If Norwegian could be summed into one word, it would be “bold”. The airline came virtually out of nowhere with a fleet of brand new Boeing 787 Dreamliner aircraft, adding routes seemingly by the hour, all while driving airfare prices down to unheard of levels. Plenty of discount airlines entered the market, but Norwegian was the one that even your grandmother had heard of. The moves were so bold, many couldn’t help but speculate that Norwegian was either helmed by the smartest people in the room, or a group taking drastic risk. The answer may be both, but at the moment, it’s the risks and worries on center stage.
Fast forward to June of 2018 and an IAG bid for ownership sparked a bidding war amongst major airlines, including the Lufthansa Group. If they couldn’t “beat” the low cost airline, they wanted to own it. After all, using Norwegian’s model against enemies by discounting on select routes would be quite a shrewd move indeed. But enigmatic Norwegian CEO Bjorn Kjos, who owns a 27% stake in the airline held out for better offers. He may have held out too long.
- Is withdrawing from unprofitable routes which it so brazenly opened.
- Raised cash via Boeing refinancing, taking on $30m additional long term debt.
- Denying delay compensation claims to slow the flow of cash.
- Slowly raising fares to extract more cash out of viable routes.
For any other airline raising fares might seem acceptable, but without a viable loyalty program or alliance partners, there’s only one reason people fly Norwegian, and it’s definitely not the pay as you go snacks. Travelers pick Norwegian on price and in recent months major airlines have been beating Norwegian on price, swooping in to damage Norwegian’s existing revenue streams. A few IAG airlines have sold New York to London and USA to Spain, two of Norwegian’s breakthrough routes, for under $300 round trip.
In short: Norwegian continues to beg, borrow and deal in an admirably entrepreneurial way to keep things afloat. The big question is: how long can they? As travelers, Norwegian is good for business, because the airline has forced priced down and wherever they operate, there are record low fares around. With the withdrawal of IAG’s takeover bid and new challenges coming from airlines further afield, it’s tough to say how much longer the game will go.