Icelandair's great dominance in scheduled flights to and from IcelandÍ decision The merger between WOW Air ehf. and Iceland Express ehf. is discussed in a report published today by the Competition Authority. Specifically, the report concerns the takeover of Iceland Express's operations by WOW Air, and the combined company is now operated under the WOW Air brand. The merger of the companies took place in October 2012, and they were granted an exemption from competition law to implement it while the Competition Authority reviewed it.
WOW Air began operations in the summer of 2012 and has since provided competition for other airlines on flights to and from Iceland. Prior to the merger, WOW Air and Iceland Express competed on seven scheduled routes to and from Iceland (including flights to Copenhagen and London). The airlines also offered flights to other destinations in competition with Icelandair and foreign airlines such as SAS and Air Berlin. In assessing the competitive effects of the merger, it was therefore necessary to consider scheduled flights as a whole between Iceland and destinations elsewhere in Europe on the one hand, and North America on the other. Information was, amongst other things, obtained to assess the size and market share on all scheduled flight routes to and from Keflavik for the years 2010, 2011 and part of 2012.
An investigation by the Competition Authority reveals Icelandair's significant dominance in scheduled flights to and from Iceland. This is largely due to the company's very high market share and even a monopoly on some of the main scheduled routes to and from the country. Icelandair's route network, which includes connecting flights between destinations in Europe and North America, also gives the company a significant market advantage. In this regard, it is also influential that the country's aviation authorities have granted Icelandair priority for the most important time slots at Reykjavik International Airport. This priority gives Icelandair a strong position and makes it very difficult for new entrants, for example, to start connecting flights to North America.
The Competition Authority's review of the airline market concludes that there is no reason to take action regarding the merger of WOW Air and Iceland Express. The authority considers that the merger will not result in the creation of a dominant market position for the combined company, strengthen such a position, or significantly harm competition. This applies even though there will be a considerable concentration on certain routes as a result of the merger, for example, on flights between Keflavik and Berlin. In this regard, Icelandair's dominant position and other factors set out in this decision are of great importance.
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