Norwegian: Flying soon to a destination near you
Don’t be surprised if Norwegian is a household name in Asia in a decade. Already the company, officially Norwegian Air Shuttle ASA, has grown exponentially in a handful of years, now the second biggest carrier in Scandinavia and the ninthlargest in Europe by passenger numbers. Yet chief executive Bjorn Kjos has much bigger goals in mind, and as the low-cost carrier commenced long-haul services between Bangkok and Oslo this summer, the Business Review caught up with the busy boss on the airline’s plans for the future. “Norwegian is entering Asia now because the company believes it has huge growth potential. China as a market is only going to keep growing, as more workers earn higher wages. And we expect in the future a lot of the traffic flow will be from Asians coming to Europe,” said Mr Kjos. “Of course as a budget carrier, we’ve already seen some travelers from Europe on our services that want a competitively priced flight for a holiday to Asia.” Norwegian takes the same approach to branding in every country, as Mr Kjos believe people everywhere want low-priced, safe air travel. The strategy appears to be paying off in Europe, but Asia is a big gamble. Even riskier is the order for 222 aircraft Norwegian placed last year: the order is for 122 aircraft from Boeing including 100 Boeing 737 MAX8 as well 100 Airbus A320neo. The aircraft will be phased in from 2016. Is it wise to expand so quickly? “It can seem risky, because it is a huge purchase and no one can predict the future,” he said. “But in the aviation business you have to plan in advance like this. We don’t see it as risky because all our business is growing, and we believe you have to have a critical mass of jets like we plan if you want to survive the competition in the future.” Norwegian has 79 aircraft with red noses, just like Rudolph, in its stable, mostly Boeing 737s, and it ordered some of Boeing’s 787 Dreamliners as well to service its long-haul routes to Bangkok and New York City. It expects to have the latter flying on its routes shortly, while an order of 100 Max 737 jets is slated for the third quarter of 2017. Mr Kjos, a former fighter pilot, lawyer and spy novelist, knew he would ruffle some feathers with his plan to register his long-haul jets in Ireland instead of Norway, but he said it was because of unnecessary regulations in his home country that prevent foreign air crew from flying into Norway, resting, and then flying out again with a work permit or being paid wages on the scale of locals. Of course cost is one of the reasons Norwegian hired a foreign air crew in the first place, and Mr Kjos said he saw no purpose for the regulation. Norwegian had a load factor of 96% on its new long-haul flights in the second quarter of this year, though short-haul routes through Europe are where Norwegian has built the bulk of its success. Some industry analysts are still sceptical about whether a low- cost carrier can compete in the long-haul market. For Mr Kjos, the doubt is misplaced. “If you have solid bases set up, then it’s just a matter of having the right planes and training the crew to switch from short-haul to long-haul routes,” he said. “If you can do short-haul successfully, you should be able to do long-haul. We have very modern airplanes and a strong infrastructure.” Mr Kjos added that Boeing’s GoldCare service is also likely to pare costs, because it means Boeing engineers are the ones providing the maintenance and service responsibilities. Boeing knows its planes better than anyone, and the complexity and cost servicing the jets ourselves would be too high, he said. Norwegian includes on-board WiFi in its base ticket price, and you can purchase food, drink or in-flight entertainment with your own credit- card kiosk. Several of Norwegian’s customers are cost- conscious, so they bring their own food and entertainment, just as many plan their own trips without using a travel agent these days. He pointed to Norwegian’s fully functional website as another play to fully independent travelers.
The airline also offers a premium economy cabin on long-haul flights that Mr Kjos believes will be appealing to business travelers because it is still priced lower than the business class section of its competitors. The consumer response to its long-haul routes has already been enthusiastic, and Norwegian expects to be cashpositive from its first year of operation on the routes. The company saw an increase of over 1 million passengers in the second quarter of 2013 year-on-year, while its unit cost reduced 9%, making it third in all of Europe.
Norwegian saw an increase of over 1 million passengers in the second quarter of 2013 year-onyear, while its unit cost reduced 9%, making it third in all of Europe.
The airline’s quarterly report also noted that its traffic growth of 35% for the period surpassed its capacity increase. These certainly are heady times for the Norwegian boss, especially considering the expansion the airline has planned over the next five years. But Mr Kjos seems clearheaded about the effort, confident in the notion that if the numbers play out the way his team calculated, Norwegian will soon be well-known in this part of the world.