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Norwegian launched its inaugural route from London Gatwick to Buenos Aires on Wednesday. The day before it held a press event to herald its ambitions for the UK.
Norwegian unveiled a shopping list of possible future long-haul routes from London Gatwick.
These routes include Tokyo, Shanghai and Beijing. Norwegian is also due to take delivery of the Airbus A321 Long Range aircraft in 2019 and, from 2020, this could operate routes from London Gatwick to Philadelphia, Detroit and Minneapolis.
The airline also has firm plans to increase frequencies on London Gatwick – Los Angeles and Fort Lauderdale this summer. It is also hoped to increase London Gatwick – New York JFK to three times daily.
Norwegian was duly rewarded with one of the most read articles on BBC News Online on Wednesday, which only touched on the sustainability of its business model towards the end of the article.
There was less positive news for Norwegian’s shareholders today.
Norwegian unveiled its financial results for the year to 31 December 2017. It unveiled a net loss of of NKr299m (£27.7m) for the year and a net loss of NKr919m (£84.4m) for the 4th quarter. This compares to a profit of NKr1.14bn for 2016.
Put simply, Norwegian is expanding rapidly, but so are its costs.
Norwegian defies conventional wisdom
Norwegian is defying conventional wisdom in many respects.
The traditional view espoused by many CEOs is that airlines should pursue disciplined rational growth that is only accretive to profitability. It is in the good times that airlines must ensure they are resilient for economic and geopolitical shocks.
And when airlines are unprofitable, the traditional response is to cut capacity and unprofitable flying and defer deliveries of new aircraft.
However, Norwegian is not going to do that. In 2018, it will add 21 net aircraft, including 11 Boeing 787-9 aircraft, and grow capacity by an astonishing 40%. It will, in part, seek to improve revenues by larger premium cabins on some Boeing 787-9 aircraft and add ancillary revenues.
Norwegian has already proved many critics wrong in some respects. It has shown that price can stimulate new demand for long-haul travel and that passengers will take to an “unbundled” long-haul economy cabin with charges for meals and baggage.
However, with many legacy airlines now offering unbundled long-haul economy cabins and launching their own low cost long-haul brands, such as IAG’s LEVEL, the competitive environment will become harder.
In addition, BA is expected to expand its long-haul network at London Gatwick in 2019 further as it absorbs the additional slots it acquired from Monarch. BA has long had its sights on Norwegian, matching New York JFK, Oakland and Fort Lauderdale at Gatwick. It will also launch its “densified” Boeing 777 at Gatwick this year.
2018 is an important year for Norwegian
Norwegian is going to face further scrutiny, particularly its financial results for the 1st quarter of 2018 which is traditionally the toughest quarter for airlines.
As with any airline, it is dependent on revenues from forward bookings and the confidence of suppliers for financial sustainability. It will need to demonstrate to investors, creditors, consumers and the media that its business model and growth plans are sustainable.
