Braathens SAFE's domestic market was deregulated on 1 April 1994. Since then, any airline within the European Economic Area is free to operate any domestic or international route. Braathens rejected a proposal from the main competitor Scandinavian Airlines System (SAS) for a merger; instead the helicopter division was sold and the company listed on the Oslo Stock Exchange. New routes were opened from Oslo Airport, Fornebu to Bodø, Harstad/Narvik and Tromsø, but the routes from Bergen to these cities were terminated. International routes to Rome, Nice and Jersey were introduced. In 1996, Braathens SAFE bought Sweden's second-largest airline, Transwede, and started flying on the Oslo–Stockholm route. The following year, Transwede, with its five domestic routes, was merged into Braathens SAFE. The same year, KLM bought 30% of Braathens SAFE and the airlines started a partnership.

In 1998, the airline changed its name to Braathens and introduced two-class cabins. Full-fare passengers traveled in the "Best"-class, while discounted travelers traveled in the "Back"-class. It also bought the Swedish airline Malmö Aviation. Oslo Airport, Gardermoen replaced Fornebu as the airline's main hub, and a price war started against SAS and the new low-cost airline Color Air. The availability of slots increased the frequency of flights for all three airlines to an unsustainable level. After a year, Color Air was bankrupt, but Braathens had suffered large losses, and terminated many routes, including all services in Sweden. In 2001, the airline was bought by SAS, and the following year the two coordinated their services so as not to compete. On 1 May 2004, they merged to create SAS Braathens, that re-branded to Scandinavian Airlines in 2007.

Deregulation

The deregulation process, which would eliminate the need for concessions for routes, was driven by Norway's application for membership of the EU. This was supported by the Labor Party and the right-winged Conservative Party and Progress Party. The plans from the EU indicated that international routes within EU should be deregulated from 1 January 1993, with Norway and Sweden joining from 1 July. Full, domestic liberalization should be performed by 1 April 1997. SAS and Braathens SAFE proposed a solution where only Norwegian airlines could compete until 1997, which was thought to efficiently hinder other airlines, rather than these two, until then. SAS announced its support for competition on 4 February 1993, while Braathens SAFE stated that it no longer was in favor of competition, despite having arguing for this for the whole of the company's history. The company stated that stability was needed and that competition would result in marginalized routes, that were being cross-subsidized, being closed. SAS stated that with competition, prices would fall 20–30%, and that SAS wanted to operate with a loss to force Braathens SAFE close services.Tjomsland and Wilsberg, 1995: 320–322

During the discussion about deregulation, Braathens SAFE considered several possibilities to strengthen itself. In particular, it had discussions with the large European airlines Lufthansa, British Airways and KLM about an alliance, but these were rejected by Braathens SAFE, stating that the agreements were all about getting traffic to the partner's hub. Minister of Transport, Kjell Opseth and director of SAS in Norway, Jan Reinås, both proposed a merger between Braathens SAFE and SAS, to ensure that the company had a 100% market share on the primary routes before the merger. This would, according to them, secure that no foreign company could compete with the merged company. The proposal was rejected by Braathens SAFE's management. Still, negotiations started between the companies in 1992, although they were quickly abandoned. The press reported the price of Braathens SAFE to be NOK 1.2 billion, but that this had been rejected as too expensive by SAS.Tjomsland and Wilsberg, 1995: 308–317

Prior to a government report being presented on 30 March 1993, SAS had launched 1 November 1993 as their preferred date of free competition, while Braathens SAFE had launched 1 April 1997 as their preferred date. Braaathens SAFE was worried that the high debt the company had due to the purchase of new aircraft would make them illiquid in a price war. Bjørn G. Braathen stated that the company had bought the new aircraft based on the belief that deregulation would occur in 1997, giving the airline time to pay more of the debt. On 2 June 1993, with 76 against 18 votes, parliament voted to deregulate the domestic airline market from 1 April 1994. It was supported by the Labor, Conservative and Progress Party. With this, Norway became the third country in Europe to fully deregulate, after Sweden and the United Kingdom.Tjomsland and Wilsberg, 1995: 327–334

Both Braathens SAFE and SAS had been cross-subsidizing their routes. Through the regulations, the airlines had agreed to fly to unprofitable airports, in exchange for making higher profits on other routes. With free competition, this would not be followed, and the authorities announced the introduction of public service obligations on routes that were not profitable. To finance these, a NOK 10 fee would be charged on all primary routes. The cost of collecting this fee was so high that SAS and Braathens SAFE announced it was cheaper to continue to fly to the unprofitable airports. Braathens SAFE stated that their routes Haugesund–Bergen and Oslo–Røros–Trondheim were not profitable.Tjomsland and Wilsberg, 1995: 334–335

To meet the free market situation, the company's management introduced measures to keep costs low. On 19 August 1993, ten of eleven trade unions agreed to a three-year wage contract, which contained bonuses for all employees based on the company's profit. The cabin crew's union had a two-day strike, before reaching an agreement. At the same time, the company needed NOK 400 million in share capital. Braathens Rederi sold the sister company Braathens Helikopter to Helkopter Service for NOK 225 million on 30 September 1993, and the money was used to buy Braathens SAFE stock. The company raised further capital in an initial public offering, and the company was listed on the Oslo Stock Exchange on 10 January 1994. After the listing, Braathens Rederi retained 69% of the company.Tjomsland and Wilsberg, 1995: 336–339

On 1 April, Braathens SAFE increased the number of services. The daily number of flights from Oslo to Bergen increased to nine, and the airline introduced four new services to Northern Norway from Oslo: two each to Tromsø and Harstad/Narvik. Later, the frequency to Tromsø increased to four, and from 28 June there were also two daily round trips to Bodø. SAS increased its services on the routes from Oslo to Stavanger and Trondheim, and from Bergen to Stavanger. The liberalization did not result in a price war, and prices remained constant.Tjomsland and Wilsberg, 1995: 340–341 The following two years, Braathens SAFE also introduced scheduled international flights to Rome, as well as summer routes to Jersey and Nice. However, Braathens SAFE terminated their routes from Bergen to Bodø, Harstad/Narvik and Tromsø, making the passengers switch planes in Trondheim.

In 1995, Braathens signed agreements with many of the large companies in Norway as a prioritized airline. Several of the contracts had been secured by the airline offering discounts to the companies in exchange for not allowing their customers to collect frequent flyer points. SAS had not allowed this scheme, and had lost companies such as Statoil, Aker and the Government of Norway.

Expansion into Sweden

In 1996, Braathens SAFE started negotiations to purchase the Swedish airline Transwede Airways from its owners, Transpool. After SAS had bought Linjeflyg, Transwede had become the second-largest domestic airline in Sweden, operating five Fokker 100s. In 1995, Braathens SAFE had a revenue of NOK 4 billion, with a profit of NOK 242 million. The same year, Transwede had lost NOK 200 million with a revenue of NOK 1.2 billion. The company had been split in two, a charter and a scheduled company, and Braathens SAFE started negotiating to purchase the scheduled company. Transwede's scheduled services were at the time form Stockholm Arlanda Airport to Halmstad, Jönköping, Luleå, Sundsvall and Umeå, plus a service from Luleå to Sundsvall. It had a 13% market share, transporting 800,000 people in 1995, and had been through a major restructuring the year before, where the fleet had been reduced from seven to five aircraft.

On 18 June, Braathens SAFE announced that starting on 27 October, the company put one aircraft into service on the route from Oslo to Stockholm. SAS had at the time fifteen round trips on the route, and Braathens planned to introduce seven. The route was considered one of the most profitable for SAS. The purchase of Transwede was confirmed on 25 June; Braathens SAFE bought 50% of the company's scheduled division, Transwede Airways, with an option to purchase the rest in 1997. The companies planned to integrate their networks, to allow connection between Braathens SAFE's and Transwede flights at Stockholm. Services to Stockholm started on 6 November; after three months, the airline had captured 14% of the Oslo–Stockholm market. In 1996, Braathens SAFE had a 51% domestic market share in Norway, transporting 9.5 million passengers.

On 3 February 1997, the airline announced it had ordered six 134-seat Boeing 737-700 aircraft for NOK 1.5 billion. These aircraft would be delivered in 1998, prior to the opening of the new airport at Gardermoen. In addition, the airline had an option for additional ten planes to be delivered after 2000. In 1997, Transwede started replacing its Fokker 100s with Boeing 737s. In May 1997, Braathens SAFE was criticized by the Norwegian Airline Pilots Association because it was using retired Braathens SAFE pilots to fly Transwede aircraft, due to Transwede not having certified pilots for their new Boeing 737-300. Braathens SAFE stated that this was within the rules of the Swedish Civil Aviation Administration and the Joint Aviation Authorities.

In 1997, SAS announced that it was going to reduce its commission to travel agents from 9 to 5%. Braathens followed, reducing from 8 to 5% from 1 January 1998. However, to try to attract more business passengers, the airline retained the 8% commission on their international routes. At the same time, the Government of Norway abandoned its old regime of negotiating prices with the airlines for state-employed civil servants' flights. Instead, they introduced an annual tender for the routes. It was awarded to SAS, who also won all subsequent tenders. For Braathens SAFE, this meant that state-employed civil servants only flew on routes where SAS did not fly. The contract was worth NOK 500 million for SAS.

On 1 April 1997, the European airline market was fully deregulated. At this time, British Airways announced increased activity to Scandinavia, based in part on a cooperation with Braathens SAFE concerning their frequently flyer program; holders of Bracard were allowed to collect frequent flyer points on British Airways' flights. On 3 April, Braathens SAFE, Transwede and Finnair signed an agreement involving codesharing on Finnair's flights from Stockholm and Oslo to Helsinki, Bracard members would be granted points on Finnair flights, and Braathens SAFE took over Finnair's handling services in Oslo.

On 18 December, Braathens SAFE bought the remaining half of Transwede, paying 2 Swedish krona for the who company. However, due to an agreement about converting debt into share capital, the company was sold for SEK 13 million. With the take-over, the company changed its name to Braathens Sverige AB. At the same time, management announced that they planned to replace all the company's Fokker 100s with 737-300s.

Partnership and new identity