The effect of public ownership and deregulation in the Scandinavian airline industry

We analyse why deregulation resulted in a temporary strong reduction in prices in Sweden, whereas in Norway the prices did not change significantly. SAS and Linjeflyg merged when the Swedish market was deregulated, whereas attempts to merge SAS and Braathens SAFE did not succeed. Upon deregulation in Sweden some of the carriers operating charter markets or regional secondary routes decided to enter the main routes. This put pressure on prices. Similar entries did not take place in the Norwegian market. We analyse whether the duopoly between SAS and Braathens SAFE is characterised by tacit collusion.