’s new bonus scheme to see whether it violates regulations. If found guilty, SAS would be subject to fines.

Norway and EFTA in talks
Meanwhile, Norwegian authorities remain firm in their desire to uphold the ban on bonus points for domestic flights. “Our attitude has not changed since October last year when the government maintained its view on this issue,” state secretary Jon Reidar Øyan told DN. He added that removing the ban could easily lead to higher prices.

Øyan said he was puzzled over the timing of SAS’ decision to challenge the ban, since there is an ongoing case between EFTA Surveillance Authority and Norwegian authorities about the ban on domestic bonus points and whether it violates the EU/EEA’s regulations for Europe’s internal market. EFTA agreed with SAS in a preliminary opinion last year that the rules do violate these principles. A final decision, a so-called “reasoned opinion,” is expected before the summer.

SAS said it intends to file a lawsuit to establish that the ban on bonus programs for domestic flights in Norway cannot be legally enforced for private customers either. “The basis of this lawsuit is that the government is in breach of EEA rights and regulations in maintaining the ban, which is unique in the world,” SAS said, adding that competition in the airline industry has dramatically changed since the ban was put in place. SAS now faces tough competition both in and out of Norway from arch rival Norwegian, which entered the domestic market after frequent flyer programs were banned.

According to Nergård at Forbrukerrådet, a bonus program will automatically “lock” consumers into choosing the same airline regardless of prices over time, which means that it will have a major commercial benefit for the airline. She believes consumers stand to lose. “The more we lock consumers in, the less competition and higher prices we will see,” she said.

Analysts called SAS’ move “a sign of desperation” and said business travellers are forced to choose the cheapest fare regardless of bonus points earned, minimizing any potential benefits from the bonus scheme.

The main competitor in Norway, Norwegian, told DN that it has no intention to follow suit and introduce a frequent flyer program within Norway. “No, we intend to follow the authorities’ regulations,” communications director Anne-Sissel Skånvik told DN.

Views and News from Norway/Aasa Christine Stoltz

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