Norwegian's low-cost long-haul transatlantic fares take off quickly
|
Version 0 of 1. At 35,000 feet above the Atlantic, there is no free lunch - and certainly not for passengers who have only stumped up £69 for a flight on Norwegian. Some of the fares advertised this week to the US from the UK and Ireland are lower than the passenger taxes levied on the tickets. Is it too good to be true – and if not, how are Norwegian doing it? Alas, £69 fares are likely to prove elusive for most. On Thursday, Norwegian launched 10 new transatlantic routes – from Edinburgh, Belfast, Cork, Shannon and Dublin to destinations billed as New York, Boston and New England – and it was briefly possible to book for £69 out (and £60.80 back) from Edinburgh to New York in the summer months. But with taxes and charges costing the airline £146 per passenger, these were limited loss-leaders. By Thursday afternoon, Norwegian’s transatlantic fares from Ireland’s airports this summer were at least €270 (£228) one-way. And for those fares, a passenger would forego niceties such as a reserved seat, onboard food, or checked baggage. All of the those cost extra and a suitcase alone adds £80-100. Comparing routes out of Gatwick, from where Norwegian started undercutting UK long-haul competitors in 2014, the cheapest fares in June are typically £393 for a return. And that is usually on days when rivals such as British Airways or American, operating out of the same airport, are a touch over £500. Those rivals are offering as standard the kind of services – food and luggage, in particular – for which Norwegian demands a further £90-100 (if pre-booked), eradicating most of the difference. Add in those, and on some dates, Virgin Atlantic from Heathrow would work out cheaper. The big difference between the Gatwick departures and the upcoming “£69” hops from Scotland and Ireland is where passengers land in the US. In a move reminiscent of Ryanair’s notorious Frankfurt (Hahn) gambit – which involved the airline flying to an old military base 75 miles from the German hub – Norwegian will be offloading its New York passengers at Stewart international, an airport that has not hitherto troubled many international travellers. Its terminal building, with the red brick and mock turrets that resemble an out-of-town Tesco supermarket, includes a newsstand and a small gift shop, while the outskirts of New York city itself are a good 90-minute drive away. Similar distances link Providence and Bradley airports to Boston and New England’s usual points of interest, but Norwegian’s chief executive, Bjørn Kjos, is stout in his defence of airports with no other connections to Europe. “Of course secondary airports will be much cheaper. It’s very expensive to fly into a Newark or a JFK,” he told the Guardian. “Most passengers don’t care where they land. And passengers will find it’s very convenient to fly into these airports because there’s no queue at immigration, no problems. You’re going to have a second gin and tonic before you see the other passengers get out of immigration from JFK.” As well as benefitting from significantly lower landing charges at its transatlantic destinations, Norwegian uses a young fleet of fuel-efficient planes. It launched its Gatwick-US routes using Boeing’s 787 Dreamliners, which claim to deliver fuel savings of 20-25% compared with similar long-haul planes – a number that is significant given fuel remains the biggest single operating cost for any airline. Norwegian packs on more seats with fewer cabins, although it does have a premium economy class on its 787, which Kjos said was attracting more and more business passengers (at fares of around £900 for a return from London): “They know the product, they get a good bargain. We have hit the right spot right there.” The Irish routes will operate with an even smaller plane, the Boeing 737 MAX, which has a longer range and more seats than existing single-aisle aircraft. Its range means Norwegian can operate to the US eastern seaboard on a flight with a similar feel to European short-haul journeys, in a single economy cabin. “I don’t see anything really different about flying long-haul or short-haul,” said Kjos. “Now with the new aircraft types we are able to fill a gap that wasn’t even there before – flying direct to the US from small cities that didn’t have the possibility.” He added: “I think we will shape the industry. If you call it disruption it will be disruption. EasyJet and Ryanair created a new way of travelling in Europe. Now we will do that with low-cost and long haul.” Norwegian started as a small regional airline before turning into a low-cost carrier that operated across Scandinavia. Its growth has surged throughout Europe since 2012, when it opened its Gatwick base and placed a large order for new fuel-efficient Boeing and Airbus planes. Only easyJet and BA are bigger at Gatwick, while Norwegian is now overtaking old rival SAS – the pan-Scandinavian carrier that once dominated its home market – to become Europe’s eighth biggest airline, carrying 30 million passengers a year compared with 12 million just five years ago. But questions still linger over the business model for some: so far, profits have been slim, with the £109m Norwegian made last year its best to date, by some way. Aviation analyst John Strickland said that while the new routes would attract traffic and be popular in the summer months, it was less clear how many could remain profitable and sustainable in the long-term. There was also the threat of a strong competitive response. Willie Walsh, chief executive of IAG, owner of BA and Aer Lingus, dismissed the fares as “gimmicks”, and flagged up how rapidly they had sold out. However, Walsh added: “I’m a great fan of Bjorn Kjos.” Walsh said Aer Lingus, and even possibly BA, could imitate Norwegian’s “unbundled” fares, without meals and bags included, if consumers bought them. Meanwhile, Kjos has his eyes on other markets: South America is in his sights, and he says Africa could follow. But Strickland remains sceptical of Norwegian’s global ambitions, warning: “The more you broaden, the more you bring in multiple challenges and complexities and it’s going to take some very attentive management to keep it all in place.” Kjos, 70, the former fighter pilot and paratrooper, who expanded Norwegian from a small upstart, may himself not be around to run the airline for ever. “I should have a natural retirement plan but I haven’t had time to think about that,” he said, laughing. |