Norwegian is ending its low-cost long-haul flights, to focus on European routes only
Norwegian Air says it is ending its long-haul operation, and end its plans for low-cost long distance flying. It had to ground most of its fleet throughout 2020 – its long-haul Boeing 787 Dreamliner jets have not been used since March. Even before Covid, it long-haul flights (to the US, Argentina and Brazil) at stupidly low prices were not making money, and Norwegian had financial troubles. In 2013, after 20 years as a standard short-haul carrier, it had its first budget transatlantic flights – firstly from Oslo, and in 2014 from Gatwick. One-way economy fares between the UK and US cost from just £125. For that price there was no free check-in baggage, or food or drink. The first flight between Gatwick and Seattle cost £150. Gatwick was its long-haul base in the UK. In 2019, it flew more passengers between the US and UK than any other airline, to 12 US destinations. Margins were very tight, and the airline had rising debt in 2019. By April 2020, 80% of its staff were on furlough. So there will be no long-haul flights by Norwegian at Gatwick, but their flights to European destinations will continue.
The rise and fall of Norwegian Air, leader of the low-cost transatlantic revolution
The pandemic, perhaps, isn’t entirely to blame. So where did it all go wrong?
By Hazel Plush, SENIOR CONTENT EDITOR (The Telegraph)
14 January 2021
Norwegian Air has announced the end of its long-haul operation, a move which will axe around 1,100 jobs in the UK alone – and bring an end to one of commercial aviation’s most ambitious grand-plans.
Like all airlines, the Oslo-based carrier has been hit hard by the pandemic, forced to ground most of its fleet throughout 2020 – its long-haul Boeing 787 Dreamliner jets entirely unused since March. Now, it seems, the writing on the wall can be ignored no longer.
“Future demand remains highly uncertain,” reads a statement from the airline. “Under these circumstances, a long-haul operation is not viable for Norwegian and these operations will not continue.”
Customers with affected bookings will be contacted directly, and refunded.
It has done well, perhaps, to make it this far. Even pre-pandemic, the airline’s long-haul offering was suffering financial turbulence – despite it seemingly flying high. But this ruinous 12 months has unravelled even the most robust business models; and low-cost carriers have borne the brunt.
Before Covid hit, Norwegian was among the world’s major transatlantic carriers, flying between Europe and the US, Argentina and Brazil. To achieve such popularity, it did what the likes of British Airways and American Airlines couldn’t, or at least wouldn’t: offered long-haul routes for ludicrously low prices.
In 2013, after 20 years as a reputable short-haul carrier, the first of its budget transatlantic flights departed – firstly from Oslo, and in 2014 from London Gatwick. One-way economy fares between the UK and US cost from just £125.
“You didn’t get much leg room, or any free check-in baggage, or any free food or drink for that matter,” recalls Greg Dickinson, who was on board Norwegian’s inaugural flight between Gatwick and Seattle, with an economy ticket price of $199 (£150).
But despite the cramped conditions, spirits on board were high: “There was a celebratory atmosphere in the air, particularly among the Norwegian staff, for this marked yet another brave step in the low-cost airline’s mission to break the stranglehold that airlines like British Airways and Virgin Atlantic had on routes to North America.”
The plan worked. Over the coming years, Norwegian’s was an oft-sighted livery on the tarmac at Gatwick, its long-haul base in the UK. In 2018, it overtook British Airways as the largest non-US carrier to serve the UK and New York. And in 2019, it outstripped the competition entirely: it transported more passengers between the US and UK than any other airline, flying to an impressive 12 US destinations.
By the end of that year, it had expanded into South America too – and become the world’s fifth-largest low-cost airline. But margins were tight, and the airline’s ascent was fuelled by rising debt, leaving many to predict that Norwegian was close to collapse.
Then, of course, the pandemic hit. Air travel ground to a halt.
By April 2020, just seven of Norwegian’s 147 airframes were in service – and 80 per cent of its staff were on furlough. It had secured a £250million state bail-out, but warned that its fleet could remain grounded until 2021: a headline-grabbing statement at the time, yet one that has proved all-too prescient.
In 2020, there were barely any short-haul services required, let alone long-haul routes. The airline pivoted to cargo-only operations, and appealed for further Norwegian Government bail-outs – but they failed. The refusal was “a slap in the face”, said Jacob Schram, the airline’s chief executive. He promised “to turn every stone” to secure a rescue from the private sector.
But now, as the pandemic’s grip on aviation shows little sign of abating, Norwegian will fly long-haul no longer. In a statement released today, Schram speaks of a simplified business structure and dedicated short haul network – and the end of its transatlantic ambitions, for now.
“Our short haul network has always been the backbone of Norwegian and will form the basis of a future resilient business model,” said Schram. “It is with a heavy heart that we must accept that this will impact dedicated colleagues from across the company.”
The job losses at its Gatwick base total 1,100 – and there will also be significant staffing cuts in Italy, France and the US.
And the packing-up has already begun. The airline has started flying Dreamliners from its Scandinavian bases to Ireland’s Shannon Airport, in preparation for them being returned to lessors, reports Aerotime Hub. From an airline that once roared with ambition, it feels like a quiet, crumbling defeat.
The long-haul budget dream is over – until, perhaps, we can dare to dream again.
Norwegian Air faces ‘very uncertain future’ after further state aid from Norway denied
The Norwegian government has refused to grant further financial assistance to Norwegian Air. It was bailed out in the spring, through state aid from Norway of 3bn krone (£255m), with stringent conditions attached, after the first wave of the grounding of airlines due to Covid. Now with the return of Covid across Europe, air travel demand is not returning for this winter, so Norwegian’s finances are in a grim state. But the Oslo government is not giving more money. The airline has, in the past, annoyed trade unions in Norway for using cheaper, foreign labour. It said it would now be forced to furlough another 1,600 staff, leaving only 600 employed out of more than 10,000 people at the start of the pandemic. It said it would park all but 6 aircraft (out of its fleet of 100 planes) and operate only domestic routes through the winter. It was flying from 6 UK airports, with its base at Gatwick. As well as cheap European leisure flights, it offered cheap trans-Atlantic routes. Before Covid it was one of the biggest airlines at Gatwick. Norwegian is fragile, as it has expanded too fast in recent years, and has a lot fo debt. The airline is expected to have losses of 5.3bn krone (about £450m) for the first half of 2020.
Norwegian Air says most of fleet will stay grounded until 2021, and shareholders will be seriously hit
Norwegian Air says virtually all of its fleet of aircraft will remain grounded until 2021 as it seeks to persuade shareholders (meeting on 4th May) to accept a government-backed rescue plan that will wipe out most of their investments. Bondholders, aircraft lessors and shareholders will have to take a huge cut in profits in order for the airline to get a 3bn kroner (£230m) state bailout. Even that may not be enough, it warned, in its “base scenario”, where operations only restart in earnest next summer. Currently just seven of a fleet of 147 planes are not grounded as they are being used for state-subsidised domestic flights in Norway, mainly for essential cargo. Its future plans may mean only keeping key profitable routes, ending long-haul routes to secondary airports, with a fleet up to 30% smaller than previously planned. Bondholders will later this week decide whether to accept the strategy and allow the debt to be converted into equity, a necessary move if Norwegian is to gain access to state funds. Norwegian’s aircraft lessors will also be asked to take equity in the company, rather than pursue debts. The airline is looking to reduce its obligations on leasing planes by £403m.