Norwegian To Buy Norway Airline Widerøe In Shock Move

Norwegian has entered into an agreement to buy Norway’s regional carrier Widerøe. The $105 million deal, subject to approval by the Norwegian Competition Authority, has shocked aviation industry experts in the Nordic region.

In a stock exchange announcement, Norwegian CEO Geir Karlsen called the deal “a milestone in Norwegian aviation history,” adding that “our two airlines have existed side by side for many years and no one knows the aviation market in Norway better.”

Economic commentator Cecilie Langum Becker and BI Business School associate professor Espen Andersen are among the leading analysts surprised at the news. Both told NRK they were surprised and that the move will be a major challenge for rival airline SAS.

A sensible partnership?

Although the deal came as a surprise to analysts, there is a lot about it that makes sense. When the stock exchange opened following the news, shares in Norwegian immediately jumped by 6%.

Using a fleet of mostly small propellor planes, Widerøe typically serves smaller airports in Norway especially in the north and rural fjord regions. Norwegian, on the other hand, runs direct flights to/from Oslo and the hubs used by Widerøe, such as Bergen, Trondheim, Bodø, and Tromsø.

Altogether, Widerøe serves more than 40 small and medium-sized airports across Norway, while Norwegian offers more than 300 routes to 114 destinations in the Nordic region and mostly leisure destinations in Europe. Widerøe does serve some European destinations, but they typically do not compete with Norwegian.

Although Norwegian’s long-haul operation stretched the company’s finances to the brink, the revised airline has returned to profitability with a leaner business model focused on the Nordic region.

The deal will also help the new-look Norwegian better deal with seasonality. Although it does compete with SAS on some domestic business routes, Norwegian is primarily a leisure airline, with fluctuating demand throughout the year.

Widerøe “needs a strong partner”

Although Widerøe has a proud history of connecting rural Norway, its CEO Stein Nilsen said it needs a strong partner due to the high taxes on air travel in Norway and fierce international competition.

“We are very happy to now join forces with Norwegian, and we are excited to get an industry owner that aspires to develop both companies further. We are convinced that this solution is in the best interest of Widerøe, our employees, and not the least our customers,” he said.

What happens now?

Before the acquisition becomes a reality, the Norwegian Competition Authority must approve the deal.

Assuming the deal completes as planned, Norwegian will acquire Widerøe for a cash consideration of NOK 1.125 billion, which is approximately USD $105 million at today’s exchange rate. According to the press release, the purchase price is subject to certain adjustments after closing, including in respect to the profitability of Widerøe in 2023.

If and when the deal completes, passengers should notice very little change. Both companies will continue to operate their headquarters and bases in Norway. Employees will remain in their existing companies and branding will remain as it is today.

Widerøe will uphold its existing agreements with other airlines, but one thing that will change is the loyalty program. A legacy of a former close relationship with SAS, Widerøe frequent flyers can earn and spend SAS EuroBonus points at the present time. Karlsen made it clear that all passengers will benefit from the Norwegian Reward loyalty program in the future.

Article source: https://airlines.einnews.com/article/643391188/QPk4wXh8WDG0NP8h?ref=rss&ecode=vaZAu9rk30b8KC5H

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