If Norwegian could be summed into one word, it would be “bold”. The airline came virtually out of nowhere with a fleet of brand new Boeing 787 Dreamliner aircraft, adding routes seemingly by the hour, all while driving airfare prices down to unheard of levels. Plenty of discount airlines entered the market, but Norwegian was the one that even your grandmother had heard of. The moves were so bold, many couldn’t help but speculate that Norwegian was either helmed by the smartest people in the room, or a group taking drastic risk. The answer may be both, but at the moment, it’s the risks and worries on center stage.
Fast forward to June of 2018 and an IAG bid for ownership sparked a bidding war amongst major airlines, including the Lufthansa Group. If they couldn’t “beat” the low cost airline, they wanted to own it. After all, using Norwegian’s model against enemies by discounting on select routes would be quite a shrewd move indeed. But enigmatic Norwegian CEO Bjorn Kjos, who owns a 27% stake in the airline held out for better offers. He may have held out too long.
- Is withdrawing from unprofitable routes which it so brazenly opened.
- Raised cash via Boeing refinancing, taking on $30m additional long term debt.
- Denying delay compensation claims to slow the flow of cash.
- Slowly raising fares to extract more cash out of viable routes.
For any other airline raising fares might seem acceptable, but without a viable loyalty program or alliance partners, there’s only one reason people fly Norwegian, and it’s definitely not the pay as you go snacks. Travelers pick Norwegian on price and in recent months major airlines have been beating Norwegian on price, swooping in to damage Norwegian’s existing revenue streams. A few IAG airlines have sold New York to London and USA to Spain, two of Norwegian’s breakthrough routes, for under $300 round trip.
In short: Norwegian continues to beg, borrow and deal in an admirably entrepreneurial way to keep things afloat. The big question is: how long can they? As travelers, Norwegian is good for business, because the airline has forced priced down and wherever they operate, there are record low fares around. With the withdrawal of IAG’s takeover bid and new challenges coming from airlines further afield, it’s tough to say how much longer the game will go.
Do you think that one of the ME3 might buy them all or in part? If so, what might the repercussions be? Obviously, the USA monopoly would scream bloody murder, but I’m not sure that they could do much. Except for that, I’m stumped.
You are an idiot. How a so-called journalist such as yourself can pen this drivel, and think you’ve done a good job is admirable to say the least. Negative crap like this spouted by a jumped up prick is was can cause irrepressible damage.
True IAG want to sell their shares but only because Willie Walsh couldn’t rinse Norwegian for what he could and buy the company at a bargain price. He could not beat Norwegian so instead planned to buy the company and then dismantle it. He would then be able to charge higher fares or whatever he liked once he had control of a route, why don’t you report facts such as these? That the consumer would be the loser if Walsh got his greedy, unscrupulous way!
Norwegian has been a breath of fresh air and long may it continue
The real Freddy Laker would’ve been mortified by such a stupid comment, in part because your two erroneous points are actually mentioned in the article. I highly suggest reading beyond the intro. Come back to me when you’ve actually read the work. And work on your manners in the mean time.
@Freddy Laker – Nice name, but you’re not doing much to emulate Sir Freddy when you act in a rude and undignified manner. Such behavior on your part simply alienates people, which seems an unlikely goal.
BA (long before Walsh & Cruz) do have a history of trying to use their financial muscle and dirty tricks to eliminate competition that they can’t / won’t match whether that’s price or product. Almost certainly the IAG stake was intended to be the first step in taking out/over this annoying new player who forced real competition onto some routes…
The Norwegian financial model may have worked were it not for the RR 787 engine issues but it’s clear, they have serious problems in this regard. There must be a happy medium (for the customer not the airlines CEO’s) on price / service just not clear who will have the foresight to deliver it or whether they will be allowed to compete in a market where the bigger players are happy to run routes at a loss to eliminate competition.
Putting aside the horrifically rude response; can’t deny GTSP nailed the timing of the article – with Norwegian forced into a rights issue this AM and shares tanking 15%.
I don’t think any impartial traveller (GTSP included) wanted Norweigan Long Haul to fail, they got a lot of things right (fare competition, modern fleet), were unfortunate in some places (RR engine issues), but also were their own worst enemy.
Their treatment of both staff and passengers has been negligent for a while. Ill thought out plans like hiring A380s to JFK when there were no A380 bridges available, point to inexperienced management taking irrational steps to avoid refunding passengers, only to end up with a much larger bill (compensation + wet leasing fees).