In October 2001, the Norwegian Competition Authority approved a bid by SAS to purchase the ailing Norwegian airline Braathens. Management, employees and trade unions at Braathens welcomed the Authority's decision. Meanwhile, its own problems and the crisis in the international airline industry have resulted in Braathens announcing workforce reductions. SAS is likely to follow suit.
On 23 October 2001, the Norwegian Competition Authority (Konkurransetilsynet) approved the offer by Scandinavia Airline Systems (SAS) to take over the troubled Norwegian airline Braathens ASA (NO0106134N). The decision followed an earlier rejection of the bid by the Competition Authority in a preliminary notice on 20 August 2001, in which it warned of a possible intervention against the acquisition of shares in Braathens by SAS. Employees and trade unions affected by the takeover, as well as the management of Braathens, had given their whole-hearted support to the SAS bid earlier in 2001, as it was seen as the only alternative to bankruptcy. However, consumer organisations and major customers of the two airlines feared that the consequences would be too little domestic competition and a rise in ticket prices.
The Competition Authority initially rejected the proposed takeover on the grounds that there were no indications to suggest that Braathens was insolvent, and that a takeover would allow SAS a monopoly position in Norwegian aviation. This would mean an elimination of competition within the domestic aviation market in Norway, with the possible consequence of significant capacity reductions and ticket price increases.
However, the Competition Authority reversed its opinion after evaluating the financial situation of Braathens in the light of changing market conditions recently, which has come as a result of the attacks on the USA on 11 September, among other factors. Taking into consideration Braathens' operating loss, credit liabilities and general market situation, the Competition Authority found that the company had to be considered insolvent. Indeed, the financial situation of the airline is so severe that the company is under any circumstances on its way out of the market, and the authorities' efforts to find and attract potential buyers among other airlines and investors failed. Since bankruptcy is not a viable alternative, the Competition Authority saw no other solution than to approve SAS's bid for Braathens. There were some concerns that the Norwegian government would interfere, but the Minister of Justice, Odd Einar Dørum, given the recommendations by the Competition Authority, stated that the government would not intervene in the process.
Despite the approval of the takeover, in the light of the recent problems witnessed in aviation worldwide and of its financial situation, Braathens has signalled significant staff reductions in the near future, as a result of a proposed 20% cut in flight traffic activity and provision. Thus, between 600 and 800 of Braathens' 4,000 employees in Norway will lose their jobs. These cuts came as no surprise to employees and trade unions at Braathens, who have been aware of the financial problems of the company for some time.
The management of Braathens has signalled a willingness to enter into a dialogue with the employees on the workforce reductions to come, and the 'downsizing' will thus take place in close cooperation with the trade unions, and as far as possible be based on voluntary arrangements. However, management doubts very much that voluntary exits are enough, and warns that redundancies will have to take place, although the exact number of employees to be made redundant is not clear.
SAS has also warned of significant staff reductions as a result of the present problems in international aviation. There are indications to suggest that 3,500 employees may have to go worldwide, and almost 1,000 employees in Norway. As at Braathens, the news did not come as a surprise to the employees as a continuous dialogue has taken place for some time now between management and trade union representatives about the need to introduce significant cost-saving measures.