Norway’s tax on domestic flights and higher fuel prices are combining to force the airline to look at cutbacks.
Eighteen of Widerøe’s 23 short-haul routes are operating with a loss, admits Widerøe’s president and chief executive Stein Nilsen in an interview with the Norwegian newspaper minE24, and some of these are likely to disappear after changes in the state budget.
The Widerøe chief had hoped that Norway’s politicians would understand his earlier warnings about a new tax on domestic routes.
But only a small adjustment to NOK 75 (€7.90) from the earlier NOK 83 for European and domestic routes has been offered, and the airline now says it is looking at which routes to cut.
“18 out of 23 commercial short-haul routes we operate today are not profitable,” Nilsen revealed during a debate on Norwegian aviation in Oslo on Monday evening.
“It’s possible that we’re a little naïve, but there had been signals from the political arena that the charging regime could change for the benefit of these routes. That didn’t happen, so now it’s over and we’re getting to work.”
The Widerøe boss says he thinks it is now “inevitable” that more of the routes currently being run on a commercial basis will be dropped.
The rules that will come into force from January come months after Widerøe had already announced cuts in routes to Lofoten and Vesterålen.
At that time, Minister of Transport Ketil Solvik-Olsen pointed out that Widerøe had a lower tax burden than other transportation companies and that the government had continued all of the routes it tenders in northern Norway.
These routes will continue as usual, because the state pays for their operation as they are not profitable but benefit local communities.
But when Nilsen speaks about commercial short-haul routes he means routes such as, for example, those between the capital Oslo and Leknes, Svolvær, Sandnessjøen and Brønnøysund, minE24 says.
“Now we have to return to the drawing board, and we are forced to reduce production,” he told the newspaper.
On whether this meant cutting frequencies or cutting routes altogether, he responded: “I have no comment yet, but we are going to work and will hopefully clarify by the end of November. The changes will come into force from January.”
High fuel costs
Aviation is being hit globally by high oil prices, which have contributed to several recent bankruptcies in Europe including Primera Air and Cobalt.
Quizzed about whether the oil price is a factor in Widerøe’s decision to make cuts, Nilsen says, “There is a correlation between all cost factors we have, but even before oil prices began to rise profitability was very pressured. When oil prices get on top of that, it’s hopeless.”
He adds that the routes most under threat are those operated by Widerøe’s smaller 39-seater flights, as the carrier’s larger aircraft are more profitable due to operating costs not being remarkably high on a flight.
“This is one factor,” he says. “The other is that we cannot expect to hold the same cabin factor as the larger markets, because on the smallest markets we can expect a thinner coating.”
Widerøe is not alone in criticising how Norway’s airline charges have risen in recent years. SAS and Norwegian have also been critical of the increase – and also doubtful that the fees’ revenues will be channelled towards biofuels or other measures to cut CO₂ emissions as the government says.