Will Norse Atlantic’s LCC Transatlantic Model Be Able To Succeed?

As startup Norse Atlantic looks to launch new long-haul services, it seems that it’ll focus on Norwegian’s core routes. Norwegian had 74 long-haul routes in 2019, with the US having nine in ten seats. But with long-haul low-cost famously difficult to get right, will Norse Atlantic be able to overcome the challenges and be sustainable?

Norwegian B787
The UK was by far Norwegian’s number-one European market in 2019. It served 14 US airports from Gatwick that year. It served both Oakland and San Francisco along with Fort Lauderdale and Miami as it switched its London flights to the main airports. Photo: Vincenzo Pace | Simple Flying.

Norse Atlantic Airways has gained much attention since it was revealed yesterday, March 15th. The startup long-haul low-cost carrier (LHLCC) from the founder of Norwegian plans to operate B787s across the Atlantic from bases at London Gatwick and Paris CDG, and possibly also Oslo and Stockholm.

Norwegian had more than 6.6 million long-haul seats in 2019, OAG data shows, more than double that of two years earlier. While the carrier was the fifth-largest between Europe and North America, this very fast growth didn’t help its already poor long-haul financial performance, with many routes cut to help to improve its situation.

It then ended long-haul to focus on its core: short-haul Boeing 737 operations primarily to, from, and within Scandinavia. Speaking in January 2021, Norwegian’s CEO said:

“Our short-haul network has always been the backbone of Norwegian and will form the basis of a future resilient business model.”

This clearly indicates what Norwegian – and virtually all other LHLCCs – have found. It is often very difficult to get the economics of the model to work. What will Norse Atlantic do differently?

Norwegian B787
It seems that Norse Atlantic will very sensibly focus on Norwegian’s long-haul core. But will it be able to overcome the big challenges with long-haul low-cost? Photo: Vincenzo Pace | Simple Flying

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Potential ways to reduce costs

Norse Atlantic, and other LHLCC startups, may be able to reduce certain costs versus full-service carriers, such as through:

  • Higher seating density
  • Lower salaries (new contracts and a large pool because of coronavirus)
  • Turning catering and baggage into revenue streams
  • Ground handling
  • Marketing
  • Much lower administration/overheads

They’ll hopefully also be able to benefit from higher seat factors, an important way to reduce seat costs, although established airlines often have this nowadays anyway.

Although long-haul and alternative airports haven’t worked really well to date, this is another way they might reduce costs, likewise using more fuel-efficient and less maintenance-intensive aircraft. However, coronavirus has led many airlines to retire less-efficient aircraft, with this potential advantage only good until others catch up. And established airlines will likely emerge from coronavirus as leaner and meaner competitors.

Norwegian B787
Norwegian’s B787s had 56 routes between Europe and the US in 2019. Photo: Vincenzo Pace | Simple Flying.

But big drawbacks

Problems of LHLCCs typically include:

  • The need for feed, especially with widebodies and high seating densities, although this is perhaps less important if the market has very high point-to-point demand and/or is operated on a fairly low-frequency basis and/or seasonally. That Norse Atlantic has mentioned London, Paris, New York, and Los Angeles is no coincidence
  • Increasing daily utilization is challenging, with block hours hard to increase beyond two sectors per day. Crew productivity increases are also much harder to achieve than for short-haul
  • The importance of premium traffic to help offset lower-yielding passengers, while ensuring sufficiently high seating density to help reduce seat costs and to increase sector revenue but without having too many seats to fill
In 2019, Norwegian had five US routes from both Oslo and Stockholm. Photo: UNDRC via Wikimedia.

JetBlue is taking a different approach

It is notable that JetBlue has repeatedly said that it will target large point-to-point markets with strong premium demand but which is overpriced. It’ll mainly be competing in this arena with its lower-density and premium-heavy narrowbodies.

JetBlue has also said that it expects to fly to Europe during the summer, so benefiting from stronger demand and higher yields, while redeploying its aircraft to warmer and more demanded winter destinations.

This is something that Norse Atlantic could consider, especially given generally already low winter fares across the Atlantic and the need to properly use expensive and pretty new aircraft.

JetBlue’s approach to the transatlantic market will be markedly different from Norse Atlantic’s.                     Photo: Vincenzo Pace | Simple Flying.

Norwegian had 74 long-haul routes in 2019

Norwegian had 74 long-haul routes over 3,000 miles in 2019, analysis of OAG data shows, almost all by B787s.

It also had a small number of long-haul B737-800 services, including Oslo to Dubai at 3,194 miles and Tromso-Gran Canaria at 3,191 miles, along with the last of its transatlantic 737 operations, including Dublin to Hamilton, Providence, and Stewart.

Norwegian long haul
The USA was utterly fundamental to Norwegian’s long-haul operation with nine in ten seats. Note: for clarity, not all routes are included here. Image: GCMap.

Norse Atlantic to focus on Norwegian’s core

Over 40 airports were involved in Norwegian’s long-haul operation, with Gatwick by far its top, with over four in ten such seats. New York JFK was next, followed by Los Angeles and Paris CDG; all had over one million seats.

It’s hardly a surprise that these airports have been singled out by Norse Atlantic given how fundamental they were to Norwegian.

Norwegian's top long-haul routes
You can tell Gatwick was by far Norwegian’s top airport! Source: OAG Schedules Analyzer.

Norwegian long-haul revolved around the USA, with nearly 5.9 million of its 6.6 million seats, with the UK, Spain, France, and Norway next. The UK-USA was its top country-pair, with one-third of all seats, and twice as many as second-place France-USA.

It’d be very strange if Norse Atlantic didn’t use its knowledge from what worked at Norwegian (or which had strong promise) and focused on these, but then raising the issue of whether it can achieve big enough scale to gain strong economies.

Do you think Norse Atlantic will be able to gain a sustainable foothold in long-haul markets? Comment below!