The Norwegian Government is set to take action to improve the local operating environment in a bid to improve the survival chances of Braathens following the blocking of merger plans with Scandinavian Airlines (SAS).

The Norwegian competition authority, the Konkurransetilsynet, last week rejected SAS's proposed purchase of a 68.8% share in Braathens, citing lack of proof of the airline's frail financial condition.

The Konkurransetilsynet had already decreed that a merger would lead to price collusion and raise fares, but the Norwegian carrier argued that it had no option but to merge if it was to survive.

The deal would have given SAS a monopoly on Norwegian services. The Oslo Government is now likely to implement a series of reforms to its aviation legislation which will assist Braathens' future operations.

Braathens says that if its appeal to the anti-trust body fails in October, then it would be forced to scale back services to cut mounting costs. It blames the introduction of a costly passenger tax on domestic flights as contributing to its poor financial performance, with a first quarter net loss after tax of NKr156 million ($17.6 million) compared with NKr45 million for the same period last year.

Local newspaper Aftenposten has launched a campaign to scrap the NKr128 flat fee tax, and the competition authority says that it is also keen to see the levy reduced dramatically. Other measures include "improved" slot allocation for Braathens flights to other Scandinavian destinations and the possible banning of frequent flyer programmes linked to alliances.

Braathens says that it "has no plan B" if the SAS merger is finally blocked, as it has "exhausted other avenues", including inviting 30% shareholder KLM Royal Dutch Airlines and other major European carriers to invest. Finnair, meanwhile, has stated its interest in operating more services from Stockholm Arlanda to other Scandinavian cities.

Source: Flight International