The Norwegian Competition Authority is moving to block Norwegian Air’s plan to buy regional airline Widerøe, in the latest sign that European regulators are taking a tougher stance against the latest wave of airline mergers.
The regulator highlighted the reduction in competition to two airlines from three on many domestic routes in the country amid reasons for its objections to the 1.13 billion Norwegian kroner ($104 million) deal. Proposed ground services remedies offered by Norwegian Air and Widerøe are not considered “adequate,” the authority said Friday.
“We are surprised by the competition authority’s decision to potentially halt the acquisition,” Norwegian Air CEO Geir Karlsen said in a statement. “I am optimistic about the final outcome of the application process. We will now familiarize ourselves with the Norwegian Competition Authority’s preliminary assessment before we respond to it.”
Norwegian Air and Widerøe, which the airlines say would continue to operate independently following the deal, together fly a nearly 61% of the seats within Norway, according to Cirium Diio schedules. The carriers have a 31% share of international seats to and from Norway.
The regulator gave Norwegian Air and Widerøe until December 8 to respond to its tentative decision, and plans to issue a final ruling by January 3.
The news in Norway comes amid tight scrutiny of airline deals by European regulators. In October, European Union antitrust commissioner Didier Reynders told the Financial Times that the regulator would seek tougher concessions from airlines that are seeking to merge. He added that in previous deals where airlines were only required to divest slots at certain airports “maybe the results are not there,” referring to the benefits of new competition.
And it’s not just European authorities. The U.S. Department of Justice has similarly taken a tough stance towards consolidation, including suing to block the merger of JetBlue Airways and Spirit Airlines. The trial in the case is currently underway in Boston.
In addition to the Norwegian Air-Widerøe deal, there are three other pending airline combinations in Europe. Air France-KLM plans to buy a nearly 19% of SAS, and maybe full control of the airline in the future, as part of the Scandinavian airline’s U.S. Chapter 11 bankruptcy restructuring. International Airlines Group is trying for the second time to acquire Madrid-based Air Europa to merge it with Iberia. And the Lufthansa Group is seeking a 41% stake in Italy’s ITA Airways.
Other potential airline deals include the Portuguese government’s plan to sell a 51% stake in TAP Air Portugal. And Norse Atlantic Airways decision earlier in November to hire “strategic” advisors after receiving unsolicited takeover offers from two airlines.
“We need to compete in a global world with a big group of airlines, and we need to have the scale,” IAG CEO Luis Gallego said in October in response to questions on stricter antitrust scrutiny. “Also in Europe, we are going to have more pressure in the sustainability area. The scale is going to be critical to achieve the objectives that we have committed to comply with the mandate that we are having. So I hope that the approach is going to be to help the consolidation in the market.”
The sustainability mandate that Gallego referred to is the European Union’s requirement that airlines use sustainable aviation fuel for at least 2% of their fuel needs by 2025. The requirement steps up to 6% in 2030 and eventually 70% by 2050.
IAG is in the process of submitting information to European antitrust regulators, and in discussions with potential partners on competition remedies for the deal, Gallego added. The group hopes to close the Air Europa transaction by the fourth quarter of 2024.
“I think it’s obvious that this transaction will increase competition in that important Italian market,” Lufthansa Group CEO Carsten Spohr said earlier in November on its ITA deal. “We are looking at this in a constructive way to eventually hand in the notification to then start to integrate ITA into our network and giving them the future they deserve.”
Spohr cited the fact that ITA is third in the Italian market as a reason European regulators should approve the deal.
ITA has a 10% share of all seats to and from Italy this year, Cirium Diio data show. That’s second only to Ryanair. Within Europe, ITA is third in terms of seats after Ryanair and EasyJet.
Air France-KLM’s investment in SAS is not as far along as either the IAG or Lufthansa deals and has yet to come in front of European authorities. The deal first needs approval from a U.S. bankruptcy court.