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1/11/17

Norway: Airline Industry - Cheap Atlantic crossing may no longer be flight of fancy

Norwegian bringing back affordable fares across  the Atlantic
Low-cost airlines dominate European and American skies, but they’ve never managed to pull off the same trick and make money by flying across the Atlantic or further afield.

Now Norwegian Air Shuttle, the Oslo-based budget carrier, thinks it might have figured out how to break that pattern and challenge the alliances of legacy airlines that rule the lucrative transatlantic market.The idea of a transatlantic low-cost airline isn’t new.

Freddie Laker tried it in the 1970s with his Skytrain, but it went bust in 1982. Other efforts like Canada’s Zoom Airlines also failed. That’s because long-haul flights on wide-body airliners across oceans are a very different proposition from the short hops flown by cheaper narrow-body aircraft in the U.S. and Europe.

“I understand where they are coming from, but I yet have to be convinced it will work,” said Tim Coombs, managing director at U.K. consultancy firm Aviation Economics. “The case for the success of the long-haul, low-cost business model is not as clear-cut as it is with short-haul, low-cost.”

AirAsia X — the long-haul, low-cost affiliate of the AirAsia Group — is the international carrier with the longest track record of trying to make money by flying to distant locations, he said. “The signs so far have been unpromising,” he added. “In the past five years, it has enjoyed only one year, 2012, when it recorded a profit.”

Norwegian hopes that its effort will be different. A few smaller competitors are also venturing into the long-haul, low-cost market. They include Iceland’s WOW Air, linking Europe and America via Iceland, and France’s French Blue. But Norwegian is the largest.

Norwegian believes it has worked out how a low-cost can make long-haul routes work. It operates a single fleet type of modern aircraft on intercontinental routes and will take delivery of its first Boeing MAXs this year. It has its own short-haul network to supply passengers and is in talks with Ryanair to bring passengers to its long-haul routes. Unlike decades-old flag carriers, the Norwegian brand dates only to 2002, which means there are no legacy work practices or inflexible staff. It has scale and sufficient aircraft orders to support its growth. Its network focuses on leisure routes and it flies to secondary airports rather than big, expensive or congested airports.

Norwegian started as a traditional short-haul, low-cost carrier. But in 2013, it parted ways with rivals like Ryanair and easyJet, launching its first nonstop long-haul flights in 2013 between Oslo and New York with a fleet of brand new Boeing 787s. Norwegian posted a 246 million Norwegian krone (€33 million) net profit in 2015, reversing a 1.1 billion krone loss in 2014.

Its network has grown substantially since then, offering transatlantic flights from several cities in Northern Europe, Paris and London Gatwick, from where it introduced the U.K.’s first long-haul, low-cost flights, and now flies to eight U.S destinations. That’s posing a growing challenge to SAS, Air France, British Airways and Virgin Atlantic.

Spain’s Iberia and Ireland’s Aer Lingus will soon feel the pinch as well. From June, Norwegian will connect Barcelona with nonstop flights to Los Angeles, San Francisco (Oakland), New York (Newark), and Miami (Fort Lauderdale). To make matters worse for Iberia, Norwegian is also considering destinations in its key markets of Argentina and Chile.

Building its intercontinental network has not been easy. But Kjos, a lawyer by training and a former fighter pilot for the Royal Norwegian Air Force, is not afraid of a good fight. It took him three years to obtain the U.S. permit for Norwegian’s Irish subsidiary, and to get it he had to abandon his initial idea to work with Asia-based contract crews in order to cut costs.

Read more: Cheap Atlantic crossing may no longer be flight of fancy – POLITICO

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