I doubt very much that Norwegian flies between Copenhagen and Alborg, the domestic Danish market. Since Norwegian is not a Danish airline they are probably allowed some kind of 5th Freedom to fly from EKCH to KJFK or other airports inside of Denmark to places other than Norway.
Ryanair probably has some subsidiary based in Italy to allow them to fly within Italy if in fact they do fly FCO-MXP. Everyone knows they have pilot bases within Italy.
So SMT is saying any European airline can fly to any place within Europe but can they pick up and drop passengers within someone else's country? Can Air France fly LHR-MAN or can BA fly FRA-MUC? If so that is the exemption but I don't think any forgeign airline flies within the UK and I know some of the large aviation markets don't allow foreign airlines to fly within their borders. Australia, Canada, Japan and China are all examples.