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An interesting airline consolidation in Norway:Â Norwegian will fully acquire regional carrier Wideroe. Norwegian will pay NOK 11.25 billion ($106 million) for Wideroe, which will continue as a separate entity operating under its own name. The acquisition follows an extensive partnership between the two airlines since July 2022. Norwegian goes regional with Wideroe acquisition.
Wideroe was founded in February 1934 and is the oldest existing aviation group in Norway. It used to be owned by SAS between 2000 and 2013. Based in Bodo but operating out of five hubs, the carrier offers more than 300 routes to 114 destinations in the Nordic country and Europe. Within Norway, Wideroe flies to forty small regional airports under the Public Service Obligation routes. It has a twenty percent market share in Norway.
In a tender for the 2024-2028 PSO that was submitted in April, the Norwegian government increased the required seat capacity and lowered maximum ticket prices to strengthen the regional offering and infrastructure.
Wideroe operates a fleet of 45 De Havilland Canada Dash 8s, of which 23 -100s and fifteen -400s. The airline was the first operator of the Embraer E190-E2 and has three of them. Last year, the airline reported NOK 5.7 billion in revenues, an EBIT of NOK 80 million, and carried 3.3 million passengers. Wideroe also has a separate company for ground handling, which has Norse Atlantic as one of its customers.
Norwegian reported a NOK 1.006 billion net profit in 2022. Acquiring another airline with a completely different business model and fleet seems an odd choice for low-cost Norwegian Air. After an extensive restructuring in 2020-2021, the carrier returned to the core principle of low-cost carriers by sticking to a single-type fleet. It currently operates 68 Boeing 737-800s and thirteen MAX 8s, but has fifty MAX on order.
Enhancing the network
The logic behind the acquisition is explained like this by Norwegian: “Linking Wideroe’s wide-spanning regional route network with Norwegian’s attractive domestic and international routes, secures a customer offering with better connectivity and seamless end-to-end experience.”Â
Norwegian says that there is very little overlap between the networks of the two airlines. Out of 107 domestic routes in Norway, Wideroe operates 85 of them and Norwegian only 22.
“The transaction will enhance Norwegian and Wideroe’s role as a critical part of the Norwegian infrastructure. For shareholders, the transaction is expected to be highly accretive through linking non-overlapping complementary route networks, enabling significant operational synergies and added diversification through Wideroe’s public service operation routes.”
Dampening seasonality
In a stock exchange release, Norwegian adds that other motivations to acquire Wideroe are: “Supporting Norwegian´s strategic objective of gaining market share in the business segment, dampening seasonality, adding additional inbound travel to the Nordics, increasing resilience and strengthening international partnerships.”
The acquisition should also enhance Wideroe’s long-term competitiveness through operational scale benefits as well as robust industrial and financial backing. For both companies, there will be material cost synergies from procurement scale, cost efficiencies, and operational best-practice. Synergies are quantified between NOK 200 and 300 million per year.
Norwegian also cites “improved capacity to invest in sustainability and green aviation.” Wideroe is known for its active strategy to explore options and invest in new aircraft that will help it to reduce carbon emissions. It was the launch customer for the electric Tecnam P-Volt, although this project has recently been postponed. Wideroe is also on Embraer’s Energia Advisory Board to advise the airframer on new, small net-zero aircraft. At the Paris Airshow, it signed a Letter of Intent for fifty Eve Air Mobility eVTOLs for local and regional services.
Expected closing in Q4
Norwegian intends to pay the NOK 11.25 billion through available funds to Wideroe’s parent, Wideroes Flyveselskap AS. This corresponded to an enterprise value of around NOK 2.0 billion. The exact amount is subject to certain adjustments after closing, which includes the profitability of Wideroe in 2023.
The transaction is expected to close in Q4 2023 but is subject to regulatory approval from the Norwegian Competition Authorities. Once completed, it is expected to be “highly accretive to earnings capacity already from 2024.” Combined revenues for the two airlines should be NOK 24.6 billion this year.
Wideroe will become a separate business unit of Norwegian, so will be independent of the LCC. The 3.500 employees will be retained and will work under existing labor contracts and collective agreements. Together, the two airlines will offer employees more career opportunities under both brands and across more locations.
Partnership since September 2022
The acquisition follows an extensive partnership between Norwegian and Wideroe that was announced as a Letter of Intent almost a year ago on July 12, 2022. It was finalized in September.
“This strategic alliance includes initiatives such as joint ticket sales, allowing passengers to enjoy a seamless travel experience across the entire route network of both airlines through an interline agreement. By leveraging our respective strengths and resources, the two airlines can together deliver enhanced services, increased connectivity, and more travel options,” Norwegian says in its 2022 annual report.Â
“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,” Norwegian CEO Geir Karlsen said in a media statement.
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