More thoughts on Norwegian

Four follow-up thoughts to my last post on Norwegian Air International:

1) As I found out from a number of emails and comments, some people find it outrageous to discuss NAI without a full airing of the controversy surrounding its application to the US Department of Transportation for a foreign air carrier permit to operate flights between the European Union and the US. We’ve covered that issue exhaustively here at ATW and I had written a news article on it the day prior to my blog post.

But the truth is that DOT likely will eventually approve the application and then NAI will get to try out its low fares, transatlantic business plan. It’s worth discussing that business plan—which upsets some longstanding ideas about the transatlantic market—without constantly stopping to go over the well-publicized arguments against NAI’s DOT application. There’s no shortage of news and information about the controversy surrounding the application to DOT. There is, however, less talk about NAI’s business plan if it gets approval—my blog post was in part aimed at getting that conversation going.

2) I have no idea whether NAI’s business plan will work. But it and other carriers—Air Canada is growing its lower fares rouge brand and WestJet has transatlantic aspirations—are going to try exploring the market for non-business-class, no-frills, low-fares flights across the Atlantic. When listening to NAI CEO Asgeir Nyseth during a recent roundtable discussion with ATW and Aviation Week editors, I couldn’t help but hear echoes of Spirit Airlines CEO Ben Baldanza. Just as Spirit is capturing leisure passengers in the US who can’t afford to fly mainline carriers but are willing to forgo creature comforts for very low fares, NAI believes it can tap into a market of passengers who are interested in transatlantic travel but flinch at current transatlantic airfares.

Spirit gets a lot of heat in the mainstream media for its fast-food version of air travel, but the airline’s financial figures and load factors speak to an undeniable fact: There exists in the US a large and growing population of leisure travelers who will only fly at Spirt/Allegiant Air-fare levels. The three major international US airlines and even Southwest Airlines acknowledge Spirit and Allegiant are creating new passengers, not taking away passengers from other airlines. Similarly, NAI believes it can create new, cost-conscious transatlantic leisure passengers.

Yes, as some emailers pointed out, NAI adds fees to its low fares, but that’s the point—as with Spirit, passengers who want to travel cheap will be able to do so, even if it means packing tight and eschewing inflight amenities. Again, I don’t know if NAI will succeed, but very few knowledgeable people in the airline industry are sneering at Spirit these days.

3) Nyseth asked, “Why should it cost twice as much to fly from New York to Europe than from New York to Seattle?” and I noted I did an online search that found a 65% difference between ticket prices between JFK and Seattle and JFK and Heathrow. Yes, there are differences between domestic and international flights in terms of taxation, regulations, etc., and I don’t think Nyseth was suggesting there would ever be price-parity between US transcontinental and transatlantic flights. But he was pointing out the extreme price difference, a function of taxes, etc., but also of passenger expectations, a status quo mentality and a resistance to the kind of open market competition in international markets—even in the competitive transatlantic market—that exists in domestic markets. Also, aircraft such as the Boeing 787, Airbus A350 and later the 737 MAX and A321neo are bringing a heretofore unavailable level of fuel efficiency that could change the cost equation for transatlantic flying.

4) An observation from covering the airline business for a long time: The industry is very resistant to change—often at a great cost—and those proposing to upend the status quo get a lot of pushback. But those who challenge that status quo and succeed—Herb Kelleher, for example—are then lauded as pioneering visionaries. In other words, the industry is generally reluctant to celebrate change until it knows for sure whether that change is going to be successful.