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Thursday, July 18, 2024

Airlines allowed to cooperate, for now

The Norwegian government has granted the transportation industry a temporary exemption from competition laws that will allow hard-hit airlines, among others, to cooperate during the Corona epidemic. Arch-rivals like SAS and Norwegian, which is struggling to survive, will now be able to coordinate routes and thus stay aloft, at least for three months.

SAS and Norwegian will now be able to cooperate, not only on bringing stranded citizens home but also by coordinating routes over the next three months. PHOTO: Avinor

“We’re doing what it takes to ensure that people will still get the necessary goods and services needed,” Trade Minister Iselin Nybø announced after another extraordinary Council of State on Wednesday. She added that the transport industry delivers critical services to society and will therefore be exempted from laws meant to ensure competition for the next three months.

“We’re doing this to secure transportation in the air, on land and at sea in the most responsible manner we can during the epidemic,” Nybø said. SAS and Norwegian normally can’t cooperate regarding which airline will fly where, she noted, “but in this very special situation, there’s a need to allow that, to make sure that people and goods get where they need to go.”

The government already had enlisted the aid of Norwegian Air, SAS and domestic carrier Widerøe in bringing home as many as 5,500 Norwegians currently stranded abroad. Foreign Minister Ine Eriksen Søreide had confirmed on Tuesday that the state would cover the documented extra expenses of sending aircraft to places like Spain and Morocco, where there currently are large groups of Norwegian and other Scandinavian tourists. With many flights grounded and borders closed, they haven’t been able to return.

‘Serious and unpredictable situation’
Stranded citizens will still need to buy tickets home, but that revenue is unlikely to cover the airlines’ actual expenses of sending aircraft and crews to various locations around the world. The airlines will also be able to work out the rescue routes among themselves, and bring home stranded Swedish and Danish nationals at the same time.

“We’re in a serious and unpredictable situation,” Søreide said in a statement issued late Tuesday. “It’s becoming steadily more difficult for many Norwegian citizens to come home because borders and air space have closed, and emergency restrictions are being imposed in many countries very quickly. The government wants to contribute towards allowing Norwegians to get safely home.” Those needing transport were asked to contact the airlines directly.

The airlines, meanwhile, have plenty of aircraft idled by the Corona crisis, and have already begun laying off employees. The rescue shuttles that also will be coordinated with Danish and Swedish officials to ensure landing rights can offer the airlines some welcome business and cash, while Transport Minister Knut Arild Hareide thanked SAS, Norwegian and Widerøe for their cooperation.

Norwegian Air bailout hotly debated
Discussions continued over a response to the airlines’ demands for capital injections to ensure their liquidity. Norwegian Broadcasting (NRK) reported on Wednesday that the airlines are demanding up to NOK 8 billion in state loan guarantees or infusions to get them through the Corona crisis that has grounded most flights after ticket sales dried up and countries closed borders to hinder spread of the virus.

The demands have been jointly made by the airlines themselves and labour organizations representing airline pilots and cabin attendants, all of whom were having a meeting with government officials on Wednesday. Yngve Carlsen, head of the pilots’ union, stressed how the airlines’ revenue stream had come to an abrupt halt, leaving the industry without the cash needed to survive.

Norwegian Air needs the biggest portion of any new emergency funding, but political debate continues over whether Norwegian taxpayers should bail out an airline that over-extended itself and took on heavy debt that caused major problems well before the Corona crisis broke out. Une Bastholm of the Greens Party was among those also stressing that a bailout of Norwegian could be highly risky for taxpayers, after Norwegian’s own management took huge risks themselves on intercontinental routes that landed them deeply in debt.

Need to preserve aviation infrastructure
Others argue that it’s most important to keep the airlines flying and preserve jobs, not least to preserve aviation infrastructure but also to ensure competition again, once the Corona crisis is over.

Still others, including a former top SAS executive, called for merging all the Nordic region’s airlines to create one large new player that could compete against foreign carriers.

SAS received emergency financial aid from the Swedish and Danish authorities on Tuesday, in the form of a guarantee valued at around SEK 3 billion. Norwegian Air’s chief executive Jacob Schram claimed similar assistance was needed as quickly as possible.

On Wednesday Norwegian’s share price soared, opening 32 percent higher than on Tuesday, with analysts uncertain what was behind the sudden surge after heavy losses over the past week. Some speculated that Norwegian would receive some form of capital assistance, while others attributed the huge share price gains to investors trying to buy low and later sell high.

Shares in Norwegian Air Shuttle closed up 27.75 percent and were among the most heavily traded on the Oslo Stock Exchange, which itself closed slightly down with its main index off 1.13 percent at 637.75. Berglund



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