Covering All Bases

Scandinavia's leading low-cost airline, Norwegian, opened its fourth capital city base in Scandinavia, with the news that it will establish a base in Helsinki next year. The Hub analyses this move.

As predicted in the Hub in our February 18th edition, Norwegian has announced that it will set up a base at Helsinki's Vantaa Airport. From March 31st 2011, Norwegian will begin domestic operations in Finland serving routes to Oulu and Rovaniemi, whilst international routes to Copenhagen, Malaga, Nice, Crete, Rome, Barcelona, London Gatwick, Split and Alicante will begin in May, complementing existing services to Stockholm and Oslo.

THE NORWEGIAN MODEL

Norwegian now has its main bases at Oslo Gardermoen (OSL), Stockholm Arlanda (after it took over FlyNordic). After the collapse of Sterling in 2008, Norwegian moved quickly to establish a base in Copenhagen, from where it plans further expansion, after Transavia recently announced that it would discontinue its base in Copenhagen.

With a focus on key city and leisure markets, Norwegian's strategy is based around serving primary airports from its home bases. From its home base in Oslo, Norwegian now operates 32% of all scheduled flights according to Flightbase data, fewer only than SAS. At Stockholm Arlanda, SAS dominates its home base with 39% of all scheduled flights, while Norwegian is now the second largest operator with 12% of all flights. In Copenhagen, Norwegian is the third largest operator, behind SAS which has a 42% share and Cimber Sterling which has a 15% share. Norwegian has an 8% share.

With Norwegian continuing to take on new B737-800 aircraft, with a phased order of 70 of the aircraft until 2014, the airline is keen to develop its brand in Scandinavia, and Helsinki is an attractive market to it.

THE HELSINKI MARKET

Helsinki is one of Europe's wealthiest capital cities and its current lack of low-cost traffic leads to significant opportunity in Finland's capital. IATA BSP data demonstrates the leading carriers in the Helsinki market:

SOURCE: IATA BSP DATA (AIRPORT IS) JUNE 2009-2010

easyJet has limited operations into Helsinki, with services from London Gatwick, Manchester and Charles de Gaulle, whilst Air Berlin has operations into Dusseldorf and Berlin Tegel.

NORWEGIAN STRATEGY IN HELSINKI

Norwegian has tested the waters in the Helsinki market, linking it with existing bases in Oslo operating 11-weekly flights and Stockholm Arlanda from where it operates 23-weekly flights. Entering on trunk routes - Stockholm is a market of over 580,000 annual passengers and Oslo is a market of over 160,000 passengers (IATA BSP data) - Norwegian has strong feed and brand presence in these markets. Both routes have been successful and have encouraged Norwegian to establish a base.

Norwegian has initially listed nine new international destinations from Helsinki, and the carrier has opted to open markets where its brand is already known. All nine new routes are served from its other capital city bases of Oslo, Stockholm and Copenhagen, with the exception of Crete, which is only currently operated from Copenhagen.

With Norwegian citing that it could seek potential cooperation with oneworld member Finnair, regional operator Blue1 will be put under pressure by Norwegian's latest announcement. Norwegian will compete directly with the SAS owned operator on routes to Barcelona, Copenhagen, Rome and Nice, and with operating MD-90 aircraft on all of these routes plus a B717 and ATR82 on Copenhagen, Blue1 could find it difficult to compete on cost.

By announcing two new domestic routes, Norwegian will compete with Blue1 on Oulu. This is a strong domestic market in Finland, with nearly half a million passengers travelling to and from Helsinki; with Blue1 having a 27% share of this route (IATA BSP data) , this could be a signal of further domestic expansion in Finland.

https://www.routesonline.com/news/36/the-hub/65716/norwegianas-anatural…