Norway's newest long-haul startup, Norse Atlantic, has just signed a lease with AerCap for nine Boeing 787 Dreamliners. The aircraft will be delivered this year. The nine leased aircraft include six used Boeing 787-9s and three used Boeing 787-8 aircraft.
Norse Atlantic Airways looks forward to providing our passengers with comfortable, affordable, intercontinental travel aboard these state-of-the-art aircraft.” says Bjørn Tore Larsen, CEO of Norse Atlantic.
The deal follows a successful US$152 million private share placement by Norse Atlantic. The placement was heavily oversubscribed. Norse Atlantic's CEO suggests this reflects confidence in his new airline from Norwegian and international investors.
Planes leased, but low-cost long-haul business model raises eyebrows
But Norse Atlantic's ambitious low-cost long-haul business model is raising eyebrows, especially as it comes just months after Norwegian's long-haul operations failed. Several of the key figures behind Norse Atlantic were instrumental in starting up Norwegian. And 2021 may not seem the ideal time to kickstart a long-haul airline. But Mr Tore Larsen disagrees.
"Bjørn thinks that this is a really good time to start an airline," says Simple Flying's Joanna Bailey in Simple Flying's latest podcast. "That's because of the cheaper leasing costs, the exit of some of the old fleets, and a lot of the legacy airlines being unwilling to restart routes. He thinks there's a massive opportunity here."
Bjørn Tore Larsen is not only Norse Atlantic's CEO, he's a major funder. Also in the driver's seat at Norse Atlantic is Bjørn Kjos. He's the founder of Norwegian. In a neat, or perhaps not so neat piece of symmetry, Norse also means Norwegian in the Norwegian language. There's plenty of pundits who think this is just round two and a case of throwing good money after bad.
AerCap wishes Norse Atlantic success
With over 1,000 aircraft on its books and owning the world's largest fleet of Dreamliners, Dublin-based Aercap probably appreciates the business in a depressed leasing market. Flush with cash from the share placement, Norse Atlantic can pay its leasing bills right now. AerCap's CCO, Peter Anderson, struck an upbeat note after the deal was signed.
“With its superior operating characteristics, the 787 is the perfect aircraft for Norse Atlantic Airways to launch a modern long-haul low-cost airline. We are delighted to be supplying them with their first aircraft.
"We wish Norse Atlantic Airways every success and look forward to working with them as they roll out their plan in the years to come.”
Norse Atlantic may have some advantages compared to Norwegian
Norse Atlantic's model does differ from the failed Norwegian long-haul model because Norse is building a long-haul airline from the ground up, rather than operating it as an adjunct to a short-haul operation. Joanna Bailey says it's the same but different. But she says there are some advantages from building a new airline from the ground up.
"They can choose planes with a higher seating density. They can offer lower salaries to their crews rather than inheriting crews. Catering and baggage can be turned into revenue streams much more easily. They can cut costs elsewhere, such as ground handling, marketing, the way they administer the airline. There are lots of savings to be made by building it as a low-cost long-haul airline from the start."
But the possible advantages may not outweigh the challenges facing the low-cost long-haul business model. The low-cost model works best when focused on short flights, fast turnarounds, and cutting out the complexities of long-haul flying.
But Bjørn Tore Larsen clearly disagrees with the reservations held by many other people. He says;
“We now have a once-in-a-lifetime opportunity to build a brand-new airline from scratch. As the world reopens, the public needs an innovative, low-cost intercontinental airline with modern, more environmentally friendly- and fuel-efficient aircraft."
As an investor, at least he's putting his money where his mouth is. Norse Atlantic aims to start flying between Europe and North America later this year.