History is repeating itself as major airlines try to stop competition

Recently, I have paid close attention to the media coverage of how major airlines and labor unions both in the U.S and in Europe have joined forces and mobilized to stop Norwegian Air International. The carrier is applying for a permanent license from the U.S. Department of Transportation (DOT) to operate low-fare flights between Europe and the United States. In a widespread interview, Lufthansa CEO Christoph Franz said that Norwegian Air “needs to be stopped.” In addition, Lufthansa and its Star Alliance partner Scandinavian Airlines explicitly urge U.S. authorities to refuse Norwegian a permanent license, in a joint letter to DOT. Although we have seen it all before, it is not pretty.

Today’s opposition to increased competition in the transatlantic skies has similarities to what Norwegian Air experienced when it entered the market in Norway with six aircraft on four domestic routes in 2002. Scandinavian Airlines (SAS) had a monopoly on domestic routes and together with the powerful industry unions they did everything in their power to stop the newcomer. However, several competition policy measures implemented by the antitrust authorities of Norway ensured that Norwegian Air was able to compete on equal terms.  

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Against all odds Norwegian Air survived in the tough climate. Norwegian is now the world’s tenth largest low-cost airline and has more than 260 Boeing aircraft on order. Because of fierce competition, Scandinavian consumers have enjoyed low airfares for more than a decade. In addition, flying has become more comfortable and convenient as new technology has allowed for more flexible tickets and products. We have also seen the rise of non-stop flights to scores of new destinations.

Norwegian Air has grown extensively and become a company with operations in Norway, Europe, Asia and the United States. Its market value way supersedes that of its main competitor in the home market, Scandinavian Airlines. However, Norwegian is still a minor player compared to the 10 airlines dominating the intercontinental sphere and transatlantic routes.

That’s why Norwegian Air’s entry into the intercontinental market is a daring move. Once again it challenges the major players, and strong forces are mobilizing in attempts to “ground” the challenger. We see opponents arguing against competition. Consumer interests and the interests of other industries that will benefit from new and affordable flights are being overshadowed.

I take for granted that Norwegian Air complies with international agreements and regulations. Willie Walsh, CEO of the International Airline Group that owns British Airways and Iberia, said in a comment to USA Today that “Norwegian follows the rules.” U.S. companies have a long tradition of arguing strongly for their case. That’s why I trust that the DOT is able to distinguish between facts and fiction in this debate. I also trust that U.S. authorities emphasize how increased competition on transatlantic routes will benefit consumers and businesses in the United States and Europe. In Norway, we’ve benefited greatly from the competition in the aviation industry the past decade. I am sure the U.S. will experience the same when Norwegian Air is allowed to offer its low fares on transatlantic routes.

Johansen is a former director general of the Norwegian Competition Authority (1999-2011).