Color Air
Encyclopedia
Color Air AS was the first Norwegian
low-cost airline. It operated from Oslo Airport, Gardermoen
in 1998 and 1999 with a fleet of three Boeing 737-300 aircraft. Color Air was a brand extension of Color Line, which shared a common owner in the Olav Nils Sunde-controlled Color Group. The airline operated five daily round trips from Oslo to Trondheim
and Bergen
, four to Ålesund
and one to London
, in addition to a weekly trip to Alicante
. Color Air pioneered the low-cost business model in Norway, with a denser seating, no frills
and lack of a frequent flyer program
. Tickets were sold only via the Internet, by telephone or in supermarkets; when bought from travel agents, there was a surcharge.
The airline was established in response to the opening of Gardermoen, which would allow any airline sufficient landing slots to compete with the incumbents Braathens
and Scandinavian Airlines (SAS). Color Air commenced operations on 1 August 1998, with the two other airlines moving from Oslo Airport, Fornebu
on 8 October. Following the airline's establishment, a price war broke out between it and the two incumbents. All three increased capacity and dropped prices, giving a 40% increase in seats on the dominant domestic routes and seat load
s of between 30 and 50 percent. After thirteen months and NOK 400 million in losses, Color Air gave up and filed for bankruptcy. The price war cost the three airlines more than NOK 3 billion, and ultimately forced the other two to merge.
, and five daily round trips to Bergen Airport, Flesland
and Trondheim Airport, Værnes
. In addition, there was a single daily round trip to London Stansted Airport
, and a weekly round trip to Alicante Airport
. From each domestic destination, flights were made to correspond with the Color Line cruiseferries
departing from Oslo to Kiel
, Germany, and Hirtshals
, Denmark.
Color Air had only one seating class, offered no on-board beverages and had no frequent flyer program or lounges. Color Air had an agreement for tickets to be sold at the Rimi supermarkets, as well as by phone and Internet. If bought at a travel agency
, there was a NOK 200 surcharge. This was because Color Air was not linked to the Amadeus
booking system, owing to the costs associated with membership.
and General Electric Capital, and cost NOK 2.25 million per month to lease, plus additional costs per hour. They were British-registered and operated by Air Foyle HeavyLift
, while maintenance was performed by British Midland
. Both companies are based in the United Kingdom. Ground handling was carried out by SAS Ground Services
in Trondheim, Bergen and Ålesund, and by Servisair
in Oslo.
, the Norwegian airline market was deregulated
from 1 April 1994. While airlines formerly needed a concession
from the Ministry of Transport
to fly a particular route, they could now compete freely on any domestic or international routes. Previously the two major airlines Scandinavian Airlines System
(SAS) and Braathens SAFE each had their own routes, but from 1994 both established themselves on several of the main-haul routes.
With increased traffic, there soon became a capacity problem at Oslo Airport, Fornebu
, the main hub
for both SAS and Braathens. During the peak times during the morning and afternoon rush, there were no excess slots for new airlines. To compensate, the Norwegian Airport Administration
was building a new main airport for Eastern Norway, to be located at Gardermoen
. A larger terminal and two runways would give ample room for expansion, and entry of new airlines. The new airport opened on 8 October 1998.
, and the lawyer
Stein Øxseth. Sunde would own 92% of the company through his shipping company Larvik Scandi Line, while Andersen and Øxseth would own 4% each. The company would be a brand extension
of Sunde's shipping company Color Line. The company aimed at a 15–20% market share
, with 1.4 million passengers annually. It was the first low-cost airline in Norway. The company launched tickets down to NOK 500 each way, and sold cheap tickets without demanding that the traveler be away during a weekend. Color Air made an agreement with the British airline Air Foyle HeavyLift
to operate a fleet of Boeing 737-300 aircraft.
Following the announcement to establish Color Air, Braathens SAFE chose to rebrand itself. They launched a new livery, and changed their name to just Braathens. Starting with the company's first Boeing 737-700 delivered on 23 March, Braathens introduced the business class, Braathens Best, that would take up 70% of the cabin, and the economy class Braathens Back, that would be at the back of the cabin. From 1 April, a new NOK 65 tax was introduced on all domestic flights. Braathens and SAS decided to divide the cross-subsidize the taxes between their routes, something Color Air was not able to do. This was because the tax was only valid for routes within Southern Norway; Braathens and SAS could therefore tacitly collude
to increase the prices to Northern Norway, and thereby subsidize their routes in Southern Norway. Color Air, on the other hand, would be forced to put the full tax on all its departures. While the government had no way to hinder the incumbents from doing this, Gudmund Restad
, Minister of Finance
from the Centre Party
, encouraged the airlines to not "cheat", and follow the intentions of the law, even if he admitted that there was nothing the government could do to hinder the airlines from cross-subsidizing.
The contract to lease two Boeing 737-300 aircraft from 1994 was made with International Lease Finance Corporation
in May. Maintenance was outsourced to a British company, after Braathens, which also operated 737 Classic
aircraft, had denied Color Air the use of its simulators and technical workshops. For the start-up, Color Air hired 18 pilots, 40 flight attendants and 40 ground employees, in addition to the administration. The company was criticized for only hiring women flight attendants. Braathens operated with an internal pension
age of 58 years for its pilots, while SAS had a 60 year age limit. Due to EEA rules, the judicial age limit was 65 years, so Color Air was able to hire retired SAS and Braathens pilots. These could be paid only NOK 500,000 in annual wage, since they received a full pension from their old employers on top of it. The Norwegian Airline Pilots Association
stated that this was morally reprehensible, but Color Air was supported by the Norwegian Civil Aviation Authority, medical experts, and SAS, who all claimed that there were no medical reasons to not let people in their 60s operate aircraft.
on 6 August. Flights to Trondheim Airport, Værnes
commenced on 8 August, while the Bergen Airport, Flesland
-route started 15 August. After a week, very few passengers were traveling with Color Air, with two at the least and twenty-four at the most per departure. Color Air was losing NOK 650,000 per week of operation.
The pricing scheme was based on tickets for NOK 399, 499, 599 and 699, plus NOK 71 in taxes. At least ten tickets were available at the lowest price per departure, and the first to order were granted the cheapest tickets. Tickets had no restrictions on cancellation, and were not subject to restrictions on return dates.
With the opening of Gardermoen, both Braathens and SAS increased the number of flights. Braathens established a route to Haugesund
, while SAS started routes to Ålesund
and Kristiansand
. The number of daily trips from Oslo for SAS increased from 59 to over 80. In total, the three companies increased their daily round trip from 138 to 200, and the daily seat capacity from 18,000 to 26,000. Ålesund had the largest increase, from seven daily round trips only with Braathens, to seventeen offered by all three companies. On the route to Trondheim, the number of departures had increased from 27 to 39, with Braathens operating 19, SAS 16 and Color Air 5. The increase in seats was profitable for the state; the new seat tax—which was also applicable to unsold seats—received an annual revenue increase of NOK 110 million.
The first plane planned to leave Gardermoen was an SAS aircraft. However, since it was 20 minutes delayed, a Color Air aircraft was instead the first to take off, at 06:52 on 8 August 1998. By the end of October, the airline had between 40 and 50% cabin load
, and the company stated that it needed "slightly more than 50%" to make a profit. It also announced that it would receive three more aircraft to supplement the two it had in service. Instead of starting a route to Stavanger
, the company instead chose to open a route to London Stansted Airport
starting 1 December. The airline stated that it did not have sufficient aircraft do make more than two round trips to Stavanger, and that this would be too little to be a credible operator on the route.
equipment at Ålesund, resulting in the plane being stuck at the airport.
In November, Color Air transported 102,544 passengers. From mid-December, the company had a time-limited offer of tickets for NOK 200.
In September, the ownership of Color Air was rearranged. Sunde reallocated his ownership and created Color Group, that would wholly own both Color Line, Scandi Line, Larvik Line and Color Air. Sunde retained a 77% ownership in the corporation through Larvik Scandi Line. The group was subsequently listed on the Oslo Stock Exchange
. In the general meeting held in December, two of the largest owners of Color Line, Vital Forsikring
and the Government Pension Fund of Norway
, both were opposed to the merger, as they felt the purchased companies were overvalued. Color Air was at the time valuated at NOK 157 million. After a long process between the miniority shareholders and Color Group, the valuation was adjusted to NOK 108 million. In May, Olav Nils Sunde bought the entire Color Group, and delisted it from the stock exchange following the conflict with the other shareholders.
By the end of 1998, it became clear that Braathens had increased capacity by 20%, but only achieved a 5.2% ridership increase after the opening of Gardermoen. Similar numbers were applicable for SAS. The business market, in particular the large corporations with divisions in several large cities, were demanding high frequencies on the routes. Color Air could get by with fewer departures because they mainly targeted the leisure segment. In particular, the routes from Oslo to Ålesund and Kristiansand had a very low seat utilization; to Ålesund there were 1.2 million seats annually, but only 345,000 passengers, giving a 29% cabin load. Accumulated cabin load for Color Air was 32%, with 116,176 passengers. In the course of the last quarter of 1998, Color Air lost NOK 91 million, or NOK 1 million each day. For the whole year, Color Air had an average ticket price of NOK 453, giving a revenue of NOK 57 million. NOK 45 million was used on taxes, giving NOK 12 million to cover operating costs of NOK 209 million. The company lost NOK 197 million in 1998.
In February 1999, Braathens announced that they would re-register all their planes in Sweden to avoid having to pay value added tax
on catering and fuel. Color Air and SAS, who had their planes registered abroad, had gotten away without paying the taxes, since it only applied to Norway-registered planes. Following this announcement, the Ministry of Finance
changed the rules so also foreign-owned planes had to pay the tax. The change in rules cost Color Air NOK 10 million per plane per year. From 1 July 1999, the seat tax was removed, but replaced by an equivalent tax for each passenger. This made it cheaper to fly an empty plane, but more expensive to fly a full one. Color Air had reduced the number of seats in each plane to avoid the seat tax, but increased them again after the tax was removed.
In the first quarter of 1999, Color Air transported 100,472 passengers. This gave a cabin load of 35%, of which the Trondheim route had 40% and the Ålesund route 32%. This gave a the airline a deficit of NOK 92 million. SAS lost NOK 22 million, while Braathens had lost NOK 300 million. In comparison, both Braathens and SAS Norway made a NOK 320 million profit in the first quarter of 1998.
On 1 April, Color Air won a two-year contract with Norway Post for all air mail from Oslo to Trondheim and Ålesund. On 10 April, Color Air started a weekly round trip each Saturday to Alicante Airport
in Spain. On 12 April, Ove Johan Solem took over as CEO of Color Air. In May, the company increased the cabin load from 38 to 48%, with ridership increasing from 33,978 to 44,081. These numbers also included a change in the number of seats per plane. The following month, 46,777 people traveled with the airline. By the end of July, Color Air had lost NOK 350 million. However, in July, Color Air had a cabin load exceeding 50%, the level Sunde had stated was necessary to make a profit.
In September, SAS announced that if Braathens took the first step to reduce capacity between Bergen and Oslo, they would follow immediately to reduce the overcapacity in the combined 37 daily departures. However, Braathens was not willing to reduce. On 15 September, Color Air announced that they would start flying five round trips from Oslo to Stavanger Airport, Sola
on 1 October, following the delivery of their fourth aircraft. At the same time, the airline would reduce the number of round trips to Ålesund from four to two. The load factor in August was 43%, and management stated that 50% load would not be sufficient to make money. In particular, the company stated that while aircraft were full during the weekends, the company was not succeeding at garnering the necessary business ridership to fill up the planes during the weekdays. To become more attractive, the company changed its fares to two classes: Business Full Flex and Saver No Flex. The company also stated that to attract more business travelers, it was looking for an international parter to conduct codesharing on international routes, and perhaps also introduce a frequent flyer program
alone or in cooperation with the partner.
for business travel. In particular, the frequent flyer programs that SAS and Braathens had made it difficult to convince corporate travelers to switch to Color Air. Sunde believed that the company would continue to lose money in 2000. 220 employees lost their jobs, while Color Group estimated it lost NOK 400 million on the airline. There were discussions concerning cooperation with, or a take-over by, British Airways
, but these discussions did not lead to an agreement. In total, Color Air flew 430,000 passengers, effectively subsidizing each passenger with almost NOK 1000. The company was not declared bankrupt, as Sunde wanted to insure his good reputation by paying everyone he owed money. While this was about NOK 10 million in airport fees and smaller sums to other parties, the largest creditors were the two aircraft leasing companies, to whom NOK 270 million was owed for the rest of the rental period. The 20,000 people who had tickets with Color Air were all rebooked onto Braathens flights. After NOK 170 million in debt was registered by the company, and assets were only worth NOK 17 million, Color Air was declared bankrupt on 10 November 1999.
On the day of the termination, the stock price of Braathens increased by 16%, while SAS's increased 3%. Immediately following the bankruptcy, the two airlines increased their prices. Subsequently, Braathens increased their ticket price by 15%, but stated that this had nothing to do with the elimination of competition, since the price increase was not on any Oslo routes. In November, Braathens started to remove routes, and announced they would increase prices by 20%. They also reintroduced the Flag of Norway
on the tailplane
that since the rebranding had been replaced by a silver, abstract wing. Both Braathens and SAS lost more than NOK 1 billion in 1999, and the total cost of the price war between the three airlines exceeded NOK 3 billion.
Norway
Norway , officially the Kingdom of Norway, is a Nordic unitary constitutional monarchy whose territory comprises the western portion of the Scandinavian Peninsula, Jan Mayen, and the Arctic archipelago of Svalbard and Bouvet Island. Norway has a total area of and a population of about 4.9 million...
low-cost airline. It operated from Oslo Airport, Gardermoen
Oslo Airport, Gardermoen
Oslo Airport, Gardermoen is the principal airport serving Oslo, Norway. It acts as the main domestic hub and international airport for Norway, and the second-busiest airport in the Nordic countries. A hub for Scandinavian Airlines and Norwegian Air Shuttle, and a focus city for Widerøe, it is...
in 1998 and 1999 with a fleet of three Boeing 737-300 aircraft. Color Air was a brand extension of Color Line, which shared a common owner in the Olav Nils Sunde-controlled Color Group. The airline operated five daily round trips from Oslo to Trondheim
Trondheim
Trondheim , historically, Nidaros and Trondhjem, is a city and municipality in Sør-Trøndelag county, Norway. With a population of 173,486, it is the third most populous municipality and city in the country, although the fourth largest metropolitan area. It is the administrative centre of...
and Bergen
Bergen
Bergen is the second largest city in Norway with a population of as of , . Bergen is the administrative centre of Hordaland county. Greater Bergen or Bergen Metropolitan Area as defined by Statistics Norway, has a population of as of , ....
, four to Ålesund
Ålesund
is a town and municipality in Møre og Romsdal county, Norway. It is part of the traditional district of Sunnmøre, and the center of the Ålesund Region. It is a sea port, and is noted for its unique concentration of Art Nouveau architecture....
and one to London
London
London is the capital city of :England and the :United Kingdom, the largest metropolitan area in the United Kingdom, and the largest urban zone in the European Union by most measures. Located on the River Thames, London has been a major settlement for two millennia, its history going back to its...
, in addition to a weekly trip to Alicante
Alicante
Alicante or Alacant is a city in Spain, the capital of the province of Alicante and of the comarca of Alacantí, in the south of the Valencian Community. It is also a historic Mediterranean port. The population of the city of Alicante proper was 334,418, estimated , ranking as the second-largest...
. Color Air pioneered the low-cost business model in Norway, with a denser seating, no frills
No frills
No-frills or no frills is a term used to describe any service or product for which the non-essential features have been removed to keep the price low. The use of the term "frills" refers to a style of fabric decoration...
and lack of a frequent flyer program
Frequent flyer program
A frequent flyer program is a loyalty program offered by many airlines. Typically, airline customers enrolled in the program accumulate frequent flyer miles corresponding to the distance flown on that airline or its partners. There are other ways to accumulate miles...
. Tickets were sold only via the Internet, by telephone or in supermarkets; when bought from travel agents, there was a surcharge.
The airline was established in response to the opening of Gardermoen, which would allow any airline sufficient landing slots to compete with the incumbents Braathens
Braathens
Braathens ASA, until 1997 Braathens South American & Far East Airtransport A/S and trading as Braathens SAFE, is a former Norwegian airline that operated from 1946 until it merged with Scandinavian Airlines Norway to become SAS Braathens in 2004. The airline was based in Oslo, first at Fornebu,...
and Scandinavian Airlines (SAS). Color Air commenced operations on 1 August 1998, with the two other airlines moving from Oslo Airport, Fornebu
Oslo Airport, Fornebu
Oslo Airport, Fornebu was the main airport serving Oslo and Eastern Norway from 1 June 1939 to 7 October 1998. It was then replaced by Oslo Airport, Gardermoen and the area has since been redeveloped. The airport was located at Fornebu in Bærum, from the city center. Fornebu had two runways, one...
on 8 October. Following the airline's establishment, a price war broke out between it and the two incumbents. All three increased capacity and dropped prices, giving a 40% increase in seats on the dominant domestic routes and seat load
Load factor (transportation)
Passenger load factor or load factoris a measure of the amount of utilisation of the total available capacity of a transport vehicle. It is useful for calculating the average occupancy on various routes of airlines, railway trains or bus...
s of between 30 and 50 percent. After thirteen months and NOK 400 million in losses, Color Air gave up and filed for bankruptcy. The price war cost the three airlines more than NOK 3 billion, and ultimately forced the other two to merge.
Service
All flights were based at Oslo Airport, Gardermoen. For the summer routes of 1999, Color Air operated four daily round trips to Ålesund Airport, VigraÅlesund Airport, Vigra
Ålesund Airport, Vigra is an airport which serves the city of Ålesund in Norway and the surrounding regions Sunnmøre, Nordfjord and Romsdal. The airport is located on the island of Vigra in the Giske municipality, northeast of Ålesund city centre and easily accessible through underseas tunnels...
, and five daily round trips to Bergen Airport, Flesland
Bergen Airport, Flesland
Bergen Airport, Flesland is an international airport located southwest of Bergen, Norway. Opened in 1955, it is the second-busiest airport in Norway, with 5,296,325 passengers in 2010. Flesland is operated by the state-owned Avinor...
and Trondheim Airport, Værnes
Trondheim Airport, Værnes
Trondheim Airport, Værnes is an international airport located in Stjørdal, east of Trondheim, Norway. Operated by the state-owned Avinor, it shares facilities with Værnes Air Station of the Royal Norwegian Air Force. In 2010, the airport had 3,521,734 passengers and 55,747 air movements,...
. In addition, there was a single daily round trip to London Stansted Airport
London Stansted Airport
-Cargo:-Statistics:-Infrastructure:-Terminal and satellite buildings:Stansted is the newest passenger airport of all the main London airports. The terminal is an oblong glass building, and is separated in to three areas: Check-in concourse, arrivals and departures...
, and a weekly round trip to Alicante Airport
Alicante Airport
Alicante Airport , , originally named El Altet, is the sixth busiest airport in Spain, and the main airport for the Province of Alicante and the Region of Murcia. The airport is situated southwest of Alicante and east of Elche in the municipality of Elche on Mediterranean coast. Up to eighty...
. From each domestic destination, flights were made to correspond with the Color Line cruiseferries
Cruiseferry
A cruiseferry is a ship that combines the features of a cruise ship with a Ro-Pax ferry. Many passengers travel with the ships for the cruise experience, staying only a few hours at the destination port or not leaving the ship at all, while others use the ships as means of...
departing from Oslo to Kiel
Kiel
Kiel is the capital and most populous city in the northern German state of Schleswig-Holstein, with a population of 238,049 .Kiel is approximately north of Hamburg. Due to its geographic location in the north of Germany, the southeast of the Jutland peninsula, and the southwestern shore of the...
, Germany, and Hirtshals
Hirtshals
Hirtshals is a town in Hjørring municipality in Region Nordjylland on the north coast of the island of Vendsyssel-Thy at the top of the Jutland peninsula in northern Denmark, Europe.-The town of Hirtshals:...
, Denmark.
Color Air had only one seating class, offered no on-board beverages and had no frequent flyer program or lounges. Color Air had an agreement for tickets to be sold at the Rimi supermarkets, as well as by phone and Internet. If bought at a travel agency
Travel agency
A travel agency is a retail business that sells travel related products and services to customers on behalf of suppliers such as airlines, car rentals, cruise lines, hotels, railways, sightseeing tours and package holidays that combine several products...
, there was a NOK 200 surcharge. This was because Color Air was not linked to the Amadeus
Amadeus CRS
Amadeus is a computer reservations system owned by the Amadeus IT Group with headquarters in Madrid, Spain. The central database is located at Erding, Germany. The development center is located at Sophia Antipolis, France...
booking system, owing to the costs associated with membership.
Fleet
The airline had three Boeing 737-300 aircraft, built in 1994. Originally fitted with 136 seats each, they were later reduced to 124, and then increased to 142. The aircraft were owned by International Lease Finance CorporationInternational Lease Finance Corporation
The International Lease Finance Corporation is an aircraft lessor headquartered in Century City, Los Angeles, California.It is the world's largest aircraft lessor by value, though ILFC's rival, General Electric's GECAS unit, has more aircraft...
and General Electric Capital, and cost NOK 2.25 million per month to lease, plus additional costs per hour. They were British-registered and operated by Air Foyle HeavyLift
Air Foyle HeavyLift
For the Australian Cargo Airline see: HeavyLift Cargo AirlinesAir Foyle HeavyLift was an aviation company based in Bishop's Stortford, United Kingdom. It specialized in heavy air cargo services. It was the worldwide sales agent for Antonov Airlines of Kiev, Ukraine...
, while maintenance was performed by British Midland
Bmi (airline)
British Midland Airways Limited , is an airline based at Donington Hall in Castle Donington in the United Kingdom, close to East Midlands Airport, and a fully owned subsidiary of Lufthansa...
. Both companies are based in the United Kingdom. Ground handling was carried out by SAS Ground Services
SAS Ground Services
SAS Ground Handling is Europe's third largest full-service provider of aircraft ground handling and airport related services. SAS Ground Handling is the largest ground handling company in Scandinavia....
in Trondheim, Bergen and Ålesund, and by Servisair
Servisair
Servisair is an aircraft ground handling company, operating at 175 airports worldwide.It is a subsidiary of Derichebourg. Its head office is in the Servisair House in Runcorn, Cheshire...
in Oslo.
Destinations
| City | Country | IATA IATA airport code An IATA airport code, also known an IATA location identifier, IATA station code or simply a location identifier, is a three-letter code designating many airports around the world, defined by the International Air Transport Association... |
ICAO ICAO airport code The ICAO airport code or location indicator is a four-character alphanumeric code designating each airport around the world. These codes are defined by the International Civil Aviation Organization, and published in ICAO Document 7910: Location Indicators.The ICAO codes are used by air traffic... |
Airport |
|---|---|---|---|---|
| Ålesund Ålesund is a town and municipality in Møre og Romsdal county, Norway. It is part of the traditional district of Sunnmøre, and the center of the Ålesund Region. It is a sea port, and is noted for its unique concentration of Art Nouveau architecture.... |
Norway Norway Norway , officially the Kingdom of Norway, is a Nordic unitary constitutional monarchy whose territory comprises the western portion of the Scandinavian Peninsula, Jan Mayen, and the Arctic archipelago of Svalbard and Bouvet Island. Norway has a total area of and a population of about 4.9 million... |
AES | ENAL | Ålesund Airport, Vigra Ålesund Airport, Vigra Ålesund Airport, Vigra is an airport which serves the city of Ålesund in Norway and the surrounding regions Sunnmøre, Nordfjord and Romsdal. The airport is located on the island of Vigra in the Giske municipality, northeast of Ålesund city centre and easily accessible through underseas tunnels... |
| Alicante Alicante Alicante or Alacant is a city in Spain, the capital of the province of Alicante and of the comarca of Alacantí, in the south of the Valencian Community. It is also a historic Mediterranean port. The population of the city of Alicante proper was 334,418, estimated , ranking as the second-largest... |
Spain Spain Spain , officially the Kingdom of Spain languages]] under the European Charter for Regional or Minority Languages. In each of these, Spain's official name is as follows:;;;;;;), is a country and member state of the European Union located in southwestern Europe on the Iberian Peninsula... |
ALC | LEAL | Alicante Airport Alicante Airport Alicante Airport , , originally named El Altet, is the sixth busiest airport in Spain, and the main airport for the Province of Alicante and the Region of Murcia. The airport is situated southwest of Alicante and east of Elche in the municipality of Elche on Mediterranean coast. Up to eighty... |
| Bergen Bergen Bergen is the second largest city in Norway with a population of as of , . Bergen is the administrative centre of Hordaland county. Greater Bergen or Bergen Metropolitan Area as defined by Statistics Norway, has a population of as of , .... |
Norway Norway Norway , officially the Kingdom of Norway, is a Nordic unitary constitutional monarchy whose territory comprises the western portion of the Scandinavian Peninsula, Jan Mayen, and the Arctic archipelago of Svalbard and Bouvet Island. Norway has a total area of and a population of about 4.9 million... |
BGO | ENBR | Bergen Airport, Flesland Bergen Airport, Flesland Bergen Airport, Flesland is an international airport located southwest of Bergen, Norway. Opened in 1955, it is the second-busiest airport in Norway, with 5,296,325 passengers in 2010. Flesland is operated by the state-owned Avinor... |
| London London London is the capital city of :England and the :United Kingdom, the largest metropolitan area in the United Kingdom, and the largest urban zone in the European Union by most measures. Located on the River Thames, London has been a major settlement for two millennia, its history going back to its... |
United Kingdom United Kingdom The United Kingdom of Great Britain and Northern IrelandIn the United Kingdom and Dependencies, other languages have been officially recognised as legitimate autochthonous languages under the European Charter for Regional or Minority Languages... |
STN | EGSS | London Stansted Airport London Stansted Airport -Cargo:-Statistics:-Infrastructure:-Terminal and satellite buildings:Stansted is the newest passenger airport of all the main London airports. The terminal is an oblong glass building, and is separated in to three areas: Check-in concourse, arrivals and departures... |
| Oslo Oslo Oslo is a municipality, as well as the capital and most populous city in Norway. As a municipality , it was established on 1 January 1838. Founded around 1048 by King Harald III of Norway, the city was largely destroyed by fire in 1624. The city was moved under the reign of Denmark–Norway's King... |
Norway Norway Norway , officially the Kingdom of Norway, is a Nordic unitary constitutional monarchy whose territory comprises the western portion of the Scandinavian Peninsula, Jan Mayen, and the Arctic archipelago of Svalbard and Bouvet Island. Norway has a total area of and a population of about 4.9 million... |
OSL | ENGM | Oslo Airport, Gardermoen Oslo Airport, Gardermoen Oslo Airport, Gardermoen is the principal airport serving Oslo, Norway. It acts as the main domestic hub and international airport for Norway, and the second-busiest airport in the Nordic countries. A hub for Scandinavian Airlines and Norwegian Air Shuttle, and a focus city for Widerøe, it is... |
| Trondheim Trondheim Trondheim , historically, Nidaros and Trondhjem, is a city and municipality in Sør-Trøndelag county, Norway. With a population of 173,486, it is the third most populous municipality and city in the country, although the fourth largest metropolitan area. It is the administrative centre of... |
Norway Norway Norway , officially the Kingdom of Norway, is a Nordic unitary constitutional monarchy whose territory comprises the western portion of the Scandinavian Peninsula, Jan Mayen, and the Arctic archipelago of Svalbard and Bouvet Island. Norway has a total area of and a population of about 4.9 million... |
TRD | ENVA | Trondheim Airport, Værnes Trondheim Airport, Værnes Trondheim Airport, Værnes is an international airport located in Stjørdal, east of Trondheim, Norway. Operated by the state-owned Avinor, it shares facilities with Værnes Air Station of the Royal Norwegian Air Force. In 2010, the airport had 3,521,734 passengers and 55,747 air movements,... |
Background
With Norway joining the European Economic AreaEuropean Economic Area
The European Economic Area was established on 1 January 1994 following an agreement between the member states of the European Free Trade Association and the European Community, later the European Union . Specifically, it allows Iceland, Liechtenstein and Norway to participate in the EU's Internal...
, the Norwegian airline market was deregulated
Deregulation
Deregulation is the removal or simplification of government rules and regulations that constrain the operation of market forces.Deregulation is the removal or simplification of government rules and regulations that constrain the operation of market forces.Deregulation is the removal or...
from 1 April 1994. While airlines formerly needed a concession
Concession (contract)
A concession is a business operated under a contract or license associated with a degree of exclusivity in business within a certain geographical area. For example, sports arenas or public parks may have concession stands. Many department stores contain numerous concessions operated by other...
from the Ministry of Transport
Norwegian Ministry of Transport and Communications
The Royal Norwegian Ministry of Transportation and Communications is a Norwegian ministry established in 1946, and is responsible for transportation and communication infrastructure in Norway. It is led by Magnhild Meltveit Kleppa...
to fly a particular route, they could now compete freely on any domestic or international routes. Previously the two major airlines Scandinavian Airlines System
Scandinavian Airlines System
Scandinavian Airlines or SAS, previously Scandinavian Airlines System, is the flag carrier of Denmark, Norway and Sweden, and the largest airline in Scandinavia....
(SAS) and Braathens SAFE each had their own routes, but from 1994 both established themselves on several of the main-haul routes.
With increased traffic, there soon became a capacity problem at Oslo Airport, Fornebu
Oslo Airport, Fornebu
Oslo Airport, Fornebu was the main airport serving Oslo and Eastern Norway from 1 June 1939 to 7 October 1998. It was then replaced by Oslo Airport, Gardermoen and the area has since been redeveloped. The airport was located at Fornebu in Bærum, from the city center. Fornebu had two runways, one...
, the main hub
Airline hub
An airline hub is an airport that an airline uses as a transfer point to get passengers to their intended destination. It is part of a hub and spoke model, where travelers moving between airports not served by direct flights change planes en route to their destinations...
for both SAS and Braathens. During the peak times during the morning and afternoon rush, there were no excess slots for new airlines. To compensate, the Norwegian Airport Administration
Avinor
Avinor AS is a state owned limited company in that operates most of the civil airports in Norway. The Norwegian state, via the Norwegian Ministry of Transport and Communications controls 100 percent of the share capital. Avinor was created on 1 January 2003, by the privatization of the...
was building a new main airport for Eastern Norway, to be located at Gardermoen
Oslo Airport, Gardermoen
Oslo Airport, Gardermoen is the principal airport serving Oslo, Norway. It acts as the main domestic hub and international airport for Norway, and the second-busiest airport in the Nordic countries. A hub for Scandinavian Airlines and Norwegian Air Shuttle, and a focus city for Widerøe, it is...
. A larger terminal and two runways would give ample room for expansion, and entry of new airlines. The new airport opened on 8 October 1998.
Establishment
In January 1998, Olav Nils Sunde announced that he would establish a low-cost airline following the opening of the new airport. The company would be led by CEO Morten Andersen, who previously had been CEO of Norway AirlinesNorway Airlines
Norway Airlines was a Norwegian airline based in Oslo, Norway. The airline was established in 1987, with its first route from Oslo Airport, Fornebu, to London Gatwick...
, and the lawyer
Lawyer
A lawyer, according to Black's Law Dictionary, is "a person learned in the law; as an attorney, counsel or solicitor; a person who is practicing law." Law is the system of rules of conduct established by the sovereign government of a society to correct wrongs, maintain the stability of political...
Stein Øxseth. Sunde would own 92% of the company through his shipping company Larvik Scandi Line, while Andersen and Øxseth would own 4% each. The company would be a brand extension
Brand extension
Brand extension or brand stretching is a marketing strategy in which a firm marketing a product with a well-developed image uses the same brand name in a different product category. The new product is called a spin-off. Organizations use this strategy to increase and leverage brand equity...
of Sunde's shipping company Color Line. The company aimed at a 15–20% market share
Market share
Market share is the percentage of a market accounted for by a specific entity. In a survey of nearly 200 senior marketing managers, 67 percent responded that they found the "dollar market share" metric very useful, while 61% found "unit market share" very useful.Marketers need to be able to...
, with 1.4 million passengers annually. It was the first low-cost airline in Norway. The company launched tickets down to NOK 500 each way, and sold cheap tickets without demanding that the traveler be away during a weekend. Color Air made an agreement with the British airline Air Foyle HeavyLift
Air Foyle HeavyLift
For the Australian Cargo Airline see: HeavyLift Cargo AirlinesAir Foyle HeavyLift was an aviation company based in Bishop's Stortford, United Kingdom. It specialized in heavy air cargo services. It was the worldwide sales agent for Antonov Airlines of Kiev, Ukraine...
to operate a fleet of Boeing 737-300 aircraft.
Tacit collusion
Tacit collusion occurs when cartels are illegal or overt collusion is absent. Put another way, two firms agree to play a certain strategy without explicitly saying so. Oligopolists usually try not to engage in price cutting, excessive advertising or other forms of competition. Thus, there may be...
to increase the prices to Northern Norway, and thereby subsidize their routes in Southern Norway. Color Air, on the other hand, would be forced to put the full tax on all its departures. While the government had no way to hinder the incumbents from doing this, Gudmund Restad
Gudmund Restad
Gudmund Restad is a politician for the Norwegian Centre Party. He was Minister of Finance 1997-2000.-References:...
, Minister of Finance
Minister of Finance (Norway)
- 1st Ministry :- 5th Ministry :- Ministry of Finance, Trade and Customs :- Ministry of Finance and Customs :- Ministry of Finance :...
from the Centre Party
Centre Party (Norway)
The Centre Party is a centrist and agrarian political party in Norway, founded in 1920. The Centre Party's policy is not based on any of the major ideologies of the 19th and 20th century, but has a focus on maintaining decentralised economic development and political decision-making.From its...
, encouraged the airlines to not "cheat", and follow the intentions of the law, even if he admitted that there was nothing the government could do to hinder the airlines from cross-subsidizing.
The contract to lease two Boeing 737-300 aircraft from 1994 was made with International Lease Finance Corporation
International Lease Finance Corporation
The International Lease Finance Corporation is an aircraft lessor headquartered in Century City, Los Angeles, California.It is the world's largest aircraft lessor by value, though ILFC's rival, General Electric's GECAS unit, has more aircraft...
in May. Maintenance was outsourced to a British company, after Braathens, which also operated 737 Classic
Boeing 737 Classic
The Boeing 737 Classic is the name given to the -300/-400/-500 series of the Boeing 737 following the introduction of the -600/-700/-800/-900 series. They are short- to medium- range, narrow-body jet airliners produced by Boeing Commercial Airplanes. The Classic series was introduced as the 'new...
aircraft, had denied Color Air the use of its simulators and technical workshops. For the start-up, Color Air hired 18 pilots, 40 flight attendants and 40 ground employees, in addition to the administration. The company was criticized for only hiring women flight attendants. Braathens operated with an internal pension
Pension
In general, a pension is an arrangement to provide people with an income when they are no longer earning a regular income from employment. Pensions should not be confused with severance pay; the former is paid in regular installments, while the latter is paid in one lump sum.The terms retirement...
age of 58 years for its pilots, while SAS had a 60 year age limit. Due to EEA rules, the judicial age limit was 65 years, so Color Air was able to hire retired SAS and Braathens pilots. These could be paid only NOK 500,000 in annual wage, since they received a full pension from their old employers on top of it. The Norwegian Airline Pilots Association
Norwegian Airline Pilots Association
The Norwegian Airline Pilots Association is a trade union of civil airline pilots in Norway.It was established as a merger in 1977. It has about 1300 members, and had its headquarters at Oksenøya near Fornebu...
stated that this was morally reprehensible, but Color Air was supported by the Norwegian Civil Aviation Authority, medical experts, and SAS, who all claimed that there were no medical reasons to not let people in their 60s operate aircraft.
Start of operation
The first aircraft was delivered on 1 August 1998. While the new airport at Gardermoen would not officially open until 8 October, when also SAS and Braathens would move to the airport, Color Air started flights from Gardermoen to Ålesund Airport, VigraÅlesund Airport, Vigra
Ålesund Airport, Vigra is an airport which serves the city of Ålesund in Norway and the surrounding regions Sunnmøre, Nordfjord and Romsdal. The airport is located on the island of Vigra in the Giske municipality, northeast of Ålesund city centre and easily accessible through underseas tunnels...
on 6 August. Flights to Trondheim Airport, Værnes
Trondheim Airport, Værnes
Trondheim Airport, Værnes is an international airport located in Stjørdal, east of Trondheim, Norway. Operated by the state-owned Avinor, it shares facilities with Værnes Air Station of the Royal Norwegian Air Force. In 2010, the airport had 3,521,734 passengers and 55,747 air movements,...
commenced on 8 August, while the Bergen Airport, Flesland
Bergen Airport, Flesland
Bergen Airport, Flesland is an international airport located southwest of Bergen, Norway. Opened in 1955, it is the second-busiest airport in Norway, with 5,296,325 passengers in 2010. Flesland is operated by the state-owned Avinor...
-route started 15 August. After a week, very few passengers were traveling with Color Air, with two at the least and twenty-four at the most per departure. Color Air was losing NOK 650,000 per week of operation.
The pricing scheme was based on tickets for NOK 399, 499, 599 and 699, plus NOK 71 in taxes. At least ten tickets were available at the lowest price per departure, and the first to order were granted the cheapest tickets. Tickets had no restrictions on cancellation, and were not subject to restrictions on return dates.
With the opening of Gardermoen, both Braathens and SAS increased the number of flights. Braathens established a route to Haugesund
Haugesund Airport, Karmøy
Haugesund Airport, Karmøy is the airport serving the city of Haugesund in Norway. It is located on the west side of the island and municipality of Karmøy, southwest of Haugesund. The airport was opened in 1975 and is operated by Avinor....
, while SAS started routes to Ålesund
Ålesund Airport, Vigra
Ålesund Airport, Vigra is an airport which serves the city of Ålesund in Norway and the surrounding regions Sunnmøre, Nordfjord and Romsdal. The airport is located on the island of Vigra in the Giske municipality, northeast of Ålesund city centre and easily accessible through underseas tunnels...
and Kristiansand
Kristiansand Airport, Kjevik
Kristiansand Airport, Kjevik is situated northeast of the city Kristiansand, Vest-Agder in southern Norway, located from the city centre. The airport serves the Agder district with domestic and international flights. In 2008 the airport had 915,092 passengers. The airport is operated by Avinor...
. The number of daily trips from Oslo for SAS increased from 59 to over 80. In total, the three companies increased their daily round trip from 138 to 200, and the daily seat capacity from 18,000 to 26,000. Ålesund had the largest increase, from seven daily round trips only with Braathens, to seventeen offered by all three companies. On the route to Trondheim, the number of departures had increased from 27 to 39, with Braathens operating 19, SAS 16 and Color Air 5. The increase in seats was profitable for the state; the new seat tax—which was also applicable to unsold seats—received an annual revenue increase of NOK 110 million.
The first plane planned to leave Gardermoen was an SAS aircraft. However, since it was 20 minutes delayed, a Color Air aircraft was instead the first to take off, at 06:52 on 8 August 1998. By the end of October, the airline had between 40 and 50% cabin load
Load factor (transportation)
Passenger load factor or load factoris a measure of the amount of utilisation of the total available capacity of a transport vehicle. It is useful for calculating the average occupancy on various routes of airlines, railway trains or bus...
, and the company stated that it needed "slightly more than 50%" to make a profit. It also announced that it would receive three more aircraft to supplement the two it had in service. Instead of starting a route to Stavanger
Stavanger Airport, Sola
Stavanger Airport, Sola is an international airport located in Sola, Norway, southwest of Stavanger. It is Norway's third-busiest airport, with both fixed-wing aircraft and helicopter traffic for the offshore North Sea oil installations...
, the company instead chose to open a route to London Stansted Airport
London Stansted Airport
-Cargo:-Statistics:-Infrastructure:-Terminal and satellite buildings:Stansted is the newest passenger airport of all the main London airports. The terminal is an oblong glass building, and is separated in to three areas: Check-in concourse, arrivals and departures...
starting 1 December. The airline stated that it did not have sufficient aircraft do make more than two round trips to Stavanger, and that this would be too little to be a credible operator on the route.
Price war
In November, Color Air changed the conditions tied to purchase of tickets. Reduced price tickets were only available seven days or more before departure, and only full-price tickets could be refunded. At the same time, the maximum price increased to NOK 870, though all ticket prices were changed to include all taxes, after requirements from the authorities. A new, cheapest ticket was introduced at NOK 345, including taxes. After the winter settled, the front between Color Air and Braathens grew colder following Braathens' denying Color Air to use their deicingDeicing
For snow and ice control on roadways and similar facilities, see Snow removalDe-icing is defined as removal of snow, ice or frost from a surface...
equipment at Ålesund, resulting in the plane being stuck at the airport.
In November, Color Air transported 102,544 passengers. From mid-December, the company had a time-limited offer of tickets for NOK 200.
In September, the ownership of Color Air was rearranged. Sunde reallocated his ownership and created Color Group, that would wholly own both Color Line, Scandi Line, Larvik Line and Color Air. Sunde retained a 77% ownership in the corporation through Larvik Scandi Line. The group was subsequently listed on the Oslo Stock Exchange
Oslo Stock Exchange
The Oslo Stock Exchange serves as the main market for trading in the shares of Norwegian companies. It opens at 9:00am and closes 5:30pm local time...
. In the general meeting held in December, two of the largest owners of Color Line, Vital Forsikring
Vital Forsikring
Vital Forsikring ASA, branded as Vital is Norway's largest life insurance and pension insurance company, and part of the DnB NOR Group. Though Vital has roots back to 1847, it was created in its present form by a merger between Vital and Gjensidige NOR's life insurance section after the mother...
and the Government Pension Fund of Norway
The Government Pension Fund of Norway
The Government Pension Fund of Norway comprises two entirely separate sovereign wealth funds owned by the Government of Norway:* The Government Pension Fund - Global...
, both were opposed to the merger, as they felt the purchased companies were overvalued. Color Air was at the time valuated at NOK 157 million. After a long process between the miniority shareholders and Color Group, the valuation was adjusted to NOK 108 million. In May, Olav Nils Sunde bought the entire Color Group, and delisted it from the stock exchange following the conflict with the other shareholders.
By the end of 1998, it became clear that Braathens had increased capacity by 20%, but only achieved a 5.2% ridership increase after the opening of Gardermoen. Similar numbers were applicable for SAS. The business market, in particular the large corporations with divisions in several large cities, were demanding high frequencies on the routes. Color Air could get by with fewer departures because they mainly targeted the leisure segment. In particular, the routes from Oslo to Ålesund and Kristiansand had a very low seat utilization; to Ålesund there were 1.2 million seats annually, but only 345,000 passengers, giving a 29% cabin load. Accumulated cabin load for Color Air was 32%, with 116,176 passengers. In the course of the last quarter of 1998, Color Air lost NOK 91 million, or NOK 1 million each day. For the whole year, Color Air had an average ticket price of NOK 453, giving a revenue of NOK 57 million. NOK 45 million was used on taxes, giving NOK 12 million to cover operating costs of NOK 209 million. The company lost NOK 197 million in 1998.
In February 1999, Braathens announced that they would re-register all their planes in Sweden to avoid having to pay value added tax
Value added tax
A value added tax or value-added tax is a form of consumption tax. From the perspective of the buyer, it is a tax on the purchase price. From that of the seller, it is a tax only on the "value added" to a product, material or service, from an accounting point of view, by this stage of its...
on catering and fuel. Color Air and SAS, who had their planes registered abroad, had gotten away without paying the taxes, since it only applied to Norway-registered planes. Following this announcement, the Ministry of Finance
Norwegian Ministry of Finance
The Royal Norwegian Ministry of Finance is a Norwegian ministry established in 1814. The ministry is responsible for state finance, including the state budget, taxation and economic policy in Norway. It is led by Sigbjørn Johnsen...
changed the rules so also foreign-owned planes had to pay the tax. The change in rules cost Color Air NOK 10 million per plane per year. From 1 July 1999, the seat tax was removed, but replaced by an equivalent tax for each passenger. This made it cheaper to fly an empty plane, but more expensive to fly a full one. Color Air had reduced the number of seats in each plane to avoid the seat tax, but increased them again after the tax was removed.
In the first quarter of 1999, Color Air transported 100,472 passengers. This gave a cabin load of 35%, of which the Trondheim route had 40% and the Ålesund route 32%. This gave a the airline a deficit of NOK 92 million. SAS lost NOK 22 million, while Braathens had lost NOK 300 million. In comparison, both Braathens and SAS Norway made a NOK 320 million profit in the first quarter of 1998.
On 1 April, Color Air won a two-year contract with Norway Post for all air mail from Oslo to Trondheim and Ålesund. On 10 April, Color Air started a weekly round trip each Saturday to Alicante Airport
Alicante Airport
Alicante Airport , , originally named El Altet, is the sixth busiest airport in Spain, and the main airport for the Province of Alicante and the Region of Murcia. The airport is situated southwest of Alicante and east of Elche in the municipality of Elche on Mediterranean coast. Up to eighty...
in Spain. On 12 April, Ove Johan Solem took over as CEO of Color Air. In May, the company increased the cabin load from 38 to 48%, with ridership increasing from 33,978 to 44,081. These numbers also included a change in the number of seats per plane. The following month, 46,777 people traveled with the airline. By the end of July, Color Air had lost NOK 350 million. However, in July, Color Air had a cabin load exceeding 50%, the level Sunde had stated was necessary to make a profit.
In September, SAS announced that if Braathens took the first step to reduce capacity between Bergen and Oslo, they would follow immediately to reduce the overcapacity in the combined 37 daily departures. However, Braathens was not willing to reduce. On 15 September, Color Air announced that they would start flying five round trips from Oslo to Stavanger Airport, Sola
Stavanger Airport, Sola
Stavanger Airport, Sola is an international airport located in Sola, Norway, southwest of Stavanger. It is Norway's third-busiest airport, with both fixed-wing aircraft and helicopter traffic for the offshore North Sea oil installations...
on 1 October, following the delivery of their fourth aircraft. At the same time, the airline would reduce the number of round trips to Ålesund from four to two. The load factor in August was 43%, and management stated that 50% load would not be sufficient to make money. In particular, the company stated that while aircraft were full during the weekends, the company was not succeeding at garnering the necessary business ridership to fill up the planes during the weekdays. To become more attractive, the company changed its fares to two classes: Business Full Flex and Saver No Flex. The company also stated that to attract more business travelers, it was looking for an international parter to conduct codesharing on international routes, and perhaps also introduce a frequent flyer program
Frequent flyer program
A frequent flyer program is a loyalty program offered by many airlines. Typically, airline customers enrolled in the program accumulate frequent flyer miles corresponding to the distance flown on that airline or its partners. There are other ways to accumulate miles...
alone or in cooperation with the partner.
Bankruptcy
On 27 September 1999, Color Air terminated all flights and ceased operations. Sunde stated that he regretted having started the airline, and said that he had overestimated the synergies between his ferry company and the airline, but also underestimated the price elasticityElasticity (economics)
In economics, elasticity is the measurement of how changing one economic variable affects others. For example:* "If I lower the price of my product, how much more will I sell?"* "If I raise the price, how much less will I sell?"...
for business travel. In particular, the frequent flyer programs that SAS and Braathens had made it difficult to convince corporate travelers to switch to Color Air. Sunde believed that the company would continue to lose money in 2000. 220 employees lost their jobs, while Color Group estimated it lost NOK 400 million on the airline. There were discussions concerning cooperation with, or a take-over by, British Airways
British Airways
British Airways is the flag carrier airline of the United Kingdom, based in Waterside, near its main hub at London Heathrow Airport. British Airways is the largest airline in the UK based on fleet size, international flights and international destinations...
, but these discussions did not lead to an agreement. In total, Color Air flew 430,000 passengers, effectively subsidizing each passenger with almost NOK 1000. The company was not declared bankrupt, as Sunde wanted to insure his good reputation by paying everyone he owed money. While this was about NOK 10 million in airport fees and smaller sums to other parties, the largest creditors were the two aircraft leasing companies, to whom NOK 270 million was owed for the rest of the rental period. The 20,000 people who had tickets with Color Air were all rebooked onto Braathens flights. After NOK 170 million in debt was registered by the company, and assets were only worth NOK 17 million, Color Air was declared bankrupt on 10 November 1999.
On the day of the termination, the stock price of Braathens increased by 16%, while SAS's increased 3%. Immediately following the bankruptcy, the two airlines increased their prices. Subsequently, Braathens increased their ticket price by 15%, but stated that this had nothing to do with the elimination of competition, since the price increase was not on any Oslo routes. In November, Braathens started to remove routes, and announced they would increase prices by 20%. They also reintroduced the Flag of Norway
Flag of Norway
The flag of Norway is red with an indigo blue Scandinavian cross outlined in white that extends to the edges of the flag; the vertical part of the cross is shifted to the hoist side in the style of the Dannebrog, the flag of Denmark.- History :...
on the tailplane
Tailplane
A tailplane, also known as horizontal stabilizer , is a small lifting surface located on the tail behind the main lifting surfaces of a fixed-wing aircraft as well as other non-fixed wing aircraft such as helicopters and gyroplanes...
that since the rebranding had been replaced by a silver, abstract wing. Both Braathens and SAS lost more than NOK 1 billion in 1999, and the total cost of the price war between the three airlines exceeded NOK 3 billion.
External links
- Official site archived on the Wayback Machine
- Official site archived on the Wayback Machine