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 loads 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, Vigra, 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.
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 Corporation 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.
Destinations CityCountryIATAICAOAirportÅlesund Norway AES ENAL Ålesund Airport, VigraAlicante Spain ALC LEAL Alicante AirportBergen Norway BGO ENBR Bergen Airport, FleslandLondon United Kingdom STN EGSS London Stansted Airport Oslo Norway OSL ENGM Oslo Airport, GardermoenTrondheim Norway TRD ENVA Trondheim Airport, Værnes
History
Background With Norway joining the European Economic Area, 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.
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 Airlines, 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.
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, Vigra 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.
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 deicing 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 minority 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.