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Norwegian: The low cost airline with ambitions to fly long haul

Norwegian Air is a no frills fly service that is looking to shake up the long haul industry. For a number of years the rapidly growing budget airline players have been considering moving into this sector but technical problems, regulatory issues and competitors have got in their way. Norwegian Air however, has found a way and now offers a number of routes from Europe across the Atlantic using the new breed of efficient yet smaller airplanes from Boeing and Airbus. However, this transition is not without issues and availability of the low-cost flights has been a problem, with some flight prices approaching what one might pay for a more premium service elsewhere.

Some fundamental issues with budget airlines flying long haul do remain however, as it is still unclear whether customers are willing to experience lower cost and quality flights over a much longer journey, if the price benefit is not drastic. Currently though the company does appear to be making a success of the tactic, beating competitors on price fairly significantly.

Part of what has prevented budget airlines from moving into the long haul segment in the past, is the fact that their fleet is largely not designed to fly such great distances as are required in a cross Atlantic or Asia to Europe flight. They cannot cover the distances and even if they could the size of the plane when compared with the relative efficiency of the jets mean that not enough passengers can be carried to cover the excessive distance and fuel cost, making ticket prices not competitive with what is already on the market.

Norwegian has successfully undercut the main players on a number of routes and has announced some block buster flight prices, such as London to New York for £69 ($91). As is usual with the budget industry these types of announcements are usually aimed at capturing headlines and the real average prices are significantly higher, with taxes and charges costing the airline $193 per passenger, these were limited loss-leader tickets. Taking a sample of available prices on the 4/10/2017 for 1st November flights between London and New York, Norwegian was still significantly cheaper than the traditional long haul carriers, £450 return ($597.1) as opposed to £861 ($1,143) and  £1,927 ($2,557) with two competitor airlines.

Norwegian has successfully undercut the main players on a number of routes and has announced some blockbuster flight prices, such as London to New York for £69 ($91). As is usual with the budget industry these types of announcements are usually aimed at capturing headlines and the real average prices are significantly higher, with taxes and charges costing the airline $193 per passenger, these were limited loss-leader tickets. Taking a sample of available prices on the 4/10/2017 for 1st November flights between London and New York, Norwegian was still significantly cheaper than the traditional long haul carriers, £450 return ($597.1) as opposed to £861 ($1,143) and  £1,927 ($2,557).

A large pilot union in the US and Canada has launched complaints against the approval of Norwegian to fly the trans-Atlantic route. They argue that Norwegian does not pay comparatively fair wages suggesting that the company employs cheaper labor from countries such as Thailand and that there is an unfair playing field with Norwegian in the game. However despite these concerns both the Obama and Trump administrations have approved Norwegian’s applications to fly transatlantic regardless.

To read our full analyst insight on Norwegian, please visit marketline.com

Posted in Aerospace, Airlines.

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