Could Norwegian Operate An A380 Long Term?

Be sure to see the first part of this article on the Norwegian new ‘first-class’ option on the HiFly A380.

Currently, Norwegian airlines have wet-leased the HiFly A380 to service its route between New York and London.

But this temporary solution has made others start to wonder if it’s possible that Norwegian could profitably run an A380 service between the two countries.

The A380 leased by Norwegian
The A380 leased by Norwegian

A Quick Background

We have spoken many times about this current situation that led to Norwegian renting this plane, but simply Norwegian is unable to run their normal Boeing 787 due to technical problems with the engines. They have a wet least (essentially the same as chartering) an entire ex-Singapore Airlines A380 from the airline company HiFly, to help manage their summer Atlantic Ocean trade.

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As the A380 is an ex-Singaporean Aircraft it has three different class distinctions, an economy class, business class and the very luxurious first-class suites (which in a previous article we mentioned that are now being sold as Norwegian first foray into a ‘first class’ offering).

HiFly Suite
A HiFly First Class Suite. Photo: HiFly

What would a Norwegian A380 look like?

Before we can dive into whether or not an A380 would be profitable for Norwegian in the long term we need to paint a picture of what a Norwegian A380 would look like.

A typical A380 has a seating capacity of 12 first class suites, 60 business class lay flat seats and 399 economy class seats (A lack of 47D is to blame for the non-round number). But if Norwegian gets to choose their configuration, they would remove the first class suites for either more economy or more premium economy seats. Whilst this ‘monstrosity’ doesn’t exist yet, an all-economy A380 could seat 868 passengers (538 on the main deck and 330 on the upper, 11 seats across).

HiFly A380
The HiFly economy section

Now to account for a two-class configuration, On the Norwegian 787-9 Dreamliner, they are configured as 35 premium economy seats and 309 economy seats. If we were to use this to estimate their ratio of seating (344 total seats divided by how many are premium economy) we would predict a split of 10% premium economy and 90% standard economy on their planes.

Applying this to an A380 seating capacity would be a Norwegian configuration of 86 premium economy seats and 782 economy seats.

How much would they charge?

If we take a typical airline ticket cost for Norwegian, for London to New York, we would estimate an economy ticket would cost $271 per seat and a premium economy seat costing $732.

Naturally, Norwegian does not include baggage, meals or other extras, so they would need to be factored into the flight sales. One item of baggage on Norwegian is $44 (35 GDP) and a meal is $32 (or 25 GDP). This flight is eight hours long so I believe that 80% of economy passengers will be buying a meal and equally 80% will also buy one item of baggage, so the optional fees on a flight would be $47,576 per flight.

Premium includes a meal and baggage and will be the same price of $732.

If we had an 80% full plane, we could estimate they would sell 69 premium economy seats and 626 economy seats (695 Passengers in total).

This would be sales of $50,508 in premium economy and $169,646 in standard economy. We can also include the optional extras of $47,576, for a total of $267,730 per flight. Let’s include an additional $10,000 for added extras, such as headphones, blankets, drinks etc.

B787 in Norwegian Livery
A B787 in Norwegian’s livery.

What are the costs?

In a previous article we outlined if Norwegian is making any money from running the A380 HiFly service (and most likely that they are not paying for this replacement plane, but Boeing or Rolls Royce are) by comparing it to a full service Qantas flight (based on data from the Australian Bureau of Infrastructure, Transport and Regional Economics). Let’s try and be a bit more accurate and take into account the Norwegian bare minimum costs.

Warning, this may get maths heavy!

Running Costs:

We can take some of these calculations and guesstimate the following:

Fuel – High end, $44.82 per nautical mile, or at 448 nautical miles per hour (cruising speed) = $20,079 per hour

Crew – 1 flight attendant per 50 passengers (18) = $35 per hour x 18 = $630 per hour

Pilots – two cockpit crew at $150 an hour each = $150 x 2 = $300 an hour* (I honestly believe this is too cheap, but let us assume the cheapest option).

Total cost: $21009 per hour

Norwegian
Norwegian Crew. Photo: Norwegian

These figures are not realistic unless we use a real-life flight time. Let us guesstimate a flight New York to London flight as an example:

Flight time would be 8 hours: $21009 per hour x 8 hours = $168,072 for the flight

Food and Drink: We can guess this would be $5,000 in costs.

Total running cost: $173,072

Airport Fees:

Heathrow T5
London’s Heathrow made a profit of about $3.6B in 2015. Photo: Heathrow Airport

At JFK $6.27 per 1000 pounds of weight, an A380 weighs 611,000 pounds (empty) and a passenger payload of 185,000 pounds plus 559,937 pounds of fuel. Therefore the fee would be $6.27 x 1356 thousand pounds = $8,501. We can also assume a passenger fee of $4.50 per passenger, with 695 passengers in total this would be $3127.50. Plus, there is a charge of $100 for every flight leaving between 3pm and 10pm. This means a total fee of $11,728.50

For simplicity, we will assume that the fee is the same in London Heathrow (That also includes slot fees) for arrival, for a total of $23,457.

There are also other fees to fly the plane over a countries land and water, however, as the route is almost entirely over water we will ignore it for now.

Fixed Costs:

Norwegian will also have to rent or buy the plane; According to Wikipedia, a second hand 2008 A380 costs about $78 million. Spread over 20 years expected useful life, the price would be $8928 per hour, even if the plane flies or not. For our flight, let’s say eight hours flight plus two hours at each end: 12 hours x $8928 = $107,136

Lastly, let us include a maintenance and cleaning for a fee of $10,000 per flight, plus another $10,000 for baggage handling and support staff at each terminal.

Running Costs: $173,072

Taxes and Fees: $23,457

Fixed Costs: $127,136

Total cost: $323,665

Would it be profitable?

Norwegian growth
Norwegian CEO Kjos sure hopes it is

New York to London

Total sales: $277,730.

Costs: $323,665

Profit per flight: -$45,935

What if the plane was entirely economy and full?

Hi Fly A380 Economy Class
Hi Fly A380 Economy Class

We would see roughly 868 passengers on board and would be $235,228 in ticket sales and $75,968 in optional sales if every customer bought a meal and luggage. Let’s see if we make a profit now.

New York to London all economy

Total sales: $311,196

Costs: $323,665

Profit per flight: -$12,469

For perspective, a full-service Qantas charges $13,129 for one of its 14 first-class suites, $10,425 to travel in business, $2975 in premium economy and $1599 in economy, return Sydney to LA (14 hour flight). Roughly $1,548,360 in sales, or $774,180 one way. Their costs are around the same at $400,000 per direction.

A Qantas A380 glides over Sydney.
Photo: Qantas

These guesstimation numbers show that you would be very tight for Norwegian to run this plane, they could potentially get cheaper fuel a potentially have many more customers on board but this article is a good example of why the A380 has not been so successful outside of its usage by full-service airlines.

Norwegian might need to still crunch the numbers before buying an A380 just yet!

*Fees and taxes have been broadly rounded up and pilot fees are possibly very cheap (Industry ranges from $50 an hour to $300 an hour depending on experience). Insurance is not taken into account either.

Have we missed something? Is one of our price points over exaggerated? Do let us know in the comments below!

6 comments
  1. As outsiders, it is hard to tell if estimates build from the ground up like this are accurate or not. It’d be more trustworthy if your method can be cross-validated.
    Perhaps do a validation of your method by running it on 2) a new Norwegian 787 for London-JFK. Then 3) run the same method on a comparable JFK-CDG or JFK-FRA A380 route. If all of them are profitable except for your hypothetical Norwegian London-JFK with A380, then it’s a great story. You can then send that to Forbes for publication 😁

  2. $150K costs per flight, 900 economy seats sold at $200 each per flight. 3 flights Europe to US East Coast per day. $50K more income per flight for cargo space they can sell out too easily.

    Total costs $150K per flight.
    Total income $230K per flight.
    Total profit per day $240K.
    Total profit per year $87 million per A380 for a low cost airline.

    Of course Easyjet, Ryanair, Norwegian, they should all buy as many A380 as possible and run all sorts of routes from Europe to the USA and from Europe to Asia. And they can feed in their full European low cost network to those.

    Airport taxes will be minimal they will not fly to any expensive airport. It’ll be Stansted to some cheap airports on US East Coast, Central US and West Coast. Cheap European hubs also to Asia, to Africa and etc.

    Low cost airlines know how to run airplanes on above 96% fully sold out.

    sub-8 hour destinations from European hubs to East coast USA at about $200 per ticket average price.
    sub-12 hour destinations from European hubs to West coast USA, to South America, to Asia, at around $300 per ticket average price.

  3. At a cost of $78m that comes to $10,700 per day vs your $8,000 plus per day. Make a big difference or am I missing something. Bob

    1. @Robert Crowley,

      He said 8,900+ per hour, and your calculation is per day. Whichever way the calculation flows, it’s wrong because certain factors weren’t taken into consideration though these numbers are mere assumptions.

  4. Mr. Nicholas,

    Thank you for taking the time to write an informative material; however, I do feel the need to counter your per-hour calculation though these are mere “assumptions”, but it certainly doesn’t reflect current aircraft / airline economics or finance. Having said that, based on my knowledge in airline economics and finance, this is usually standard for a fairly used 2008 non-economical, a highly non-appreciable airliner with troubled history.

    A down payment of 10% or greater;
    Terms of 15 years or less, couldn’t go any higher except impeccable credit rating;
    Interest Rate of at least 3% or more – depending on credit and financial factors;

    For the purpose of this analysis, let’s assume a 10% down payment, 3% interest rate, which is somewhat standard in aircraft finance [refer to major airline financials for more information on Capital Leases], and a 10 years (120 months) or (3650 days) term, this would result to a daily rate of $22,261 which does NOT include Mandatory Maintenance Reserves (though Variable), Plus Taxes and Depreciation.

    On a per hour basis of representation, assuming a block of 1,960 hrs annually, which isn’t far-fetched, considering that typical airliners fly about 3,000 hrs annually. In perspective, based on your reference [Sydney to LA – a 14 hrs nonstop flight], we can deduct that an A380 can comfortably fly two (2) round trip per weeks OR four (4) flights per week between these two cities. So it’s fair to say the Avg Aircraft Utilization is about 56 hrs [14 hrs x 4] weekly. So 56 hrs / week x 35 weeks = 1,960 hrs. Assuming the aircraft is docked for the remainder part of 17 weeks whether for maintenance, non-utilization, etc.

    The per-hour lease cost is $4,607 considering the purchase amount and interest rate. Over a 1,960 annual hours, the annual lease cost is $9.028 Million. Assuming a 30 year life of which 10 years is gone, and 20 years still remaining, let’s assume that this aircraft has about 39,000 more hours [1,960 hours / year x 20 years], that provides a depreciation cost of $1,990 per hour. Based on this calculation, the fixed cost per hour of the A380 is about $6,600. This is way lower than what you proposed in your write-up.

    I do believe that the only reason why it isn’t profitable for US airlines is simply because of corporate greed and lack of long-haul competitive routes. The A380 in my opinion is useless on 10 hrs or shorter direct flight. This is a long-haul aircraft which passengers are willing to pay extra for convenience. You can easily forgo convenience in a 6 hrs flight from London to New York.

    Though a few of your assumptions seem fair but a lot of them are far from reality, like the Maintenance, and I don’t remember seeing insurance as well, I would have wished to dissect some of your numbers, but I just wanted to point out the per-hour calculation first. Needless to say, there’s room for improvement in your calculation.

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