Norwegian Air is one of the fastest growing airlines in the world, operating highly profitable low-cost long-haul routes between many destination cities.
The key to their profitability, is rock bottom pricing on large capacity planes with no frills, between destinations that would normally not be connected directly, such as Oakland to Rome.
For example, a flight between New York and Amsterdam can be found for under US$200 on Norwegian Air.
But some industry experts are starting to wonder if it is growing too fast.
They currently field 51 planes (Boeing 737-800’s) and have 134 on order (A mix of Boeing and Airbus jets). They were originally a domestic carrier in Norway with three Fokker planes in 1993, but since starting long-haul routes in May 2013, they have been on a mission to dominate Europe.
On Norwegian Air, everything is available for purchase, from the usual items like food and drinks, baggage to entertainment, seat selection and more. And by more, we mean a $5 blanket or $4 to rent a pair of headphones. It is the small purchases that really drive the profitability of this airline.
They have ambitious plans to have nearly 200 aircraft in the air by the end of 2019. To understand the scale they are aiming for, the benchmark is three daily flights between London and New York.
This rapid expansion means they have taken on substantial debt. In the second quarter of 2017, they recorded a loss of $104 million and have only made $37 million net profit so far in 2018.
“They are not profitable this year in what is a very good year for the airline industry, the underlying business is losing considerable sums of money. This is not sustainable, something has to change.” – Andrew Lobbenberg, Aviation analyst at HSBC.Advertisement:
This is due to the debt that they have taken on board to acquire so many new aircraft so fast.
And the sharks are circling. As it is a publicly traded company, anyone can buy shares, like IAG (International Airline Group, who own British Airways and Iberian Air) whom recently (in April) bought 5% of Norwegian Air. And they have not been quiet about their desire to buy more.
Some experts even claim that Norwegian Air has so many planes that they can’t even use them all.
“When you set so much production capacity into the market, it will take time before the routes are set in the market, before people actually see what you are doing, and get used to it and try it,” Norwegian Air CEO Bjorn Kjos said, “Sometimes it will take some months. On some routes, it may take a year or two. The longer you are in the market, the better set you are.”
With more low-cost carriers starting to reach across the Atlantic (West Jet and Wow Air) and the rise of new competitor Airlines like LEVEL, Norwegian Air faces stiff competition in the coming years and it remains to be seen if this Scandinavian giant can survive.