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Norwegian Air: Revolutionizing Long Haul Travel

Norwegian Air: Revolutionizing Long Haul Travel
Case Code: BSTR543
Case Length: 17 Pages
Period: 2014-2017
Pub Date: 2018
Teaching Note: Available
Price: Rs.500
Organization: Norwegian Air Shuttle ASA
Industry: Aviation
Countries: Norway, Global
Themes: Competitive Strategy, Cost Leadership, International Business
Norwegian Air: Revolutionizing Long Haul Travel
Abstract Case Intro 1 Case Intro 2 Excerpts

Excerpts

The Move into Low-Cost Long Haul Services

Over the years, NAS transformed the Norwegian airline industry and emerged as one of the foremost LCCs in Europe.

In 2013, NAS decided to replicate the success of its LLC model for its short-haul inter-European flights in long-haul transatlantic flights. The carrier then announced the launch of its flight services from Gatwick, UK, to New York, Los Angeles, and Fort Lauderdale (Florida) in the US. The fare was just £149 or US$ 240 one-way. At that point of time, the cost of a typical transatlantic round trip was £500-£600. Speaking about one of the reasons for launching the low-cost transatlantic service, Kjos said, “There’s great demand for high quality flights at a low fare between the UK and the US, particularly to and from London Gatwick, where no other airline currently offers these routes.” ...

Reaction of the Global Airline Industry

The launch of NAS’ low-cost long-haul services gave rise to a lot of discussion in the global airline industry, with some sections believing that it would transform the industry and others questioning the long-term viability of the carrier’s services. Some analysts even felt that NAS was taking a costly gamble and setting itself up for failure considering that its model was no different from that of other airlines which had made the same attempt and failed....

NAS’s Solution for Low-Cost Long Haul

In spite of heavy skepticism about the success of its venture, NAS stated that it had done its calculations, and was confident that it could make the long-haul service profitable. It said it intended to change perceptions in the global airline industry, which it believed were built on “high prices and semi-good quality.”...

Teething Troubles for NAS?

By 2015, NAS was operating a growing network of routes to the US from five Scandinavian and European airports. In 2015, the carrier started new long-haul routes with destinations such as Las Vegas, Puerto Rico, St. Croix, and Boston. Industry observers pointed out that NAS was actually constituted of four different carriers — two based in Norway, one in the UK, and one in Ireland. Kjos confirmed that the carrier needed different operating licenses in order to gain access to a wide range of international routes. In 2016, the carrier began flights from the Charles de Gaulle Airport in Paris to the US, apart from establishing a new base in Rome, Italy...

NAS and its Standing in the Global Aviation Industry

In December 2016, NAS finally got approval from DOT for a UK-based foreign air carrier permit for NAI, enabling the carrier to better utilize aircraft on long-haul routes and consider further expanding operations from 58 transatlantic routes from 13 US airports. However, US aviation industry labor unions were still opposing grant of the permit stating that NAS contravened many of the labor provisions laid out in the Open Skies Agreement...

Journey Ahead

Some analysts were worried that NAS’ drive to increase its capacity rapidly without ensuring proper returns was increasing its costs and risks. NAS had experienced a year of loss in 2014. It then made a recovery in 2015 and 2016, which analysts attributed to lower fuel costs. Nevertheless, the carrier was expected to face another year of financial losses in 2017....

Exhibits

Exhibit I: List of Awards Won by NAS (2012-2016)
Exhibit II: Airline Operating Costs (in %)
Exhibit III: NAS’S Optional Services and their Prices on International Long Haul
Exhibit IV: Key Operating Figures of NAS
Exhibit V: NAS’ Pay Structure in 2017
Exhibit VI: Details of the ‘Big Three’ American Airlines
Exhibit VII: Details of the Largest European Airlines
Exhibit VIII: Financial Performance of NAS for 2012-2016 (In Millions of NOK)
Exhibit IX: World's Best Low-Cost “Long Haul” Airlines

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