How Norwegian became a disruptive force

Our exclusive data has found that Norwegian has received more meeting requests at Routes events from airports and tourism destinations than any other airline since 2012, with the Scandinavian carrier securing 33.6 percent more requests than American Airlines in second place.

In each of the last three years, the airline has received the most meeting requests at World Routes, putting it ahead of full service carriers Delta Air Lines, Lufthansa British Airways and United Airlines. But it wasn’t always like this. Back at World Routes in 2011, Norwegian was in sixth place, receiving 50 percent fewer meeting requests than British Airways which topped the list.

So what changed?

Norwegian has been a disruptive force in the European aviation industry in recent years, adding large amounts of low-cost capacity and rapidly increasing the number of it routes operates, particularly to transatlantic markets. While the strategy has at times proved difficult financially, the airline has attracted takeover interest from multiple potential bidders in recent months.

According to figures from OAG Schedules, Norwegian’s (D8/DY) capacity has risen from 25 million seats in 2012 to reach 40.2 million in 2017. Its year-on-year growth from 2016 to 2017 was 12.2 percent, putting it just outside the top 20 fastest-growing carriers in the world.

International frequencies have almost doubled from 70,622 in 2012 to 134,170 in 2017, while domestic frequencies are up from 66,469 to 74,674 over the same period.

Where is Norwegian putting capacity?

Unsurprisingly, its Scandinavian bases at Oslo Gardermoen, Stockholm Arlanda and Copenhagen Kastrup have grown strongly over the past five years. Capacity has increased by 29 percent, 51 percent and 46 percent respectively from 2012 to 2017, with the three collectively now accounting for more than 15 million of Norwegian’s available seats.

Other strong growth markets have been London Gatwick (with 2.6 million seats in 2017, compared with 881,549 seats in 2012); Barcelona El Prat (1.26 million vs 243,734); Malaga Airport (951,347 vs 315,813); and Madrid Adolfo Suarez-Barajas (802,012 vs 23,325).

Top five airports by capacity in 2017:

New horizons

In 2017, Norwegian added a whopping 15 destinations to its network as it continued to push its long-haul low-cost strategy, flying primarily from the UK and Ireland to secondary airports in the US. By the end of the year the airline operated a total of 511 routes – a marked rise from the 334 operated in 2012.

New locations added were: Athens, Belfast International, Belgrade Nikola Tesla, Denver, Dusseldorf International, Hannover, Hartford Bradley, Kaunas, Kemi/Tornio, New York Stewart, Newark Liberty, Providence, Seattle-Tacoma, Shannon and Skellefteå.

From London Gatwick the airline added Denver and Seattle-Tacoma, alongside routes from Belfast International to New York Stewart and Providence. Other low-cost transatlantic launches included Cork – Providence and Edinburgh – Hartford Bradley, albeit the later has been discontinued this year.

Canada is the latest country to be added to its route map with services from Dublin to Hamilton International Airport near Toronto, starting in March 2019.

Fleet expansion

Norwegian’s strong capacity growth came after the airline placed one of Europe’s biggest-ever aircraft orders in 2012 when it ordered 222 narrow-body aircraft worth $21.5bn at list prices. At that time, it had just 68 aircraft flying European short-haul routes.

The carrier ended 2017 with 146 Boeing aircraft in service, comprising 22 787 Dreamliners, 118 737-800s and six 737 MAX 8s. The Oslo-headquartered carrier also has unfilled orders for 106 737 MAX 8s and 15 787-9s. With Airbus, it has 65 A320neos on order and 30 A321neos.

Norwegian’s place in the market

It is less than four years since Norwegian launched transatlantic flights, but the low-cost airline is now the ninth largest by percentage of seats offered, increasing the pressure on legacy carriers Delta Air Lines, British Airways and United Airlines.

In Europe, Norwegian has moved up to eighth in terms of capacity share and in 2017 accounted for 3.2 percent of the market, eating into Air France, British Airways and Lufthansa’s share.

Network analysis

Chief executive Bjørn Kjos has stated that Norwegian’s global expansion will be “more important than ever” as it seeks to get better symbiosis between its long-haul and short-haul networks. It has enjoyed a successful strategy of flying routes where there is little or no competition, connecting secondary cities - particularly in the US - and penetrating against a hub.

Further Asia expansion will build upon the launch of the world’s longest low-cost route from London Gatwick to Singapore with destinations such as Tokyo, Shanghai and Beijing planned if the airline receives access to the Siberian corridor. The Siberian corridor gives Norwegian the most efficient and direct routing across Russia to the Far East.

The eight Airbus A321neo LR due to join Norwegian’s fleet in 2019 will offer passengers in smaller cities their first direct connection across continents on a single-aisle aircraft. Detroit, Philadelphia and Minneapolis are examples of destinations that could be served, while the carrier will also consider routes to the Middle East using the long-range jet, potentially from the Nordics.

Finances

After a period of losses, Norwegian this week posted an all-time high in revenue and an unexpected profit during the second quarter of 2018. The carrier reported a profit of NOK 300m (€31.7m) for the period, compared with a loss of NOK 691m (€73m) in the same period last year.

ASM’s view

Nigel Mayes, ASM’s SVP consulting and product development, says: “Norwegian has a track record of finding big point-to-point markets with room to grow and stimulate new traffic. It has demonstrated an ability to enter large markets - such as London and New York - and provide a low-cost option, disrupting the established competition.

“The carrier is also strong at targeting unserved routes to secondary cites, capturing the market as a first mover. This has been evident on Gatwick to Fort Lauderdale, a service which forced British Airways to respond.

“The new long-range narrow-body aircraft joining its fleet will allow Norwegian to further test unserved routes. Smart regional airports, which can demonstrate a fair forecast on future demand and revenue, should therefore be the ones pitching to the airline. In Europe, for example, destinations such as Prague, Marseille and Munich are prime candidates for services to major US cities like New York.

“However, airports should not just focus on the point-to-point opportunity but present a clear analysis of the connecting flow.”

How can airports influence Norwegian’s route planning?

• Regional airports, particularly in Europe and the US, are in a strong position when pitching to Norwegian
• The Boeing 737 MAX and Airbus A321neo LR will open new routes from 2019
• New services require strong two-way traffic, rather than an outbound leisure market
• Connectivity is becoming increasingly important
• Expanding east from the Nordics will be a focus
• Expect routes to Tokyo, Shanghai and Beijing in the coming years

What to do in your Routes presentation

Put forward your key messages - Begin with a summary of the route opportunity and why the airline should operate at your airport. Keep these messages short and succinct.

Include the market size - Always look at qualifying your numbers by looking at traffic history or benchmarking against a similar market where the conditions are expected to be the same.

Negotiate - Understand what the benefit of the carrier is to your business and destination in terms of direct revenues and wider economic impact. Then, establish how much support you can afford to provide

To find out how ASM can support your business please visit www.asm-global.com or contact [email protected].

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