The launch of a low-cost no-frills start-up in Norway has forced the incumbents to cut prices, but the new entrant will be facing tough competition.
Color Air began flying out of Oslo to Aaselsund on 7 August and will expand its network to Trondheim and Bergen later in August, and to Stavanger within a few months. Managing director Morton Andersen has ambitions to expand in Scandinavia and elsewhere in Europe. He predicts that the carrier will turn over some US$80 million annually, carrying some 1 million passengers by the end of the first year and achieving break-even by the end of the second year.
With start-up capital of $40 million and majority ownership by the Scadilion Group - one of Norway's largest travel groups - Color Air will undercut established carriers by 60-70 per cent, says Andersen. It will be able to afford this, he says, through a no-frills service, maximum use of outsourcing, in-house sales and distribution, lower wages and higher productivity. 'We will be employing 30 people per aircraft, compared with 130-140 per aircraft at Braathens and SAS,' Andersen claims. Color Air will not make significant inroads into SAS and Braathens' customer base, however, because it will generate new traffic, he claims.
Nevertheless, the incumbents have been preparing themselves. Braathens pre-empted the carrier's launch with higher frequencies and the introduction of a budget, no-frills class in March. Braathen's director of business development, Kjell Wilsberg, claims that Norway's seat tax and the big surplus of seats which will come with the opening of Oslo's new airport this year will create difficulties for the new entrant.
Source: Airline Business
