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Monday, June 24, 2024

Warnings against more airline aid

Norway’s competition authority is warning against more financial aid to the country’s three established airlines: SAS, Norwegian Air and Widerøe. The warning comes despite looming cutbacks at SAS and Norwegian and the risk of monopolies on some routes.

The skies over Norway aren’t especially clear for the airlines keen to keep flying through them. PHOTO:

The three established carriers have already received more than NOK 6 billion (around USD 700 million) in state aid during the Corona crisis, and the airline industry in general NOK 22 billion, all part of an effort to maintain airline service in a country where it’s not always easy to drive or take a train. The current Conservatives-led government has provided the aid mostly in the form of loan guarantees and subsidies of important routes.

It has resisted contributing capital or taking direct ownership stakes in the airlines, but now a new Labour Party-led government that’s likely to form after Monday’s parliamentary election may be more willing to reinvest. Labour’s transport spokesman has told newspaper Dagens Næringsliv (DN) that he thinks Norway should join the governments of Denmark and Sweden in their efforts to save SAS.

“The most important thing is to have a strong SAS,” Myrli told DN.

Not necessarily, according to the competition authority (Konkurransetilsynet). “What’s critical is that new companies (airlines) that establish themselves get a possibility to compete on equal terms with the established companies,” said Elisabeth Stockmest, a senior adviser at the authority. It sent out a press release this week calling for “new measures” to improve competition in Norway’s airline market.

Fearing route monopolies
Such measures could include, for example, construction of longer runways at small airports so that other airlines could better compete with short-haul carrier Widerøe. The authority specifically warned against more state aid to the airlines since that could prevent new airlines from establishing themselves.

If the decline in the numbers of airline passengers continues even after infection concerns and Corona-related travel restrictions ease, the authority worries that Norway may wind up with more routes served by only one airline. “That can be dramatic for passengers, in the form of higher ticket prices and worse flight schedules,” the authority stated. Politicians could then define them as routes that must go out to bid and receive financial aid, but they wouldn’t be commercially profitable.

The pandemic has forced major restructuring among existing airlines and prompted others to start up, while still others have withdrawn from the market. Both SAS and Norwegian are struggling to adust to the sharp decline in passengers, and meeting resistance from pilots’ and cabin crew unions unhappy about the prospect of seasonal layoffs and pay reductions.

Surprised and disappointed employees
Newly recapitalized Norwegian has suggested it may park aircraft during months with low traffic, like November and February, while SAS is threatened by a major decline in their important business travelers. High executive salaries and especially the secret bonuses paid to Norwegian Air executives after the airline emerged from bankruptcy last spring have not endeared management to workers laid off during the pandemic, either.

“In crises, you need to get folks with you, and that means you include them and communicate and have open, clear dialogue,” René-Charles Gustavsen, leader of Norwegian’s cabin crew’s union, told DN this week. He and his collegues were caught by surprise when Norwegian’s new CEO Geir Karlsen suddenly mentioned more seasonal staffing when releasing the airline’s second quarter results last week. Karlsen was later criticized by union leaders as “number-cruncher” who hasn’t been nearly as visible for the airline’s employees as former management was.

DN editorialized on Thursday that it’s not “most important” to merely have a strong SAS but rather “several airlines that can fly passengers where they want to go for a reasonable price.” The new government can help ensure that, DN suggested, by “contributing towards equal competition among serious airlines on routes in Norway, instead of using taxpayers’ money to give advantages to individual companies.”

No one disputes that the airline industry has suffered greatly during the pandemic. An evaluation of government policy for the industry has been underway for months, with debate over strategy and financing due during the upcoming parliament session, probably next spring. Berglund



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