Nor­we­gian Air lands in the U.S.

The up­start car­rier’s in­sanely cheap fares to Europe are just one more step to­ward world air­line dom­i­na­tion.

Fast Company - - Contents - By Sara Cle­mence Il­lus­tra­tion by Ben Wiseman

How the low-cost car­rier went from re­gional com­peti­tor to the envy of legacy air­lines.

Ninety-nine dol­lars isn’t enough to buy a month’s worth of rides on the New York City sub­way sys­tem. But it can get you a plane ticket across the At­lantic on Scan­di­na­vian car­rier Nor­we­gian Air—and that’s caus­ing more than a lit­tle tur­bu­lence in the air­line in­dus­try.

The low-cost air­line, which has long con­nected Scan­di­navia with des­ti­na­tions across Europe, has been mak­ing in­roads into the United States for sev­eral years, with di­rect flights from cities such as Lon­don, Paris, Copen­hagen, and its home base of Oslo. But this year, af­ter win­ning ap­proval from the U.S. De­part­ment of Trans­porta­tion to use an Ir­ish sub­sidiary for transat­lantic travel, Nor­we­gian is launch­ing a mas­sive ex­pan­sion. In

the first quar­ter of 2017 alone, the car­rier an­nounced a dozen new routes from U.S. cities in­clud­ing Bos­ton, Seat­tle, and Den­ver—at prices that are of­ten less than half those of legacy air­lines. By year’s end, Nor­we­gian plans to op­er­ate nearly 100 flights weekly out of 13 Amer­i­can hubs. “Three or four air­lines have con­trolled the flights [over the At­lantic],” says CEO Bjørn Kjos. “We have dis­rupted this mo­nop­oly [with] our low fares.”

A decade ago, Nor­we­gian was a vir­tu­ally un­known re­gional air­line; to­day, it’s rein­vent­ing the in­dus­try. Transat­lantic fares are just the be­gin­ning. In April, the car­rier an­nounced non­stop flights be­tween Lon­don and Sin­ga­pore for $199 each way. And one route map the com­pany re­cently shared with in­vestors shows how Nor­we­gian hopes to one day en­cir­cle the globe. “If they ex­e­cute on their plan,” says Henry Harteveldt, a trav­elin­dus­try an­a­lyst for At­mos­phere Re­search Group, “Nor­we­gian could be the 21st-cen­tury-air­line equiv­a­lent of Pan Am.”

Nor­we­gian isn’t the only car­rier to of­fer bud­get flights across the At­lantic—ice­land’s Wow Air of­fers $99 fares to Europe, with a stop in Reyk­javík, from 10 North Amer­i­can cities; Lufthansa off­shoot Eurow­ings has plans to con­nect Mu­nich to Or­lando, Florida; Las Ve­gas; and Seat­tle. But Nor­we­gian aims to beat them all in ex­e­cu­tion and scale. Like other low-cost car­ri­ers, it charges for checked bags, snacks, drinks, and blan­kets. But its transat­lantic ex­pe­ri­ence is nonethe­less re­mark­ably com­fort­able. The ser­vice is cheer­ful, the food de­cent, and the in-flight en­ter­tain­ment op­tions ro­bust. Each seat has its own power out­let and USB port. The planes are next-gen­er­a­tion Boe­ings with qui­eter cab­ins and pres­sure lev­els de­signed to re­duce jet lag.

The air­line’s young fleet is the foun­da­tion of its suc­cess—and not just be­cause it at­tracts pas­sen­gers. “If you fly an old air­plane, it’s like an old car,” Kjos says. “It uses a lot of gas and has high maintenance costs.” In 2007, Nor­we­gian was a re­gional player knit­ting to­gether 75 Euro­pean des­ti­na­tions when Kjos made a bold pur­chase of 42 Boe­ing 737-800s for roughly $3 bil­lion. The planes, which have be­come the air­line’s short-haul Euro­pean work­horses, have flier-friendly fea­tures such as high-speed Wi-fi and light­ing that ad­justs to match the phase of flight. They also cut Nor­we­gian’s fuel con­sump­tion by more than a fifth, while in­creas­ing its cabin ca­pac­ity.

In 2011, Kjos re­peated the move, plac­ing an or­der for the then-new Boe­ing Dream­liner, which has even bet­ter fuel ef­fi­ciency and can seat up to 290 peo­ple. He ded­i­cated these planes to long-dis­tance flights be­tween ma­jor hubs such as Oslo, New York, and Bangkok.

It’s not just the air­craft that cre­ate ef­fi­ciency, but also how they’re de­ployed. While most ma­jor car­ri­ers are bound by ex­ist­ing net­works and com­mit­ments—obliged to di­rect planes through their hub cities and those of part­ner air­lines—nor­we­gian takes a blank-slate ap­proach to its route map, fly­ing where it an­tic­i­pates it can cre­ate de­mand. This year, Nor­we­gian will be the first air­line to fly the speedy, fuel-sav­ing, 189-seat Boe­ing 737 Max in the U.S. The new air­craft will con­nect sec­ond- and third-tier des­ti­na­tions like Prov­i­dence, Rhode Is­land, and Belfast, Ire­land. Us­ing smaller, even mi­nus­cule, air­ports means cheaper rent and lower land­ing fees, sav­ings that Nor­we­gian can use to at­tract trav­el­ers who have, un­til now, been un­able to af­ford in­ter­na­tional air­fares.

Nor­we­gian also spurns the tra­di­tional long-haul model of sched­ul­ing flights to carry waves of pas­sen­gers in the morn­ing and evening. In­stead, it fo­cuses on keep­ing air­craft in the air as much as pos­si­ble—even if that means in­con­ve­nient de­par­tures. Us­ing a plane for a few more hours a day rad­i­cally im­proves the fi­nan­cials, Kjos says.

Con­tain­ing those costs is es­sen­tial. Kjos founded the air­line in 1993 and stepped back in as CEO in 2002, when it was a bit player com­pet­ing re­gion­ally with the dom­i­nant Scan­di­na­vian op­er­a­tor SAS. He quickly de­duced that to sur­vive, Nor­we­gian had to bring down costs by scal­ing up rapidly. “We were forced to be­come a much big­ger player,” he says. That plan helped Nor­we­gian post a net profit of $136 mil­lion in 2016. (In the first quar­ter of 2017, the car­rier boosted its pas­sen­ger count, but took a big­ger-than-ex­pected $174 mil­lion loss, burned by higher fuel costs and ex­change-rate fluc­tu­a­tions.)

A sure sign that the car­rier has be­come a po­tent in­dus­try force: Legacy air­lines have been try­ing to thwart it. The U.S. De­part­ment of Trans­porta­tion, be­sieged with op­po­si­tion from do­mes­tic air­lines, la­bor unions, and other in­ter­est groups, took three years to ap­prove Nor­we­gian’s transat­lantic plan. Its com­peti­tors are also cre­at­ing their own bud­get mini-mes: In­ter­na­tional Air­lines Group, which owns Bri­tish Air­ways, has launched a long-haul, low-cost brand called Level, which op­er­ates out of Spain; Delta will soon of­fer its ba­sic econ­omy fare on long-haul routes.

Kjos, mean­while, is or­ches­trat­ing his next move: a part­ner­ship deal with at least one other bud­get air­line to cre­ate an al­liance that would al­low pas­sen­gers to seam­lessly book across car­ri­ers. To­gether, Ryanair and easy­jet shut­tled some 17 mil­lion pas­sen­gers around Europe in April alone. Fun­nel­ing a por­tion of those trav­el­ers to Nor­we­gian’s transoceanic flights would boost busi­ness— and bring Kjos one step closer to re­al­iz­ing his vi­sion of a world con­nected by af­ford­able flights.

A sure sign that Nor­we­gian has be­come a po­tent in­dus­try force: Legacy air­lines have been try­ing to thwart it.

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