Long-promised consolidation in the European airline market is happening. Norwegian announced plans to purchase Norway’s oldest airline, Widerøe, for approximately $105 million in cash, subject to adjustment at closing based on Widerøe’s profitability for the year.
Norwegian will also assume Widerøe’s debt, valuing the total transaction just under $200 million. The companies expect the deal to close in Q4 2023, subject to government approvals.
This is a milestone in Norwegian aviation history. Our two airlines have existed side by side for many years and no one knows the aviation market in Norway better. With this transaction, we will now create a streamlined and more comprehensive offer for all customers, and we look forward to offering seamless travel across our entire route networks.– Geir Karlsen, CEO of Norwegian
The deal combines Widerøe’s heavily domestic operations, many of which serve specific “public service obligation” markets, with Norwegian’s reach further afield into Europe. Norwegian expects that Widerøe’s broad footprint across Norway will help it to feed those onward international trips. Among the 107 total domestic routes operated by the two carriers, only five overlap between them.
The acquisition is expected to help Norwegian reduce its seasonal variability of service. Widerøe’s operations show far smaller shifts in passenger numbers or load factors between summer and winter. It also carriers far fewer passengers and at lower load factors than Norwegian’s 737 fleet.
Despite fewer passengers on smaller planes Widerøe tends to deliver stronger economics than Norwegian, albeit at a much smaller scale. The PSO routes, supported by the government, focus less of unit costs and more on ensuring service remains available to remote regions of the country. Widerøe delivered revenues 30% of Norwegian’s in 2022, on a passenger count just 18% of the new parent. The PSO routes are also a much more stable revenue stream than at-risk commercial operations.
Norwegian also expects the deal to help it grow in the much desired business traveler market, presumably through access to the 40+ domestic airports and 20% market share Widerøe controls. Those passengers would potentially feed into the jet-operated routes, or generally just count towards Norwegian’s bottom line.
Other cost synergies are also expected, but full integration between the two airlines is not part of the plan, at least not to start. Norwegian expects to keep Widerøe’s brand wholly separate initially. Widerøe will run as a separate business unit, independent from Norwegian´s core low-cost carrier operation. Employees will remain in existing companies under existing collective agreements.
Widerøe CEO Stein Nilsen notes the growing challenges to his company’s smaller operation, even when supported by government mandates. “The tax level for air travel in Norway is particularly high, and this, in combination with fierce international competition, makes it difficult for a smaller regional airline to persevere without a strong partner,” Nilsen stated in justifying the transaction. “We are therefore very happy to now join forces with Norwegian, and we are excited to get an industrial owner that aspires to develop both companies further.”
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