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Price war in midair

Management at SAS Braathens claims they are doomed to loose the price war on domestic tickets against the low fares airline Norwegian.

Norwegian has the lowest prices on airline tickets in Norway and SAS Braathens has declared that they can not compete with the prices offered.

While SAS Braathens charge NOK 323 (USD 48) for the cheapest ticket in southern Norway, Norwegian charges only NOK 198 (USD 30). The cheapest tickets between southern and northern Norway are NOK 498 (USD 73) and NOK 399 (USD 58) representatively. The offers from SAS Braathens are available from May 12, while Norwegian’s costumers have to wait until May 18 before the discount prices are available.

Can not match Norwegian
The SAS Braathens management claims they are doomed to loose the price war against Norwegian. The reason is that the company fear the consequences imposed on them by the Norwegian Competition Authority (NCA) if they sell tickets at a loss.

«We have to live with the fact that we are somewhat more expensive on single tickets,» said Siv Meisingset, press officer at SAS, to TV 2 Nettavisen. «If we announced that we were going to go down to for example NOK 198 (USD 30) on a trip in southern Norway, the Competition authority would have reacted.»

SAS Braathens advertised its low price offer April 21. Already the following day, Norwegian reduced its ticket price on the cheapest tickets to NOK 198 (USD 30).

«For us it is an almost impossible task to match that price, and we have no intention of doing so either,» Meisingset stated. «We must have a certain degree of profitability in order to function. We make money on a ticket price of NOK 323 (USD 48).»

The Norwegian Competition Authority (NCA) has never denied that it is keeping a watch on SAS Braathens’ movements on the domestic market. Competition legislation in both Norway and the European Union prohibit the dominating player on the market to price its products in such a way that smaller competitors are pressed out of the market.

Make money on the discount tickets
The management in Norwegian claims that the company is making money on the low price tickets, even if investors are doubtful. Norwegian shares fell with about 20 percent on Oslo Burse when both SAS Braathens and Norwegian announced price cuts in the end of April.

«We have a cost level which is much lower than that of SAS Braathens, and this makes it possible for us to lower the prices,» said Anne Grethe Ellingsen, information director at Norwegian, to TV 2 Nettavisen.

According to Ellingsen, Norwegian offers discount tickets to between ten and 20 seats per departure depending on the time and date.

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