As far as mergers go, it’s a seemingly strange one. Low-cost operator Norwegian has announced it will buy Norway’s regional airline, Widerøe. The two airlines make quite the odd couple, though there is some rationale behind the proposed tie-up. I’m just not convinced it makes sense.

We all know the general story of Norwegian. It rose fast as a successful low-cost operator within Europe. Then, the airline went insane. It created a house of cards with a complex structure that I’m not sure anyone inside the airline even understood. It expanded to fly long-haul and grew incredibly quickly. In October 2018, the route map was too big to even fit in Cirium’s mapping tool. This leaves out the bizarre intra-Argentina operation entirely.

This entire operation collapsed in a blaze of glory. Some of this was pandemic-induced, but really, it was bound to fail either way.

The airline retrenched and has slowly been building back up. It shrunk back down to having just a Norwegian and Sweden subsidiary. The airline flew only 737s and has stayed within Europe, its original bread-and-butter. And as you can see above, the airline has now turned on the gas and begun growing once again.

The route map now looks completely different. The original DY Norwegian operation is largely focused on Oslo for flights throughout Europe with a secondary hub in Bergen. Every flight touches Norway.

Meanwhile, the Swedish D8 subsidiary spreads itself between Stockholm, Copenhagen, and Helsinki operations.

Norwegian is really a different airline now, and I mean that in a good way. In 2022, the airline made about a $150 million profit (EBIT) and analyst consensus has it going higher this year.

That’s great and all, but just because Norwegian is doing well doesn’t mean an acquisition of Widerøe automatically makes sense. After all, these are very different airlines.

Widerøe is a regional carrier in a country that requires a great deal of regional carrier service. The airline almost exclusively operates Dash 8 turboprops with a fleet approaching 50, though it does have three Embraer 195-E2s as well for further flights. The route network is about what you’d expect to see.

It’s a whole lot of short hops with small planes half full of passengers buzzing around Norway. This is profitable business since the fares are high. So what on earth does a low-cost operator want with this regional operation? That’s the question that’s somewhat hard to answer. The most obvious reason is simply for growth purposes.

July 2023 Seats Departing Norway within Europe

This purchase vaults Norwegian from having about a third of the seats departing Norway within Europe to more than half. It takes Norwegian well above SAS in that regard. But these two airline brands serve different markets and will continue to operate separately, so does that heft really matter?

Norwegian says this supports five strategic priorities:

• grow its presence with business travelers
• become less of a seasonal airline (business travel does that vs leisure)
• increase inbound traffic (I have no idea how it does this)
• improve resilience by getting a lot of government funding to fly in small markets and become indispensable within Norway
• build connectivity between the networks and through interlining with other airlines that Widerøe already works with

So it sounds like Norwegian wants Widerøe to help subsidize Norwegian during the cold, dark winter months while then also getting Norway’s government to subsidize the whole operation year-round as it does with Widerøe today. Government money isn’t a bad plan.

The part about building connectivity is the most potentially-interesting commercial rationale for doing this, but I’m not entirely sure how much connectivity will even exist. There is very limited route overlap, that much is true. In July of this year I show Bergen to Oslo, Stavanger, Tromsø, and Trondheim along with Oslo to Trondheim and Tromsø to Alta as being the only domestic routes they both fly. They also each fly Bergen to Alicante, Billund, Nice, and Palma de Mallorca internationally.

That is remarkably minimal overlap, but how much traffic is there that would come from these smaller cities on Widerøe to fill Norwegian’s airplanes? It’s all gravy, of course, but Norwegian could have gotten that through a partnership versus an outright merger.

One of the big wildcards here is SAS. Widerøe already has a frequent flier and codeshare agreement with SAS. The merger announcement says “Widerøe will uphold its existing agreements with other airlines.” So does this mean the airline will continue to feed into SAS despite now being owned by an arch-rival? And if it were to unwind, wouldn’t that really hurt the commercial viability of Widerøe? This seems like a very odd scenario whichever way it lands.

Merging very different airlines like this seems like a stretch. There is certainly some opportunity for a combined company, but I’m just not sure that it’s enough to justify the purchase.