I do not accept that this was done to “suffocate” Norwegian. That is simply your subjective view.
I do not accept that IAG want to “kill” Norwegian or that IAG wanted to buy Norwegian to “shut them down”. Again, this is simply a subjective view.
It's a subjective view held by every airline executive I know outside IAG, the trade press, and the vast majority of all airline analysts and consultants.
Successful businesses make money by offering a compelling product at a price that covers costs.
Unfortunately, successful businesses in less competitive industries frequently loss-lead to eliminate competitors through cross-subsidization and make up the losses by increasing margins even above prior levels once the competition is eliminated. This is common in numerous industries. There are numerous documented examples stretching over a hundred years into the past.
Buying a loss-making business, taking on its debt, and then shutting it down is a very expensive way of competing.
Again, there are numerous examples of where that has been done in the airlines business. Usually the wind-down takes a few years rather than an immediate shutdown. For example, Southwest essentially shut down Air Tran. It has retained very little of what was AirTran. The goal was to eliminate their low prices from East Coast routes. That was achieved.
In your post you show a fundamental misunderstanding of the way IAG is structured.
IAG is organized in a way that absolutely does NOT allow for cross-subsidisation. IAG requires each business to stand on its own two feet.
In order to prove that statement as anything other than a subjective view, you would need to show Level's financial results. Can you provide a link? If you cannot, then you have zero basis for that statement.
Additionally, you can cross-subsidize inside a single airline even more easily, and that is EXTREMELY common. For example, BA demonstrably lost tons of money flying to OAK, but cross-subsidized the losses from other BA markets.
BA, IB, EI, AA, VS, DL, UA and others are not obliged to simply give in.
When the regulatory powers allow more and more consolidations, they give the existing carriers greater and greater power to cross-subsidize. A start-up, by definition, can't cross-subsidize as they have no other operations yet. If that situation is allowed and mergers are allowed to continue, eventually you have one airline, or the prior phase (which is already full in effect) you must allow foreign companies to behave as national airlines by elimination of rules like cabotage. That is only a way-stop, however, as eventually even those carriers will merge as we are already seeing with a proliferation of cross-border investments and control regimens.
As I said, if IAG had based half a dozen widebodies at OSL, CPH, STO and HEL and gone head to head with Norwegian to NYC, BKK and DXB offering ‘bait and switch’ and below costs fares then that would have been a clear indication that IAG wanted to “suffocate” Norwegian.
However, BA operating from Gatwick to FLL and OAK and Level from BCN to JFK, BOS, SFO, BUE and SCL was simply IAG putting down a marker to say that in its home markets it was going to compete with Norwegian. These defensive actions were never going to “suffocate” or “kill” Norwegian.
I am in regular contact with airline executives, analysts and consultants and have never heard any of them express the view, subjective or otherwise, that IAG, BA or Iberia wants to “kill” Norwegian.
Arguably we’ve seen Norwegian loss-lead in an attempt to eliminate competitors. However, in a number of markets (eg Warsaw) Norwegian found its competitors to be more resilient than they anticipated and Norwegian gave up before the other airlines did.
From your comments it is clear that you do not understand how IAG is structured and how it works.
I recently retired after 37 years in the airline business. The last 32 years was in commercial roles, of which 27 years was at senior level at a number of Europe and US based airlines. I now do some airline commercial consultancy. I have worked very closely with IAG.
As I said, IAG requires each business to stand on its own two feet. Where a loss-making business unit cannot be moved into profitability it is closed down. At route level, where a route does not make money, action is taken to improve revenue, reduce costs or both. Unprofitable routes are not ‘cross-subsidised’ by profitable routes. Where a loss-making route cannot be moved into profitability it is terminated.
The EU is pro-consumer and pro-competition. EU competition law seeks to maintain competition and to protect consumers from anti-competitive behaviour. In the EU rules on acquisition it says: “…the entry of new competitors may be regarded as a competitive constraint which is sufficient to prevent or thwart the potential anti-competitive effects of the concentration.”
To enable competition, EU regulators have made their approval of an airline acquisition, merger or joint venture conditional on the removal of barriers to entry (those things that a prospective market entrant does not have control over, for example landing slots at slot-restricted airports).
EU approval of the BA acquisition of bmi was, amongst others things, conditional on BA releasing slots at Heathrow to enable other airlines to offer UK domestic services. See: https://ec.europa.eu/commission/pressco ... /IP_12_338
On that webpage you will find links to more detailed information.
Re your suggestion that eventually we will have one airline; economic theory says that if a company makes excess profits ("profit over and above what provides its owners with a normal [market equilibrium] return to capital") competitors will enter the market. That is, excess profits are unsustainable because they stimulate new supply, which forces down prices and eliminates the excess profit. In other words, if an airline is able to eliminate competitors, put up prices and make excess profits, then other airlines will see an opportunity to enter the market.
I don’t comment on something I don’t know a lot about, so I wouldn’t normally comment on Southwest and AirTran.
However, your claim about the Southwest acquisition of AirTran made me think of the “What did the Romans ever do for us” scene in ‘The Life of Brian’.
As in, ‘what does Southwest have to show for its acquisition of AirTran’.
How about: the AirTran customer database, the AirTran gates, the AirTran landing slots, the AirTran employees, the many routes that AirTran flew that Southwest did not (eg to / from and within Florida), the AirTran fleet of B737-700s, the AirTran B717s now making money on lease to Delta…..
Or, maybe Southwest did acquire AirTran to shut it down.
Ever since childhood, when I lived within sight of London Airport, I have seldom seen a plane go by and not wished I was on it.”
With apologies to Paul Theroux - ‘The Great Railway Bazaar’