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low cost carriers

Aug 6, 2017

Norwegian trips up on the way to whole new longer haul market

Norwegian has some bold ideas for shaking up longer distance low cost flying, despite hitting some financial turbulence

Norwegian will soon have 737 MAX 8’s like this doing trans Atlantic routes

About a year ago, Norwegian Air enjoyed a similar profile among European and North American carriers as the offshore sighting of a Viking raiding party would have had from an English North Sea facing fishing village in the medieval period.

Norwegian promised nothing less than rape and pillage in terms of what it set out to do, including exploiting the low wages and non-existent labor protections of its Irish base. It has many bases in the EU and in Thailand.

But it now transpires that while passengers increased by 19 percent over a year on its latest quarterly filing, they didn’t bring enough money with them to offset massive increases in the airline’s costs of doing business. The Norwegian kroner went south, fuel went north, lots of jets were ordered or received, and chief financial officer Frode Foss, who has been at Norwegian since 2002 also went.

The cautionary tale about the costs of Norwegian’s aggressive expansion in the North Atlantic and European markets is dissected by Air Finance Journal. (You can find a read-me-for-free option at the link.) Although this isn’t a postmortem and the Norwegian brand carried by the bright red nosed jets is very much alive, it’s now a bit anaemic.

Norwegian had 133 jets in its fleet up until the end of its last quarter, mainly 737-800s, but also a small number of 787-8s and -9s and the first two 737 MAX 8s, of  another 106 Boeing single aisle jets and a few dozen from Airbus’s A321 NEO line on order.

While consumer reports of its flights vary from ‘influencer’ social media posts declaring a new age of millennial friendly flights has opened (whatever that means) to the usual scathing stuff possibly posted by ‘anti-influencers’ Norwegian gets positive wraps for offering an amazing 117 cms of leg room in its premium economy rows, or about 10 cms more than Virgin Australia or 20 cms more than Qantas.

Ordinary economy is, um, ordinary, and only around 2.5 cms roomier in seat pitch than Qantas or Virgin Australia. But the 787s are unfortunately nine across in economy which is very un-Viking of Norwegian.

Its headline initiative in the last year has been to use single aisle 737-800s (pending ugrades to the MAX 8s) to do non-stop trans Atlantic flights, some from relatively obscure facilities that are  ultra-convenient to neighborhoods where the wallets are thick and the patience with the drive to places like JFK or Heathrow is thin, even if in one’s dreams, the airports gave away the parking for free.

This is an interesting variation on the concept of Dreamliners and the like being used as hub busters, more like connecting say Beaumaris to Fivedock rather than Tullamarine to Mascot, except that Australia doesn’t have a huge supply of well off suburbs concealing underutilised 2500 metre runways generally hosting corporate jets or upper end general aviation ‘toys’.

Nevertheless, there are possibilities of doing that sort of service around some of the larger or more travel active cities on either side of the Atlantic. Norwegian seems prepared to find and develop them, but from a low fare or leisure perspective rather than something that might dislodge loyal legacy airline customers from their club rooms and costlier airline cabins.

So far, Norwegian shows no signs of being interested in taking on AirAsia X, Jetstar or Scoot in this country, but it is clearly thinking of linking SE Asia to Scandinavia or northern Germany, and there are signs of interest in flying 737 MAXs from India to secondary or tertiary cities in Europe.

There are massive attitudinal and public policy barriers to Norwegian’s ‘wilder’ or more impulsive thoughts, but if it finds such rich veins of untapped demand exist then there will be a new contest underway among transborder low cost franchises, no doubt including the likes of Jetstar.

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16 comments

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16 thoughts on “Norwegian trips up on the way to whole new longer haul market

  1. Dan Dair

    I believe you hit the nail on the head when you said;
    “Australia doesn’t have a huge supply of well off suburbs concealing underutilised 2500 metre runways”

    Europe, mostly as a legacy of World War 2, has a lot of small airports & (semi-)disused runways dotted about. Additionally, there are current & former military bases in what were previously quite remote places, which urban sprawl has meant are now in or close to towns & cities. This makes them much more accessible to the public.
    (not unlike RAAF base Richmond, for example)

    To give a couple of examples;
    Doncaster/Sheffield airport (DSA) in the North of England is on the site of what was the former world war 2 & cold war heavy-bomber base, RAF Finningley.
    It had been closed for 10 years before re-opening as a commercial airport & is apparently very successful, mostly flying holiday/leisure passengers.

    Also, I have family close to San Javier (MJV) airport in Murcia, Spain.
    That airport was a military airfield 20 years ago, but Ryanair came in & was able to develop it as a low-cost alternative to Alicante (ALC), which serves the Mediterranean coastal resort of Benidorm, one of the prime ‘Brits-abroad’ holiday destinations. Many other low-cost airlines have followed Ryanair into this airport. (It’s a bit like Toowoomba, but the runway at Murcia is shorter)
    The decision to open MJV as a passenger airfield was in fact so successful, the Spanish authorities decided to fund the building of a brand new airport (RMU), slightly nearer to Murcia itself, which actually makes it further away from Benidorm. (& from my family.!)
    As an aside, I’m told it was impressive when it was finished over 3 years ago & I’m also told that due to a cataclysmic failure to arrange airspace agreements with the military, it’s probably going to be another year or so before it actually sees any commercial traffic.!!! (that’s the Spanish government for you)
    Meanwhile MJV is apparently flourishing.!!!

    1. Giant Bird

      And here in Melbourne we had, Fishermans Bend (bulldozed), Laverton (bulldozed), Essendon (operational), Avalon (kept open with subsidies). So Dan Dair we also have or have had similar runways but not the volume, interest or entrepreneurial aggression to do anything with then. Or maybe we were savvy enough to see the best long term value was as housing and industrial estates.

      1. Dan Dair

        Giant Bird,
        That wasn’t what I was getting at.
        I’ve no doubt that hundreds of airfields (possibly thousands.?) across Europe have been bulldozed & returned to agriculture, industrial or residential use.?
        Ryanair fly to Reus (REU) and (Girona (GRO) & call the Barcelona airports, as well as flying to Beauvais (BVA) & call it Paris. All 3 airports are roughly 100km away from their respective CBD’s.!

        The lack of any easy-options in Australia for generating alternate routes is something which restricts the opportunities for airlines to by-pass expensive ‘legacy’ airfields.
        If you’re flying to Sydney, it’s KSA with no other options.!
        Maybe someone with enough ‘pull’ might get Richmond to make itself available, but that airfield is still ‘out in the sticks’. In 15 or 20 years though, it might be ideally-placed to become Sydney’s third airport.?

      2. Jacob HSR

        MBW airport runway 35R can probably be extended – it just has commercial buildings to the south of it and a golf course south of those.

        Fishermans Bend probably has enough land to allow a 3000 metre long runway to be built. But the muppets did not even reserve land for a park there:

        theage. com. au/victoria/fishermans-bend-park-comes-with-a-catch–planning-mess-means-itll-cost-19m-20170804-gxpn10.html

    2. michael r james

      “Ryanair came in & was able to develop it as a low-cost alternative to Alicante (ALC), which serves the Mediterranean coastal resort of Benidorm, one of the prime ‘Brits-abroad’ holiday destinations. ”

      Thanks for the heads up. If ever there was a reason (another one) to avoid Ryan Air and MJV, you just gave it. And yes, I am an unreconstructed snobs, especially when it comes to Brits abroad. Take a look at this pic (link below) and tell me this is what you want to sit next to at an outdoor terrace cafe ….

      [(theguardian.com/politics/2016/mar/05/brexit-costa-del-sol-spain-eu-referendum)]

      1. Dan Dair

        MRJ,
        My family members live closer to MJV than ALC which is why they use MJV for preference.

        Snobbishness aside,
        the fact that there IS an alternative airfield to Alicante for the resort of Benidorm, means that Alicante airport CAN NOT gouge airlines over landing-fees, etc., because they can & do use the alternative. Consequently, the price of flying to both airports is cheaper for the passenger.?

        As I mentioned earlier, if you’re flying into Sydney on a scheduled route, you’ll always end up at KSA. Consequently, they can charge what they like in landing fees, what they like in parking fees & what they like in gating fees for public transport users to access their airport.?
        The moment BCA is open, KSA will have to have a rethink about all of those things. Until then, there’s nothing to stop them making (a lot of) hay.?

        1. michael r james

          I think the logic and the reality on those claims is suspect. I doubt BCA will make any material impact on KSA’s quasi-monopoly. Just like Heathrow’s landing and pax charges have been and remain the highest in Europe–and are reflected in ≈$100 more in ticket prices to London versus Paris-CDG.
          Notice the common factor? Privatisation. Despite all the other airports in the London region, Heathrow still retains an effective monopoly on the most common routes. The third runway (almost certainly heavily subsidised by public funds if it is to be built) will just entrench it further.

          1. Dan Dair

            MRJ,
            I agree with much of what you’ve said, but I think you can also make a case that without the other airports around London, Heathrow’s behaviour would be even worse.?

            None of the other airports directly compete with LHR, but they do prevent it from expanding because of the unutilised capacity at all the others.

            Plus direct-flight passengers (as opposed to transferring ones) often have the same routes available from another London airport, so they don’t HAVE to use Heathrow.

          2. michael r james

            In reply to Dan Dair:

            Just like the good old days. We’re taking our country back! /s

            Heathrow is the worst in Europe and I would guess the worst of any top 30 or maybe 50 international airports around the world. Sydney would be worse (and is for parking charges, apparently worst in the world) if they could get away with it.

            other airports directly compete with LHR, but they do prevent it from expanding because of the unutilised capacity at all the others.

            No, absolutely not. Gatwick and Stansted only have LCCs and a very few other services (North Africa etc). The reason why there is desperation to build Heathrow’s third runway is because the world’s major airlines already use it and don’t want to split their operations over any other airport. Do you blame them? Remember that Gatwick originally had a lot of the American airlines for the transAtlantic traffic, but today not a single American line flies out of Gatwick. This is the same problem Sydney West will have.

          3. Dan Dair

            MRJ,
            “other airports directly compete with LHR, but they do prevent it from expanding because of the underutilised capacity at all the others.”
            Was that a deliberate attempt to completely misrepresent the point I made, or simply a complete failure to read & understand the first two words in the sentence, which you omitted from the above quotation.?
            (as in;
            “None of…..
            the other airports directly compete with LHR, but they do prevent it from expanding because of the underutilised capacity at all the others.”)

          4. Dan Dair

            Regarding your point of airlines not wanting to expand into the other airports;
            No I don’t blame them.
            London’s 5 airports are so unconnected from eachother that they are completely useless as a cohesive entity.
            Privatisation is definitely a factor, but IMO the failure on the part of government to ‘retro-fit’ interconnectivity over the last 30 years is at least as big an issue.?
            Why would airlines want to split their UK operations over different sites when those places as so unconnected from eachother & how would they expect their passengers to overcome these shortcomings if the airlines did use different airports.?

            I also agree that BCA may have similar issues,
            but they have been ‘intimated’ the late Emirates flight, so if that happens, it will generate its own supporting internal flight network.?
            Everyone has to start somewhere.!

          5. michael r james

            Reply to Dan Dair:

            No, I was just focussed on the “underutilized capacity”. (Also re-reading your original I may have been thrown by your something contradictory statement ….). Not deliberate obfuscation and we both agree on the salient point.

  2. comet

    Those red-faced jets look a tad embarrased.

  3. Tango

    A moment of pause to reflect on the 3 dead US Marines.

  4. Tango

    What is missing here is where the Norwegian loss came form.

    They ordered A321s they are not using. They formed a lease department .

    The lease operation is where the loss came from.

    I have long said those 200 and larger single ail orders form the like of Air Asia, Lion and Norwegian were nonsense.

    No one grows that fast (unless they are spaced out over 15 years)

    1. Dan Dair

      ‘No one grows that fast’
      Unless they’ve got very substantial financial backing.?

      I don’t know if Norwegian have or if they can get ‘deep-pocketed’ backers,?
      but that support would be necessary to keep them stable through their currently rocky path
      & help them to achieve the low-cost aims they’re striving for.?