Norwegian show sky-high benefits of competition

Last week, the US Department of Transport gave approval to low cost airline Norwegian Air Shuttle to operate freely between the UK and the US, writes Joe Gill.

This followed earlier support for the carrier’s connections between Ireland and the US. It marks a significant advance in providing more competition on the fiercely contested North Atlantic air travel market.

There were plenty of opponents to Norwegian being given approval. Incumbents, especially in America, were unhappy at having their patch interfered with. Labour unions who oppose the Norwegian business model lobbied intensely against approval. Yet, the regulators and officials responsible for air travel in the US gave the go-ahead. Consumers should be cheering.

Competition is the lifeblood of efficient markets. It ensures that consumers are given ample choice which, in turn, helps provide lower prices and wider options. An individual consumer is in a weak position when up against the vast resources that vested interests can amass.

The vested interests, who usually are ensconced in the market with comfortable power and conditions, deploy PR and intense political pressure to keep the established structures in place.

You don’t have to look far to see how egregious this can be. Before the single aviation market was created in Europe, the market was defined by high absolute prices and very limited choices. For Irish consumers in particular, being on an island, it was a nightmare. It was the chattering and well-heeled classes that flew. The rest of us either did not fly or took the boat.

European liberalisation utterly changed all that by unleashing a wave of competition that brought down fares and increased choice.

Younger readers will hardly remember the crazy fares that existed in the 1980s. They may be lulled into thinking the existing system, which provides extraordinary value, is here forever. The fight Norwegian had to undertake should remind them otherwise.

Aside from the Atlantic routes, long haul competition has also provided tremendous competition to the East as Gulf carriers pursued ambitious growth plans. Here, too, vested interests have been busy at work. Some American and European incumbent airlines have lobbied hard to curtail and limit the expansion of middle eastern carriers.

When you hear voices calling for constraints on new competition, with arguments focused on spurious issues, the alarm bells should go off. Consumers need the power of liberal-minded politicians to champion their cause and combat those who want to limit choice.

Norwegian Air Shuttle is an example of the entrepreneurial spirit that has regularly bubbled up in the aviation industry. There is no doubt it is stretching its finances to achieve its goals. Ultimately, it may not succeed but its chutzpah has to be applauded.

Freddie Laker was killed off in the airline industry by the incumbents during the 1970s. Tony Ryan’s airline was almost wiped out in the 1980s. Richard Branson was attacked many times while trying to launch Virgin. All of these brought variety, choice, and most importantly, low fares. Supporting that spirit of competition is more important than ever, and needs to be defended to avoid a return to high fares and limited choice.

Norwegian Air Shuttle is now operating from Cork, Shannon, Dublin, and Belfast to the US.

It may or may not succeed with all of these routes but its willingness to commit resources to the Irish market while others shy away should be welcomed because it is part of a much deeper battle between those who covet competition and those who want a cosy life.

• Joe Gill is director of corporate broking with Goodbody Stockbrokers. His views are personal.